-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YSfWkE0BYcpCDPH7mHR9hyHTrR4hY7w1tglCwdzYkidqkcpizg0l3LBCgGWiV+5q ybwUHYXPo0RErZnBbc/LeA== 0000950112-95-001669.txt : 19950616 0000950112-95-001669.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950112-95-001669 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19950614 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950615 SROS: CSX SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROMUS HOTEL CORP CENTRAL INDEX KEY: 0000944647 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 621596939 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11463 FILM NUMBER: 95547205 BUSINESS ADDRESS: STREET 1: 6800 POPLAR AVENUE STREET 2: STE 200 CITY: MEMPHIS STATE: TN ZIP: 38138 MAIL ADDRESS: STREET 1: 6800 POPLAR AVENUE STREET 2: STE 200 CITY: MEMPHIS STATE: TN ZIP: 38138 8-K 1 PROMUS HOTEL CORPORATION As filed with the Securities and Exchange Commission on June 15, 1995. ---------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 14, 1995 PROMUS HOTEL CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-11463 62-1596939 (State or other (Commission (I.R.S. Employer jurisdiction File Number) Identification No.) of incorporation) 6800 Poplar Avenue, Suite 200 Memphis, Tennessee 38138 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (901) 758-3100 Not Applicable - ---------------------------------------------------------------------- (Former name or former address, if changed since last report) ITEM 5. Other Events. Promus Hotel Corporation ("PHC") is an indirect wholly-owned subsidiary of The Promus Companies Incorporated ("Promus"). Promus intends to distribute (the "Distribution") in the form of a special dividend to all holders of Promus's outstanding shares of common stock, on a one-for-two basis, all outstanding shares of common stock, and the associated stockholders' rights, of PHC. The Distribution will separate Promus's hotel business (the "Hotel Business") from its casino entertainment business (the "Casino Business"). Prior to the Distribution, Promus will transfer to PHC the stock of certain subsidiaries principally engaged in the Hotel Business, and consummate certain other transfers intended to allocate assets and liabilities relating to the Hotel Business to PHC and assets and liabilities relating to the Casino Business to Promus. After the Distribution, PHC will operate and develop the Hotel Business and Promus will operate and develop the Casino Business. In addition, upon consummation of the Distribution, Promus will change its name to "Harrah's Entertainment, Inc.". On May 26, 1995, stockholders of Promus approved the Distribution and Promus's Board of Directors declared a dividend of shares of common stock of PHC conditioned upon occurrence of four events prior to June 19, 1995. On June 14, 1995, Promus announced that the four events had occurred and that the conditions to the dividend had been satisfied. The Distribution will occur on June 30, 1995. On that date, Embassy Suites, Inc., a wholly-owned subsidiary of Promus and the sole stockholder of PHC, will distribute to Promus all of the outstanding shares of common stock of PHC and the associated stockholders' rights. Substantially concurrently therewith, Promus will make the Distribution to stockholders of record of Promus as of June 21, 1995. Each stockholder will receive one share of common stock of PHC for every two shares of common stock of Promus held by such stockholder. Fractional shares will be aggregated and, after the Distribution, sold in the public market and the aggregate net cash proceeds will be distributed ratably to those stockholders of record otherwise entitled to fractional interests. ITEM 7. Financial Statements and Exhibits (c) Exhibits. No. --- 10(1) Form of Plan of Reorganization and Distribution Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(2) Tranche A Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time to time party thereto, as Guarantors, the several lenders from time to time party thereto, and NationsBank, N.A. (Carolinas), as Agent. 10(3) Tranche B Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time to time party thereto, as Guarantors, the several lenders from time to time party thereto, and NationsBank, N.A. (Carolinas), as Agent. 10(4) Form of Employee Benefits and Other Employment Matters Allocation Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(5) Form of Risk Management Allocation Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(6) Form of Tax Sharing Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(7) Promus Hotel Corporation Executive Deferred Compensation Plan. 10(8) Promus Hotel Corporation Deferred Compensation Plan. 10(9) Escrow Agreement, dated as of June 30, 1995, among Promus Hotel Corporation, Promus Hotels, Inc. and NationsBank. 10(10) Promus Hotel Corporation Savings and Retirement Plan Trust Agreement, dated as of May 26, 1995, among Promus Hotel Corporation, and Robert S. Davis, Donald H. Dempsey, Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins, Frederick G. Schultz and Mark C. Wells, as trustees. 10(11) Form of Severance Agreement, dated as of June 30, 1995, to be entered into with Michael D. Rose and Raymond E. Schultz. 10(12) Form of Severance Agreement, dated as of June 30, 1995, to be entered into with David C. Sullivan, Donald H. Dempsey, Ralph B. Lake, Thomas L. Keltner and Marc C. Wells. 99(1) Press Release, dated June 14, 1995, announcing the satisfaction of the final conditions to the Distribution. FOOTNOTES (1) Incorporated by reference from the Current Report on Form 8-K of The Promus Companies Incorporated, filed June 15, 1995, File No. 1-10410. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PROMUS HOTEL CORPORATION JEFFERY M. JARVIS --------------------------------------- Jeffery M. Jarvis Vice-President and Controller Dated: June 15, 1995 EXHIBIT INDEX EXHIBIT NO. Description ------- ----------- 10(1) Form of Plan of Reorganization and Distribution Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(2) Tranche A Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time to time party thereto, as Guarantors, the several lenders from time to time party thereto, and NationsBank, N.A. (Carolinas), as Agent. 10(3) Tranche B Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower, Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time to time party thereto, as Guarantors, the several lenders from time to time party thereto, and NationsBank, N.A. (Carolinas), as Agent. 10(4) Form of Employee Benefits and Other Employment Matters Allocation Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(5) Form of Risk Management Allocation Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(6) Form of Tax Sharing Agreement, dated June __, 1995, between The Promus Companies Incorporated and Promus Hotel Corporation. (1) 10(7) Promus Hotel Corporation Executive Deferred Compensation Plan. 10(8) Promus Hotel Corporation Deferred Compensation Plan. 10(9) Escrow Agreement, dated as of June 30, 1995, among Promus Hotel Corporation, Promus Hotels, Inc. and NationsBank. 10(10) Promus Hotel Corporation Savings and Retirement Plan Trust Agreement, dated as of May 26, 1995, among Promus Hotel Corporation, and Robert S. Davis, Donald H. Dempsey, Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins, Frederick G. Schultz and Mark C. Wells, as trustees. 10(11) Form of Severance Agreement, dated as of June 30, 1995, to be entered into with Michael D. Rose and Raymond E. Schultz. 10(12) Form of Severance Agreement, dated as of June 30, 1995, to be entered into with certain David C. Sullivan, Donald H. Dempsey, Ralph B. Lake, Thomas L. Keltner and Marc C. Wells. 99(1) Press Release, dated June 14, 1995, announcing the satisfaction of the final conditions to the Distribution. FOOTNOTES (1) Incorporated by reference from the Current Report on Form 8-K of The Promus Companies Incorporated, filed June 15, 1995, File No. 1-10410. EX-10.2 2 Exhibit 10(2) TRANCHE A CREDIT AGREEMENT Dated as of June 7, 1995 among EMBASSY SUITES, INC., as Initial Borrower, PROMUS HOTELS, INC., as the Subsequent Borrower, CERTAIN SUBSIDIARIES AND RELATED PARTIES FROM TIME TO TIME PARTY HERETO, as Guarantors, THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO AND NATIONSBANK, N.A. (CAROLINAS), as Agent TABLE OF CONTENTS ----------------- Page No. ------- SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Computation of Time Periods . . . . . . . . . . . . . . . 28 1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . 28 SECTION 2 CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . 28 2.1 Committed Revolving Loans . . . . . . . . . . . . . . . . 28 2.2 Letter of Credit Subfacility . . . . . . . . . . . . . . 31 2.3 Swingline Loan Subfacility. . . . . . . . . . . . . . . . 35 2.4 Competitive Loan Subfacility . . . . . . . . . . . . . . 38 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES . . . . . 41 3.1 Default Rate . . . . . . . . . . . . . . . . . . . . . . 41 3.2 Extension and Conversion . . . . . . . . . . . . . . . . 41 3.3 Reductions In Commitments and Prepayments . . . . . . . . 42 3.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 45 3.5 Capital Adequacy . . . . . . . . . . . . . . . . . . . . 46 3.6 Inability To Determine Interest Rate . . . . . . . . . . 47 3.7 Illegality . . . . . . . . . . . . . . . . . . . . . . . 47 3.8 Requirements of Law . . . . . . . . . . . . . . . . . . . 48 3.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 49 3.10 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 51 3.11 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . 52 3.12 Sharing of Payments . . . . . . . . . . . . . . . . . . . 53 3.13 Place and Manner of Payments . . . . . . . . . . . . . . 54 3.14 Indemnification; Nature of Issuing Lender's Duties . . . 55 3.15 Replacement of Lenders . . . . . . . . . . . . . . . . . 56 3.16 Change of Lending Office . . . . . . . . . . . . . . . . 57 SECTION 4 GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . 57 4.1 The Guarantee . . . . . . . . . . . . . . . . . . . . . . 57 4.2 Obligations Unconditional . . . . . . . . . . . . . . . . 58 4.3 Reinstatement . . . . . . . . . . . . . . . . . . . . . . 59 4.4 Certain Additional Waivers . . . . . . . . . . . . . . . 59 4.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 59 4.6 Continuing Guarantee . . . . . . . . . . . . . . . . . . 60 4.7 Discharge of Guarantor . . . . . . . . . . . . . . . . . 60 SECTION 5 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 60 5.1 Conditions to Initial Extensions of Credit . . . . . . . 60 5.2 Conditions to Assignment to Hotel Inc., Release of Embassy Suites and Promus Co. and Initial Extensions of Credit to Hotel Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 62 5.3 Each Extension of Credit . . . . . . . . . . . . . . . . 64 SECTION 6 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 65 6.1 Financial Condition . . . . . . . . . . . . . . . . . . . 65 6.2 No Change; Solvent . . . . . . . . . . . . . . . . . . . 66 6.3 Corporate and Partnership Existence; Compliance with Law 67 i 6.4 Corporate and Partnership Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . 67 6.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . 68 6.6 No Material Litigation . . . . . . . . . . . . . . . . . 68 6.7 No Default . . . . . . . . . . . . . . . . . . . . . . . 68 6.8 Ownership of Property; Liens . . . . . . . . . . . . . . 68 6.9 Intellectual Property . . . . . . . . . . . . . . . . . . 68 6.10 No Burdensome Restrictions . . . . . . . . . . . . . . . 69 6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 69 6.12 Federal Regulations . . . . . . . . . . . . . . . . . . . 69 6.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 69 6.14 Investment Company Act; Other Regulations . . . . . . . . 70 6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 70 6.16 Purpose of Loans . . . . . . . . . . . . . . . . . . . . 71 6.17 Environmental Matters . . . . . . . . . . . . . . . . . . 71 SECTION 7 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 73 7.1 Information Covenants. . . . . . . . . . . . . . . . . . 73 7.2 Preservation of Existence and Franchises . . . . . . . . 75 7.3 Books and Records . . . . . . . . . . . . . . . . . . . . 75 7.4 Compliance with Law . . . . . . . . . . . . . . . . . . . 75 7.5 Payment of Taxes and Other Indebtedness . . . . . . . . . 75 7.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 76 7.7 Maintenance of Property . . . . . . . . . . . . . . . . . 76 7.8 Performance of Obligations . . . . . . . . . . . . . . . 76 7.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 76 7.10 Audits/Inspections . . . . . . . . . . . . . . . . . . . 76 7.11 Financial Covenants . . . . . . . . . . . . . . . . . . . 76 7.12 Additional Credit Parties . . . . . . . . . . . . . . . . 77 SECTION 8 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 78 8.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 78 8.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 81 8.3 Nature of Business . . . . . . . . . . . . . . . . . . . 81 8.4 Consolidation, Merger, Sale or Purchase of Assets . . . . 81 8.5 Investments . . . . . . . . . . . . . . . . . . . . . . . 83 8.6 Prepayments of Indebtedness . . . . . . . . . . . . . . . 84 8.7 Transactions with Affiliates . . . . . . . . . . . . . . 84 8.8 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 84 8.9 No Dividend Restrictions . . . . . . . . . . . . . . . . 85 SECTION 9 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 85 9.1 Events of Default . . . . . . . . . . . . . . . . . . . . 85 9.2 Acceleration; Remedies . . . . . . . . . . . . . . . . . 88 SECTION 10 AGENCY PROVISIONS . . . . . . . . . . . . . . . . . . . . 89 10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . 89 10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . 90 10.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . 90 10.4 Reliance on Communications . . . . . . . . . . . . . . . 91 10.5 Notice of Default . . . . . . . . . . . . . . . . . . . . 91 10.6 Non-Reliance on Agent and Other Lenders . . . . . . . . . 91 10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . 92 10.8 Agent in its Individual Capacity . . . . . . . . . . . . 93 10.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . 93 ii SECTION 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 94 11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 94 11.2 Right of Set-Off . . . . . . . . . . . . . . . . . . . . 95 11.3 Benefit of Agreement . . . . . . . . . . . . . . . . . . 95 11.4 No Waiver; Remedies Cumulative . . . . . . . . . . . . . 99 11.5 Payment of Expenses, etc . . . . . . . . . . . . . . . . 99 11.6 Amendments, Waivers and Consents . . . . . . . . . . . . 100 11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . 101 11.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . 102 11.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . 102 11.10 Governing Law; Submission to Jurisdiction; Venue . . . . 102 11.11 Severability . . . . . . . . . . . . . . . . . . . . . . 102 11.12 Entirety . . . . . . . . . . . . . . . . . . . . . . . . 103 11.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . 103 11.14 Knowledge Standard . . . . . . . . . . . . . . . . . . . 103 11.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . 103 11.16 Agent's and Lender's Covenant . . . . . . . . . . . . . . 104 iii TRANCHE A CREDIT AGREEMENT THIS TRANCHE A CREDIT AGREEMENT dated as of June 7, 1995 (as amended, modified and extended from time to time, the "Credit Agreement" and ---------------- sometimes, this "Credit Agreement"), is by and among EMBASSY SUITES, INC., ---------------- a Delaware corporation as the initial Borrower, and PROMUS HOTELS, INC., a Delaware corporation, as assignee and subsequent Borrower upon satisfaction of the conditions set forth in Section 5.2 (the applicable Borrower hereunder being referred to as the "Borrower"), THE PROMUS COMPANIES -------- INCORPORATED, a Delaware corporation as an initial guarantor subject to release upon satisfaction of the conditions set forth in Section 5.2, and PROMUS HOTEL CORPORATION, a Delaware corporation as a guarantor (such applicable parent company guarantor hereunder being referred to as the "Parent Company") and those certain Subsidiaries and related parties -------------- identified as "Guarantors" on the signature pages hereto and such other Subsidiaries as may from time to time become a Guarantor hereunder (together with the applicable Parent Company, the "Guarantors"), the ---------- several lenders identified on the signature pages hereto and such other lenders as may from time to time become a party hereto (the "Lenders") and ------- NATIONSBANK, N.A. (CAROLINAS), as agent for the Lenders (in such capacity, the "Agent"). ----- W I T N E S S E T H WHEREAS, Embassy Suites, Inc. ("Embassy Suites") and its parent -------------- company, The Promus Companies Incorporated ("Promus Co."), have proposed a ---------- reorganization of their corporate structure as more particularly described in the Proxy Statement (the "Reorganization") whereby, among other things, -------------- (i) certain hotel related assets and liabilities will be transferred to Promus Hotels, Inc. ("Hotel Inc."), a newly formed and wholly-owned ---------- subsidiary of Promus Hotel Corporation ("Hotel Corp."), a newly formed and ----------- wholly-owned subsidiary of Embassy Suites, (ii) Embassy Suites will enter into this Tranche A Credit Agreement and the Tranche B Credit Agreement (hereafter the Tranche A Credit Agreement and the Tranche B Credit Agreement may be referred to collectively as the "Hotel Facility") and make -------------- initial borrowings hereunder and/or thereunder, (iii) Embassy Suites will assign to Hotel Inc. and Hotel Inc. will assume from Embassy Suites the Hotel Facility, and Embassy Suites and Promus Co. will be released from liability as the initial Borrower and an initial guarantor, respectively, under the Hotel Facility as provided herein and in the Tranche B Credit Agreement, (iv) Embassy Suites will dividend the stock of Hotel Corp. to Promus Co. which will dividend such stock to its public shareholders (the "Distribution"); ------------ WHEREAS, Embassy Suites has requested that the Lenders provide a $350,000,000 Hotel Facility consisting of a 1 $300,000,000 five year revolving credit facility under this Tranche A Credit Agreement and a $50,000,000 364-day revolving credit facility under the Tranche B Credit Agreement for the purposes hereinafter set forth; and WHEREAS, the Lenders have agreed to make the requested Hotel Facility available on the terms and conditions set forth herein and in the Tranche B Credit Agreement. NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS ----------- 1.1 Definitions. As used herein, the following terms shall have the ----------- meanings herein specified unless the context otherwise requires. Defined terms herein shall include in the singular number the plural and in the plural number the singular: "Additional Credit Party" means each Person that becomes a ----------------------- Guarantor after the Closing Date by execution of a Joinder Agreement. "Affiliate" means, with respect to any Person, any other Person --------- directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control an entity if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities or other ownership interests having ordinary voting power for the election of directors of such corporation or the members of the managing body of such Person or (ii) to direct or cause direction of the management and policies of such corporation or other entity, whether through the ownership of voting securities, by contract or otherwise. "Agent" means NationsBank, N.A. (Carolinas) and any successors ----- and permitted assigns in such capacity. "Agent's Fee Letter" means the letter agreement dated as of March ------------------ 1, 1995 among NationsBank, N.A. (Carolinas), NationsBanc Capital Markets, Inc., Promus Co. and Embassy Suites, as amended, modified, supplemented or replaced from time to time. "Agent's Fees" means such term as defined in Section 3.4(c). ------------ 2 "Applicable Percentage" means, for any day, the rate per annum --------------------- set forth below opposite the applicable Level Period then in effect, it being understood that the Applicable Percentage for (i) Base Rate Loans shall be the percentage set forth under the column "Base Rate Margin", (ii) Eurodollar Loans shall be the percentage set forth under the column "Eurodollar Margin", (iii) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee" and (iv) the Letter of Credit Fee shall be the percentage set forth under the column "Letter of Credit Fee": Letter of Level Base Rate Eurodollar Commitment Credit Period Margin Margin Fee Fee Level I Period 0% .25% .125% .25% Level II 0% .30% .15% .30% Period Level III 0% .35% .20% .35% Period Level IV 0% .50% .25% .50% Period Level V Period 0% .6875% .3125% .6875% In the event the applicable Level Period is determined by reference to clause (i) of the definitions of "Level I Period", "Level II Period", "Level III Period", "Level IV Period" and "Level V Period", the Applicable Percentage shall be adjusted for all purposes as soon as reasonably practicable, but in no event later than 5 days, after the date of receipt by the Agent of notice of a change in the applicable debt rating. In the event the applicable Level Period is determined by reference to clause (ii) of the definitions of "Level I Period", "Level II Period", "Level III Period", "Level IV Period" and "Level V Period", the Applicable Percentage shall be adjusted for all purposes quarterly as soon as reasonably practicable, but not later than 5 days, after the date of receipt by the Agent of the quarterly financial information in accordance with the provisions of Section 7.1(b) together with a calculation by the Borrower of the Leverage Ratio for the period ending on the last day of the most recent fiscal quarter. "Assignment and Assumption" means the assignment of the ------------------------- obligations of Embassy Suites hereunder by Embassy Suites and the assumption of such obligations by Hotel Inc. pursuant to the terms of Section 11.3(b). "Audobon Woods" means such term as defined in the Proxy ------------- Statement. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the --------------- United States Code, as amended, modified, succeeded or replaced from time to time. 3 "Base Rate" means, for any day, the rate per annum (rounded --------- upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for ---- any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. "Base Rate Loan" means any Loan bearing interest at a rate -------------- determined by reference to the Base Rate. "Borrower" means, prior to the time of effectiveness of the -------- Assignment and Assumption, Embassy Suites, and after the time of effectiveness of the Assignment and Assumption, Hotel Inc. "Business" means such term as defined in Section 6.17(a). -------- "Business Day" means a day other than a Saturday, Sunday or other ------------ day on which commercial banks in Charlotte, North Carolina and New York, New York are authorized or required by law to close, except ------ that, when used in connection with a Eurodollar Loan, such day shall ---- also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England and New York, New York. "Capital Expenditures" means all expenditures for property, plant -------------------- and equipment which in accordance with GAAP would be so classified on a Statement of Cash Flows (or Statement of Sources and Uses). "Capital Lease" means any lease of property, real or personal, ------------- the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP. "Closing Date" means the date of the occurrence of the ------------ Distribution, but not in any event later than 90 days after the date of this Credit Agreement. "Code" means the Internal Revenue Code of 1986, as amended from ---- time to time. 4 "Commitment" means the Revolving Commitment, the LOC Commitment ---------- and the Swingline Commitment, individually or collectively, as appropriate. "Commitment Fee" means such term as defined in Section 3.4(a). -------------- "Commitment Percentage" means the Revolving Commitment Percentage --------------------- or the LOC Commitment Percentage, as appropriate. "Committed Revolving Loans" means such term as defined in Section ------------------------- 2.1(a). "Committed Revolving Note" or "Committed Revolving Notes" means ------------------------ ------------------------- the promissory notes of the Borrower in favor of each of the Lenders evidencing the Committed Revolving Loans provided pursuant to Section 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Commonly Controlled Entity" means an entity, whether or not -------------------------- incorporated, which is under common control with the Borrower within the meaning of Section 4001(a)(14)(B) of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b), (c) or (m) of the Code. "Competitive Bid" means an offer by a Lender to make a --------------- Competitive Loan pursuant to the terms of Section 2.4(c). "Competitive Bid Rate" means, as to any Competitive Bid made by a -------------------- Lender in accordance with the provisions of Section 2.4, the fixed rate of interest offered by the Lender making the Competitive Bid. "Competitive Bid Request" means a request by the Borrower for ----------------------- Competitive Bids in accordance with the provisions of Section 2.4(b), a form of which is attached at Schedule 2.4(b)-1. ----------------- "Competitive Bid Request Fee" means the administrative fee --------------------------- payable to the Agent, if any, in connection with a Competitive Bid Request as provided in the Agent's Fee Letter. "Competitive Loan" means a loan made by a Lender pursuant to the ---------------- provisions of Section 2.4. "Competitive Loan Lenders" means, at any time, those Lenders ------------------------ which have Competitive Loans outstanding. "Competitive Loan Maximum Amount" means such term as defined in ------------------------------- Section 2.4(a). 5 "Competitive Loan Note" or "Competitive Loan Notes" means the --------------------- ---------------------- promissory notes of the Borrower in favor of each of the Lenders evidencing the Competitive Loans, if any, provided pursuant to Section 2.4(h), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Consolidated Adjusted EBITDA" means, for any period, the amount ---------------------------- equal to (i) the sum of Consolidated Net Income for such period plus ---- Consolidated Interest Expense for such period to the extent deducted in the calculation of Consolidated Net Income plus all provisions for ---- any Federal, state or other income taxes plus depreciation and ---- amortization, in each case for the Parent Company and its Subsidiaries on a consolidated basis, but excluding in each case the portion of such components attributable to Joint Ventures, determined in accordance with GAAP plus (ii) all cash distributions from Joint ---- Ventures received by the Parent Company, the Borrower or any of their respective Subsidiaries for such period. For the portion of any such period which is prior to the Closing Date, Consolidated Adjusted EBITDA shall be calculated with respect to the Hotel Inc. Business. "Consolidated Fixed Charge Coverage Ratio" means the ratio of ---------------------------------------- Consolidated Net Income Available for Fixed Charges to Consolidated Fixed Charges. "Consolidated Fixed Charges" means, for any period, without -------------------------- duplication, the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period, (ii) the cash portion of Consolidated Interest Expense during such period, (iii) the cash payment portion of current maturities of Funded Debt, and (iv) all cash Dividends paid in such period, in each case for the Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP. For the portion of any such period which is prior to the Closing Date, Consolidated Fixed Charges shall be calculated with respect to the Hotel Inc. Business. "Consolidated Funded Debt" means Funded Debt of the Parent ------------------------ Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP. "Consolidated Interest Expense" means, for any period, all ----------------------------- interest expense, including the amortization of debt discount and premium and the interest component under Capital Leases for the Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP. For the portion of any such period which is prior to the Closing Date, Consolidated Interest Expense shall be calculated with respect to the Hotel Inc. Business based 6 upon an annualization of actual interest expense for the portion of such period elapsed since the Closing Date. "Consolidated Legal Entity Assets" means, for any Person and its -------------------------------- Subsidiaries as of any date of determination, the total assets of such Person and its Subsidiaries on a consolidated basis as reflected in the most recent tax return of such Person. "Consolidated Legal Entity EBITDA" means, for any Person and its -------------------------------- Subsidiaries as of any date of determination, the sum of (i) net income (excluding for purposes hereof extraordinary gains or losses and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses), plus (ii) interest expense ---- (including the amortization of debt discount and premium and the interest component under Capital Leases), plus (iii) Federal, state or ---- other income taxes, plus (iv) depreciation and amortization, in each ---- case for such Person and its Subsidiaries on a consolidated basis as reflected in the most recent tax return of such Person and for the period covered by such tax return. "Consolidated Legal Entity Gross Revenues" means, for any Person ---------------------------------------- and its Subsidiaries as of any date of determination, the gross revenues of such Person and its Subsidiaries on a consolidated basis as reflected in the most recent tax return of such Person and for the period covered by such tax return. "Consolidated Net Income" means, for any period, the net income ----------------------- of the Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP, but excluding for purposes hereof extraordinary gains or losses, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses. For the portion of any such period which is prior to the Closing Date, Consolidated Net Income shall be calculated with respect to the Hotel Inc. Business. "Consolidated Net Income Available for Fixed Charges" means, for --------------------------------------------------- any period, the sum of Consolidated Adjusted EBITDA minus Capital ----- Expenditures made or incurred (excluding, for purposes hereof, up to $27,000,000 of Capital Expenditures for Audobon Woods during fiscal year 1995) plus Rentals, in each case for the Parent Company and its ---- Subsidiaries on a consolidated basis determined in accordance with GAAP. For the portion of any such period which is prior to the Closing Date, Consolidated Net Income Available for Fixed Charges shall be calculated with respect to the Hotel Inc. Business. "Consolidated Net Worth" means total stockholders' equity for the ---------------------- Parent Company and its Subsidiaries on a consolidated basis as determined in accordance with GAAP. 7 "Contractual Obligation" means, as to any Person, any provision ---------------------- of any material security issued by such Person or of any material agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Date" means (i) the date of each request for Extension of ----------- Credit pursuant to a Notice of Borrowing or a Notice of Conversion, in the case of Committed Revolving Loans and Swingline Loans, a notice of request for issuance or extension of a Letter of Credit in accordance with the provisions of Section 2.2(a), in the case of Letters of Credit, and a Competitive Bid Request, in the case of Competitive Loans, and (ii) the date of any such Extension of Credit relating thereto. "Credit Documents" means this Credit Agreement, the Notes, the ---------------- Pledge Agreement, the Assignment and Assumption, any Joinder Agreements and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Credit Party" means any of the Borrower and the Guarantors. ------------ "Credit Party Obligations" means, without duplication, all of the ------------------------ obligations of the Borrower and the other Credit Parties to the Lenders and the Agent, whenever arising, under this Credit Agreement, the Notes or any of the other Credit Documents to which the Borrower or any other Credit Party is a party. "Currency Protection Agreement" shall mean any foreign exchange ----------------------------- contract, currency swap agreement or other financial agreement or arrangement designed to protect against fluctuations in currency values. "Default" means any event, act or condition which with notice or ------- lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that, at such ----------------- time (a) has failed to make a Loan, issue a Letter of Credit or fund a Participation Interest required pursuant to the term of this Credit Agreement, (b) has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. "Disqualified Stock" means any capital stock which, by its terms ------------------ (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily 8 redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part on, or prior to, or is exchangeable for debt securities of the Parent Company or any of its Subsidiaries prior to, the first anniversary of the Termination Date. "Distribution" means such term as defined in the Recitals hereto. ------------ "Dividends" means any payment, distribution or dividend (other --------- than a dividend or distribution payable solely in stock of the Person making such payment, distribution or dividend) on, or any payment on account of the purchase, redemption or retirement of, or any other distribution in respect of, any shares of any class of stock or other ownership interest in a Person (including any such payment or distribution in cash or in property or obligations). "Dollars" and "$" means dollars in lawful currency of the United ------- - States of America. "Effective Date of Assignment" means such term as defined in ---------------------------- Section 11.3(b). "Eligible Assignee" means (A) (i) a commercial bank organized ----------------- under the laws of the United States or any state thereof and (ii) a commercial bank organized under the laws of any other country, or a political subdivision thereof, provided that (a) such bank is acting through a branch or agency located in the United States or (b) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, in each case (under clauses (i) and (ii) above) that is reasonably acceptable to the Agent and the Borrower and (B) any Lender or its parent company or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company. It shall be deemed reasonable for the Borrower to refuse to accept as an "Eligible Assignee" any entity the inclusion of which as a Lender hereunder would be reasonably likely to increase amounts payable by the Borrower under Sections 3.5, 3.8, 3.9 or 3.10 or give rise to the circumstances described in Section 3.6. "Eligible Participant" means any entity satisfying the -------------------- requirements set forth in the first sentence of the definition of "Eligible Assignee" other than the requirement for the Borrower's approval. "Embassy Suites" means Embassy Suites, Inc., a Delaware -------------- corporation and the initial Borrower under this Credit Agreement subject to release upon satisfaction of the conditions set out in Section 5.2. 9 "Environmental Laws" shall mean any and all lawful and applicable ------------------ Federal, state, local and foreign statutes, laws, regulations, ordinances, codes, rules, judgments, orders, decrees, permits, licenses or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Transaction" means (i) the issuance by the Borrower or ------------------ any of its Subsidiaries of new shares of its capital stock, unless such new shares are being issued in exchange for an ownership interest in another Person or in exchange for substantially all of the assets of another Person in connection with an acquisition permitted by Section 8.4(c), (ii) an issuance by the Borrower or any of its Subsidiaries of any shares of its capital stock pursuant to the exercise of options or warrants and (iii) an issuance by the Borrower or any of its Subsidiaries of any shares of its capital stock pursuant to the conversion of any debt securities (including without limitation any Subordinated Debt) to equity. "ERISA" means the Employee Retirement Income Security Act of ----- 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. "Eurodollar Loan" means any Loan bearing interest at a rate --------------- determined by reference to the Eurodollar Rate. "Eurodollar Rate" means, for the Interest Period for each --------------- Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined pursuant to the following formula: Eurodollar Rate = Interbank Offered Rate ---------------------------------- 1 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage" means for any Interest Period, ----------------------------- the average daily percentage (expressed as a decimal) which is in effect from time to time during such Interest Period under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities 10 that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means such term as defined in Section 9.1. ---------------- "Excluded Taxes" means such term as is defined in Section 3.9(a). -------------- "Existing Letters of Credit" means those Letters of Credit -------------------------- outstanding on the Closing Date and identified on Schedule 2.2(a). --------------- "Extension of Credit" means, as to any Lender, the making of a ------------------- Loan by such Lender or the issuance of, or participation in, a Letter of Credit by such Lender. "Federal Funds Rate" means, for any day, the rate of interest per ------------------ annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 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 by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (A) if such day is not a Business Day, the -------- Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (B) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent. "Form 10" means the registration statement on Form 10 filed with ------- and declared effective by the Securities and Exchange Commission in respect of the Distribution. "Former Plan" means any employee benefit plan in respect of which ----------- the Borrower or a Commonly Controlled Entity has engaged in a transaction described in Section 4069 or Section 4212(c) of ERISA and with respect to which transaction the Borrower or Commonly Controlled Entity, as applicable, has as its principal purpose the evasion of liability described in such sections. "Funded Debt" shall mean, with respect to any Person, without ----------- duplication, (i) all indebtedness of such Person for 11 borrowed money, (ii) all purchase money indebtedness of such Person, including, without limitation, the principal portion of all obligations of such Person under Capital Leases and (iii) the amount of any Qualified Stock; provided that, "Funded Debt" shall not include -------- ----------- indebtedness owing under or in connection with Joint Ventures to the extent such indebtedness is Non-Recourse Indebtedness. The Funded Debt of any Person shall include the Funded Debt of any partnership or joint venture in which such Person is a general partner (except as set forth in the preceding proviso). "GAAP" means generally accepted accounting principles in the ---- United States. "Government Acts" means such term as defined in Section 3.14(a). --------------- "Governmental Authority" means any Federal, state, local or ---------------------- foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantor" means Promus Co. as an initial Guarantor subject to --------- release upon satisfaction of the conditions set out in Section 5.2 and each of the other Persons identified as a "Guarantor" on the signature pages hereto, and each other Additional Credit Party, together with their successors and permitted assigns. "Guaranty Obligations" means, with respect to any Person, without -------------------- duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including, without limitation, any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. 12 "Hotel Corp." means Promus Hotel Corporation, a Delaware ----------- corporation and a Guarantor under this Credit Agreement upon satisfaction of the conditions set out in Section 5.2. "Hotel Facility" means such term as defined in the Recitals -------------- hereto. "Hotel Inc." means Promus Hotels, Inc., a Delaware corporation ---------- and the subsequent Borrower under this Credit Agreement upon satisfaction of the conditions set out in Section 5.2. "Hotel Inc. Assignment and Assumption Agreement" means the ---------------------------------------------- Assignment, Assumption and Release Agreement among Embassy Suites, Hotel Inc. and the Agent, substantially in the form of Schedule -------- 11.3(b). ------- "Hotel Inc. Business" means the "Hotel Business" described under ------------------- the subheading "PHC Business and Properties" under the heading "The Distribution" in the Proxy Statement. "Indebtedness" of any Person shall mean, without duplication, (i) ------------ all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (iii) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations, including, without limitation, intercompany items, of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt incurred in the ordinary course of business) which would appear as liabilities on a balance sheet of such Person, (v) all obligations of such Person under take-or-pay arrangements or under commodities agreements, (vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds or production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (vii) all Guaranty Obligations of such Person, (viii) the principal portion of all obligations of such Person under Capital Leases, (ix) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements, (x) the maximum amount of all letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), and (xi) the amount of any 13 Disqualified Stock. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner (except to the extent any such Indebtedness is Non-Recourse Indebtedness). "Insolvency" means with respect to any Multiemployer Plan, the ---------- condition that such Plan is insolvent within the meaning of Section 4245(b)(i) of ERISA. "Insolvent" means pertaining to a condition of Insolvency. --------- "Interbank Offered Rate" means, with respect to any Eurodollar ---------------------- Loan for the Interest Period applicable thereto, (i) the interest rate per annum for deposits in Dollars for a maturity most nearly comparable to such Interest Period which appears on page 3740 or 3750, as applicable, of the Dow Jones Telerate Screen as of 11:00 A.M. (Charlotte, North Carolina time) on the day that is two (2) Business Days prior to the first day of such Interest Period or (ii) if such a rate does not appear on page 3750 of the Dow Jones Telerate Screen, an interest rate per annum (rounded to the next 1/1000th of 1%) equal to the rate at which deposits in Dollars approximately equal in principal amount to the Eurodollar Loan of the Agent, in its capacity as a Lender, included in such Eurodollar Loan, and for a maturity comparable to such Interest Period are offered to the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 A.M. (London time) on the date that is two (2) Business Days prior to the first day of such Interest Period. If no such offers or quotes are generally available for such amount, then the Agent shall be entitled to determine the Eurodollar Rate by estimating in its reasonable judgment the per annum rate (as described above) that would be applicable if such quote or offers were generally available. "Intercompany Indebtedness" means any Indebtedness of the Parent ------------------------- Company, the Borrower or any of their respective Subsidiaries which is owing to another of such Persons. "Interest Payment Date" means (i) as to any Base Rate Loan, the --------------------- last day of each March, June, September and December, the date of repayment of principal of such Loan and the Termination Date, (ii) as to any Eurodollar Loan or any Competitive Loan, the last day of each Interest Period for such Loan and the Termination Date, and in addition where the applicable Interest Period is more than 3 months, then also on the date 3 months from the beginning of the Interest Period, and each 3 months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except ------ that in the case of Eurodollar Loans where the next succeeding ---- Business Day 14 falls in the next succeeding calendar month, then on the next preceding Business Day. "Interest Period" means (i) with respect to any Eurodollar Loan, --------------- a period of one, two, three or six months' duration, as the Borrower may elect, commencing in each case on the date of the borrowing (including extensions and conversions) and (ii) with respect to any Competitive Loan, a period beginning on the date of borrowing and ending on the date specified in the respective Competitive Bid whereby the offer to make such Competitive Loan was extended, which shall be not less than 7 days nor more than 180 days' duration; provided, -------- however, (A) if any Interest Period would end on a day which is not a ------- Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that in the case of Eurodollar Loans, where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Termination Date, and (C) in the case of Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall, subject to clause (A) above, end on the last Business Day of such calendar month. "Interest Rate Protection Agreement" means any interest rate swap ---------------------------------- agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect against fluctuations in interest rates. "Investment", in any Person, shall mean any loan or advance to ---------- such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of such Person, or any capital contribution to such Person or any other similar investment in such Person. "Issuing Lender" means NationsBank, in its capacity as issuer of -------------- any Letter of Credit, or such other Lender as to which the Borrower may request and such Lender may agree. "Joinder Agreement" means a Joinder Agreement substantially in ----------------- the form of Schedule 7.12 hereto, executed and delivered by an ------------- Additional Credit Party in accordance with the provisions of Section 7.12. "Joint Venture" means any corporation, general or limited ------------- partnership or limited liability company in which the Parent Company, the Borrower or any of their respective Subsidiaries is a shareholder, partner or member which is not a Subsidiary of the Parent Company or the Borrower. "Lenders" means each of the Persons identified as a "Lender" on ------- the signature pages hereto, and each Person 15 which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "Letter of Credit" means the Existing Letters of Credit and any ---------------- letter of credit issued by the Issuing Lender pursuant to the terms hereof, as such Letter of Credit may be amended, modified, extended, renewed or replaced from time to time. "Letter of Credit Fee" means such term as defined in Section -------------------- 3.4(b). "Level I Period" means a period during which (i) the Parent -------------- Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BBB+" or better by S&P or "Baa1" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 1.25:1.0. "Level II Period" means a period during which a Level I Period --------------- does not exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BBB" or better by S&P or "Baa2" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 1.75:1.0 but greater than or equal to 1.25:1.0. "Level III Period" means a period during which neither a Level I ---------------- Period nor a Level II Period shall exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BBB-" or better by S&P or "Baa3" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 2.25:1.0 but greater than or equal to 1.75:1.0. "Level IV Period" means a period during which none of a Level I --------------- Period, a Level II Period nor a Level III Period shall exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BB+" or better by S&P or "Ba1" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 2.75:1.0 but greater than or equal to 2.25:1.0. 16 "Level V Period" means a period during which none of a Level I -------------- Period, a Level II Period, a Level III Period nor a Level IV Period shall exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BB" or worse by S&P or "Ba2" or worse by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be greater than or equal to 2.75:1.0. "Leverage Ratio" means, for any period, the ratio of Consolidated -------------- Funded Debt as of the end of such period to Consolidated Adjusted EBITDA for such period. "Lien" means any mortgage, pledge, hypothecation, assignment, ---- deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means a Committed Revolving Loan, a Swingline ---- ----- Loan and/or a Competitive Loan, as appropriate. "LOC Commitment" means the commitment of the Issuing Lender to -------------- issue Letters of Credit and with respect to each Lender, the commitment of such Lender to purchase participation interests in the Letters of Credit up to such Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced from time --------------- to time in accordance with the provisions hereof. "LOC Commitment Percentage" means, for each Lender a fraction ------------------------- (expressed as a percentage) the numerator of which is the LOC Commitment of such Lender at such time and the denominator of which is the LOC Committed Amount at such time, provided that if the LOC -------- Commitment Percentage of any Lender is to be determined after the LOC Committed Amount has been terminated, then the LOC Commitment Percentage of such Lender shall be determined immediately prior (and without giving effect) to such termination. "LOC Committed Amount" means, collectively, the aggregate amount -------------------- of all of the LOC Commitments of the Lenders to issue and participate in Letters of Credit as referenced in Section 2.2 and, individually, the amount of each Lender's LOC Commitment as specified in Schedule -------- 2.1(a). ------ 17 "LOC Documents" means, with respect to any Letter of Credit, such ------------- Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or at risk or (ii) any collateral security for such obligations. "LOC Obligations" means, at any time, the sum of (i) the maximum --------------- amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (ii) the aggregate amount of all drawings under Letters of ---- Credit honored by the Issuing Lender but not theretofore reimbursed. "Mandatory Borrowing" means such term as defined in Section ------------------- 2.2(e) and Section 2.3(b)(iii). "Material Adverse Effect" shall mean a material adverse effect on ----------------------- (i) the financial condition, operations, business or prospects of the Parent Company, the Borrower and their Subsidiaries taken as a whole, (ii) the ability of the Borrower and the Guarantors taken as a whole to perform any material obligation under the Credit Documents or (iii) the material rights and remedies of the Agent and the Lenders under the Credit Documents. "Material Asset Sale" means the sale, lease or other disposition ------------------- of an asset (other than non-hotel property or assets sold, leased or disposed of in the normal course of business) which either (i) together with all other such sales, leases or other dispositions of assets in the then current calendar year has a net book value in excess of ten percent (10%) of the consolidated assets of the Parent Company and its Subsidiaries at such time, or (ii) together with all other such sales, leases or other dispositions of assets since the Closing Date has a net book value in excess of twenty-five percent (25%) of the consolidated assets of the Parent Company and its Subsidiaries at such time; provided, however, that leases with a term -------- ------- of ten (10) years or less or which demise less than 100% of the subject asset shall not constitute leases of assets for purposes of this subparagraph. An Investment shall not constitute a "disposition" for purposes of this definition. "Material Environmental Amount" means any amount payable by the ----------------------------- Parent Company, the Borrower or their Subsidiaries not subject to payment or reimbursement by another Person in respect of or under any Environmental Law for remedial costs, compliance costs, compensatory damages, 18 punitive damages, fines, penalties or any combination thereof, that has a Material Adverse Effect. "Materials of Environmental Concern" means any gasoline or ---------------------------------- petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Moody's" means Moody's Investors Service, Inc., or any successor ------- or assignee of the business of such company in the business of rating securities. "Multiemployer Plan" means a Plan which is a multiemployer plan ------------------ as defined in Section 4001(a)(3) of ERISA. "NationsBank" means NationsBank, N.A. (Carolinas) and its ----------- successors. "Net Sale Proceeds" means for any Material Asset Sale, the gross ----------------- cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note receivable or otherwise, but only as and when received) received from such Material Asset Sale, net of reasonable transaction costs and payments of unassumed liabilities relating to the asset sold at the time of, or within sixty (60) days after, the date of such Material Asset Sale and the amount of such gross cash proceeds required to be used to repay any Indebtedness (other than Indebtedness owing under the Hotel Facility) which is secured by the respective assets which were sold. "Non-Excluded Taxes" means such term as defined in Section ------------------ 3.9(a). "Non-Guarantor Subsidiaries" means such term as defined in -------------------------- Section 7.12. "Non-Investment Grade" means debt or equity interests which are -------------------- not rated by S&P or Moody's or have a rating of less than "BBB-" by S&P or "Baa3" by Moody's. "Non-Recourse Indebtedness" means Indebtedness with respect to ------------------------- which recourse for payment is limited to specific assets encumbered by a Lien securing such Indebtedness; provided, however, that personal -------- ------- recourse of a holder of Indebtedness against any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate shall not, by itself, prevent any Indebtedness from being characterized as Non- Recourse Indebtedness. 19 "Note" or "Notes" means the Committed Revolving Notes, the ---- ----- Swingline Note and/or the Competitive Notes, collectively, separately or individually, as appropriate. "Notice of Borrowing" means the written notice of borrowing as ------------------- referenced and defined in Section 2.1(b)(i) or Section 2.3(b)(i), as appropriate. "Notice of Conversion/Extension" means the written notice of ------------------------------ extension or conversion as referenced and defined in Section 3.2. "Obligations" means, collectively, the Loans and LOC Obligations. ----------- "PBGC" means the Pension Benefit Guaranty Corporation established ---- under ERISA, and any successor thereto. "Parent Company" means, prior to the time of effectiveness of the -------------- Assignment and Assumption, Promus Co., and after the time of effectiveness of the Assignment and Assumption, Hotel Corp. "Participation Interest" means the purchase by a Lender of a ---------------------- participation interest in Letters of Credit as provided in Section 2.2(c), in Swingline Loans as provided in Section 2.3(b)(iii) or in Committed Revolving Loans as provided in Section 3.12. "Permitted Liens" shall mean: --------------- (i) Liens in favor of the Agent on behalf of the Lenders hereunder and under the Tranche B Credit Agreement; (ii) Liens (other than Liens created or imposed by the PBGC under ERISA) for taxes, assessments or governmental charges or levies not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business, provided that such Liens secure only amounts not yet -------- due and payable or, if due and payable, are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to 20 any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iv) Liens (other than Liens created or imposed by the PBGC under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, bids, leases, operating, reciprocal easement or similar agreements, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Liens in connection with attachments or judgments (including judgment or appeal bonds) in respect of which the Parent Company or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceeding; (vi) easements, rights-of-way, restrictions (including zoning restrictions and operating, reciprocal easement or similar agreements), and minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered Property for its intended purposes; (vii) Liens on Property securing purchase money Indebtedness (including Capital Leases) to the extent permitted under Section 8.1(c), provided that any such Lien attaches to -------- such Property concurrently with or within 90 days after the acquisition thereof; (viii) leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (ix) any interest or title of a lessor (including Liens and underlying leases to which such lessor or its property may be subject) under, and Liens arising from Uniform Commercial Code financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases permitted by this Credit Agreement; (x) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 8.5; (xi) Liens on assets at the time such assets are acquired in accordance with Section 8.4(a) or 21 8.4(c), including continuations or renewals thereof in connection with the extension, renewal, refunding or refinancing of the Indebtedness secured thereby; provided that such Liens are not -------- created in contemplation of such acquisition; (xii) Liens on assets of any Person at the time such Person becomes a Subsidiary in accordance with Section 8.4(a) or 8.5, including continuations or renewals thereof in connection with the extension, renewal, refunding or refinancing of the Indebtedness secured thereby; provided that such Liens are not -------- created in contemplation of such Person becoming a Subsidiary; (xiii) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xiv) Liens existing as of the Closing Date and set forth on Schedule 8.2, including continuations or renewals ------------ thereof in connection with the extension, renewal, refunding or refinancing of the Indebtedness secured thereby to the extent permitted under Section 8.1; provided that no such Lien shall at -------- any time be extended to or cover any property of the Parent Company, the Borrower or any of their respective Subsidiaries other than the property subject thereto on the Closing Date, except by virtue of an after acquired property provision set forth in the current documentation of such Liens; (xv) Liens securing Non-Recourse Indebtedness of any Specified Subsidiaries permitted pursuant to Section 8.1(k) hereof so long as such Liens only encumber the hotel properties owned by the Specified Subsidiary being developed or financed with such Non-Recourse Indebtedness, including any real property and furniture, fixtures and equipment related thereto, it being understood and agreed that such assets of such Specified Subsidiary also may secure Non-Recourse Indebtedness incurred by other Subsidiaries or Joint Ventures pursuant to Section 8.1(k); (xvi) Liens securing any Interest Rate Protection Agreements or Currency Protection Agreements entered into, in either case, with a Lender or an Affiliate of a Lender hereunder, permitted by Section 8.1(d), which obligations may be equally and ratably secured with the Obligations; (xviii) Liens on the Parent Company's, the Borrower's or any of their respective Subsidiaries' equity interest in any Specified Subsidiary or Joint Venture so long as such Liens only secure Indebtedness 22 of such Specified Subsidiary or Joint Venture, it being understood and agreed that such equity interests in any Specified Subsidiaries or Joint Ventures also may secure Indebtedness incurred by other Specified Subsidiaries or Joint Ventures permitted under Section 8.1; and (xix) Liens not otherwise permitted hereunder securing amounts in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding. "Person" means any individual, partnership, joint venture, firm, ------ corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan as defined in Section 3(3) ---- of ERISA which is not a Multiemployer Plan and in respect of which the Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA. "Plan Reorganization" means with respect to any Multiemployer ------------------- Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Pledge Agreement" means the Pledge Agreement substantially in ---------------- the form of Schedule 5.1(a) attached hereto, dated as of the Closing --------------- Date and executed and delivered by Hotel Corp., Hotel Inc. and certain other Credit Parties existing after the Assignment and Assumption, in favor of the Agent, for the benefit of the Lenders, to secure their obligations under the Credit Documents, as amended, modified, extended, renewed or replaced from time to time. "Prime Rate" means the per annum rate of interest established and ---------- announced from time to time by the Agent at its principal office in Charlotte, North Carolina as its Prime Rate. Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of 12:01 a.m. of the Business Day on which each change in the Prime Rate is announced by the Agent. The Prime Rate is a reference rate used by the Agent in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. "Pro Forma Basis" shall mean, with respect to any transaction, --------------- that such transaction shall be deemed to have occurred as of the first day of the four fiscal-quarter period ending as of the last day of the fiscal quarter most recently ended preceding the date of such transaction with respect to which the Agent has received annual or quarterly financial information, accompanied by an officer's certificate, in accordance with the provisions of Section 23 7.1. As used herein, "transaction" shall mean any merger or consolidation as referred to in Section 8.4(a) and 8.4(c). "Projections" means such term as is defined in Section 6.1(c). ----------- "Promus Co." means The Promus Companies Incorporated, a Delaware ---------- corporation and an initial Guarantor under this Credit Agreement subject to release upon satisfaction of the conditions set out in Section 5.2. "Property" means any interest in any kind of property or asset, -------- whether real, personal or mixed, or tangible or intangible. "Proxy Statement" means the Proxy Statement dated April 25, 1995 --------------- of Promus Co. describing the Distribution and mailed to the shareholders of Promus Co. for purposes of its May 26, 1995 shareholders meeting. "Qualified Stock" means any capital stock which, by its terms (or --------------- by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part on, or on or after, or is exchangeable for debt securities of the Parent Company or any of its Subsidiaries on or after, the first anniversary of the Termination Date. "Regulation D, G, T, U, or X" means Regulation D, G, T, U or X, --------------------------- respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Rentals" means, as of the date of determination, all fixed ------- payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by a Person as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid (whether designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross rents. "Reorganization" means such term as defined in the Recitals. -------------- "Reorganization Agreement" means the Distribution Agreement ------------------------ between Embassy Suites and Hotel Inc., as more particularly described in the Proxy Statement. 24 "Reorganization Documents" means, collectively, the ------------------------ Reorganization Agreement and the Tax Sharing Agreement, the Trademark Assignment Agreement and the Employee Benefits Allocation Agreement, as such terms are defined in the Proxy Statement. "Reportable Event" means a "reportable event" as defined in ---------------- Section 4043(b) of ERISA with respect to which the notice requirements to the PBGC have not been waived. "Required Lenders" means Lenders holding in the aggregate at ---------------- least fifty-one percent (51%) of the Commitments (other than with respect to the Letters of Credit and Swingline Loans), or if the aggregate Commitments have been terminated, Lenders in the aggregate holding at least fifty-one percent (51%) of the principal amount of Obligations then outstanding (provided that in the case of Swingline -------- Loans, the amount of each Lender's funded participation interest in such Swingline Loans shall be considered for purposes hereof as if it were a direct loan and not a participation interest, and the aggregate amount of Swingline Loans owing to the Swingline Lender shall be considered for purposes hereof as reduced by the amount of such funded participation interests); provided, however, that if any Lender shall -------- ------- be a Defaulting Lender at such time then there shall be excluded from the determination of Required Lenders the amount of such Defaulting Lender's Commitments or Obligations, as appropriate. "Requirements of Law" means, as to any Person, the certificate of ------------------- incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its material property or assets. "Revolving Commitment" means, with respect to each Lender, the -------------------- commitment of such Lender to make Committed Revolving Loans in an aggregate principal amount at any time outstanding up to such Lender's Revolving Committed Amount as specified in Schedule 2.1(a), as such --------------- amount may be reduced from time to time in accordance with the provisions hereof. "Revolving Commitment Percentage" means, for each Lender, a ------------------------------- fraction (expressed as a percentage) the numerator of which is the Revolving Commitment of such Lender at such time and the denominator of which is the Revolving Committed Amount at such time, provided that -------- if the Revolving Commitment Percentage of any Lender is to be determined after the Revolving Committed Amount has been terminated, then the Revolving Commitment Percentage of such Lender shall be determined immediately prior (and without giving effect) to such termination. 25 "Revolving Committed Amount" means, collectively, the aggregate -------------------------- amount of all of the Revolving Commitments as referenced in Section 2.1(a) and, individually, the amount of each Lender's Revolving Commitment as specified in Schedule 2.1(a). --------------- "S&P" means Standard & Poor's Ratings Group, a division of McGraw --- Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "Single Employer Plan" means any Plan which is covered by Title -------------------- IV of ERISA. "Solvent" and "Solvency" means with respect to any Person on a ------- -------- particular date, the condition that on such date, (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small amount of capital. "Specified Subsidiary" means any Subsidiary of the Borrower so -------------------- long as such Subsidiary has no material assets other than the hotel property to be developed and financed with Non-Recourse Indebtedness incurred pursuant to Section 8.1(k). "Subject Properties" means such term as defined in Section ------------------ 6.17(a). "Subordinated Debt" means such term as defined in Section 8.6. ----------------- "Subsidiary" means, as to any Person, (a) any corporation more ---------- than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than 50% of the equity interest at any time and in which such Person 26 possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such partnership, association, joint venture or other entity, whether through the ownership of equity interests, by contract or otherwise. Unless otherwise specified, any reference to a Subsidiary is intended as a reference to a Subsidiary of the Borrower. "Swingline Commitment" means the commitment of the Swingline -------------------- Lender to make Swingline Loans in an aggregate principal amount at any time outstanding up to the Swingline Committed Amount, and the commitment of the Lenders to purchase participation interests in the Swingline Loans up to such Lender's Revolving Commitment Percentage as provided in Section 2.3(b)(iii), as such amounts may be reduced from time to time in accordance with the provisions hereof. "Swingline Committed Amount" means the amount of the Swingline -------------------------- Lender's Swingline Commitment as specified in Section 2.3(a). "Swingline Lender" means NationsBank, in its capacity as such, ---------------- together with its permitted assigns. "Swingline Loan" means a swingline revolving loan made by the -------------- Swingline Lender pursuant to the provisions of Section 2.3(a). "Swingline Note" means the promissory note of the Borrower in -------------- favor of the Swingline Lender evidencing the Swingline Loans provided pursuant to Section 2.3(d), as such promissory note may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Termination Date" means such term as defined in Section 2.1(a). ---------------- "Third Party Investment Basket Amount" means such term as defined ------------------------------------ in Section 8.1(1). "Threshold Requirement" means such term as defined in Section --------------------- 7.12. "Tranche A Credit Agreement" means this Credit Agreement. -------------------------- "Tranche B Credit Agreement" means that Tranche B Credit -------------------------- Agreement dated as of the date hereof among Embassy Suites, Promus Co., certain subsidiaries as now or hereafter may become a party thereto, the lenders named therein and party thereto and NationsBank, N.A. (Carolinas), as Agent, as amended, modified, extended, renewed or restated from time to time. "UCP" means such term as defined in Section 2.2(g). --- 27 "Underfunding" means an excess of all accrued benefits under a ------------ Plan (based on those assumptions used to fund such Plan), determined as of the most recent annual valuation date, over the value of the assets of such Plan allocable to such accrued benefits. "Wholly Owned Subsidiary" means, as to any Person, any Subsidiary ----------------------- 100% of whose voting stock or other equity interests and control is at the time owned by such Person directly or indirectly through other Wholly Owned Subsidiaries. 1.2 Computation of Time Periods. For purposes of computation of --------------------------- periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 Accounting Terms. The financial statements to be furnished by ---------------- the Borrower pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Agent); provided, that, except as otherwise specifically -------- provided herein, all computations determining compliance with Section 7.11 shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements delivered to the Agent on or before the Closing Date. SECTION 2 CREDIT FACILITIES ----------------- 2.1 Committed Revolving Loans. ------------------------- (a) Revolving Commitment. Subject to the terms and conditions -------------------- hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make revolving credit loans ("Committed Revolving Loans") to the Borrower from time to time ------------------------- from the Closing Date until the fifth anniversary of the Closing Date, or such earlier date as the Revolving Commitments shall have been terminated as provided herein (the "Termination Date") for the ---------------- purposes hereinafter set forth; provided, however, that (i) with -------- ------- regard to each Lender individually, the sum of such Lender's share of outstanding Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Swingline Loans or Competitive Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus such Lender's LOC ---- Commitment Percentage of LOC Obligations plus such Lender's Revolving ---- Commitment Percentage of Swingline Loans shall not exceed such Lender's Revolving Committed Amount, and (ii) with regard to the Lenders collectively, the sum of the aggregate amount of outstanding Committed 28 Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Swingline Loans or Competitive Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus the aggregate amount of LOC ---- Obligations plus the aggregate amount of Swingline Loans plus the ---- ---- aggregate amount of Competitive Loans (other than Competitive Loans made for the purpose of repaying Committed Revolving Loans or Swingline Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) shall not exceed THREE HUNDRED MILLION DOLLARS ($300,000,000) (as such aggregate maximum amount may be reduced from time to time, the "Revolving --------- Committed Amount"). Committed Revolving Loans may consist of Base ---------------- Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be prepaid or repaid and reborrowed in accordance with the provisions hereof; provided, however, that no more -------- ------- than ten (10) Eurodollar Loans shall be outstanding hereunder at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date and have the same duration, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. (b) Committed Revolving Loan Borrowings. ----------------------------------- (i) Notice of Borrowing. The Borrower shall request a ------------------- Committed Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing in the case of Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Committed Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. A form of Notice of Borrowing (a "Notice of Borrowing") is attached as Schedule ------------------- -------- 2.1(b)(i). If the Borrower shall fail to specify in any --------- such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Committed Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder. 29 Promptly upon receipt of each Notice of Borrowing, the Agent shall give notice to each Lender of the contents thereof and each such Lender's Revolving Commitment Percentage thereof. (ii) Minimum Amounts. Each Committed Revolving Loan --------------- borrowing shall be in a minimum aggregate amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining available amount of the Revolving Commitment, if less, provided, however, that no Eurodollar -------- ------- Loan shall be permitted for a principal amount less than $5,000,000). (iii) Advances. Each Lender will make its Revolving -------- Commitment Percentage of each Committed Revolving Loan borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Schedule -------- 11.1, or at such other office as the Agent may designate in ---- writing, by 10:00 A.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars (or by 1:00 P.M. (Charlotte, North Carolina time) on such date if the applicable Notice of Borrowing is received on the same date) and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. (c) Repayment. The principal amount of all Committed Revolving --------- Loans shall be due and payable in full on the Termination Date. (d) Interest. Subject to the provisions of Section 3.1, -------- Committed Revolving Loans shall bear interest at a per annum rate equal to: (i) Base Rate Loans. During such periods as Committed --------------- Revolving Loans shall be comprised of Base Rate Loans, the sum of the Base Rate plus the Applicable Percentage; and ---- (ii) Eurodollar Loans. During such periods as ---------------- Committed Revolving Loans shall be comprised of Eurodollar Loans, the sum of the Eurodollar Rate plus the Applicable ---- Percentage. Interest on Committed Revolving Loans shall be payable in arrears on each Interest Payment Date. 30 (e) Committed Revolving Notes. The Committed Revolving Loans ------------------------- made by each Lender shall be evidenced by a duly executed promissory note of the Borrower to each Lender substantially in the form of Schedule 2.1(e). --------------- 2.2 Letter of Credit Subfacility. ---------------------------- (a) Issuance. Subject to the terms and conditions hereof, the -------- Issuing Lender shall issue, and the Lenders shall participate in, Letters of Credit for the account of the Borrower, the Parent Company or any of its Subsidiaries from time to time upon request from the Closing Date until the Termination Date in a form customarily used by the Issuing Lender or in such other form reasonably acceptable to the Issuing Lender and delivered to the Issuing Lender and the Agent; provided, however, that (i) the aggregate amount of LOC Obligations -------- ------- shall not at any time exceed TWENTY MILLION DOLLARS ($20,000,000) (the "LOC Committed Amount") and (ii) the sum of the aggregate amount of -------------------- Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Swingline Loans or Competitive Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus the aggregate amount of LOC ---- Obligations plus the aggregate amount of Swingline Loans plus the ---- ---- aggregate amount of Competitive Loans (other than Competitive Loans made for the purpose of repaying Committed Revolving Loans or Swingline Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) shall not at any time exceed the aggregate Revolving Committed Amount and (iii) any Letter of Credit shall be issued in the ordinary course of the business of the Parent Company and its Subsidiaries. Except as otherwise expressly agreed upon by all the Lenders, no Letter of Credit shall have an original expiry date more than one year from the date of issuance; provided, however, so long as no Default or Event of -------- ------- Default has occurred and is continuing and subject to the other terms and conditions to the issuance of Letters of Credit hereunder, the expiry dates of Letters of Credit may be extended annually on each anniversary date of their date of issuance for an additional one year period; provided, further, that no Letter of Credit, as originally -------- ------- issued or as extended, shall have an expiry date extending beyond the Termination Date unless, but only to the extent that, the Borrower ------ shall provide cash collateral to the Issuing Lender on the date of issuance or extension in an amount equal to the maximum amount available to be drawn under such Letter of Credit. The issuance and expiry date of each Letter of Credit shall be a Business Day. (b) Notice and Reports. The request for the issuance of a ------------------ Letter of Credit shall be submitted to the Issuing Lender with a copy to the Agent at least three (3) Business Days prior to the requested date of issuance. The Issuing 31 Lender will, at least quarterly and more frequently upon request, provide to the Agent for dissemination to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the account party, the beneficiary, the face amount, and expiry date, as well as any payments or expirations which may have occurred. The Issuing Lender will further provide to the Agent promptly upon request copies of the Letters of Credit. The Issuing Lender will provide to the Agent at least weekly, and more frequently upon request, a summary report of the nature and extent of LOC Obligations then outstanding. (c) Participations. Each Lender, upon issuance of a Letter of -------------- Credit, shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its LOC Commitment Percentage of the obligations under such Letter of Credit and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Lender therefor and discharge when due, its LOC Commitment Percentage of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to the Issuing Lender its LOC Commitment Percentage of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event; provided, however, that a -------- ------- Lender shall not be obligated to reimburse the Issuing Lender for any wrongful payment made by such Issuing Bank as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Issuing Lender. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any Letter ------------- of Credit, the Issuing Lender will promptly notify the Borrower and the Agent. Unless the Borrower shall immediately notify the Issuing Lender of its intent to otherwise reimburse the Issuing Lender, the Borrower shall be deemed to have requested a Committed Revolving Loan in the amount of the drawing as provided in subsection (e) 32 hereof, the proceeds of which will be used to satisfy the reimbursement obligations. The Borrower shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Committed Revolving Loan obtained hereunder or otherwise) in same day funds as provided herein. If the Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing shall bear interest at a per annum rate equal to the Base Rate plus two percent (2%). The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of set-off, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including, without limitation, any defense based on any failure of the Borrower to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit; provided, -------- however, that the Borrower shall not be obligated to reimburse the ------- Issuing Lender for any wrongful payment made by such Issuing Lender under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Issuing Lender. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's LOC Commitment Percentage of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full following such request in accordance with the preceding sentence, such Lender shall, on demand, pay to the Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date of drawing, the Federal Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance other than the gross negligence or willful misconduct of the Issuing Lender and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the Obligations hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. 33 (e) Repayment with Committed Revolving Loans. On any day on ---------------------------------------- which the Borrower shall have requested, or been deemed to have requested, a Committed Revolving Loan borrowing to reimburse a drawing under a Letter of Credit, the Agent shall give notice to the Lenders that a Committed Revolving Loan has been requested or deemed requested in connection with a drawing under a Letter of Credit, in which case a Committed Revolving Loan borrowing comprised solely of Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be immediately ------------------- made from all Lenders (without giving effect to any termination of the Commitments pursuant to Section 9.2) pro rata based on each Lender's --- ---- respective Revolving Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each such Lender hereby irrevocably agrees to make such Committed Revolving Loans promptly upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date (or the next Business Day if such notice is received after 2:00 P.M. (Charlotte, North Carolina time)) notwithstanding (i) the amount of Mandatory Borrowing may not --------------- comply with the minimum amount for borrowings of Committed Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 5.3 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure of any such request or deemed request for a Committed Revolving Loan to be made by the time otherwise required in Section 2.1(b), (v) the date of such Mandatory Borrowing (provided that such date must be a Business Day occurring prior to the Termination Date), or (vi) any reduction in the Revolving Committed Amount after any such Letter of Credit may have been drawn upon; provided, however, that in the event any such -------- ------- Mandatory Borrowing should be less than the minimum amount for borrowings of Committed Revolving Loans otherwise provided in Section 2.1(b)(ii), the Borrower shall pay to the Agent for its own account an administrative fee of $500. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each such Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) its Participation Interest in the outstanding LOC Obligations; provided, further, that in the event any -------- ------- Lender shall fail to fund its Participation Interest on the day the Mandatory Borrowing would otherwise have occurred, then the amount of such Lender's unfunded Participation Interest therein shall bear interest payable to the Issuing Lender upon demand, at the rate equal to, if 34 paid within two (2) Business Days of such date, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate. (f) Modification, Extension. The issuance of any supplement, ----------------------- modification, amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (g) Uniform Customs and Practices. The Issuing Lender may have ----------------------------- the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (the "UCP"), in which case the UCP --- may be incorporated therein and deemed in all respects to be a part thereof. 2.3 Swingline Loan Subfacility. -------------------------- (a) Swingline Commitment. Subject to the terms and conditions -------------------- of this Section 2.3 and in reliance upon the representations and warranties set forth herein, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline -------------- --------- Loans") from time to time from the Closing Date until the Termination ----- Date for the purposes hereinafter set forth; provided, however, (i) -------- ------- the aggregate amount of Swingline Loans outstanding at any time shall not exceed TWENTY MILLION DOLLARS ($20,000,000) (the "Swingline --------- Committed Amount"), and (ii) the sum of the aggregate amount of ---------------- Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Swingline Loans or Competitive Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus the aggregate amount of LOC ---- Obligations plus the aggregate amount of Swingline Loans plus the ---- ---- aggregate amount of Competitive Loans (other than Competitive Loans made for the purpose of repaying Committed Revolving Loans or Swingline Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) shall not exceed the aggregate Revolving Committed Amount. Swingline Loans may be prepaid or repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Borrowings. ------------------------- (i) Notice of Borrowing and Disbursement. The Borrower ------------------------------------ shall request a Swingline Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Swingline Lender and the Agent not later than 12:00 Noon (Charlotte, North Carolina time) on the Business Day of the requested Swingline Loan borrowing. Each such request for borrowing shall be irrevocable and shall specify (A) that a Swingline Loan 35 borrowing is requested, (B) the date of the requested Swingline Loan borrowing (which shall be a Business Day) and (C) the aggregate principal amount of the Swingline Loan borrowing requested. A form of Notice of Borrowing (a "Notice of --------- Borrowing") is attached as Schedule 2.1(b)(i). The Swingline --------- ------------------ Lender will make each Swingline Loan borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Schedule 11.1, or at such other office as the Agent ------------- may designate in writing, by 1:30 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office with the amount of such borrowing as made available to the Agent by the Swingline Lender and in like funds as received by the Agent. (ii) Minimum Amounts. Each Swingline Loan borrowing shall --------------- be in a minimum principal amount of $250,000 and integral multiples of $100,000 in excess thereof. (iii) Repayment of Swingline Loans. Each Swingline Loan ---------------------------- borrowing shall be due and payable on the earliest of (A) 30 days from the date of borrowing thereof, (B) the date of the next Committed Revolving Loan borrowing, if sooner, or (C) the Termination Date. If, and to the extent, any Swingline Loans shall be outstanding on the date of any Committed Revolving Loan borrowing (other than an extension or a conversion of such Committed Revolving Loan), such Swingline Loans shall first be repaid from the proceeds of such Committed Revolving Loan borrowing prior to disbursement to the Borrower. If, and to the extent, Committed Revolving Loans or Competitive Loans are not requested prior to the Termination Date or the end of any such 30 day period from the date of any such Swingline Loan borrowing, or the date of the next extension or conversion of a Committed Revolving Loan after any such Swingline Loan borrowing, the Borrower shall be deemed to have requested a Committed Revolving Loan comprised entirely of Base Rate Loans in the amount of such Swingline Loan borrowing then outstanding, the proceeds of which shall be used to repay the Swingline Lender for such Swingline Loan. In addition, the Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Agent, demand repayment of its Swingline Loans by way of a Committed Revolving Loan borrowing, in which case the Borrower shall be deemed to have requested a Committed Revolving Loan borrowing comprised entirely of Base Rate Loans in the amount of such Swingline 36 Loans; provided, however, that any such demand shall be deemed to -------- ------- have been given one Business Day prior to the Termination Date and upon the occurrence of any Event of Default described in Section 9.1(f) and also upon acceleration of the Obligations hereunder, whether on account of an Event of Default described in Section 9.1(f) or any other Event of Default, and the exercise of remedies in accordance with the provisions of Section 9.2 hereof (each such Committed Revolving Loan borrowing made on account of any such deemed request therefor as provided herein being hereinafter referred to as a "Mandatory Borrowing"). Each Lender ------------------- hereby irrevocably agrees to make such Committed Revolving Loans promptly upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date (or the next Business Day if such notice is received after 2:00 P.M. (Charlotte, North Carolina time)) notwithstanding (I) the amount --------------- of Mandatory Borrowing may not comply with the minimum amount for borrowings of Committed Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 5.3 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Committed Revolving Loan to be made by the time otherwise required in Section 2.1(b)(i), (V) the date of such Mandatory Borrowing (provided that such date must be a Business Day occurring prior to the Termination Date), or (VI) any reduction in the Revolving Committed Amount or termination of the Commitments relating thereto immediately prior to such Mandatory Borrowing or contemporaneous therewith. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each Lender hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its respective Revolving Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 9.2), provided that (A) all -------- interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased, and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender 37 interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to, if paid within two (2) Business Days of the date of the Mandatory Borrowing, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate. (c) Interest on Swingline Loans. Subject to the provisions of --------------------------- Section 3.1, Swingline Loans shall bear interest at a per annum rate equal to the sum of the Base Rate plus the Applicable Percentage. ---- Interest on Swingline Loans shall be payable in arrears on each Interest Payment Date. (d) Swingline Note. The Swingline Loans shall be evidenced by a -------------- duly executed promissory note of the Borrower to the Swingline Lender in the original amount of the Swingline Committed Amount and substantially in the form of Schedule 2.3(d). --------------- 2.4 Competitive Loan Subfacility. ---------------------------- (a) Competitive Loans. Subject to the terms and conditions and ----------------- relying upon the representations and warranties herein set forth, from such time as the Borrower shall have attained, and for so long as the Borrower shall maintain, a senior unsecured long-term debt rating of "BBB-" or better by S&P or "Baa3" or better by Moody's, the Borrower may, from time to time from the Closing Date until the Termination Date, request and each Lender may, in its sole discretion, agree to make, Competitive Loans to the Borrower; provided, however, (i) the -------- ------- aggregate amount of Competitive Loans shall not at any time exceed the lesser of THREE HUNDRED MILLION DOLLARS ($300,000,000) or the ------ Revolving Committed Amount (the "Competitive Loan Maximum Amount"), ------------------------------- and (ii) the sum of the aggregate amount of Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Swingline Loans or Competitive Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus the aggregate amount of LOC Obligations plus the ---- ---- aggregate amount of Swingline Loans plus the aggregate amount of ---- Competitive Loans (other than Competitive Loans made for the purpose of repaying Committed Revolving Loans or Swingline Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) shall not at any time exceed the aggregate Revolving Committed Amount. Each Competitive Loan shall be not less than $5,000,000 in the aggregate and integral multiples of $1,000,000 in excess thereof (or the remaining available portion of the Competitive Loan Maximum Amount, if less). Competitive Loans may be repaid and reborrowed in accordance with the provisions hereof. 38 (b) Competitive Bid Requests. The Borrower may solicit ------------------------ Competitive Bids by delivery of a Competitive Bid Request substantially in the form of Schedule 2.4(b)-1 to the Agent by 12:00 ----------------- Noon (Charlotte, North Carolina time) on a Business Day not less than two (2) nor more than ten (10) Business Days prior to the date of a requested Competitive Loan borrowing. A Competitive Bid Request shall specify (i) the date of the requested Competitive Loan borrowing (which shall be a Business Day), (ii) the amount of the requested Competitive Loan borrowing and (iii) the applicable Interest Periods requested and shall be accompanied by payment of the Competitive Bid Request Fee, if any. The Agent shall promptly notify the Lenders of its receipt of a Competitive Bid Request and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto. A form of such notice is provided in Schedule 2.4(b)-2. No more than ----------------- three Competitive Bid Requests (e.g., the Borrower may request Competitive Bids for no more than three different Interest Periods at a time) shall be submitted at any one time and Competitive Bid Requests may be made no more frequently than once every ten (10) Business Days. (c) Competitive Bid Procedure. Each Lender may, in its sole ------------------------- discretion, make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid must be received by the Agent not later than 10:00 A.M. (Charlotte, North Carolina time) on the proposed date of a Competitive Loan borrowing; provided, however, that should the Agent, in its capacity as a Lender, -------- ------- desire to submit a Competitive Bid it shall notify the Borrower of its Competitive Bid and the terms thereof not later than 9:30 A.M. (Charlotte, North Carolina time) on the proposed date of a Competitive Loan borrowing. A Lender may offer to make all or part of the requested Competitive Loan borrowing and may submit multiple Competitive Bids in response to a Competitive Bid Request. The Competitive Bid shall specify (i) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (ii) the minimum (which shall be not less than $1,000,000 and integral multiples of $500,000 in excess thereof) and maximum principal amounts of the requested Competitive Loan or Loans as to which the Lender is willing to make, and (iii) the applicable interest rate or rates and Interest Period or Periods therefor. A form of such Competitive Bid is provided in Schedule 2.4(c). A Competitive Bid submitted by a Lender --------------- in accordance with the provisions hereof shall be irrevocable (absent manifest error). The Agent shall promptly notify the Borrower of all Competitive Bids made and the terms thereof. The Agent shall send a copy of each of the Competitive Bids to the Borrower for its records as soon as practicable. (d) Acceptance of Competitive Bids. The Borrower may, in its ------------------------------ sole and absolute discretion, subject only to the provisions of this subsection (d), accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid, 39 the Borrower shall give written notification (or telephone notice promptly confirmed in writing) of its acceptance of any or all such Competitive Bids to the Agent by 11:00 A.M. (Charlotte, North Carolina time) on the proposed date of a Competitive Loan advance; provided, -------- however, (i) the failure by the Borrower to give timely notice of its ------- acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (ii) the Borrower may accept Competitive Bids only in ascending order of rates, (iii) the aggregate amount of Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) the Borrower may accept a portion of a Competitive Bid in the event, and to the extent, acceptance of the entire amount thereof would cause the Borrower to exceed the principal amount specified in the Competitive Bid Request, subject however to the minimum amounts provided herein (and provided that where two or more such Lenders may submit such a Competitive Bid at the same such Competitive Bid Rate, then pro rata between or among such Lenders) and (v) no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof, except that where a portion of a Competitive Bid is accepted in accordance with the provisions of subsection (iv) hereof, then in a minimum principal amount of $100,000 and integral multiples thereof (but not in any event less than the minimum amount specified in the Competitive Bid), and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to subsection (iv) hereof, the amounts shall be rounded to integral multiples of $100,000 in a manner which shall be in the discretion of the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower in accordance with the provisions hereof shall be irrevocable. The Agent shall, not later than 12:00 Noon (Charlotte, North Carolina time) on the proposed date of a Competitive Loan borrowing, notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted. (e) Funding of Competitive Loans. Each Lender which is to make ---------------------------- a Competitive Loan shall make its Competitive Loan borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Schedule 11.1, or at such other office as the Agent ------------- may designate in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the Competitive Bid Request in Dollars and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by crediting the account of the Borrower on the books of such office with the aggregate of the amount made available to 40 the Agent by the Competitive Loan Lenders and in like funds as received by the Agent. (f) Maturity of Competitive Loans. Each Competitive Loan shall ----------------------------- mature and be due and payable in full on the last day of the Interest Period applicable thereto. Unless the Borrower shall give notice to the Agent otherwise, the Borrower shall be deemed to have requested a Committed Revolving Loan borrowing in the amount of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan. (g) Interest on Competitive Loans. Subject to the provisions of ----------------------------- Section 3.1, Competitive Loans shall bear interest in each case at the Competitive Bid Rate applicable thereto. Interest on Competitive Loans shall be payable in arrears on each Interest Payment Date. (h) Competitive Loan Notes. The Competitive Loans shall be ---------------------- evidenced by a duly executed promissory note of the Borrower to each Lender in an original principal amount equal to the Competitive Loan Maximum Amount and substantially in the form of Schedule 2.4(h). --------------- SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES ---------------------------------------------- 3.1 Default Rate. Overdue principal and, to the extent permitted by ------------ law, overdue interest in respect of each Loan and any other overdue amount payable hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then 2% greater than the Base Rate). 3.2 Extension and Conversion. The Borrower shall have the option, on ------------------------ any Business Day, to extend existing Committed Revolving Loans into a subsequent permissible Interest Period or to convert Committed Revolving Loans of one type into Committed Revolving Loans of another type; provided, -------- however, that (i) except as provided in Section 3.7, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest Period" set forth in --------------- Section 1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii), (iv) no more than ten (10) separate Eurodollar Loans shall be outstanding hereunder at any one time and (v) any request for extension or conversion of a Eurodollar Loan which 41 shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Swingline Loans and Competitive Loans may not be extended or converted pursuant to this Section 3.2. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Committed Revolving Loans to be so extended or converted, the types of Committed Revolving Loans into which such Committed Revolving Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Multiple Eurodollar Loans with Interest Periods ending on the same date may be combined and extended as one Eurodollar Loan, and a single Eurodollar Loan may be extended as multiple Eurodollar Loans. Each request for extension of, or conversion into, Eurodollar Loans, shall constitute a representation and warranty by the Borrower of the matters specified in Section 5.3(b), (c), (d) and (e). In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Loans shall be automatically converted into Base Rate Loans at the end of their Interest Period. The Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 Reductions In Commitments and Prepayments. ----------------------------------------- (a) Voluntary Reduction of Commitments. The Borrower may from ---------------------------------- time to time permanently reduce the Revolving Committed Amount, the LOC Committed Amount and/or the Swingline Committed Amount in whole or in part (in each such case in a minimum aggregate amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof) upon three (3) Business Days' prior written notice to the Agent and, in the case of a reduction of the LOC Committed Amount or the Swingline Committed Amount, also to the Issuing Lenders or the Swingline Lender, as appropriate. (b) Mandatory Reduction of Commitments. On each date after the ---------------------------------- Closing Date upon which the Parent Company, the Borrower or any of their respective Wholly Owned Subsidiaries receives proceeds from any Material Asset Sale, the Revolving Committed Amount shall be reduced by an amount equal to 100% of the Net Sale Proceeds thereof. Notwithstanding anything contained herein to the contrary, reductions on account of Material Asset Sales shall be applied (i) prior to the Termination Date under the Tranche B Credit Agreement, first to the Revolving Committed Amount 42 hereunder until such Revolving Committed Amount is reduced to zero and terminated, and then to the Revolving Committed Amount under the Tranche B Credit Agreement and (ii) after the Termination Date under the Tranche B Credit Agreement, first to the Term Loans outstanding under the Tranche B Credit Agreement, if any, and then to the Revolving Committed Amount hereunder. (c) Allocation of Commitment Reductions. A reduction of the ----------------------------------- Revolving Committed Amount pursuant to clauses (a) or (b) of this Section 3.3 shall not effect a reduction in the LOC Committed Amount or the Swingline Committed Amount (unless so elected by the Borrower in its sole discretion) until the Revolving Committed Amount has been reduced to an amount equal to the sum of the LOC Committed Amount and the Swingline Committed Amount and then only in the amounts determined by the Borrower in its sole discretion. In the event the Revolving Committed Amount has been reduced to an amount that is less than the sum of the LOC Committed Amount and the Swingline Committed Amount and the Borrower fails to direct the application of such deficiency to the LOC Committed Amount and/or the Swingline Committed Amount, the amount of such deficiency shall be deemed a reduction first of the Swingline Committed Amount and then a reduction of the LOC Committed Amount. (d) Termination of Individual Lender Commitment. In the event ------------------------------------------- of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as provided in Section 11.6(b), the Borrower shall have the right, upon three (3) Business Days' prior written notice to the Agent, to terminate the Commitments of such Lender, so long as (i) all Loans, together with accrued and unpaid interest, fees and all other amounts owing to such Lender are repaid and all Letters of Credit issued by such Lender are replaced or fully collateralized with cash or a letter of credit concurrently with the effectiveness of such termination and (ii) the amount of Commitments (including for purposes hereof Commitments hereunder and under the Tranche B Credit Agreement) terminated pursuant to this Section 3.3(d), after giving effect to termination of the Commitments of any such non-consenting Lender, shall not exceed $70,000,000 in the aggregate. At such time as any such termination shall become effective in accordance with the terms hereof, such Lender shall no longer constitute a "Lender" for purposes of this Agreement, except with respect to indemnifications under this Agreement which shall survive as to such repaid Lender. (e) Voluntary Prepayments. The Borrower shall have the right to --------------------- prepay Loans in whole or in part from time to time without premium or penalty; provided, however, that (i) Competitive Loans and Committed -------- ------- Revolving Loans which are 43 Eurodollar Loans may only be prepaid on three Business Days' prior written notice to the Agent and any prepayment of such Competitive Loans or Eurodollar Loans will be subject to Section 3.10; and (ii) each such partial prepayment of Loans shall be (A) in the minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof for all Competitive Loans and Committed Revolving Loans and (B) in the minimum principal amount of $250,000 and integral multiples of $100,000 in excess thereof for Swingline Loans. (f) Mandatory Prepayments. If at any time (i) the sum of the --------------------- aggregate amount of outstanding Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Swingline Loans or Competitive Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) plus ---- the aggregate amount of LOC Obligations plus the aggregate amount of ---- Swingline Loans plus the aggregate amount of Competitive Loans (other ---- than Competitive Loans made for the purpose of repaying Committed Revolving Loans or Swingline Loans or reimbursing the Issuing Lender for any amount drawn under any Letter of Credit but not yet so applied) shall exceed the aggregate Revolving Committed Amount, (ii) the aggregate amount of LOC Obligations shall exceed the aggregate LOC Committed Amount, (iii) the aggregate amount of Swingline Loans shall exceed the Swingline Committed Amount, or (iv) the aggregate amount of Competitive Loans shall exceed the Competitive Loan Maximum Amount, the Borrower shall immediately make payment on the Loans or in respect of the LOC Obligations in an amount sufficient to eliminate such excess. In the case of a mandatory prepayment required on account of subsection (ii), (iii) or (iv), the amount required to be prepaid hereunder shall serve to temporarily reduce the Revolving Committed Amount (for purposes of borrowing availability hereunder, but not for purposes of computation of fees) by the amount of the payment required until such time as the situation described in subsection (ii), (iii) or (iv) shall no longer exist. Payments required to be made hereunder shall be applied first to Committed Revolving Loans, Swingline Loans or Competitive Loans, as appropriate, and then to a cash collateral account in respect of the LOC Obligations, and with respect to the types of Loans, first to Base Rate Loans and then to Eurodollar Loans in direct order of their Interest Period maturities. To the extent that the Borrower is required to make a mandatory prepayment of the Loans which is required to be applied to Competitive Loans or to Committed Revolving Loans which are Eurodollar Loans (following the operation of the immediately preceding sentence) on a date other than the last day of an Interest Period applicable thereto, at the option of the Borrower, the Agent shall hold the amount of such prepayment in an account in the Agent's sole dominion and control. The Agent shall invest the amounts held by it in such account as 44 directed by the Borrower. On the last day of the Interest Period relating to the next-maturing Competitive Loans or to Committed Revolving Loans which are Eurodollar Loans, as appropriate, the Agent shall apply the amounts held by it in such account to the prepayment of such maturing Loan and the Agent shall notify the Borrower of the application of such amounts. Upon the direction of the Borrower, the Agent shall apply any earnings on amounts held in such account to the payment of accrued interest on such Loans or shall release such earnings to the Borrower. (g) Prepayment of Loans of Individual Lender. In the event of ---------------------------------------- certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as provided in Section 11.6(b), the Borrower shall have the right, upon three (3) Business Days' prior written notice to the Agent, to repay all Loans, together with accrued and unpaid interest, fees and all other amounts owing to such Lender, and cause all Letters of Credit issued by such Lender to be replaced or fully collateralized with cash or a letter of credit, each in accordance with said Section 11.6(b) so long as (A) the Commitments of such Lender are terminated concurrently with such repayment in accordance with, and to the extent permitted under, the provisions of Section 3.3(d), and (B) the consents required by Section 11.6(b) in connection with such repayment have been obtained. (h) Notice. The Borrower will provide notice to the Agent of ------ any prepayment by 11:00 A.M. (Charlotte, North Carolina time) on the day prior to the date of prepayment. Amounts paid on the Loans under subsection (e) and (f)(i) hereof may be reborrowed in accordance with the provisions hereof. 3.4 Fees. ---- (a) Commitment Fee. In consideration of the Commitments by the -------------- Lenders hereunder, the Borrower agrees to pay to the Agent for the ratable benefit of the Lenders a commitment fee (the "Commitment Fee") -------------- equal to the Applicable Percentage per annum on the aggregate Revolving Committed Amount in effect from time to time for the applicable period. The Commitment Fee shall accrue from the date hereof and shall be payable quarterly in arrears on the 15th day following the end of each calendar quarter and on the Termination Date. (b) Letter of Credit Fee. In consideration of the issuance of -------------------- Letters of Credit hereunder, the Borrower agrees to pay to the Issuing Lender for the ratable benefit of the Lenders a fee (the "Letter of --------- Credit Fee") equal to the Applicable Percentage per annum on the ---------- average daily maximum amount available to be drawn under each such Letter of 45 Credit from the date of issuance to the date of expiration. The Issuing Lender shall promptly pay such Letter of Credit Fee to the Agent for the benefit of and payment to the Lenders (including the Issuing Lender). In addition, the Borrower shall pay to the Issuing Lender, for its own account without sharing by the other Lenders, one- eighth of one percent (1/8%) per annum thereon. The Letter of Credit Fees hereunder shall be payable quarterly in arrears on the 15th day following the end of each calendar quarter and on the Termination Date. (c) Administrative Fees. The Borrower agrees to pay to the ------------------- Agent, for its own account, the administrative and other fees referred to in the Agent's Fee Letter (the "Agent's Fees"). ------------ (d) Competitive Bid Request Fee. The Borrower shall make --------------------------- payment to the Agent of the applicable Competitive Bid Request Fee, if any, concurrently with delivery of such Competitive Bid Request (whether or not any Competitive Bid is offered by a Lender, accepted by the Borrower or extended by the offering Lender pursuant thereto). 3.5 Capital Adequacy. If, after the date hereof, any Lender has ---------------- determined that the adoption after the date hereof of any applicable law, rule or regulation regarding capital adequacy, or any change therein after the date hereof, or any change in the interpretation or administration thereof after the date hereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive arising after the date hereof regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or will have the effect of reducing the rate of return on such Lender's or its parent company's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender or its parent company could have achieved but for such adoption or change (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender and its parent company for such reduction; provided, however, that a -------- ------- Lender shall not be entitled to avail itself of the benefit of this Section 3.5 to the extent that any such reduction in return was incurred more than ninety (90) days prior to the time it gives notice to the Borrower of the relevant circumstances. In determining the additional amount payable under this Section 3.5, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided, -------- that such Lender's determination of compensation owing under this Section 3.5 shall, absent manifest error, be final and conclusive and binding on all parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 3.5, will give prompt written notice thereof to the 46 Borrower, through the Agent, which notice shall show the basis for calculation of such additional amounts. 3.6 Inability To Determine Interest Rate. If prior to the first day ------------------------------------ of any Interest Period, the Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (y) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. This Section 3.6 shall not apply to Competitive Loans or Swingline Loans. 3.7 Illegality. Notwithstanding any other provision herein, if the ---------- adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 3.10. Notwithstanding the foregoing, to the extent a circumstance described above relates to a Eurodollar Loan then being requested by the Borrower pursuant to a Notice of Borrowing or a Notice of Conversion, the Borrower shall have the option to rescind such Notice of Borrowing or Notice of Conversion as to all Lenders by giving notice (in writing or by telephone confirmed in writing) to the Agent of such rescission on the date on which the Lender affected by such circumstances gives notice thereof as described above. This Section 3.7 shall not apply to Competitive Loans or Swingline Loans. 47 3.8 Requirements of Law. If the adoption of or any change in any ------------------- Requirement of Law or in the interpretation or application thereof applicable to any Lender, or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Closing Date (or, if later, the date on which such Lender becomes a Lender): (i) shall subject such Lender to any tax of any kind whatsoever with respect to any Letter of Credit or any Eurodollar Loans made by it or its obligation to make Eurodollar Loans, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes) covered by subsection 3.9 (including Non-Excluded Taxes imposed solely by reason of any failure of such Lender to comply with its obligations under subsection 3.9(b)) and Excluded Taxes; (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition (excluding any tax of any kind) whatsoever; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from such Lender, through the Agent, in accordance herewith, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable, provided that, in any such case, the Borrower -------- may elect to convert the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the Agent at least one Business Day's notice of such election, in which case the Borrower shall promptly pay to such Lender, upon demand, without duplication, such amounts, if any, as may be required pursuant to Section 3.10; provided, further, however, that a -------- ------- ------- Lender shall not be entitled to avail itself of the benefit of this Section 3.8 to the extent that any such additional amounts were incurred more than ninety (90) days prior to the time it gives notice to the Borrower as provided in the next sentence. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall provide prompt notice thereof to the Borrower, through the Agent, certifying (x) that one of the events described in this Section has occurred and describing in reasonable detail the nature of such event, (y) as to the 48 increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Agent, to the Borrower shall be conclusive in the absence of manifest error. This Section 3.8 shall not apply to Competitive Loans or Swingline Loans. 3.9 Taxes. (a) Except as provided below in this subsection (a), all ----- payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding taxes measured by or imposed upon the overall net income or profits of any Lender or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes (such excluded taxes being herein referred to as "Excluded Taxes"). If any such non-excluded taxes, levies, imposts, -------------- duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") ------------------ are required to be withheld from any amounts payable to the Agent or any Lender hereunder or under any Notes, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that -------- ------- the Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of subsection (b) below. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or 49 other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Agent or any Lender as a result of any such failure. The agreements in this subsection (a) shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (X) (i) on or before the date of any payment by the Borrower under this Credit Agreement or the Notes to such Lender, deliver to the Borrower and the Agent (A) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and its Notes without deduction or withholding of any United States federal income taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; (ii) deliver to the Borrower and the Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Agent; or (Y) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the Borrower (for the benefit of the Borrower and the Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Agent (A) a certificate substantially in the form of Schedule 3.9 hereto (any such ------------ certificate a "U.S. Tax Compliance Certificate") and (B) two ------------------------------- accurate and complete original signed copies of Internal Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Code with respect to payments to be made under this Credit Agreement and its Notes (and to deliver to the 50 Borrower and the Agent two further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and its Notes; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Agent. Each Person that shall become a Lender or a participant pursuant to Section 11.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a -------- Participant the obligations of such Participant pursuant to this subsection (b) shall be determined as if the Participant were a Lender except that such Participant shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. (c) If the Borrower pays any additional amount under Section 3.9(a) to a Lender and such Lender determines that it has received or realized in connection therewith any refund or any reduction of, or credit against, its tax liabilities in or with respect to the taxable year in which the additional amount is paid, such Lender shall pay to the Borrower an amount that the Lender shall determine is equal to the net benefit, after tax, which was obtained by the Lender in such taxable year as a consequence of such refund, reduction or credit. 3.10 Indemnity. The Borrower agrees to indemnify each Lender and to --------- hold each Lender harmless from any reasonable loss or expense which such Lender may sustain or incur (other than through such Lender's gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Competitive Loans or Committed Revolving Loans which are Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Competitive Loan or a Committed Revolving Loan which is a Eurodollar Loan after the Borrower has given a notice thereof in accordance with 51 the provisions of this Credit Agreement or (c) the making of a prepayment of Competitive Loans or Committed Revolving Loans which are Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto other than pursuant to Section 3.11(c). Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Competitive Loan or a Committed Revolving Loan which is a Eurodollar Loan provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. This Section 3.10 shall not apply to Swingline Loans. 3.11 Pro Rata Treatment. Except to the extent otherwise provided ------------------ herein: (a) Committed Revolving Loans. Each Committed Revolving Loan ------------------------- advance (including without limitation each Mandatory Borrowing), each payment or prepayment of principal of any Committed Revolving Loan, each payment of interest on the Committed Revolving Loans, each payment of the Commitment Fee and the Letter of Credit Fee (other than the portion of the Letter of Credit Fee retained by the Issuing Lender for its own account), each reduction of the Revolving Committed Amount or the LOC Committed Amount, and each conversion or continuation of any Committed Revolving Loan, shall be allocated pro rata among the relevant Lenders in accordance with the respective applicable Revolving Committed Amounts (or, if the Commitments of such Lenders have expired or been terminated, in accordance with the respective principal amounts of the outstanding Loans and Participation Interests of such Lenders). (b) Letters of Credit. Each payment of unreimbursed drawings in ----------------- respect of LOC Obligations shall be allocated to each Lender entitled thereto pro rata in accordance with its LOC Commitment Percentage; provided that, if any Lender shall have failed to pay its applicable -------- pro rata share of any drawing under any Letter of Credit, then any amount to which such Lender would otherwise be entitled pursuant to this subsection (b) shall instead be payable to the Issuing Lender; provided further, that in the event any amount paid to any Lender -------- ------- pursuant to this subsection (b) is rescinded or must otherwise be returned by the Issuing Lender, each 52 Lender shall, upon the request of the Issuing Lender, repay to the Agent for the account of the Issuing Lender the amount so paid to such Lender, with interest for the period commencing on the date the Lender receives such request until the date the Issuing Lender receives such repayment at a rate per annum equal to, during the period to but excluding the date two (2) Business Days after such request, the Federal Funds Rate, and thereafter, the Base Rate plus two percent ---- (2%). (c) Funding. Unless the Agent shall have been notified in ------- writing by any Lender prior to a Committed Revolving Loan borrowing that such Lender will not make the amount that would constitute its Revolving Commitment Percentage of such borrowing available to the Agent, the Agent may assume that such Lender is making such amount available to the Agent, and the Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Agent by the required time on the borrowing date therefor, such Lender shall pay to the Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for the period until such Lender makes such amount immediately available to the Agent. A certificate of the Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Revolving Commitment Percentage of such borrowing is not made available to the Agent by such Lender within three Business Days of such borrowing date, (i) the Agent shall notify the Borrower of the failure of such Lender to make such amount available to the Agent and the Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower and (ii) the Borrower may, without waiving any rights it may have against such Lender, borrow a like amount on an unsecured basis from any commercial bank for a period ending on the date upon which such Lender does in fact make such borrowing available, provided that at the time such borrowing is made -------- and at all times while such amount is outstanding the Borrower would be permitted to borrow such amount pursuant to Section 2.1 of this Credit Agreement. 3.12 Sharing of Payments. The Lenders agree among themselves that, ------------------- in the event that any Lender shall obtain payment in respect of any Loan, unreimbursed drawing with respect to any LOC Obligations or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment 53 as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans, LOC Obligations and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan, LOC Obligation or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or any other Lender an amount payable by such Lender or the Agent to the Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.12 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.12 to share in the benefits of any recovery on such secured claim. 3.13 Place and Manner of Payments. Except as otherwise specifically ---------------------------- provided herein, all payments hereunder shall be made to the Agent in Dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at its offices specified in Schedule 2.1(a) not later than 2:00 P.M. (Charlotte, North Carolina time) - --------------- on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Agent the Loans, LOC Obligations, fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Agent shall distribute such payment to the Lenders in the manner set forth in Section 54 3.3(f) for mandatory prepayments). The Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. 3.14 Indemnification; Nature of Issuing Lender's Duties. -------------------------------------------------- (a) In addition to its other obligations under Section 2.2, the Borrower hereby agrees to protect, indemnify, pay and save each Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of the Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called "Government Acts"). --------------- (b) As between the Borrower and the Issuing Lender, the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuing Lender shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any 55 messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (vii) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to the Borrower. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify the Issuing Lender against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any present or future Government Acts. The Issuing Lender shall not, in any way, be liable for any failure by the Issuing Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Issuing Lender. (d) Nothing in this Section 3.14 is intended to limit the reimbursement obligation of the Borrower contained in Section 2.2(d) hereof. The obligations of the Borrower under this Section 3.14 shall survive the termination of this Credit Agreement. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Issuing Lender to enforce any right, power or benefit under this Credit Agreement. (e) Notwithstanding anything to the contrary contained in this Section 3.14, the Borrower shall have no obligation to indemnify any Issuing Lender in respect of any liability incurred by such Issuing Lender (and the Issuing Lender shall retain all such liability) arising out of the gross negligence or willful misconduct of the Issuing Lender. 3.15 Replacement of Lenders. If any Lender either (i) becomes a ---------------------- Defaulting Lender or (ii) delivers a notice to the Borrower pursuant to Sections 3.5 or 3.8, the Borrower shall have the right, if no Default or Event of Default then exists, to replace such Lender (the "Replaced -------- Lender") with one or more Eligible Assignees (collectively, the - ------ "Replacement Lender"), provided that (A) at the time of any replacement ------------------ -------- pursuant to this Section 3.15, the Replacement Lender shall enter into one or more assignment agreements substantially in the form of Schedule -------- 56 11.3(c) pursuant to, and in accordance with the terms of, Section 11.3(c) - ------- (and with all fees payable pursuant to said Section 11.3(c) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the rights and obligations of the Replaced Lender hereunder and, in connection therewith, shall pay to (1) the Replaced Lender in respect thereof an amount equal to the sum of (a) the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (b) all unreimbursed drawings under the Letters of Credit that have been funded by the Replaced Lender, together with all then unpaid interest with respect thereto at such time and (c) all accrued but theretofore unpaid, fees and other amounts owing to the Replaced Lender pursuant to Section 3.4 and (2) each Issuing Lender an amount equal to such Replaced Lender's LOC Commitment Percentage of any unreimbursed drawings under Letters of Credit issued by such Issuing Lender to the extent such amount was not heretofore funded by Replaced Lender, and (B) all obligations of the Borrower owing to the Replaced Lender (including all obligations, if any, owing pursuant to Section 3.5 or 3.8, but excluding those obligations specifically described in clause (A) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full by the Borrower to such Replaced Lender concurrently with such replacement. 3.16 Change of Lending Office. Each Lender agrees that on the ------------------------ occurrence of any event giving rise to the operation of Sections 3.5, 3.8 or 3.9 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is -------- made on such terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. SECTION 4 GUARANTY -------- 4.1 The Guarantee. Each of the Guarantors hereby jointly and ------------- severally guarantees to each Lender and the Agent as hereinafter provided the prompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as 57 a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, in the event of a bankruptcy or other similar insolvency proceeding of a Guarantor, the obligations of each such Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its Obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 4.2 Obligations Unconditional. The obligations of the Guarantors ------------------------- under Section 4.1 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of any of the Credit Documents or any other agreement or instrument referred to therein shall be done or omitted; (iii) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents or any other agreement or instrument referred to therein shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien granted to, or in favor of, the Agent or any Lender or Lenders as security for any of the Obligations shall fail to attach or be perfected; or (v) any of the Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be 58 subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Credit Documents or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. 4.3 Reinstatement. The obligations of the Guarantors under this ------------- Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 4.4 Certain Additional Waivers. Without limiting the generality of -------------------------- the provisions of this Section 4, each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. Sec.Sec. 26-7 through 26-9, inclusive. Each of the Guarantors further agrees that it shall have no right of subrogation, reimbursement or indemnity, nor any right of recourse to security, if any, for the Obligations so long as any amounts payable to the Agent or the Lenders in respect of the Obligations shall remain outstanding and until all of the Commitments shall have expired or been terminated. 4.5 Remedies. The Guarantors agree that, to the fullest extent -------- permitted by law, as between the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.2 hereof (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or such Obligations being deemed to have become automatically due and payable), such Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of said Section 4.1. 59 4.6 Continuing Guarantee. The guarantee in this Section 4 is a -------------------- continuing guarantee, and shall apply to all Obligations whenever arising. 4.7 Discharge of Guarantor. If all of the stock of any Guarantor or ---------------------- any of its successors in interest under this Section 4 shall be sold or otherwise disposed of (including by merger or consolidation) in a transaction not prohibited by this Agreement, or if a Guarantor shall no longer satisfy the conditions for being a Guarantor under Section 7.12, the guaranty of such Guarantor or such successor in interest, as the case may be, hereunder and the pledge of the capital stock or other ownership interest in such Guarantor or such successor in interest, as the case may be, pursuant to the Pledge Agreement shall automatically be discharged and released without any further action by the Agent, any Lender or any other Person effective as of the date of such transaction or as of the date the Agent receives evidence reasonably satisfactory to the Agent that such conditions are not longer satisfied. The Borrower will give prompt notice to the Agent of any discharge and release pursuant to this Section 4.7. SECTION 5 CONDITIONS ---------- 5.1 Conditions to Initial Extensions of Credit. The obligation of ------------------------------------------ each Lender to make its initial Extensions of Credit to Embassy Suites, as the initial Borrower, is subject to the satisfaction of the following conditions on or prior to the Closing Date: (a) Executed Credit Documents. Receipt by the Agent of executed ------------------------- counterparts of this Credit Agreement, the Notes and the other Credit Documents. (b) Tranche B Credit Agreement. Receipt by the Agent of copies -------------------------- of the executed Tranche B Credit Agreement, the promissory notes issued thereunder and the other collateral, security and other documents relating thereto. (c) No Default; Representations and Warranties. As of the ------------------------------------------ Closing Date (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects. (d) Opinion of Counsel. Receipt by the Agent of an opinion, or ------------------ opinions, satisfactory to the Agent, addressed to the Agent and the Lenders and dated as of the Closing Date, from legal counsel to the Credit Parties and in form reasonably acceptable to the Agent and the Credit Parties. (e) Corporate Documents. Receipt by the Agent of the following: ------------------- 60 (i) Charter Documents. Copies of the articles or ----------------- certificates of incorporation or other charter documents of each Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (ii) Bylaws. A copy of the bylaws of each Credit Party ------ certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (iii) Resolutions. Copies of resolutions of the Board ----------- of Directors of each Credit Party approving and adopting the Credit Documents to which it is a party and the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Credit Party to be true and correct and in force and effect as of the Closing Date. (vi) Good Standing. Copies of (a) certificates of good ------------- standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing would have a Material Adverse Effect and (b) to the extent available, a certificate indicating payment of all corporate franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. (f) Fees and Expenses. Provided the Borrower has received ----------------- proper documentation and support therefor, payment by the Borrower of all fees and expenses owed by it to the Lenders and the Agent, including, without limitation, payment to the Agent of the fees set forth in the Agent's Fee Letter. (g) Distribution. Receipt by the Agent of evidence satisfactory ------------ to the Agent that (i) all conditions precedent to the consummation of the Distribution have been satisfied and (ii) the Distribution will be consummated immediately after the making of such initial Extensions of Credit in the manner contemplated by the Proxy Statement. (h) Other. Receipt by the Lenders of such other documents, ----- instruments, agreements or information as reasonably requested by the Agent or the Required Lenders. 5.2 Conditions to Assignment to Hotel Inc., Release of Embassy Suites ----------------------------------------------------------------- and Promus Co. and Initial Extensions of Credit to - --------------------------------------------------- 61 Hotel Inc. The obligation of the Lenders to accept the assignment to and - ---------- the assumption by Hotel Inc. of the rights and obligations of Embassy Suites under this Credit Agreement and to release Embassy Suites and Promus Co. of their respective obligations, direct and indirect, present and future, under this Credit Agreement pursuant to Section 11.3(b) and to make its initial Extensions of Credit to Hotel Inc. shall be subject to satisfaction of the following conditions on or prior to the Effective Date of Assignment: (a) Assignment and Assumption Agreement. Receipt by the Agent ----------------------------------- of executed counterparts of the Hotel Inc. Assignment and Assumption Agreement. (b) Pledge Agreement and Stock Certificates. Receipt by the --------------------------------------- Agent of the executed Pledge Agreement and all of the stock certificates evidencing the stock pledged to the Lenders pursuant to the Pledge Agreement, along with duly executed undated stock powers executed in blank attached thereto. (c) Reorganization Resolution. Receipt by the Agent of (i) a ------------------------- copy of corporate resolutions of the directors of Promus Co. and Embassy Suites approving the Reorganization, (ii) copies of the Reorganization Documents, certified by a secretary or assistant secretary of Hotel Corp. and (iii) such other information regarding the structure, tax treatment, existing and projected tax liabilities and other matters relating to the Reorganization as the Agent may reasonably request. (d) Solvency Certificate. Receipt by the Agent of a certificate -------------------- of the chief financial officer of Embassy Suites as of the Effective Date of the Assignment stating that, immediately after giving effect to the Reorganization, the Distribution and Hotel Inc. Assignment and Assumption Agreement, Embassy Suites is Solvent. (e) Reorganization. The Agent shall have received a certificate -------------- executed by the chief financial officer of Hotel Corp. as of the Effective Date of Assignment stating that (i) the terms of the Reorganization and the final corporate organization and structure of Hotel Corp. and Hotel Inc. are consistent in all material respects with the Proxy Statement; (ii) the transactions described in clause (i) of the first recital hereof have been consummated in a manner consistent in all material respects with the terms of the Proxy Statement on or before the execution of the Hotel Inc. Assignment and Assumption Agreement; (iii) no material adverse change has occurred since December 31, 1994, with respect to the combined financial condition of the Hotel Inc. Businesses; (iv) there does not exist any order, decree, judgment, ruling or injunction which restrains the consummation of the Reorganization or the Distribution in the manner contemplated by the Proxy Statement, and there 62 does not exist any action, suit or proceeding, pending or threatened, in which there is a reasonable possibility of an adverse decision, which would materially adversely affect the ability of Hotel Inc. or any of the Guarantors (including Hotel Corp.) to perform its obligations under the Credit Documents or the ability of the Lenders to exercise their rights thereunder; and (v) immediately after giving effect to the Reorganization, the Distribution and the Hotel Inc. Assignment and Assumption Agreement, (A) no Default or Event of Default shall have occurred and be continuing and (B) the representations and warranties set forth in Section 6 will be true and correct in all material respects. (f) NYSE Listing. Receipt by the Agent of evidence satisfactory ------------ to it that the shares of Hotel Corp.'s common stock shall have been approved for listing on the New York Stock Exchange. (g) Form 10 Filing. Receipt by the Agent of evidence -------------- satisfactory to it that the Form 10 shall have been filed with the Securities and Exchange Commission together with a certification by the chief financial officer of Embassy Suites that Embassy Suites has received no stop order regarding the Form 10 from the Securities and Exchange Commission and that the Form 10 shall have become effective. (h) Other Documents. Receipt by the Agent of all documents it --------------- and the Required Lenders may reasonably request relating to the existence of each of Hotel Corp., Hotel Inc. and the other Guarantors, the corporate authority for and the validity of Hotel Inc. Assignment and Assumption Agreement and any other matters relevant thereto, all in form and substance reasonably satisfactory to the Agent. (i) Legal Opinions. Receipt by the Agent of legal opinions -------------- addressed to the Agent and the Lenders from (i) counsel to Embassy Suites and Promus Co. satisfactory to Agent, dated as of the Effective Date of Assignment and in a form reasonably acceptable to the Agent, Promus Co. and Embassy Suites and (ii) counsel to Hotel Corp. and Hotel Inc. satisfactory to Agent, dated as of the Effective Date of Assignment and in form reasonably acceptable to the Agent, Promus Co. and Embassy Suites. (j) Other Information. Receipt by the Agent of such other ----------------- documents, agreements or information which may be reasonably requested by the Agent and the Required Lenders. The Agent's execution and delivery of the Hotel Inc. Assignment and Acceptance Agreement shall constitute the agreement of the Agent binding upon the Lenders that all of the conditions set forth in this Section 5.2 have been either satisfied or waived. 63 5.3 Each Extension of Credit. The obligation of each Lender to make ------------------------ any Extension of Credit, including the conversion to or extension of any Eurodollar Loan (and including the obligation of the Swingline Lender to make any Swingline Loan) is subject to satisfaction of the following conditions in addition to (i) with respect to any Extension of Credit to be made, converted or extended on a date occurring prior to the Effective Date of Assignment, satisfaction on the Closing Date of the conditions set forth in Section 5.1 and (ii) with respect to any Extension of Credit to be made, converted or extended on a date occurring on or after the Effective Date of Assignment, satisfaction on the Closing Date of the conditions set forth in Section 5.1 and satisfaction on the Effective Date of Assignment of the conditions set forth in Section 5.2: (a) (i) In the case of any Committed Revolving Loan, the Agent shall have received an appropriate Notice of Borrowing or Notice of Conversion/Extension; (ii) in the case of any Letter of Credit, the Issuing Bank and the Agent shall have received an appropriate notice of request for issuance of a Letter of Credit in accordance with the provisions of Section 2.2(b), (iii) in the case of any Competitive Loan, the applicable Competitive Loan Lender shall have received an appropriate notice of acceptance of its related Competitive Bid; and (iv) in the case of any Swingline Loan, the Swingline Lender shall have received an appropriate Notice of Borrowing in accordance with the provisions of Section 2.3(b)(i); (b) The representations and warranties set forth in Section 6 hereof and in the Pledge Agreement shall be true and correct in all material respects as of such date (except for those which expressly relate to an earlier date); (c) There shall not have been commenced against the Parent Company, the Borrower or any Guarantor an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Parent Company, the Borrower or any Guarantor or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded; (d) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; and (e) Since December 31, 1994, there shall not have been a material adverse change in or event or condition materially adversely affecting the financial condition, operations, business or prospects of the hotel business of 64 the Parent Company, the Borrower and their Subsidiaries, taken as a whole. The delivery of each Notice of Borrowing and each Notice of Conversion relating to an extension of or conversion into Eurodollar Loans, each request for the issuance or extension of a Letter of Credit, each request for a Competitive Bid pursuant to a Competitive Bid Request and each request for a Swingline Loan pursuant to Section 2.3(b)(i) shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c), (d) and (e) above. SECTION 6 REPRESENTATIONS AND WARRANTIES ------------------------------ To induce the Agent and each Lender to make the Extensions of Credit requested to be made by it on the Closing Date and on each Credit Date thereafter, the Credit Parties hereby represent and warrant, on the Closing Date, and on every Credit Date thereafter (except to the extent the following representations warranties relate to a specific date), to the Agent and each Lender that: 6.1 Financial Condition. (a) The audited consolidated balance sheet ------------------- of Promus Co. and its consolidated Subsidiaries as of December 31, 1994 and the audited consolidated statements of earnings and statements of cash flows for the year ended December 31, 1994 have heretofore been furnished to the Agent. Such financial statements (including the notes thereto) (i) have been audited by Arthur Andersen LLP, (ii) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (iii) (on the basis disclosed in the footnotes to such financial statements) present fairly, in all material respects, the consolidated financial condition, results of operations and cash flows of Promus Co. and its consolidated Subsidiaries as of such date and for such periods. The unaudited interim balance sheets of Promus Co. and its consolidated Subsidiaries as at the end of, and the related unaudited interim statements of earnings and of cash flows for, each fiscal month and quarterly period ended after December 31, 1994 and prior to the Closing Date have heretofore been furnished to the Agent. Such interim financial statements for each such quarterly period, (i) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (ii) (on the basis disclosed in the footnotes to such financial statements) present fairly, in all material respects, the consolidated financial condition, results of operations and cash flows of Promus Co. and its consolidated Subsidiaries as of such date and for such periods subject to year-end and audit adjustments. During the period from December 31, 1994 to and including the Closing Date, there has been no sale, transfer or other disposition by Promus Co. or any of its Subsidiaries of any material part of the business or property of Promus Co. and its 65 consolidated Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any capital stock of any other person) material in relation to the consolidated financial condition of Promus Co. and its consolidated Subsidiaries, taken as a whole, in each case, which, is not reflected in the foregoing financial statements or in the notes thereto and has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date. (b) The pro forma balance sheet of Hotel Corp. and its consolidated --- ----- Subsidiaries set forth in the Proxy Statement (the "Pro Forma Balance ----------------- Sheet") is the balance sheet of Hotel Corp. and its consolidated - ----- Subsidiaries as of December 31, 1994 (the "Pro Forma Date"), adjusted to -------------- give effect (as if such events have occurred on such date) to (i) the consummation of the Reorganization and Distribution on the Closing Date and of the Assignment and Assumption, (ii) the Extension of Credit under this Credit Agreement and/or the Tranche B Credit Agreement to be made on the Closing Date in an aggregate principal amount of not more than $225,000,000, and (iii) the payment of estimated fees, expenses and financing costs related to the transactions contemplated hereby and thereby. The Pro Forma Balance Sheet was prepared on the same basis as the balance sheets included in the financial statements described in the first sentence of subsection 6.1(a), except as set forth in Schedule 6.1(b). --------------- (c) On and as of the Closing Date, (i) the financial projections (the "Projections") prepared by the Parent Company and the Borrower and ----------- contained in the Confidential Offering Memorandum delivered to the Lenders by the Agent prior to the Closing Date were prepared based upon the assumptions concerning various industry trends described therein for the periods presented, (ii) the Projections were based on good faith assumptions and estimates, and (iii) although a range of possible different assumptions and estimates might also be reasonable, the Parent Company and the Borrower are not aware of any facts that would lead them to believe that the assumptions and estimates on which the Projections were based are not reasonable; provided that no assurance can be given that the projected -------- results will be realized or with respect to the ability of the Parent Company and the Borrower to achieve the projected results, and while the Projections are necessarily presented with numerical specificity, the actual results achieved during the periods presented in all likelihood will differ from the projected results and such differences may be material. 6.2 No Change; Solvent. Since December 31, 1994, (a) there has been ------------------ no development or event relating to or affecting the Parent Company, the Borrower or any of their Subsidiaries which has had or would be reasonably expected to have a Material Adverse Effect and (b) except as permitted under this Credit Agreement no dividends or other distributions have been declared, paid or made upon the capital stock of the Borrower nor has any of the capital stock of the Borrower been redeemed, retired, 66 purchased or otherwise acquired for value by the Borrower or any of its Subsidiaries. As of the Closing Date, after giving effect to (i) the consummation of the Assignment and Assumption, (ii) the making of the Extensions of Credit under this Credit Agreement and/or the Tranche B Credit Agreement to be made on the Closing Date in an aggregate principal amount of not more than $225,000,000 and (iii) the payment of estimated fees, expenses and financing costs related to the transactions contemplated hereby and thereby, Hotel Corp., Hotel Inc. and each Guarantor is Solvent. 6.3 Corporate and Partnership Existence; Compliance with Law. Each -------------------------------------------------------- of the Parent Company, the Borrower and their Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or partnership power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, except to the extent that the failure to have such legal right would not be reasonably expected to have a Material Adverse Effect, (c) is duly qualified and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not be reasonably expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.4 Corporate and Partnership Power; Authorization; Enforceable ----------------------------------------------------------- Obligations. The Parent Company, the Borrower and each of the other Credit - ----------- Parties has the corporate or partnership power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and to borrow and accept Extensions of Credit hereunder or to issue the guarantee or to pledge stock hereunder, and have taken all necessary corporate or partnership action to authorize the borrowings or guarantees and Extensions of Credit or guarantee such borrowings and Extensions of Credit, as appropriate, on the terms and conditions of this Credit Agreement and any Notes and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of the Borrower or any Guarantor in connection with the borrowings or guarantees hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower is a party, except for consents, authorizations, notices and filings described in Schedule 6.4, all of which ------------ have been obtained or made or have the status described in such Schedule -------- 6.4. This Credit Agreement has been, and each other Credit Document to - --- which it is a party will be, 67 duly executed and delivered on behalf of the Borrower and the Guarantors. This Credit Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower and the Guarantors enforceable against them in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 No Legal Bar. The execution, delivery and performance of the ------------ Credit Documents by the Borrower, the Parent Company and the other Credit Parties, the borrowings and extensions of credit and the guarantees thereof hereunder and the use thereof and the pledge of stock in connection therewith (a) will not violate any Requirement of Law or Contractual Obligation of the Borrower, the Parent Company or the other Credit Parties in any respect that would reasonably be expected to have a Material Adverse Effect and (b) will not result in, or require, the creation or imposition of any Lien (other than the Liens created by the Pledge Agreement) on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 6.6 No Material Litigation. No litigation, investigation or ---------------------- proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Parent Company, the Borrower or any of their Subsidiaries or against any of its or their respective properties or revenues which would be reasonably expected to have a Material Adverse Effect. 6.7 No Default. Neither the Parent Company, the Borrower nor any of ---------- their Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which would be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 6.8 Ownership of Property; Liens. Except as would not have a ---------------------------- Material Adverse Effect or as set forth in Schedule 6.8 hereto, the Parent ------------ Company, the Borrower and each of their Subsidiaries has good record and sufficient title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property. None of such property is subject to any Lien, except for Permitted Liens. 6.9 Intellectual Property. The Parent Company, the Borrower and each --------------------- of their Subsidiaries owns, or has the legal right to use, all United States trademarks, tradenames, copyrights, service marks, technology, know- how and processes necessary for each of them to conduct its business as currently conducted (the "Intellectual Property") except for those the --------------------- 68 failure to own or have such legal right to use would not be reasonably expected to have a Material Adverse Effect. Except as provided on Schedule -------- 6.9, no claim has been asserted and is pending by any Person challenging or - --- questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any such claim, and the use of such Intellectual Property by the Parent Company, the Borrower and their Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that in the aggregate, would not be reasonably expected to have a Material Adverse Effect. 6.10 No Burdensome Restrictions. No Requirement of Law of the -------------------------- Borrower or any of its Subsidiaries would be reasonably expected to have a Material Adverse Effect. 6.11 Taxes. The Parent Company, the Borrower and each of their ----- Subsidiaries that are corporations have filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the knowledge of the Borrower, are required to be filed, and have paid (a) all taxes shown to be due and payable on said returns and (b) any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect and (ii) taxes, fees or other charges the amount or validity of which are currently being contested and with respect to which reserves in conformity with GAAP have been provided on the books of the Parent Company, the Borrower or such Subsidiaries, as the case may be). 6.12 Federal Regulations. No part of the proceeds of any Loans will ------------------- be used in any manner which might cause the Loans or the application of such proceeds to violate Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. If requested by any Lender or the Agent, the Parent Company, the Borrower and the other Credit Parties will furnish to the Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. The parties hereto acknowledge that the use of proceeds of the Loans by the Borrower to purchase $25,000,000 of shares in Felcor Suites Hotels, Inc. or units in Felcor Suites Hotels Limited Partnership will not cause a violation of said Regulation U. 6.13 ERISA. During the five year period prior to each date as of ----- which this representation is made, or deemed made (or, with respect to (vi) or (viii) below, as of the date such representation is made or deemed made), none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a liability to the Parent Company, the Borrower or any of their Subsidiaries which would be reasonably expected to have a Material Adverse 69 Effect: (i) a Reportable Event with respect to any Single Employer Plan; (ii) an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) with respect to any Single Employer Plan which has not been waived; (iii) any material noncompliance with the application of ERISA or the Code with respect to any Plan; (iv) a termination of a Single Employer Plan (other than a standard termination pursuant to Section 4041(b) of ERISA); (v) a Lien in favor of the PBGC with respect to any Single Employer Plan or a Plan pursuant to Section 4068 or Section 302(f) of ERISA, respectively; (vi) Underfunding with respect to any Single Employer Plan; (vii) a complete or partial withdrawal from any Multiemployer Plan by the Parent Company, the Borrower or any Commonly Controlled Entity; (viii) any liability of the Parent Company, the Borrower or any Commonly Controlled Entity under ERISA if the Parent Company, the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the annual valuation date most closely preceding the date on which their representation is made or deemed made; (ix) the Plan Reorganization or Insolvency of any Multiemployer Plan; (x) the excess of the present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the aggregate liability of the Parent Company, the Borrower or any of their Subsidiaries for post-retirement benefits to be provided to their current and former employees (excluding benefits provided pursuant to Section 4980B of the Code or Section 601 of ERISA), under Plans which are welfare benefit plans (as determined in Section 3(1) of ERISA) over the assets under all such Plans; and (xi) an event or condition with respect to which the Parent Company, the Borrower or any Commonly Controlled Entity could incur any liability in respect of a Former Plan. 6.14 Investment Company Act; Other Regulations. The Borrower is not ----------------------------------------- an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness as contemplated hereby. 6.15 Subsidiaries. Set forth in Schedule 6.15 is a complete and ------------ ------------- accurate list of all Subsidiaries of the Parent Company and the Borrower both immediately prior to, and immediately after giving effect to, the Assignment and Assumption. Information on the attached Schedule includes jurisdiction of incorporation or organization; the number of shares of each class of capital stock or other equity interest outstanding; the number and percentage of outstanding shares of each class owned (directly or indirectly) by such Person; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and similar rights. The outstanding capital stock of all such corporate Subsidiaries is validly issued, fully paid and non-assessable and is owned by such 70 Person, directly or indirectly, free and clear of all Liens other than Permitted Liens. 6.16 Purpose of Loans. The Extensions of Credit and the proceeds ---------------- therefrom shall be used for working capital and general corporate purposes (including, without limitation, the support of commercial paper), to finance the costs and expenses of the Reorganization, including the repayment of certain indebtedness of Embassy Suites outstanding immediately prior to the Reorganization, and to finance hotel development and other investments not prohibited hereunder. 6.17 Environmental Matters. (a) To the knowledge of the Borrower, the --------------------- facilities and properties owned, leased or operated by the Parent Company, the Borrower or any of their Subsidiaries (the "Subject Properties") and ------------------ all operations at the Subject Properties are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the business operated by the Parent Company, the Borrower or any of their Subsidiaries (the "Business"), and -------- there are no conditions relating to the Business or Subject Properties that would be reasonably likely to give rise to liability under any applicable Environmental Law, except for any failure so to comply or violation or condition, or any aggregation thereof, that would not be reasonably likely to result in the payment of a Material Environmental Amount. (b) To the knowledge of the Borrower, the Subject Properties do not contain any Materials of Environmental Concern at, on or under the Subject Properties in amounts or concentrations that constitute a violation of, or could reasonably give rise to liability under, Environmental Laws, except insofar as the presence of any Materials of Environmental Concern is not reasonably likely to result in the payment of a Material Environmental Amount. (c) Neither the Parent Company, the Borrower nor any of their Subsidiaries has received any written notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non- compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Subject Properties or the Business, nor does the Borrower have knowledge that any such notice will be received or is being threatened, except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that is or are reasonably likely to result in the payment of a Material Environmental Amount. (d) The Borrower has not, nor to the knowledge of the Borrower have any other Persons, transported or disposed of Materials of Environmental Concern from the Subject Properties, or generated, treated, stored or disposed of at, on or under any of the Subject Properties or any other location, in each case by or on behalf of the Parent Company, the Borrower or any of their 71 Subsidiaries in violation of, or in a manner that would be reasonably likely to give rise to liability under, any applicable Environmental Law, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Parent Company, the Borrower or any of their Subsidiaries is named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Parent Company, the Borrower, any of their Subsidiaries, the Subject Properties or the Business, except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (f) To the knowledge of the Borrower, there has been no release or threat of release of Materials of Environmental Concern at or from the Subject Properties, or arising from or related to the operations (including, without limitation, disposal) of the Parent Company, the Borrower or any of their Subsidiaries in connection with the Subject Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that would be reasonably likely to give rise to liability under Environmental Laws, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (g) To the knowledge of the Borrower, neither the Parent Company, the Borrower nor any of their Subsidiaries has voluntarily assumed any liability of any Person under any Environmental Law that is not subject to indemnification and is reasonably likely to result in the payment of a Material Environmental Amount. Notwithstanding any provision herein to the contrary, all references in Sections 6.1 through 6.17 to the "Parent Company" shall mean Hotel Corp., -------------- all references in this Section 6 to the "Borrower" shall mean Hotel Inc. -------- and all references in this Section 6 to "Credit Parties" or "Guarantors" -------------- ---------- shall mean only Hotel Corp. and its Subsidiaries which are included in the definitions of such terms. 72 SECTION 7 AFFIRMATIVE COVENANTS --------------------- Each Credit Party hereby covenants and agrees that commencing with the Closing Date and so long as this Credit Agreement is in effect and until the Obligations, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated: 7.1 Information Covenants. The Parent Company and the Borrower will --------------------- furnish, or cause to be furnished, to the Agent: (a) Annual Financial Statements. As soon as available, and in --------------------------- any event within 120 days after the close of each fiscal year of the Parent Company, a consolidated balance sheet and income statement of the Parent Company and its consolidated subsidiaries (including the Borrower), as of the end of such fiscal year, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal year, setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by Arthur Anderson LLP or other independent certified public accountants of recognized national standing reasonably acceptable to the Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Credit Parties as a going concern. (b) Quarterly Financial Statements. As soon as available, and ------------------------------ in any event within 45 days after the close of each fiscal quarter of the Parent Company (other than the fourth fiscal quarter, in which case 120 days after the end thereof) a consolidated balance sheet and income statement of the Parent Company and its consolidated subsidiaries (including the Borrower), as of the end of such fiscal quarter, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal quarter in each case setting forth in comparative form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by a certificate of the chief financial officer, treasurer or controller of the Parent Company to the effect that such quarterly financial statements fairly present in all material respects the financial condition and results of operations of the Parent Company and its consolidated subsidiaries (including the Borrower), and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. 73 (c) Officer's Certificate. At the time of delivery of the --------------------- financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of the chief financial officer, treasurer or controller of the Parent Company substantially in the form of Schedule 7.1(d) --------------- attached hereto, (i) demonstrating compliance with the financial covenants contained in Section 7.11 by calculation thereof as of the end of each such fiscal period and (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Parent Company proposes to take with respect thereto. (d) Accountant's Report. Within the period for delivery of the ------------------- annual financial statements provided in Section 7.1(a), a report of the accountants conducting the annual audit stating that they have reviewed Section 7.11 and stating further whether, in the course of their audit, anything came to their attention to cause them to believe that the Parent Company and its consolidated Subsidiaries were not in compliance with Section 7.11, in so far as such Section 7.11 relates to accounting matters, on the date of such statements. (e) Reports. Promptly upon transmission or receipt thereof, (a) ------- copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalent) which the Parent Company or any of its Subsidiaries shall file with the Securities and Exchange Commission, or any successor agency, (b) copies of all financial statements, proxy statements, notices and reports as the Parent Company, the Borrower or any of their Subsidiaries shall send to its shareholders or to a holder of any Indebtedness with a maximum principal amount exceeding $25,000,000 owed by the Parent Company, the Borrower or any of their Subsidiaries in its capacity as such a holder (other than reports of a routine or ministerial nature which are not material) and (c) upon the request of the Agent, all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for enforcement of Environmental Laws (other than reports of a routine or ministerial nature which are not material). (f) Notices. Upon the Borrower obtaining knowledge thereof, the ------- Borrower will give written notice to the Agent immediately of (a) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrower proposes to take with respect thereto, and (b) the occurrence of any of the following (i) the pendency or commencement of any litigation, arbitration or governmental proceeding against the Parent Company, the Borrower or any of their Subsidiaries which is reasonably likely to have a 74 Material Adverse Effect, (ii) the institution of any proceedings against the Parent Company, the Borrower or any of their Subsidiaries with respect to, or the receipt of notice by such Person of potential liability or responsibility for, violation, or alleged violation of any Environmental Laws, the violation of which would likely have a Material Adverse Effect, or (iii) any notice or determination concerning the imposition of any withdrawal liability by a Multiemployer Plan against the Parent Company, the Borrower or any of their Subsidiaries or any of their Commonly Controlled Entities, the determination that a Multiemployer Plan is, or is expected to be, in a Plan Reorganization or the termination of any Plan in a distress termination under Section 4041(c) of ERISA. (g) Other Information. With reasonable promptness upon any such ----------------- request, such other information regarding the business, properties or financial condition of the Parent Company, the Borrower or any of their Subsidiaries as the Agent or the Required Lenders may reasonably request. 7.2 Preservation of Existence and Franchises. Each of the Credit ---------------------------------------- Parties will do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority except as permitted under Section 8.4 or where failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.3 Books and Records. Each of the Credit Parties will, and will ----------------- cause their Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 7.4 Compliance with Law. Each of the Credit Parties will, and will ------------------- cause their Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property if noncompliance with any such law, rule, regulation, order or restriction would have a Material Adverse Effect. 7.5 Payment of Taxes and Other Indebtedness. Each of the Credit --------------------------------------- Parties will, and will cause their Subsidiaries that are corporations to, pay and discharge (i) all material taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before a material penalty begins to accrue, (ii) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (iii) except as prohibited hereunder, all of its other Indebtedness as it shall become due; provided, however, that there shall be no requirement to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in 75 accordance with GAAP, unless the failure to make any such payment (i) would give rise to an immediate right to foreclose on a Lien securing such amounts or (ii) would have a Material Adverse Effect. 7.6 Insurance. Each of the Credit Parties will, and will cause their --------- Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice. 7.7 Maintenance of Property. Each of the Credit Parties will, and ----------------------- will cause their Subsidiaries to, maintain and preserve its properties and equipment material to the conduct of its business in good repair, working order and condition, normal wear and tear excepted, except where failure to do so would not have a Material Adverse Effect and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may be needed or proper, to the extent and in the manner customary for companies in similar businesses except where failure to do so would not have a Material Adverse Effect. 7.8 Performance of Obligations. Each of the Credit Parties will, and -------------------------- will cause their Subsidiaries to, perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other debt instruments to which it is a party or by which it is bound, except where failure to do so would not have a Material Adverse Effect. 7.9 Use of Proceeds. The Extensions of Credit and the proceeds --------------- thereof may be used solely for the purposes provided in Section 6.16. 7.10 Audits/Inspections. Upon reasonable prior notice, with ------------------ reasonable frequency and during normal business hours, each Credit Party will, and will cause their Subsidiaries to, permit representatives appointed by the Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect their property, including their books and records, their accounts receivable and inventory, their facilities and their other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers of the Credit Parties and their Subsidiaries. 7.11 Financial Covenants. ------------------- 76 (a) Consolidated Net Worth. There shall be maintained at all ---------------------- times determined at the end of each fiscal quarter Consolidated Net Worth of at least $125,000,000; provided, however, that the minimum -------- ------- Consolidated Net Worth required hereunder shall be increased by (i) on the last day of each fiscal quarter to occur after the Closing Date, an amount equal to 50% of Consolidated Net Income for the fiscal quarter then ended (or if Consolidated Net Income is a deficit, then zero), and (ii) immediately upon receipt, 100% of the net proceeds received by the Borrower or any Subsidiary pursuant to any Equity Transaction occurring after the Closing Date. (b) Leverage Ratio. The Leverage Ratio, as determined at the end -------------- of each fiscal quarter for the four consecutive fiscal quarter period then ended, shall not at any time exceed: Period Ending ------------- Closing Date through the last day of fiscal year 1995 3.5:1.0 First day of fiscal year 1996 through last day of fiscal year 1996 3.25:1.0 First day of fiscal year 1997 and thereafter 3.0:1.0 (c) Consolidated Fixed Charge Coverage Ratio. The Consolidated ---------------------------------------- Fixed Charge Coverage Ratio, as determined at the end of each fiscal quarter for the four consecutive fiscal quarter period then ended, shall be not less than: Period Ending ------------- Closing Date through the last day of fiscal year 1996 1.25:1.0 First day of fiscal year 1997 through the last day of fiscal year 1997 2.0:1.0 First day of fiscal year 1998 and thereafter 2.5:1.0 7.12 Additional Credit Parties. Where the Wholly Owned Subsidiaries ------------------------- of the Parent Company or the Borrower (other than a Wholly Owned Subsidiary formed solely to provide insurance to the Parent Company, its Subsidiaries and Joint Ventures) which are not Guarantors hereunder (the "Non-Guarantor ------------- Subsidiaries") shall at any time - ------------ (i) individually in any instance constitute more than either (A) 10% of Consolidated Legal Entity Assets of the Parent Company, the Borrower and their Subsidiaries, or 77 (B) 10% of Consolidated Legal Entity Gross Revenues of the Parent Company, the Borrower and their Subsidiaries, or (C) 10% of Consolidated Legal Entity EBITDA of the Parent Company, the Borrower and their Subsidiaries, the Parent Company and the Borrower will promptly notify the Agent thereof, and promptly cause any such Non- Guarantor Subsidiary to become a "Guarantor" hereunder by way of execution of a Joinder Agreement; or (ii) as a group constitute more than either (i) 25% of Consolidated Legal Entity Assets of the Parent Company, the Borrower and their Subsidiaries, or (ii) 25% of Consolidated Legal Entity Gross Revenues of the Parent Company, the Borrower and their Subsidiaries, or (iii) 25% of Consolidated Legal Entity EBITDA of the Parent Company, the Borrower and their Subsidiaries (collectively, the "Threshold Requirement"), the Parent Company and the Borrower will --------------------- promptly notify the Agent thereof, and promptly cause one or more of the Non-Guarantor Subsidiaries to become a "Guarantor" hereunder by way of execution of a Joinder Agreement, such that immediately after the joinder of such Subsidiaries as Guarantors hereunder, the remaining Non-Guarantor Subsidiaries shall not, as a group, exceed the Threshold Requirement. The Borrower may at any time, at its option, cause a Non-Guarantor Subsidiary to execute a Joinder Agreement at which time such Subsidiary shall become a Guarantor hereunder. The Borrower will cause to be delivered with any such Joinder Agreement such other documentation as the Agent may reasonably request, including specifically without limitation, certified corporate resolutions, other corporate documentation and legal opinions (covering, among other things, the legality, validity, binding effect and enforceability of the Joinder Agreement) of or relating to such Additional Credit Party, all in form and substance reasonably satisfactory to the Agent. With respect to any Non-Guarantor Subsidiary that becomes a Guarantor pursuant to this Section 7.12, the Borrower shall promptly cause all of the capital stock or other ownership interest of such Non-Guarantor Subsidiary to be pledged to the Agent pursuant to the Pledge Agreement. SECTION 8 NEGATIVE COVENANTS ------------------ Each Credit Party hereby covenants and agrees that commencing with the Closing Date and so long as this Credit Agreement is in effect and until the Obligations, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated: 8.1 Indebtedness. Neither the Parent Company or the Borrower will, ------------ nor will they permit any of their Subsidiaries to, 78 contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising under this Credit Agreement and the other Credit Documents; (b) Indebtedness existing as of the Closing Date and disclosed in the financial statements referenced in Section 6.1(a) or set forth in Schedule 8.1 (and renewals, refinancings and extensions thereof in ------------ a principal amount not in excess of the amount then outstanding on terms and conditions no less favorable to such Person than such existing Indebtedness); (c) purchase money Indebtedness (including Capital Leases) hereafter incurred to finance the purchase of fixed assets provided -------- that (i) the total of all such Indebtedness incurred after the Closing Date for the Parent Company, the Borrower and their Subsidiaries taken together shall not exceed an aggregate principal amount of $20,000,000 at any one time outstanding; (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (d) obligations in respect of Interest Rate Protection Agreements, Currency Protection Agreements and commodity purchase or option agreements entered into in order to manage existing or anticipated interest rate, exchange rate or commodity price risks and not for speculative purposes; (e) Intercompany Indebtedness; provided that all such -------- Intercompany Indebtedness owed by any Credit Party to any Subsidiary of the Borrower or the Parent Company which is not a Credit Party shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of an intercompany subordination agreement reasonably satisfactory to the Agent; (f) Indebtedness acquired in connection with mergers and acquisitions permitted under Sections 8.4(a) or 8.4(c) and not incurred in contemplation of their becoming Subsidiaries (and renewals, refinancings and extensions thereof in a principal amount not in excess of the amount then outstanding on terms and conditions no less favorable to such Person than such existing Indebtedness); (g) Indebtedness arising under the Tranche B Credit Agreement and other related agreements and documents issued or delivered thereunder or pursuant thereto; (h) accrued expenses and current trade accounts payable incurred in the ordinary course of business; 79 (i) unsecured Indebtedness under performance bonds and completion guarantees in respect of the construction of any properties in accordance with the plans or standards as agreed with the obligee of such guarantee so long as such bonds or guarantees are incurred in the ordinary course of business; (j) Indebtedness consisting of (i) reimbursement obligations on letters of credit (other than Letters of Credit), bankers acceptances or similar instruments, provided that the aggregate amount thereof at -------- any one time outstanding shall not exceed $5,000,000 and (ii) surety, performance or appeal bonds to the extent permitted by Section 8.2; (k) Non-Recourse Indebtedness of any Specified Subsidiary to finance the development of hotel properties so long as the aggregate amount thereof at any time outstanding does not exceed $100,000,000, it being understood and agreed, however, that (i) a Specified Subsidiary which has incurred outstanding Non-Recourse Indebtedness pursuant to this Section 8.1(k) may guaranty the Non-Recourse Indebtedness incurred pursuant to this Section 8.1(k) by other Specified Subsidiaries, and (ii) such Non-Recourse Indebtedness may be guaranteed by the Parent Company, the Borrower and their respective Subsidiaries to the extent otherwise permitted under this Section 8.1; (l) Unsecured Guaranty Obligations in relation to Indebtedness of Specified Subsidiaries, Joint Ventures and parties to management or franchise agreements with the Borrower or its Subsidiaries or such Joint Ventures engaged in each case primarily in the hotel business or other reasonably related business, but only if, and to the extent, that the sum of (i) the aggregate amount of such Guaranty Obligations under this subsection (l) incurred after the Closing Date plus (ii) ---- the aggregate amount of cash Investments permitted under Section 8.5(g) made after the Closing Date, shall not at any time exceed $150,000,000 at any time, provided that the limitation set forth above -------- shall be (A) increased (or decreased if Consolidated Net Income is negative) on the first day of each fiscal year of the Parent Company (commencing with the first day of fiscal year 1996) by 100% of the Consolidated Net Income for the fiscal year last ended and (B) decreased from time to time by the aggregate amount of cash Dividends paid by the Parent Company on and after the Closing Date and prior to the date of determination (such limitation, as increased and decreased from time to time, herein referred to as the "Third Party Investment ---------------------- Basket Amount"); ------------- (m) Subordinated Debt with a final maturity beyond the Termination Date which is subordinated in a manner, and with subordination language, reasonably acceptable to the Required Lenders; 80 (n) commercial paper borrowings of the Borrower supported by the Hotel Facility in an amount not to exceed $100,000,000 in the aggregate at any time outstanding; (o) unsecured Guaranty Obligations of the Parent Company, the Borrower or any of their respective Subsidiaries in relation to Indebtedness (other than Non-Recourse Indebtedness) of Subsidiaries of the Parent Company or the Borrower otherwise permitted under this Section 8.1; (p) Indebtedness permitted under Section 3.11(c) of this Credit Agreement or the Tranche B Credit Agreement; and (q) Indebtedness not otherwise permitted under this Section 8.1 in an aggregate principal amount not to exceed $25,000,000 at any one time outstanding. 8.2 Liens. Neither the Parent Company or the Borrower will, nor will ----- they permit any of their Subsidiaries to, contract, create, incur, assume or permit to exist any Lien with respect to any of their Property, whether now owned or after acquired, except for Permitted Liens. 8.3 Nature of Business. Neither the Parent Company, the Borrower nor ------------------ any other Credit Party will substantively alter the character or conduct of the business conducted by them as of the Closing Date other than to enter into other reasonably related businesses. 8.4 Consolidation, Merger, Sale or Purchase of Assets. Except in ------------------------------------------------- relation to the Reorganization and the Distribution, neither the Parent Company or the Borrower will, nor will they permit any of their Subsidiaries to: (a) dissolve, liquidate or wind up its affairs, or enter into any transaction of merger or consolidation; provided, however, that, -------- ------- so long as no Default or Event of Default then exists or would be directly or indirectly caused as a result thereof, (i) any Credit Party may merge or consolidate with another Credit Party; (ii) any Subsidiary of the Borrower or the Parent Company which is not a Credit Party may merge or consolidate with another such Subsidiary; (iii) any Subsidiary of the Parent Company or the Borrower may merge or consolidate with any other Person provided that either (A) such Subsidiary is the surviving corporation, 81 (B) such Subsidiary is not the surviving corporation but the surviving corporation is a Subsidiary of the Borrower or the Parent Company, or (C) such Subsidiary is not the surviving corporation and the surviving corporation is not a Subsidiary of the Borrower or the Parent Company, but no more than 25% of the gross consideration received in connection therewith consists of Non-Investment Grade debt or equity interests, and subject to the additional conditions, (I) in the case of any individual transaction (or series of related transactions) described in subsections (A) or (B) above, where the acquisition price for such transaction (whether a single transaction or a series of related transactions) exceeds $75,000,000, then the Borrower must first demonstrate compliance with the financial covenants under Section 7.11 on a Pro Forma Basis after giving effect to such transaction and (II) after giving effect to such transaction, the Threshold Requirement set forth in Section 7.12 shall not be exceeded; and (iv) any Subsidiary of the Parent Company or the Borrower may dissolve, liquidate or wind up its affairs at any time; (b) sell, transfer or otherwise dispose of any of its Property (including without limitation pursuant to any sale and leaseback transaction) except that the following shall be permitted: (i) the sale of inventory for fair value in the ordinary course of business, (ii) the sale or disposition of machinery and equipment no longer useful in the conduct of such Person's business, (iii) transfers of Property to Credit Parties, (iv) non-cash Investments permitted under Section 8.5(d) and (e), and (v) sales, transfers and dispositions for fair value in the reasonable determination of the Borrower, so long as (A) no Default or Event of Default then exists or would exist after giving effect thereto and (B) no more than 25% of the gross consideration received in connection therewith consists of Non- Investment Grade debt or equity interests. Sales, leases, transfers and other dispositions constituting Material Asset Sales will be subject to a mandatory reduction in the Commitments hereunder as provided in Section 3.3(b). (c) purchase or otherwise acquire (in a single transaction or a series of related transactions) all or substantially all of the Property of any other Person except where (i) no Default or Event of Default then exists or would exist after giving effect thereto, (ii) the purchase or acquisition does not require the solicitation of the 82 consent of the shareholders or other equity owners of the Person which is the subject thereof against the recommendation of management, the board of directors or other managing entity of such Person, (iii) the Person, division, operations or Property which is the subject of the acquisition is in a reasonably related line of business to that of the Parent Company and the Borrower, and (iv) the acquisition price for such transaction (whether a single transaction or a series of related transactions) shall exceed $75,000,000, the Borrower must first demonstrate compliance with the financial covenants under Section 7.11 on a Pro Forma Basis after giving effect to such acquisition. 8.5 Investments. The Parent Company and the Borrower will not, and ----------- will not permit any of their Subsidiaries to, directly or indirectly, make Investments other than (a) existing Investments set forth on Schedule 8.5, ------------ (b) Investments in the ordinary course of the hotel business (or other reasonably related businesses) not otherwise described in Section 8.5 (specifically excluding for purposes hereof loans and advances to Subsidiaries which are separately dealt with in this Section 8.5), (c) Investments in Credit Parties, (d) Investments in Wholly-Owned Subsidiaries of the Borrower or the Parent Company, (e) non-cash Investments in Subsidiaries which are not Wholly- Owned Subsidiaries of the Borrower or the Parent Company or Credit Parties and in Joint Ventures made after the Closing Date, provided -------- that no such non-cash Investment shall individually (i) involve the transfer of assets (A) with a book value in excess of 10% of the Consolidated Legal Entity Assets of the Parent Company and its Subsidiaries at such time, (B) generating more than 10% of the Consolidated Legal Entity Gross Revenues of the Parent Company and its Subsidiaries or (C) generating more than 10% of Consolidated Legal Entity EBITDA for the Parent Company and its Subsidiaries or (ii) cause the Subsidiaries and Joint Ventures in which non-cash Investments have been made pursuant to this clause (e) (including the subject non-cash Investment) plus all Non-Guarantor Subsidiaries, as a group, to exceed the Threshold Requirement, (f) Investments received in connection with a merger or disposition permitted by Sections 8.4(a) and 8.4(b), and (g) cash Investments in Subsidiaries of the Parent Company or the Borrower which are not Wholly-Owned Subsidiaries of the Parent Company or the Borrower, Joint Ventures, parties to management or franchise agreements with 83 the Borrower or its Subsidiaries or such Joint Ventures engaged primarily in the hotel business or other reasonably related business, but only if, and to the extent, that the sum of (i) the aggregate amount of such Investments under this subsection (g) made after the Closing Date plus (ii) the aggregate amount of Guaranty Obligations ---- permitted under Section 8.1(l) incurred after the Closing Date, shall not at any time exceed the Third Party Investment Basket Amount. 8.6 Prepayments of Indebtedness. Neither the Parent Company or the --------------------------- Borrower will, nor will they permit any of their Subsidiaries to, (a) amend or modify, or permit the amendment or modification of, any of the subordination provisions of any Subordinated Debt or any other material term relating to any Subordinated Debt the amendment or modification of which would be materially adverse to the interests of the Lenders hereunder as the holders of indebtedness senior thereto, or (b) make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due) or exchange any Subordinated Debt permitted pursuant to Section 8.1. As used herein, "Subordinated Debt" means any Indebtedness of the Parent ----------------- Company, the Borrower or any of their Subsidiaries for borrowed money which by its terms is subordinated in right of payment to the indebtedness hereunder and other amounts owing hereunder or in connection herewith. 8.7 Transactions with Affiliates. Neither the Parent Company or the ---------------------------- Borrower will, nor will they permit any of their Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any officer, director, shareholder or Affiliate of the Parent Company, the Borrower or any of their Subsidiaries other than on terms and conditions substantially as favorable as would be obtainable in a comparable arm's-length transaction with a Person other than an officer, director, shareholder or Affiliate, except that the restriction contained in this Section 8.7 shall not apply to (i) Investments permitted under Section 8.5, (ii) transactions and transfers among and between the Parent Company, the Borrower and their Wholly-Owned Subsidiaries, (iii) the payment of reasonable compensation and benefits and reimbursement of reasonable expenses of officers and directors, (iv) the Reorganization and the Distribution and (v) Dividends permitted hereunder. 8.8 Fiscal Year. Neither the Parent Company nor the Borrower will, ----------- nor will they permit any of their Subsidiaries to, change its fiscal year. 84 8.9 No Dividend Restrictions. No Credit Party shall agree to or ------------------------ permit to exist, any restrictions or limitations on the declaration or payment of Dividends. SECTION 9 EVENTS OF DEFAULT ----------------- 9.1 Events of Default. An Event of Default shall exist upon the ----------------- occurrence of any of the following specified events (each an "Event of -------- Default"): - ------- (a) Payment. Any Credit Party shall ------- (i) default in the payment when due of any principal of any of the Loans or of any reimbursement obligations arising from drawings under Letters of Credit, or in providing cash collateral when due pursuant to Section 9.2(iv), or the payment of any guaranty obligations in respect thereof; (ii) default, and such default shall continue for five (5) or more days, in the payment when due of any interest on the Loans or the payment of any guaranty obligations in respect thereof; or (iii) default, and such default shall continue for five (5) or more days after notice from the Agent, in the payment when due of any amounts hereunder or under any of the other Credit Documents other than as provided in subsections (i) and (ii) above, or the payment of any guaranty obligations in respect thereof; or (b) Representations. Any representation, warranty or --------------- statement made or deemed to be made by any Credit Party herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. Any Credit Party shall --------- (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.11 or 8.1 through 8.9, inclusive; or (ii) default in the due performance or observance of any term, covenant or agreement contained 85 in Sections 7.1(g) or 7.10 and such default shall continue unremedied for a period of at least 5 days; or (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained in this Credit Agreement or any of the other Credit Documents and such default shall continue unremedied for a period of at least 30 days after notice thereof by the Agent; or (d) Other Credit Documents. Any Credit Document shall fail ---------------------- to be in full force and effect or to give the Agent and/or the Lenders the material liens, rights, powers and privileges purported to be created thereby; or (e) Guaranties. The guaranty given by the Credit Parties ---------- hereunder or by any Additional Credit Party hereafter or any material provision thereof shall cease to be in full force and effect, or any guarantor thereunder or any Person acting by or on behalf of such guarantor shall deny or disaffirm such guarantor's obligations under such guaranty, or any guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty; or (f) Bankruptcy, etc. The Parent Company, the Borrower or --------------- any other Credit Party shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case is commenced against the Parent Company, the Borrower or any other Credit Party under the Bankruptcy Code and the petition is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of all or substantially all of the property of the Parent Company, the Borrower or other Credit Party; or the Parent Company, the Borrower or any other Credit Party commences any other proceeding under any reorganization, arrangement, adjustment of the debt, relief of creditors, dissolution, insolvency or similar law of any jurisdiction whether now or hereafter in effect relating to the Parent Company, the Borrower or any other Credit Party; or there is commenced against the Parent Company, the Borrower or other Credit Party any such proceeding which remains undismissed for a period of 60 days; or the Parent Company, the Borrower or any other Credit Party is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Parent Company, the Borrower or any other Credit Party suffers appointment of any custodian or the like 86 for it or for any substantial part of its property to continue unchanged or unstayed for a period of 90 days; or the Parent Company, the Borrower or any other Credit Party makes a general assignment for the benefit of creditors; or any corporate action is taken by the Parent Company, the Borrower or any other Credit Party for the purpose of effecting any of the foregoing; or (g) Defaults under Other Agreements. With respect to any ------------------------------- Indebtedness (other than Non-Recourse Indebtedness and Indebtedness outstanding under this Credit Agreement) for which there is recourse against the Parent Company, the Borrower and their Subsidiaries in excess of $10,000,000 in the aggregate, (i) the Parent Company, the Borrower or any of their Subsidiaries shall (A) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (B) default in the observance or performance of any covenant relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause, any such Indebtedness to become due prior to its stated maturity; or (ii) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (h) Judgments. One or more judgments or decrees shall be --------- entered against the Parent Company, the Borrower or any of their Subsidiaries involving a liability of $5,000,000 or more in the aggregate (to the extent not paid or covered by insurance) and any such judgments or decrees shall not have been vacated, discharged, satisfied or stayed or bonded pending appeal within 30 days from the entry thereof; or (i) ERISA. The Parent Company, the Borrower or any of ----- their Subsidiaries shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), which has not been waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan pursuant to Section 4068 or Section 302(f) of ERISA, respectively, shall arise on the assets of the Parent Company, the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence by the PBGC to have a trustee appointed, or a trustee shall be appointed by the PBGC, to administer 87 or terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA (other than a standard termination pursuant to Section 4041(b) of ERISA), (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA in a distress termination under Section 4041(c), (v) the Parent Company, the Borrower or any Commonly Controlled Entity shall, or is reasonably likely to, incur any liability in connection with a withdrawal by the Parent Company, the Borrower or any Commonly Controlled Entity from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (vi) the occurrence or expected occurrence of any event or condition which results or is reasonably likely to result in the Parent Company's, the Borrower's or any Commonly Controlled Entity's becoming responsible for any liability in respect of a Former Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, would be reasonably expected to result in liability which could have a Material Adverse Effect; provided, however, that the fact that a Plan is underfunded shall not -------- ------- by itself constitute an Event of Default unless and until another event or condition described in clause (i) through (vi) affecting such underfunded Plan occurs and has a Material Adverse Effect; or (j) Change of Control. Either (i) a "person" or a "group" ----------------- (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more than 25% of the then outstanding voting stock of the Parent Company or (ii) a majority of the Board of Directors of the Parent Company shall consist of individuals who are not Continuing Directors; "Continuing Director" means, as of any date ------------------- of determination, (i) an individual who on the Closing Date or the date two years prior to the date of determination was a member of the Parent Company's Board of Directors and (ii) any new director whose nomination for election by the Parent Company's shareholders was approved by a vote of a majority of the directors then still in office who either were directors on the Closing Date or the date two years prior to such determination date or whose nomination for election was previously so approved. 9.2 Acceleration; Remedies. Upon the occurrence of an Event of ---------------------- Default, and at any time thereafter unless and until such Event of Default has been waived by the Required Lenders or cured to the satisfaction of the Required Lenders (pursuant to the voting procedures in Section 11.6), the Agent shall, upon the request and direction of the Required Lenders, by written notice 88 to the Borrower take any of the following actions without prejudice to the rights of the Agent or any Lender to enforce its claims against the Credit Parties, except as otherwise specifically provided for herein: (i) Termination of Commitments. Declare the Commitments -------------------------- terminated whereupon the Commitments shall be immediately terminated. (ii) Acceleration of Loans. Declare the unpaid principal of --------------------- and any accrued interest in respect of all Loans and unreimbursed drawings in respect of LOC Obligations and any and all other indebtedness or obligations of any and every kind owing by the Borrower to any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. (iii) Enforcement of Rights. Enforce any and all rights and --------------------- interests created and existing under the Credit Documents and all rights of set-off. (iv) Cash Collateral. Direct the Credit Parties to pay (and --------------- the Credit Parties agree that upon receipt of such notice, or upon the occurrence of an Event of Default under Section 9.1(f), they will immediately pay) to the Agent additional cash, to be held by the Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations for subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur, then the Commitments shall automatically terminate and all Loans and LOC Obligations, all accrued interest in respect thereof, all accrued and unpaid fees and other indebtedness or obligations owing to the Lenders hereunder shall immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders and the Credit Parties will be required to pay on the guaranty hereunder and to deliver cash collateral in respect of the LOC Obligations. SECTION 10 AGENCY PROVISIONS ----------------- 10.1 Appointment. Each Lender hereby designates and appoints ----------- NationsBank, N.A. (Carolinas) as administrative agent (in such capacity hereunder, the "Agent") of such Lender to act as specified herein and the ----- other Credit Documents, and each such 89 Lender hereby authorizes the Agent, as the agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Agent. The provisions of this Section (other than Section 10.9) are solely for the benefit of the Agent and the Lenders, and the Borrower and the other Credit Parties shall not have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Agent shall not act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any other Credit Party. 10.2 Delegation of Duties. The Agent may execute any of its duties -------------------- hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 10.3 Exculpatory Provisions. Neither the Agent nor any of its ---------------------- officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any of the Credit Parties contained herein or in any of the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower or any Credit Party in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection 90 herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Credit Parties to the Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Credit Parties. 10.4 Reliance on Communications. The Agent shall be entitled to -------------------------- rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of the other Credit Parties, independent accountants and other experts selected by the Agent with reasonable care). The Agent may deem and treat the Lenders as the owner of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent in accordance with Section 11.3(b) hereof. The Agent (solely in its capacity as the Agent) shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 10.5 Notice of Default. The Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or a Credit Party referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders. 10.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly --------------------------------------- acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and 91 that no act by the Agent or any affiliate thereof hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Credit Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in- fact or affiliates. 10.7 Indemnification. The Lenders agree to indemnify the Agent in --------------- its capacity as such (to the extent not reimbursed by the Borrower or another Credit Party and without limiting the obligation of the Borrower or another Credit Party to do so), ratably according to their respective Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent in its capacities as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any -------- portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section shall survive the payment of the Obligations and all other amounts payable hereunder and under the other Credit Documents. 92 10.8 Agent in its Individual Capacity. The Agent and its affiliates -------------------------------- may make loans to, accept deposits from and generally engage in any kind of business with the Borrower or any other Credit Party as though the Agent were not Agent hereunder. With respect to the Loans made and all Obligations owing to it, the Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though they were not Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 10.9 Successor Agent. (a) The Agent may resign from the performance --------------- of all its functions and duties hereunder at any time by giving fifteen (15) Business Day's prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the appointment of a successor Agent pursuant to clause (b) or (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Borrower shall appoint a successor Agent hereunder who shall be commercial bank or trust company reasonably acceptable to the Required Lenders (it being understood and agreed that any Lender is deemed to be acceptable to the Required Lenders), provided that if a Default or an Event of Default exists at the time of such resignation, the Required Lenders shall appoint such successor Agent. (c) If a successor Agent shall not have been so appointed within such fifteen (15) Business Day period, the Agent, with the consent of the Borrower, shall then appoint a successor Agent who shall serve as the Agent hereunder until such time, if any, as the Borrower or Required Lenders, as the case may be, appoint a successor Agent as provided above. (d) If no successor Agent has been appointed pursuant to clause (b) or (c) above by the thirtieth (30th) Business Day after the date such notice of resignation was given by the Agent, the Agent's resignation shall become effective and the Lenders shall thereafter perform all the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor Agent. (e) Upon the acceptance of any appointment as Agent hereunder by a successor, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent (including, without limitation, duties as Swingline Lender and Issuing Lender), and the resigning Agent shall be discharged from its duties and obligations as Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Credit Agreement. 93 SECTION 11 MISCELLANEOUS ------------- 11.1 Notices. Except as otherwise expressly provided herein, all ------- notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower and the Agent, set forth below, and in the case of the Lenders, set forth on Schedule 11.1, or at such other address as such party ------------- may specify by written notice to the other parties hereto: if to the Borrower or Guarantors: Prior to the Effective Date of Assignment ----------------------------------------- c/o Embassy Suites, Inc. 1023 Cherry Road Memphis, Tennessee 38117 Attn: William S. McCalmont Telephone: (901) 762-8861 Telecopy: (901) 762-8695 After the Effective Date of Assignment -------------------------------------- c/o Promus Hotels, Inc. 850 Ridgelake Boulevard Memphis, Tennessee 38120 Attn: Carol G. Champion Telephone: (901) 762-4052 Telecopy: (901) 680-7220 if to the Agent: NationsBank, N.A. (Carolinas) Independence Center, 15th Floor NC1-001-15-04 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Agency Services Telephone: (704) 386-9368 Telecopy: (704) 386-9923 94 with a copies to: NationsBank, N.A. (Carolinas) Corporate Bank 1 NationsBank Plaza Nashville, Tennessee 37329-1697 Attn: J.E. Ball Telephone: (615)749-3469 Telecopy: (615)749-4640 Christopher C. Kupec, Esq. Moore & Van Allen, PLLC NationsBank Corporate Center 47th Floor 100 North Tryon Street Charlotte, North Carolina 28202-4003 Telephone: (704) 331-1046 Telecopy: (704) 331-1159 11.2 Right of Set-Off. In addition to any rights now or hereafter ---------------- granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or affiliates of such Lender which are at least 50% owned by such Lender or its parent company wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of the Borrower to such Lender hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. The Borrower hereby agrees that any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 11.3(c) or Section 3.12 may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder. 11.3 Benefit of Agreement. -------------------- (a) Generally. This Credit Agreement shall be binding upon and --------- inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that, except -------- for the assignment by Embassy Suites to Hotel Inc. contemplated by subsection (b) below, the Borrower may not assign or transfer any of its interests without prior written consent of the Lenders; provided -------- further that the rights of each Lender to transfer, assign ------- 95 or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 11.3, provided, however, -------- ------- that nothing herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or participations in such Lender's Loans and/or Commitments hereunder to its parent company and/or to any affiliate of such Lender which is at least fifty percent (50%) owned by such Lender or its parent company. To the extent required in connection with a pledge of Loans by any Lender to a Federal Reserve Bank, the Borrower agrees that, upon request of any such Lender, it will promptly provide such Lender a promissory note evidencing the repayment obligations of the Borrower with respect to the principal of and interest on the Loans of such Lender arising under Section 2.1, 2.2, 2.3 and/or 2.4, as applicable, such promissory note to be in a form reasonably satisfactory to the Borrower and the applicable Lender. (b) Assignment to the Hotel Inc.. At such time as the Agent ---------------------------- shall have determined that each of the conditions set forth in Section 5.2 shall have been satisfied, then, at the request of Embassy Suites and Hotel Inc., the Agent, on behalf of the Lenders, shall execute and deliver the Hotel Inc. Assignment and Assumption Agreement. Each Lender hereby (i) irrevocably authorizes the Agent to execute and deliver the Hotel Inc. Assignment and Assumption Agreement on behalf of such Lender on the terms set forth in the immediately preceding sentence and (ii) acknowledges and agrees that such execution and delivery by the Agent of the Hotel Inc. Assignment and Assumption Agreement shall be binding upon and enforceable against such Lender. Upon execution and delivery by the Agent of the Hotel Inc. Assignment and Assumption Agreement (i) Hotel Inc. shall succeed to all of the rights and obligations of Embassy Suites as "Borrower" under this Credit Agreement, and all references to the "Borrower" in the Credit Documents henceforth shall be deemed to refer to Hotel Inc. and (ii) Embassy Suites and Promus Co. shall be released and discharged from any obligation or liability arising under or relating to this Credit Agreement, in each case on the terms more fully set forth in the Hotel Inc. Assignment and Assumption Agreement. The date as of which the Agent executes and delivers the Hotel Inc. Assignment and Assumption Agreement shall be referred to herein as the "Effective Date of ----------------- Assignment." ---------- (c) Assignments by Lenders. Each Lender may assign all or a ---------------------- portion of its rights and obligations hereunder and under the Tranche B Credit Agreement pursuant to an assignment agreement substantially in the form of Schedule 11.3(c) to one or more Eligible Assignees, ---------------- provided that any such assignment shall be in a minimum aggregate -------- amount of $10,000,000 of the Commitments and in integral multiples of 96 $1,000,000 above such amount, and that each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Credit Agreement and under the Tranche B Credit Agreement; provided, however, that the Agent and -------- ------- its affiliates which are at least 50% owned by the Agent or its parent company, as a group, shall continue to hold Commitments hereunder and under the Tranche B Credit Agreement in a minimum aggregate amount of $20,000,000 at all times. Any assignment hereunder shall be effective upon delivery to the Agent of written notice of the assignment together with a transfer fee of $5,000 payable to the Agent for its own account; provided that no such transfer fee shall be payable in -------- connection with an assignment by any Lender to its affiliates which are at least 50% owned by such Lender or its parent company. The assigning Lender will give prompt notice to the Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. By executing and delivering an assignment agreement in accordance with this Section 11.3(c), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of any Credit Party or the performance or observance by any Credit Party of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem 97 appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. (d) Participations. Each Lender may sell, transfer, grant or -------------- assign participations in all or any part of such Lender's interests and obligations hereunder to one or more Eligible Participants; provided that (i) such selling Lender shall remain a "Lender" for all -------- purposes under this Credit Agreement and the other Credit Documents (such selling Lender's obligations under this Credit Agreement remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or any of the other Credit Documents except with respect to any such amendment or waiver which would, under the terms of Section 11.8, require the consent of all of the Lenders, (iii) sub-participations by the participant (except to an affiliate, parent company or affiliate of a parent company of the participant) shall be prohibited and (iv) any such participations shall be in a minimum aggregate amount of $5,000,000 of the Commitments and in integral multiples of $1,000,000 in excess thereof. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or under any of the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.5 and 3.8 on the same basis as if it were a Lender (limited to the extent that the selling Lender would be able to receive additional amounts under Sections 3.5 and 3.8); provided, further, in the event such -------- ------- participant exercises any rights under Sections 3.5 or 3.8, the Borrower shall be permitted to exercise its rights pursuant to Section 3.15 with respect to the selling Lender. (e) Disclosure of Confidential Information. (i) Any Lender may, -------------------------------------- in connection with any assignment pursuant to paragraph (c) above or a participation pursuant to paragraph (d) above, disclose to the assignee or the proposed assignee or the participant or the proposed participant any information relating to Embassy Suites, Hotel Corp., Hotel Inc., any Subsidiary of Embassy Suites or the Hotel Corp., the Reorganization or the Distribution furnished to such Lender by or on behalf of Embassy Suites, the Hotel Corp., Hotel 98 Inc. or any Subsidiary of Embassy Suites or the Hotel Corp. in connection with this Credit Agreement, provided that, prior to any -------- such disclosure each such assignee or proposed assignee or participant or proposed participant shall execute an agreement containing substantially the terms of all then existing confidentiality agreements entered into by the assigning or selling Lender with respect to the Borrower and its Subsidiaries, in each case whereby such assignee or proposed assignee or participant or proposed participant shall agree to preserve the confidentiality of any non- public, confidential or proprietary information relating to Embassy Suites, the Hotel Corp., Hotel Inc., any Subsidiary of Embassy Suites or the Hotel Corp., the Reorganization or the Distribution. 11.4 No Waiver; Remedies Cumulative. No failure or delay on the part ------------------------------ of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any Guarantor and the Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower or any Guarantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or demand. 11.5 Payment of Expenses, etc. The Borrower agrees to: (i) pay all ------------------------ reasonable out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery and administration (but as to administration, only administration of the credit as among the Agent, the Borrower, the other Credit Parties and the Lenders and not as to any internal administration within the Agent) of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Moore & Van Allen, special counsel to the Agent) and any amendment, waiver or consent relating hereto and thereto requested or required by the Borrower including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement and of the Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the 99 reasonable fees and disbursements of counsel for the Agent and each of the Lenders) provided, that for the purposes of this Credit Agreement, -------- "reasonable attorneys' fees" shall be limited by the actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the Commitments; (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary and mortgage recording taxes and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified). 11.6 Amendments, Waivers and Consents. (a) Neither this Credit -------------------------------- Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing signed by the Required Lenders, provided that no such amendment, change, -------- waiver, discharge or termination shall, without the consent of each Lender adversely affected, (i) extend the Termination Date or reduce the rate or extend the time of payment of interest or principal (other than as a result of waiving the applicability of any post-default increase in interest rates) on any Loan or portion thereof or fees hereunder or reduce the principal amount thereof, or increase the Commitments of the Lenders over the amount thereof in effect (it being understood and agreed that a waiver of any condition for an Extension of Credit, Default or Event of Default or of a mandatory reduction in the total commitments shall not constitute a change in the terms of any Commitment of any Lender) or issue or extend Letters of Credit with expiry dates not permitted by the provisions of Section 2.2, (ii) release any Guarantor from its guaranty obligations hereunder except in accordance with the provisions hereof, (iii) amend, modify or waive any provision of this Section or of subsection (ii) of Section 3.3(d) (provided that any Lender to be terminated pursuant to -------- Section 3.3(d) shall not be required to consent to any such amendment, modification or waiver of 100 subsection (ii) of Section 3.3(d) necessary to effect such termination), (v) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, (v) release all or substantially all of the collateral subject to the Pledge Agreement or (vi) consent to the assignment or transfer by the Borrower (or Guarantor) of any of its rights and obligations under (or in respect of) this Credit Agreement or other Credit Documents except as permitted hereunder. No provision of Section 10 may be amended without the consent of the Agent. No provision affecting the duties and obligations (and compensation) of the Issuing Lender may be amended without the consent of the Issuing Lender. Notwithstanding anything to the contrary contained above, any Letter of Credit may be modified by the respective Issuing Lender so long as the terms thereof would be permitted in a newly issued Letter of Credit in accordance with the terms hereof. (b) If, in connection with any proposed change, waiver, discharge or termination of any of the provisions of this Agreement as contemplated by subclauses (i) through (iv), inclusive, of clause (a) above, the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, the Borrower shall have the right (so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below) to either (A) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 3.15 so long as at the time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender's Commitment and repay all outstanding Loans of such Lender in accordance with Sections 3.3(d) and 3.3(g), provided that, unless -------- the Commitments terminated and Loans repaid pursuant to the preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to the preceding clause (B), the Required Lenders (determined before giving effect to the proposed action) shall specifically consent thereto, provided further, that ---------------- in any event the Borrower shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the withholding of any required consent by such Lender to any increase in the Commitment of such Lender. 11.7 Counterparts. This Credit Agreement may be executed in any ------------ number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 11.8 Headings. The headings of the sections and subsections hereof -------- are provided for convenience only and shall 101 not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 Survival of Indemnification. All indemnities set forth herein, --------------------------- including, without limitation, in Sections 3.5, 3.8, 3.9, 3.10, 3.14, 10.7 and 11.5 shall survive the execution and delivery of this Credit Agreement, and the making of the Loans, the repayment of the Obligations and other obligations and the termination of the Commitment hereunder. 11.10 Governing Law; Submission to Jurisdiction; Venue. ------------------------------------------------ (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of North Carolina in Mecklenburg County, or of the United States for the Western District of North Carolina, and, by execution and delivery of this Credit Agreement, each of the Credit Parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Each of the Credit Parties further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 11.1, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Borrower in any other jurisdiction. (b) Each of the Credit Parties hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) EACH OF THE AGENTS, EACH OF THE LENDERS AND EACH OF THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.11 Severability. If any provision of any of the Credit Documents ------------ is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be 102 construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 Entirety. This Credit Agreement together with the other Credit -------- Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 11.13 Survival of Representations and Warranties. All ------------------------------------------ representations and warranties made by the Borrower herein shall survive delivery of the Notes and the making of the Loans hereunder. 11.14 Knowledge Standard. As used herein, the phrase "to the ------------------ knowledge of the Borrower" or any similar phrase shall mean the knowledge of any of the following persons: Raymond E. Schultz, President and Chief Executive Officer; David C. Sullivan, Executive Vice President and Chief Operating Officer; Donald H. Dempsey, Senior Vice President and Chief Financial Officer; Ralph B. Lake, Senior Vice President, General Counsel, and Secretary; Thomas L. Keltner, Senior Vice President, Development; Carol G. Champion, Vice President, Treasurer; and Jeffery M. Jarvis, Vice President and Controller; or any other person succeeding to the responsibilities of any such individual. 11.15 Confidentiality. Each Lender agrees that it will use its best --------------- efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors or counsel) any information with respect to the Parent Company, the Borrower or any of their respective Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated by the Parent Company, the Borrower or any of their respective Subsidiaries as confidential, provided -------- that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender (including bank examiners) or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required in respect to any summons or subpoena or in connection with any investigation by a Governmental Authority or litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, and (e) to any prospective or actual transferee or participant of any rights and interests hereunder provided such prospective transferee or participant executes an agreement containing provisions substantially identical to those contained in this Section. 11.16 Agent's and Lender's Covenant. The Agent and each Lender ----------------------------- hereby covenants that neither any Extension of Credit nor any part of any Extension of Credit constitutes assets of an 103 "employment benefit plan" within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Code. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 104 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Tranche A Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: - -------- EMBASSY SUITES, INC., a Delaware corporation By____________________________ Title_________________________ GUARANTORS: THE PROMUS COMPANIES INCORPORATED, - ---------- a Delaware corporation By____________________________ Title_________________________ PROMUS HOTEL CORPORATION, a Delaware corporation By____________________________ Title_________________________ PROMUS HOTELS, INC., a Delaware corporation By____________________________ Title_________________________ HAMPTON INNS, INC., a Delaware corporation By____________________________ Title_________________________ S-1 EMBASSY EQUITY DEVELOPMENT CORPORATION, a Delaware corporation By____________________________ Title_________________________ S-2 Signature Pages to Embassy Suites, Inc/ Promus Hotels, Inc. Tranche A Credit Agreement LENDERS: - ------- NATIONSBANK, N.A. (CAROLINAS), individually in its capacity as a Lender and in its capacity as Agent By_____________________________ Title__________________________ THE BANK OF NEW YORK By_____________________________ Title__________________________ THE BANK OF NOVA SCOTIA By_____________________________ Title__________________________ CIBC INC. By_____________________________ Title__________________________ THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By_____________________________ Title__________________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA By_____________________________ Title__________________________ S-3 Signature Pages to Embassy Suites, Inc/ Promus Hotels, Inc. Tranche A Credit Agreement LTCB TRUST COMPANY By_____________________________ Title__________________________ THE NIPPON CREDIT BANK, LTD. - LOS ANGELES AGENCY By_____________________________ Title__________________________ SOCIETE GENERALE, SOUTHWEST AGENCY By_____________________________ Title__________________________ CREDIT LYONNAIS By_____________________________ Title__________________________ FIRST AMERICAN NATIONAL BANK By_____________________________ Title__________________________ FIRST NATIONAL BANK OF COMMERCE By_____________________________ Title__________________________ FIRST TENNESSEE BANK, NATIONAL ASSOCIATION By_____________________________ Title__________________________ S-4 Signature Pages to Embassy Suites, Inc/ Promus Hotels, Inc. Tranche A Credit Agreement THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY By_____________________________ Title__________________________ THIRD NATIONAL BANK By_____________________________ Title__________________________ U.S. NATIONAL BANK OF OREGON By_____________________________ Title__________________________ S-5 Schedule 2.1(a) --------------- Tranche A Credit Agreement -------------------------- Schedule of Lenders and ----------------------- Commitments -----------
Revolving Revolving LOC LOC Committed Commitment Committed Commitment Lender Amount Percentage Amount Percentage ------ --------- ---------- ---------- ---------- NationsBank, N.A. $30,000,000.00 10.00000000% $2,000,000.00 10.00000000% (Carolinas) The Bank of New York $25,714,285.71 8.57142857% $1,714,285.71 8.57142857% The Bank of Nova $25,714,285.71 8.57142857% $1,714,285.71 8.57142857% Scotia CIBC Inc. $25,714,285.71 8.57142857% $1,714,285.71 8.57142857% The Sumitomo Bank, $25,714,285.71 8.57142857% $1,714,285.71 8.57142857% Limited, New York Branch First Union National $19,285,714.29 6.42857143% $1,285,714.29 6.42857143% Bank of North Carolina LTCB Credit Bank $19,285,714.29 6.42857143% $1,285,714.29 6.42857143% The Nippon Credit $19,285,714.29 6.42857143% $1,285,714.29 6.42857143% Bank, Ltd. - Los Angeles Agency Societe Generale, $19,285,714.29 6.42857143% $1,285,714.29 6.42857143% Southwest Agency Credit Lyonnais $12,857,142.86 4.28571429% $857,142.86 4.28571429% First American $12,857,142.86 4.28571429% $857,142.86 4.28571429% National Bank First National Bank $12,857,142.86 4.28571429% $857,142.86 4.28571429% of Commerce First Tennessee Bank $12,857,142.86 4.28571429% $857,142.86 4.28571429% National Association The Industrial Bank $12,857,142.86 4.28571429% $857,142.86 4.28571429% of Japan, Limited, Atlanta Agency Third National Bank $12,857,142.86 4.28571429% $857,142.86 4.28571429% U.S. National Bank $12,857,142.86 4.28571429% $857,142.86 4.28571429% of Oregon -------------- ----------- ----------- ----------- $300,000,000 100.0000000% $20,000,000.00 100,000,000%
1 Schedule 2.1(b)(i) ------------------ TRANCHE A CREDIT AGREEMENT FORM OF NOTICE OF BORROWING NationsBank, N.A. (Carolinas), NationsBank, N.A. (Carolinas), as Agent for the Lenders as Swingline Lender 101 N. Tryon Street 101 N. Tryon Street Independence Center, 15th Floor Independence Center, 15th Floor NC1-001-15-04 NC1-001-15-04 Charlotte, North Carolina 28255 Charlotte, North Carolina 28255 Attn: Agency Services Attn: Agency Services Ladies and Gentlemen: The undersigned, EMBASSY SUITES, INC./PROMUS HOTELS, INC. (the "Borrower"), refers to the Tranche A Credit Agreement dated as of June 7, -------- 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among Embassy Suites, Inc., as initial borrower, ---------------- certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice that it requests a Committed Revolving Loan borrowing or a Swingline Loan borrowing pursuant to the provisions of Section 2.1(b) or 2.3(b)(i) of the Credit Agreement, as appropriate, and in connection herewith sets forth below the terms on which such borrowing is requested to be made: (A) Type of Loan Borrowing Requested _____ Committed Revolving Loan _____ Swingline Loan (B) Date of Borrowing (which is a Business Day) _______________________ (C) Principal Amount of Borrowing1 _______________________ (D) Interest rate basis2 _______________________ (E) Interest Period and the last day thereof3 _______________________ In accordance with the requirements of Section 5.3, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (ii) of such Section, and confirms that the matters referenced in subsections (b), (c), (d) and (e) of such Section, are true and correct. Very truly yours, EMBASSY SUITES, INC./PROMUS HOTELS, INC. By:_____________________________________ Title:__________________________________ -------------------- 1 In the case of Committed Revolving Loans, minimum of $5,000,000 and $1,000,000 increments in excess thereof (or the remaining available Revolving Committed Amount, if less). In the case of Swingline Loans, a minimum of $250,000 and $100,000 in excess thereof (or the remaining available Swingline Committed Amount, if less). 2 In the case of Committed Revolving Loans, Eurodollar and Base Rate Loans available. In the case of Swingline Loans, Base Rate Loans available. 3 Interest Periods of one, two, three and six months' duration for Eurodollar Loans. Schedule 2.1(e) --------------- Form of Tranche A Committed Revolving Note $_________________ June _, 1995 FOR VALUE RECEIVED, EMBASSY SUITES, INC./PROMUS HOTELS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of -------- __________________________, its successors and assigns (the "Lender"), at the ------ office of NationsBank, N.A. (Carolinas), as Agent (the "Agent"), at 101 N. Tryon ----- Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Tranche A Credit Agreement dated as of June 7, 1995 among Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and the Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all ---------------- capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the principal amount of ________________________DOLLARS ($____________) or, if less than such principal amount, the aggregate unpaid principal amount of all Committed Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.1(d) of the Credit Agreement. Overdue principal and, to the extent permitted by law, overdue interest owing hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition the principal and interest, all costs of collection, including reasonable attorneys' fees; provided, that for purposes of this note, -------- "reasonable attorneys' fees" shall be limited to actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the principal amount hereof. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on Schedule A attached hereto and incorporated ---------- herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such -------- ------- information (or an error in such endorsement) on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. EMBASSY SUITES, INC./ PROMUS HOTELS, INC. By____________________________ Title_________________________ 1 SCHEDULE A TO THE TRANCHE A COMMITTED REVOLVING NOTE OF EMBASSY SUITES, INC./PROMUS HOTELS, INC. DATED JUNE _, 1995
Unpaid Name of Type Principal Person of Interest Payments Balance Making Date Loan Period Principal Interest of Note Notation ---- ---- -------- --------- -------- -------- --------
2 Schedule 2.2(a) --------------- Existing Letters of Credit 1 Schedule 2.3(d) --------------- Form of Swingline Note $20,000,000 June _, 1995 FOR VALUE RECEIVED, PROMUS HOTELS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of NATIONSBANK, N.A. -------- (CAROLINAS), its successors and assigns (the "Swingline Lender"), at the office ---------------- of NationsBank, N.A. (Carolinas), as Agent (the "Agent"), at 101 N. Tryon ----- Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Tranche A Credit Agreement dated as of June 7, 195 among Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and the Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all ---------------- capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the principal amount of TWENTY MILLION DOLLARS ($20,000,000) or, if less than such principal amount, the aggregate unpaid principal amount of all Swingline Loans made by the Swingline Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.3(c) of the Credit Agreement. Overdue principal and, to the extent permitted by law, overdue interest owing hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Swingline Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition the principal and interest, all costs of collection, including reasonable attorneys' fees; provided, that for purposes of this note, -------- "reasonable attorneys' fees" shall be limited by actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the principal amount hereof. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on Schedule A attached hereto and incorporated ---------- herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such -------- ------- information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. EMBASSY SUITES, INC./ PROMUS HOTELS, INC. By____________________________ Title_________________________ 1 SCHEDULE A TO THE SWINGLINE NOTE OF EMBASSY SUITES, INC./PROMUS HOTELS, INC. DATED JUNE _, 1995
Unpaid Name of Type Principal Person of Interest Payments Balance Making Date Loan Period Principal Interest of Note Notation ---- ---- -------- --------- -------- -------- --------
2 Schedule 2.4(b)-1 ----------------- Form of Tranche A Competitive Bid Request NationsBank, N.A. (Carolinas) as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-005-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, PROMUS HOTELS, INC. (the "Borrower"), refers to the -------- Tranche A Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among Embassy ---------------- Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives you notice pursuant to Section 2.4(b) of the Credit Agreement it requests solicitation of Competitive Bids under the Credit Agreement, and in connection herewith sets forth below the terms on which such Competitive Loan borrowing is requested to be made: (A) Date of Competitive Loan Borrowing (which is a Business Day) __________________ (B) Principal Amount of Competitive Loan Borrowing4 __________________ (C) Interest Period and the last day thereof5 __________________ In accordance with the requirements of Section 5.3, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (ii) of such Section, and confirms that the matters referenced in subsections (b), (c), (d) and (e) of such Section, are true and correct. Very truly yours, PROMUS HOTELS, INC. By:____________________________ Title:_________________________ -------------------- 4 A minimum of $5,000,000 and $1,000,000 increments in excess thereof. 5 Subject to the provisions and definitions of the Credit Agreement, but generally not less than 7 days nor more than 180 days. 1 Schedule 2.4(b)-2 ----------------- Form of Notice of Tranche A Competitive Bid Request [Name of Lender] [Address] Attention: Ladies and Gentlemen: Reference is made to the Tranche A Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit ------ Agreement"), among Embassy Suites, Inc., as initial borrower, (the "Borrower"), - --------- -------- certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower made a Competitive Bid Request on _____________, 19__, pursuant to Section 2.4(b) of the Credit Agreement, and in that connection you are invited to submit a Competitive Bid by 10:00 A.M. (Charlotte, North Carolina time) ______________, 19__ [Date of Proposed Competitive Loan Borrowing] Your Competitive Bid must comply with Section 2.4(c) of the Credit Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Date of Competitive Loan Borrowing __________________ (B) Principal amount of Competitive Loan Borrowing __________________ (C) Interest Period and the last day thereof __________________ Very truly yours, NATIONSBANK, N.A. (CAROLINAS), as Agent By________________________________ Title:____________________________ 1 Schedule 2.4(c) --------------- Form of Tranche A Competitive Bid NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, [Name of Lender], refers to the Tranche A Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among Embassy Suites, Inc., as initial ---------------- borrower, (the "Borrower"), certain subsidiaries and related parties, the -------- Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section 2.4(c) of the Credit Agreement, in response to the Competitive Bid Request made by the Borrower on ________________, 19__, and in that connection sets forth below the terms on which such Competitive Bid is made: (A) Principal Amount6 ____________________ (B) Competitive Bid Rate ____________________ (C) Interest Period and last day thereof ____________________ The undersigned hereby confirms that it is prepared, subject to the conditions set forth in the Credit Agreement, to extend credit to the Borrower upon acceptance by the Borrower of this bid in accordance with Section 2.4(e) of the Credit Agreement. Very truly yours, [NAME OF LENDER] By:______________________________ Title:___________________________ -------------------- 6 Acceptance in a minimum principal amount of $1,000,000 and $500,000 increments in excess thereof. 1 Schedule 2.4(d) --------------- Form of Tranche A Competitive Bid Accept/Reject Letter NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, PROMUS HOTELS, INC. (the "Borrower"), refers to the -------- Tranche A Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among Embassy ---------------- Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. In accordance with Section 2.4(d) of the Credit Agreement, we have received Competitive Bids in connection with our Competitive Bid Request dated ______________ and in accordance with Section 2.4(d) of the Credit Agreement, we hereby accept the following bids for maturity on [date]: Interest Principal Amount Competitive Bid Rate Paid Lender - ---------------- -------------------- -------- ------ $ [%] $ [%] We hereby reject the following bids: Interest Principal Amount Competitive Bid Rate Paid Lender - ---------------- -------------------- -------- ------ $ [%] $ [%] The Competitive Loans accepted as provided above should be deposited in the general deposit account maintained by the Borrower with NationsBank, N.A. (Carolinas) on the date hereof in accordance with Section 2.4(e) of the Credit Agreement. Very truly yours, PROMUS HOTELS, INC. By:_____________________________ Name:________________________ Title:_______________________ 1 Schedule 2.4(h) --------------- Form of Tranche A Competitive Loan Note $300,000,000 June _, 1995 FOR VALUE RECEIVED, PROMUS HOTELS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of __________________________, -------- its successors and permitted assigns (the "Lender"), at the office of ------ NationsBank, N.A. (Carolinas), as Agent (the "Agent"), at 101 N. Tryon Street, ----- Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Tranche A Credit Agreement dated as of June 7, 1995 among Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and the Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms not ---------------- otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the principal amount of THREE HUNDRED MILLION DOLLARS ($300,000,000) or, if less than such principal amount, the aggregate unpaid principal amount of all Competitive Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.4(g) of the Credit Agreement and in the respective Competitive Bid applicable to each Competitive Loan borrowing evidenced hereby. Overdue principal and, to the extent permitted by law, overdue interest owing hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition the principal and interest, all costs of collection, including reasonable attorneys' fees; provided, that for purposes of this note, -------- "reasonable attorneys' fees" shall be limited by actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the principal amount hereof. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on Schedule A attached hereto and incorporated ---------- herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such -------- ------- information (or an error in such endorsement) on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. PROMUS HOTELS, INC. By____________________________ Title_________________________ 1 SCHEDULE A TO THE TRANCHE A COMPETITIVE LOAN NOTE OF EMBASSY SUITES, INC./PROMUS HOTELS, INC. DATED JUNE _, 1995
Unpaid Name of Type Principal Person of Interest Payments Balance Making Date Loan Period Principal Interest of Note Notation ---- ---- -------- --------- -------- -------- --------
2 Schedule 3.2 ------------ Form of Tranche A Notice of Conversion or Extension NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Ladies and Gentlemen: The undersigned, PROMUS HOTELS, INC. (the "Borrower"), refers to the -------- Tranche A Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among ---------------- Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an extension or conversion of one or more Committed Revolving Loans outstanding under the Credit Agreement, and in connection herewith sets forth below the terms on which such extension or conversion is requested to be made: (A) Date of Extension or Conversion (which is the last day of the _______________________ the applicable Interest Periods) (B) Principal Amount of Extension or Conversion7 _______________________ (C) Interest rate basis8 _______________________ (D) Interest Period and the last day thereof9 _______________________ In accordance with the requirements of Section 5.3, except in the case of extension of or conversion to Base Rate Loans, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (ii) of such Section, and confirms that the matters referenced in subsections (b), (c), (d) and (e) of such Section, are true and correct. Very truly yours, PROMUS HOTELS, INC. By:__________________________________ Title:_______________________________ -------------------- 7 A minimum of $5,000,000 and $1,000,000 increments in excess thereof (or the remaining available Revolving Committed Amount, if less). 8 Eurodollar and Base Rate Loans available. 9 Interest Periods of one, two, three and six months' duration for Eurodollar Loans. 1 Schedule 5.1(a) --------------- Form of Pledge Agreement 1 Schedule 6.15 ------------- Subsidiaries 2 Schedule 7.1(d) --------------- Form of Officer's Compliance Certificate For the fiscal quarter ended _________________, 19___. I, ______________________, [Title] of PROMUS HOTELS, INC. (the "Borrower") hereby certify that, to the best of my knowledge and belief, -------- with respect to that certain Tranche A Credit Agreement dated as of June 7, 1995 and that certain Tranche B Credit Agreement dated as of June 7, 1995 (each as may be as amended, modified, extended or restated from time to time, collectively, the "Hotel Facility"; all of the defined terms in the -------------- Hotel Facility are incorporated herein by reference) among Promus Hotels, Inc., a wholly-owned subsidiary of Promus Hotel Corporation, as Borrower, Promus Hotel Corporation, as Guarantor, the Lenders party thereto and NationsBank, N.A. (Carolinas), as Agent: a. The company-prepared financial statements which accompany this certificate are true and correct in all material respects and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, subject to changes resulting from normal year-end audit adjustments; and b. Since ___________ (the date of the last similar certification, or, if none, the Closing Date) (i) the Credit Parties have kept, observed, performed and fulfilled each and every agreement binding on them contained in the Credit Documents and (ii) no Default or Event of Default has occurred under the Hotel Facility. Delivered herewith are detailed calculations demonstrating compliance by the Credit Parties with the financial covenants contained in Section 7.11 of the Hotel Facility as of the end of the fiscal period referred to above. This ______ day of ___________, 19__. PROMUS HOTEL CORPORATION ________________________________ Title: 1 Attachment to Officer's Certificate ----------------------------------- Computation of Financial Covenants 2 Schedule 7.12 ------------- Form of Joinder Agreement THIS JOINDER AGREEMENT (the "Agreement"), dated as of --------- _____________, 19__, is by and between _____________________, a ___________________ (the "Subsidiary"), and NATIONSBANK, N.A. ---------- (CAROLINAS), in its capacity as Agent under that Tranche A Credit Agreement and that Tranche B Credit Agreement (as amended, modified, extended or restated from time to time, the "Tranche A --------- Credit Agreement" and the "Tranche B Credit Agreement", ---------------- -------------------------- respectively, and sometimes hereafter referred to collectively as the "Credit Agreements"), in each case dated as of June 7, 1995 ----------------- by and among EMBASSY SUITES, INC., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders party thereto and NationsBank, N.A. (Carolinas), as Agent. All of the defined terms in the Credit Agreements are incorporated herein by reference. The Subsidiary is an Additional Credit Party, and, consequently, the Credit Parties are required by Section 7.12 of each of respective the Credit Agreements to cause the Subsidiary to become a "Guarantor". --------- Accordingly, the Subsidiary hereby agrees as follows with the Agent, for the benefit of the Lenders: 1. The Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Subsidiary will be deemed to be a party to each of the Credit Agreements and a "Guarantor" for all purposes of the Credit Agreements, and shall have all of the obligations of a Guarantor thereunder as if it had executed the Credit Agreements. The Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in each of the Credit Agreements, including without limitation (i) all of the representations and warranties set forth in Section 6 of each of the Credit Agreements as they relate to such Subsidiary, (ii) all of the affirmative and negative covenants set forth in Sections 7 and 8 of each of the Credit Agreements and (iii) all of the undertakings and waivers set forth in Section 4 of each of the Credit Agreements (subject to the limitations set forth therein). Without limiting the generality of the foregoing terms of this paragraph 1, the Subsidiary hereby (i) subject to the limitation set forth in Section 4.1 of each of the Credit Agreements, jointly and severally together with the other Guarantors, guarantees to each Lender and the Agent, as provided in Section 4 of each of the Credit Agreements, the prompt payment and performance of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof and (ii) agrees that if any of the Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the Subsidiary will, jointly and severally together with the other Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2. The undersigned Credit Party, being the parent company of the Subsidiary, joins in the execution of the Joinder Agreement for purposes of (i) acknowledging, and agreeing to be bound by the terms of, the Pledge Agreement as a Pledgor thereunder as if it had been an original party thereto, (ii) acknowledging, representing and affirming to the Collateral Agent that the Pledged Securities (as such term is defined in the Pledge Agreement) hereby delivered to the Collateral Agent and which are subject to the pledge and security interest under the Pledge Agreement are as follows: 1 Nominal Certificate No. of Percentage Issuer Owner No. Shares of Total ------ ------- ------- ------ Ownership --------- and (iii) acknowledging that its notice address and the address of its chief executive office for purposes of the Pledge Agreement is c/o Promus Hotels, Inc., 850 Ridgelake Boulevard, Memphis, Tennessee 38120, Attn: Carol G. Champion, Telephone: (901) 680-7201, Telecopy: (901) 680-7270. 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be duly executed by its authorized officers, and the Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. [SUBSIDIARY] By____________________________ Title_________________________ PLEDGOR [PARENT COMPANY] ------- By____________________________ Title_________________________ Acknowledged and accepted: NATIONSBANK, N.A. (CAROLINAS), as Agent By______________________________ Title___________________________ 2 Schedule 8.1 ------------ Existing Indebtedness 1 Schedule 8.2 ------------ Existing Liens 1 Schedule 11.1 ------------- Schedule of Addresses
Address for Funding Address for Lender and Payments Other Notices ------ ------------ ------------- NationsBank, N.A. NationsBank, N.A. (Carolinas) NationsBank, N.A. (Carolinas) 101 N. Tryon St. (Carolinas) Independence Center Corporate Bank NC1-001-15-04 1 NationsBank Plaza Charlotte, NC 28255 Nashville, TN 37329-1697 Attn: Agency Services Attn: J.E. Ball Phone: (704) 386-9368 Phone: (615) 749-3469 Fax: (704) 386-9923 Fax: (615) 749-4640 with a copy to: Christopher C. Kupec, Esq. Moore & Van Allen, PLLC NationsBank Corporate Center, Floor 47 100 N. Tryon Street Charlotte, NC 28202-4003 Phone: (704) 331-1046 Fax: (704) 331-1159 The Bank of New The Bank of New York The Bank of New York York One Wall Street, 22nd Floor One Wall Street, 22nd Floor New York, NY 10286 New York, NY 10286 Attn: Greg Batson Attn: Greg Batson Phone: (212) 635-6898 Phone: (212) 635-6898 Fax: (212) 635-6434 Fax: (212) 635-6434 Credit Lyonnais Credit Lyonnais Cayman Branch Credit Lyonnais Cayman Branch Cayman Branch 1301 Avenue of the Americas 1301 Avenue of the Americas 18th Floor 18th Floor New York, NY 10019 New York, New York 10019 Attn: Alex Larrinaga Attn: Mischa Zabotin Phone: (212) 261-7833 Phone: (212) 261-7872 Fax: (212) 261-7890 Fax: (212) 261-7890 The Sumitomo Bank, The Sumitomo Bank, Limited, New The Sumitomo Bank, Limited, New Limited, New York York Branch York Branch Branch 277 Park Avenue 277 Park Avenue New York, NY 10172 New York, New York 10172 Attn: Christine Bonifacic Attn: Christine Bonifacic Phone: (212) 224-4138 Phone: (212) 224-4138 Fax: (212) 224-5197 Fax: (212) 224-5197 The Bank of Nova The Bank of Nova Scotia The Bank of Nova Scotia Scotia 1100 Louisiana 1100 Louisiana Suite 3000 Suite 3000 Houston, TX 77002 Houston, Texas 77002 Attn: Paul Gonin Attn: Paul Gonin Phone: (713) 759-3443 Phone: (713) 759-3443 Fax: (713) 752-2425 Fax: (713) 752-2425 1 Address for Funding Address for Lender and Payments Other Notices ------ ------------ ------------- CIBC Inc. CIBC Inc. CIBC Inc. 300 South Grand Avenue 300 South Grand Avenue Suite 2700 Suite 2700 Los Angeles, CA 90071 Los Angeles, CA 90071 Attn: Paul Chakmak Attn: Paul Chakmak Phone: (213) 617-6226 Phone: (213) 617-6226 Fax: (213) 346-0157 Fax: (213) 346-0157 First Tennessee First Tennessee Bank National First Tennessee Bank National Bank National Association Association Association 165 Madison Avenue 165 Madison Avenue National Department, 9th Floor National Department, Memphis, TN 38103 9th Floor Attn: Steve Wade Memphis, TN 38103 Phone: (901) 523-4118 Attn: Steve Wade Fax: (901) 523-4267 Phone: (901) 523-4118 Fax: (901) 523-4267 First American First American National Bank First American National Bank National Bank 4894 Poplar Avenue, 2nd Floor 4894 Poplar Avenue, 2nd Floor Memphis, TN 38117 Memphis, TN 38117 Attn: David May/Beth Vaughn Attn: David May/Beth Vaughn Phone: (901) 762-5688/762-5671 Phone: (901) 762-5688/762-5671 Fax: (901) 762-5665 Fax: (901) 762-5665 The Industrial Bank The Industrial Bank of Japan, The Industrial Bank of Japan, of Japan, Limited, Limited, Atlanta Agency Limited, Atlanta Agency Atlanta Agency 191 Peachtree Street, Suite 3600 191 Peachtree Street, Suite 3600 Atlanta, GA 30303 Atlanta, GA 30303 Attn: Jackie Brunetto Attn: Jackie Brunetto Phone: (404) 420-3325 Phone: (404) 420-3325 Fax: (404) 524-8509 Fax: (404) 524-8509 LTCB Trust Company LTCB Trust Company The Long Term Credit Bank of 165 Broadway Japan, Limited New York, NY 10006 45 Peachtree Center Avenue Attn: Winston Brown Suite 2801 Phone: (212) 335-4854 Atlanta, GA 30303 Fax: (212) 608-3081 Attn: Rebecca Sedlar Silbert Phone: (404) 659-7210 Fax: (404) 658-9751 The Nippon Credit The Nippon Credit Bank, Ltd. - The Nippon Credit Bank, Ltd. - Bank, Ltd. - Los Los Angeles Agency Los Angeles Agency Angeles Agency 550 South Hope Street 550 South Hope Street Suite 2500 Suite 2500 Los Angeles, CA 90071 Los Angeles, CA 90071 Attn: Helen Rhee/Jay Schwartz Attn: Helen Rhee/Jay Schwartz Phone: (213) 243-5723/243-5722 Phone: (213) 243-5723/243-5722 Fax: (213) 243-892-0111 Fax: (213) 243-892-0111 2 Address for Funding Address for Lender and Payments Other Notices ------ ------------ ------------- Societe Generale, Societe Generale, Southwest Societe Generale, Southwest Southwest Agency Agency Agency 4800 Trammell Crow Center 1111 Bagby Street 2001 Ross Avenue Suite 2020 Dallas, TX 75201 Houston, TX 77002 Attn: Terry Jones Attn: Paul Cornell/Thierry Phone: (214) 979-2777 Namuroy Fax: (214) 979-1104 Phone: (713) 759-6301/759-6313 Fax: (713) 650-0824 with a copy to: Societe Generale, Southwest Agency 4800 Trammell Crow Center 2001 Ross Avenue Dallas, TX 75201 Attn: Terry Jones Phone: (214) 979-2777 Fax: (214) 979-1104 U.S. National Bank U.S. National Bank of Oregon U.S. National Bank of Oregon of Oregon 555 SW Oak Street 555 SW Oak Street Suite 400 Suite 400 Portland, Oregon 97204 Portland, Oregon 97204 Attn: Claire C. Jones Attn: Claire C. Jones Phone: (503) 275-3192 Phone: (503) 275-3192 Fax: (503) 275-5428 Fax: (503) 275-5428 First Union First Union National Bank of First Union National Bank of National Bank of North Carolina North Carolina North Carolina One First Union Center One First Union Center 301 South College Street 301 South College Street Charlotte, NC 28288 Charlotte, NC 28288 Attn: Leo Leitner Attn: Leo Leitner Phone: (704) 383-5210 Phone: (704) 383-5210 Fax: (704) 374-2802 Fax: (704) 374-2802 First National Bank First National Bank of Commerce First National Bank of Commerce of Commerce Suite 751 Suite 751 210 Baronne Street 210 Baronne Street New Orleans, LA 70112 New Orleans, LA 70112 Attn: Louis Ballero Attn: Louis Ballero Phone: (504) 561-1989 Phone: (504) 561-1989 Fax: (504) 561-1738 Fax: (504) 561-1738 Third National Bank Third National Bank Third National Bank 6000 Poplar 6000 Poplar Suite 145 Suite 145 Memphis, TN 38119 Memphis, TN 38119 Attn: Carol Yochem/Saul Komisar Attn: Carol Yochem/Saul Komisar Phone: (901) 766-7561 Phone: (901) 766-7561 Fax: (901) 766-7565 Fax: (901) 766-7565
3 Schedule 11.3(b) ---------------- Form of Hotel Inc. Tranche A Assignment and Assumption Agreement THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of June 7, 1995 (the "Agreement"), among EMBASSY SUITES, INC., a Delaware corporation ("Embassy --------- ------- Suites"), PROMUS HOTELS, INC., a Delaware corporation (the "Hotel Inc."), THE - ------ ---------- PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus Co.") and ---------- NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under the Credit Agreement hereinafter described. Embassy Suites and Promus Co. have agreed to transfer to Hotel Inc. certain hotel related assets and liabilities in contemplation of the Reorganization and the Distribution. In consideration therefor, the parties hereto agree as follows: SECTION 1. Definitions. Terms capitalized but not defined herein shall ----------- have the meanings assigned thereto in that certain Tranche A Credit Agreement dated as of June 6, 1995 (the "Credit Agreement") among Embassy Suites, as ---------------- initial borrower, certain subsidiaries and related parties as guarantors, the Lenders party thereto and the Agent. SECTION 2. Assignment and Assumption. Effective as of the date hereof, ------------------------- Embassy Suites hereby irrevocably and unconditionally assigns to Hotel Inc. all of its rights as "Borrower" under the Credit Agreement. Effective as of the date hereof, Hotel Inc. hereby irrevocably and unconditionally agrees with the Agent and the Lenders to be bound by all of the terms and conditions of the Credit Agreement and to perform all of the obligations and discharge all of the liabilities of the Borrower existing at or accrued prior to the date hereof or hereafter arising under the Credit Agreement and (ii) and ratifies, and agrees to be bound by, (A) the representations and warranties set forth in Section 6 of the Credit Agreement and (B) all of the affirmative and negative covenants set forth in Sections 7 and 8 of the Credit Agreement. Without limiting the generality of the foregoing terms of this Section 2, Hotel Inc. hereby promises to pay to each Lender the principal balance of, and accrued interest on, each Loan outstanding (and to pay all other Obligations, including LOC Obligations and Swingline Loans) at, or advanced on or after, the date hereof. SECTION 3. Release. The Agent, acting on behalf of the Lenders, hereby ------- fully and unconditionally releases and forever discharges (i) Embassy Suites as of the date hereof from any and all liabilities, claims, charges, choses in actions, causes of action, damages, and other obligations, in each case whether known or unknown, absolute or contingent, at law or in equity, now existing or hereafter arising and whether arising under contract, by operation of law or otherwise (collectively, "Claims") arising under and relating to the Credit ------ Agreement and (ii) Promus Co. from any Claims arising under or relating to its guaranty obligations relating thereto under or relating to the Credit Agreement. SECTION 4. References in the Credit Documents. From and after the ---------------------------------- Effective Date of Assignment, (a) Hotel Inc. shall have succeeded Embassy Suites as the "Borrower" under the Credit Agreement, and all references to the "Borrower" in the Credit Agreement shall refer to Hotel Inc. and not to Embassy Suites and (b) all references to the "Credit Agreement" in any Credit Documents shall refer to the Credit Agreement, as amended and modified by this Agreement. Except as expressly amended and modified by this Agreement, all of the terms and provisions of the Credit Agreement shall remain in full force and effect. SECTION 5. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ------------- OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. 1 SECTION 6. WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, EMBASSY -------------------- SUITES AND HOTEL INC. HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 7. Successors and Assignees. Subject to the terms of Section 11.4 ------------------------ of the Credit Agreement, this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of Embassy Suites, Hotel Inc., the Agent and each of the Lenders. SECTION 8. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. EMBASSY SUITES, INC. By:___________________________ Title:________________________ PROMUS HOTELS, INC. By:___________________________ Title:________________________ THE PROMUS COMPANIES INCORPORATED By:___________________________ Title:________________________ NATIONSBANK, N.A. (CAROLINAS), as Agent as aforesaid for the Lenders By____________________________ Title_________________________ 2 Schedule 11.3(c) ---------------- Form of Tranche A Assignment and Acceptance THIS ASSIGNMENT AND ACCEPTANCE dated as of ________, 199_ is entered into between ________________ ("Assignor") and ____________________ ("Assignee"). -------- -------- Reference is made to the Tranche A Credit Agreement dated as of June 7, 1995, as amended and modified from time to time thereafter (the "Credit ------ Agreement") among EMBASSY SUITES, INC., as initial borrower, certain - --------- subsidiaries and related parties as guarantors, the Lenders party thereto and NationsBank, N.A. (Carolinas), as Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and ----------------- obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Commitments of the Assignor on the effective date of the assignment designated below (the "Effective Date") and the Committed -------------- Revolving Loans, Swingline Loans and Competitive Loans owing to the Assignor which are outstanding on the Effective Date, together with unpaid interest accrued on the assigned Loans to the Effective Date and the amount, if any, set forth below of the fees accrued to the Effective Date for the account of the Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 11.3(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee, if it is not already a Lender under the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests (except for its right to seek indemnification under the Credit Agreement) assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of North Carolina. 3. Terms of Assignment (a) Date of Assignment: (b) Legal Name of Assignor: (c) Legal Name of Assignee: (d) Effective Date of Assignment: (e) Revolving Loan Commitment Percentage Assigned (expressed as a percentage of the total Commitment of the Lenders to make Committed Revolving Loans and set forth to at least 8 decimals) % (f) Revolving Loan Commitment Percentage of Assignor after Assignment (set forth to at least 8 decimals) % 1 (g) Total Committed Revolving Loans outstanding as of Effective Date $_____________ (h) Principal Amount of Committed Revolving Loans assigned on Effective Date (the amount set forth in (g) multiplied by the percentage set forth in (e)) $_____________ The terms set forth above are hereby agreed to: ____________________, as Assignor By:_____________________________________ Title:__________________________________ _____________________, as Assignee By:_____________________________________ Title:__________________________________ CONSENTED TO: NATIONSBANK, N.A. (CAROLINAS), as Agent By:____________________________________ Title:_________________________________ PROMUS HOTELS, INC. By:____________________________________ Title:_________________________________ 2 Schedule 2.2(a) Existing Letters of Credit -------------------------- None. Schedule 6.1(b) Special Provisions Regarding Pro Forma Balance Sheets ----------------------------------------------------- The pro forma adjustments made in the preparation of the Pro Forma Balance Sheet are as set forth in the Proxy Statement dated April 25, 1995 of Promus Co. describing the Distribution and mailed to the shareholders of Promus Co. for purposes of its May 26, 1995 shareholders meeting. Schedule 6.4 Consents, Authorizations, Notices and Filings --------------------------------------------- None. Schedule 6.8 Excluded Assets --------------- After giving effect to the Reorganization, Distribution and the Hotel Inc. Assignment and Assumption Agreement, those certain hotel-related assets of Promus Co. and its Subsidiaries that will be retained by Promus Co. and its Subsidiaries but which shall be managed by Hotel Inc. pursuant to that certain Asset Management Agreement by and between Embassy Suites and Hotel Inc. to be executed as of June 30, 1995. Schedule 6.9 Claims Regarding Intellectual Property -------------------------------------- None. Schedule 8.1 Existing Indebtedness --------------------- (as of March 31, 1995) Capital Leases - -------------- Embassy - Tucson $ 44,350 Embassy - Orlando $ 31,362 Embassy - Thomas Road $ 35,072 Embassy - Philadelphia Airport $ 41,031 Information Technology $ 1,773,302 Marketing Services Center $ 68,061 Notes - ----- Embassy - DeBanks Henwood $ 917,641 Hampton - San Francisco land $ 296,724 Guarantees - ---------- Meadowlands Land Lease $29,356,749 Chicago Lombard $ 500,000 Embassy Pacific Partner LP, Embassy Atlanta Buckhead Partners LP and Embassy LaJolla Partners LP $ 4,000,000 Executive Life Guarantee [Not to exceed $8,100,000] Schedule 8.2 Existing Liens -------------- (as of March 31, 1995) Capital Leases - -------------- Embassy - Tucson $ 44,350 Embassy - Orlando $ 31,362 Embassy - Thomas Road $ 35,072 Embassy - Philadelphia Airport $ 41,031 Information Technology $1,773,302 Marketing Services Center $ 68,061 Schedule 8.5 Existing Investments -------------------- Name (percent ownership interest) - --------------------------------- ATM Hotels Pty Limited (75%) Barshop-HII Joint Venture (50%) Embassy Akers Venture (50%) Embassy Atlanta Buckhead Partners Limited Partnership (5%) Embassy/GACL Lombard Joint Venture (50%) Embassy LaJolla Partners Limited Partnership (10%) Embassy Pacific Partners Limited Partnership (10%) Embassy/Shaw Parsippany Venture (50%) Embassy/Shaw Rochester Venture (50%) Embassy Suites Club No. Two, Inc. (49%) EPT Atlanta-Perimeter Center Limited Partnership (50%) EPT Austin Joint Venture (50%) EPT Bloomington Joint Venture (50%) EPT Covina Joint Venture (50%) EPT Crystal City Land Limited Partnership (50%) EPT Kansas City Joint Venture (50%) EPT Meadowlands Limited Partnership (50%) EPT Omaha Joint Venture (50%) EPT Overland Park Limited Partnership (50%) EPT Raleigh Limited Partnership (50%) EPT San Antonio Joint Venture (50%) ES/PA, L.P. (98%) E.S. Philadelphia Airport Joint Venture (99.8%) GOL (Texas) Inc. (49%) Granada Royale Hometel-Tucson, a limited partnership (50.003%) Granada Royale Hometel-West, a limited partnership (65%) Hampton/GHI Associates #1 (20%) Hampton/GHI Associates #2 (20%) Hospitality Capital Group (33.3%) Hospitality Capital Group II (33.3%) King Street Station Hotel Associates, L.P. (50%) MHV Joint Venture (50%) Pacific Market Investment Company Joint Venture (50%) Riverview/Embassy Joint Venture (50%) SES/D.C. Venture (25%) Existing Investments (Notes Receivable) --------------------------------------- (as of March 31, 1995) Embassy Suites - -------------- El Paso $ 133,503 Richmond $ 1,000,000 LaJolla $ 687,970 Santa Clara $ 611,428 Crystal City $ 638,375 Charleston $ 682,461 Hampton Inn - ----------- Secaucus $ 50,637 San Antonio - Downtown $ 1,000,000 San Diego $ 57,954 Hampton Inn & Suites - -------------------- Newport News $ 1,000,000 Homewood Suites - --------------- Lane/Raymond/Smith $ 500,000 Santa Fe $ 1,500,000 San Antonio - Downtown $ 1,000,000 Harrisburg $ 939,105 Alexandria $ 529,588 Information Technology $ 750,000 - ---------------------- Marketing Services Center $ 125,725 - ------------------------- ----------- $11,206,746 =========== SCHEDULE 6.15 ------------- Subsidiaries
# of Outstanding # of Shares of Each Options, Warrants, Class of Capital Stock Rights of Jurisdiction of Percentage or Other Equity Conversion or Incorporation or of Interest Outstanding Purchase and Similar Name Organization Ownership (# Owned) Rights (Effect if Exercised) Ziwa Insurance Ltd. (to be formed) None Promus Hotels, Inc.*/ Delaware 100% None - Buckleigh, Inc. Delaware 100% 100 (100) None ATM Hotels Pty Limited Australia 50% 2 (1) None Compass, Inc. Tennessee 100% 1000 (1000) None EJP Corporation Delaware 100% 1000 (1000) None Suite Life, Inc. Delaware 100% 1000 (1000) None Embassy Development Corporation Delaware 100% 100 (100) None Embassy Suites De Mexico, S.A., de C.V. Mexico 1% 10,000 (100) None ES/PA, L.P. [Pennsylvania] 98% [Not Applicable] None E.S. Philadelphia Airport Joint Venture Pennsylvania 10% [Not Applicable] None Embassy Equity Development Corporation Delaware 100% 100 (100) None Embassy Suites De Mexico S.A., de C.V. Mexico 1% 10,000 (100) None Embassy Syracuse Development Corporation Delaware 100% 100 (100) None - -------------------------------- */ Indicates Subsidiaries of the Parent Company and the Borrower immediately prior to the Assignment and Assumption. - -
# of Outstanding # of Shares of Each Options, Warrants, Class of Capital Stock Rights of Jurisdiction of Percentage or Other Equity Conversion or Incorporation or of Interest Outstanding Purchase and Similar Name Organization Ownership (# Owned) Rights (Effect if Exercised) Embassy Suites De Mexico, S.A., de C.V. Mexico 1% 10,000 (100) None Southfield Hotel Management, Inc. Florida 100% 1000 (1000) None Embassy Memphis Corporation Tennessee 100% 100 (100) None Embassy Pacific Equity Corporation Delaware 100% 100 (100) None Embassy Suites Club No. 1, Inc. Kansas 100% 1000 (1000) None Embassy Suites Club No. Three, Inc. Louisiana 100% 1000 (1000) None Embassy Suites De Mexico, S.A., De C.V. Mexico 97% 10,000 (9,700) None Embassy Suites (Isla Verde), Inc. Delaware 100% 1000 (1000) None Embassy Suites (Puerto Rico), Inc. Delaware 100% 1000 (1000) None Embassy Vacation Resorts, Inc. Delaware 100% 1000 (1000) None EPAM Corporation Delaware 100% 100 (100) None ESI Development, Inc. Tennessee 100% 1000 (1000) None ESI Mortgage Development Corporation Delaware 100% 1000 (1000) None ESI Mortgage Development Corporation II Delaware 100% 100 (100) None E.S. Philadelphia Airport Joint Venture Pennsylvania 90% [Not Applicable] None GOL Columbia Limited Partnership Maryland 1% [Not Applicable] None GOL (Heathrow), Inc. Tennessee 100% 1000 (1000) None
2
# of Outstanding # of Shares of Each Options, Warrants, Class of Capital Stock Rights of Jurisdiction of Percentage or Other Equity Conversion or Incorporation or of Interest Outstanding Purchase and Similar Name Organization Ownership (# Owned) Rights (Effect if Exercised) Granada Royale Hometel-West, a limited Arizona 50.003% [Not Applicable] None partnership Granada Royale Hometel-Tucson, a limited Arizona 65% [Not Applicable] None partnership Hampton Inns, Inc. Delaware 100% 1000 (1000) None GOL Columbia Limited Partnership Maryland 99% [Not Applicable] None Old Town Hotel Corporation Delaware 100% 1000 (1000) None Pacific Hotels, Inc. Tennessee 100% 1000 (1000) None ATM Hotels Pty Limited Australia 50% 2 (1) None Promus Hotel Services, Inc. Delaware 100% 1000 (1000) None Promus Hotels Florida, Inc. Delaware 100% 1000 (1000) None
3 EX-10.3 3 Exhibit 10(3) TRANCHE B CREDIT AGREEMENT Dated as of June 7, 1995 among EMBASSY SUITES, INC., as Initial Borrower, PROMUS HOTELS, INC., as the Subsequent Borrower, CERTAIN SUBSIDIARIES AND RELATED PARTIES FROM TIME TO TIME PARTY HERETO, as Guarantors, THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO AND NATIONSBANK, N.A. (CAROLINAS), as Agent TABLE OF CONTENTS ----------------- Page No. ------- SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . . 26 1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2 CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . 26 2.1 Committed Revolving Loans . . . . . . . . . . . . . . . . . . . 26 2.2 [Intentionally Left Blank]. . . . . . . . . . . . . . . . . . . 29 2.3 [Intentionally Left Blank]. . . . . . . . . . . . . . . . . . . 29 2.4 Competitive Loan Subfacility . . . . . . . . . . . . . . . . . 29 2.5 Extension of Termination Date . . . . . . . . . . . . . . . . . 32 2.6 Amortization of Loans Outstanding at the Termination Date . . . 32 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES . . . . . . . . 33 3.1 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . 33 3.2 Extension and Conversion . . . . . . . . . . . . . . . . . . . 33 3.3 Reductions In Commitments and Prepayments . . . . . . . . . . . 34 3.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 3.5 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . 37 3.6 Inability To Determine Interest Rate . . . . . . . . . . . . . 38 3.7 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 38 3.8 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . 39 3.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.10 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3.11 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . 43 3.12 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . 44 3.13 Place and Manner of Payments . . . . . . . . . . . . . . . . . 45 3.14 [Intentionally Left Blank]. . . . . . . . . . . . . . . . . . . 46 3.15 Replacement of Lenders . . . . . . . . . . . . . . . . . . . . 46 3.16 Change of Lending Office . . . . . . . . . . . . . . . . . . . 46 SECTION 4 GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 4.1 The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 47 4.2 Obligations Unconditional . . . . . . . . . . . . . . . . . . . 47 4.3 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . 48 4.4 Certain Additional Waivers . . . . . . . . . . . . . . . . . . 48 4.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 4.6 Continuing Guarantee . . . . . . . . . . . . . . . . . . . . . 49 4.7 Discharge of Guarantor . . . . . . . . . . . . . . . . . . . . 49 SECTION 5 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 49 5.1 Conditions to Initial Extensions of Credit . . . . . . . . . . 49 5.2 Conditions to Assignment to Hotel Inc., Release of Embassy Suites and Promus Co. and Initial Extensions of Credit to Hotel Inc. . 51 5.3 Each Extension of Credit . . . . . . . . . . . . . . . . . . . 53 SECTION 6 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 54 6.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . 54 6.2 No Change; Solvent . . . . . . . . . . . . . . . . . . . . . . 56 i 6.3 Corporate and Partnership Existence; Compliance with Law . . . 56 6.4 Corporate and Partnership Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 56 6.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . 57 6.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . 57 6.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 57 6.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . 57 6.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 58 6.10 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . 58 6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 6.12 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . 58 6.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 6.14 Investment Company Act; Other Regulations . . . . . . . . . . . 59 6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 59 6.16 Purpose of Loans . . . . . . . . . . . . . . . . . . . . . . . 60 6.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 62 7.1 Information Covenants. . . . . . . . . . . . . . . . . . . . . 62 7.2 Preservation of Existence and Franchises . . . . . . . . . . . 64 7.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . 64 7.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 64 7.5 Payment of Taxes and Other Indebtedness . . . . . . . . . . . . 64 7.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 7.7 Maintenance of Property . . . . . . . . . . . . . . . . . . . . 65 7.8 Performance of Obligations . . . . . . . . . . . . . . . . . . 65 7.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 65 7.10 Audits/Inspections . . . . . . . . . . . . . . . . . . . . . . 65 7.11 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . 65 7.12 Additional Credit Parties . . . . . . . . . . . . . . . . . . . 66 SECTION 8 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 67 8.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 67 8.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 8.3 Nature of Business . . . . . . . . . . . . . . . . . . . . . . 70 8.4 Consolidation, Merger, Sale or Purchase of Assets . . . . . . . 70 8.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 72 8.6 Prepayments of Indebtedness . . . . . . . . . . . . . . . . . . 73 8.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . 73 8.8 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 73 8.9 No Dividend Restrictions . . . . . . . . . . . . . . . . . . . 74 SECTION 9 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 74 9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . 74 9.2 Acceleration; Remedies . . . . . . . . . . . . . . . . . . . . 77 SECTION 10 AGENCY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 78 10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 78 10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 79 10.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . 79 10.4 Reliance on Communications . . . . . . . . . . . . . . . . . . 79 10.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 80 10.6 Non-Reliance on Agent and Other Lenders . . . . . . . . . . . . 80 10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 81 ii 10.8 Agent in its Individual Capacity . . . . . . . . . . . . . . . 81 10.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 82 11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 11.2 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . 83 11.3 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . 84 11.4 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . 87 11.5 Payment of Expenses, etc . . . . . . . . . . . . . . . . . . . 88 11.6 Amendments, Waivers and Consents . . . . . . . . . . . . . . . 89 11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 90 11.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 11.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 11.10 Governing Law; Submission to Jurisdiction; Venue . . . . . . . 90 11.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 91 11.12 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 11.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 11.14 Knowledge Standard . . . . . . . . . . . . . . . . . . . . . . 91 11.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 91 11.16 Agent's and Lender's Covenant . . . . . . . . . . . . . . . . . 92 iii TRANCHE B CREDIT AGREEMENT THIS TRANCHE B CREDIT AGREEMENT dated as of June 7, 1995 (as amended, modified and extended from time to time, the "Credit Agreement" and sometimes, ---------------- this "Credit Agreement"), is by and among EMBASSY SUITES, INC., a Delaware ---------------- corporation as the initial Borrower, and PROMUS HOTELS, INC., a Delaware corporation, as assignee and subsequent Borrower upon satisfaction of the conditions set forth in Section 5.2 (the applicable Borrower hereunder being referred to as the "Borrower"), THE PROMUS COMPANIES INCORPORATED, a Delaware -------- corporation as an initial guarantor subject to release upon satisfaction of the conditions set forth in Section 5.2, and PROMUS HOTEL CORPORATION, a Delaware corporation as a guarantor (such applicable parent company guarantor hereunder being referred to as the "Parent Company") and those certain Subsidiaries and -------------- related parties identified as "Guarantors" on the signature pages hereto and such other Subsidiaries as may from time to time become a Guarantor hereunder (together with the applicable Parent Company, the "Guarantors"), the several ---------- lenders identified on the signature pages hereto and such other lenders as may from time to time become a party hereto (the "Lenders") and NATIONSBANK, N.A. ------- (CAROLINAS), as agent for the Lenders (in such capacity, the "Agent"). ----- W I T N E S S E T H WHEREAS, Embassy Suites, Inc. ("Embassy Suites") and its parent company, -------------- The Promus Companies Incorporated ("Promus Co."), have proposed a reorganization ---------- of their corporate structure as more particularly described in the Proxy Statement (the "Reorganization") whereby, among other things, (i) certain hotel -------------- related assets and liabilities will be transferred to Promus Hotels, Inc. ("Hotel Inc."), a newly formed and wholly-owned subsidiary of Promus Hotel ---------- Corporation ("Hotel Corp."), a newly formed and wholly-owned subsidiary of ----------- Embassy Suites, (ii) Embassy Suites will enter into the Tranche A Credit Agreement and this Tranche B Credit Agreement (hereafter the Tranche A Credit Agreement and the Tranche B Credit Agreement may be referred to collectively as the "Hotel Facility") and make initial borrowings hereunder and/or thereunder, -------------- (iii) Embassy Suites will assign to Hotel Inc. and Hotel Inc. will assume from Embassy Suites the Hotel Facility, and Embassy Suites and Promus Co. will be released from liability as the initial Borrower and an initial guarantor, respectively, under the Hotel Facility as provided herein and in the Tranche A Credit Agreement, (iv) Embassy Suites will dividend the stock of Hotel Corp. to Promus Co. which will dividend such stock to its public shareholders (the "Distribution"); ------------ WHEREAS, Embassy Suites has requested that the Lenders provide a $350,000,000 Hotel Facility consisting of a 1 $300,000,000 five year revolving credit facility under the Tranche A Credit Agreement and a $50,000,000 364-day revolving credit facility under this Tranche B Credit Agreement for the purposes hereinafter set forth; and WHEREAS, the Lenders have agreed to make the requested Hotel Facility available on the terms and conditions set forth herein and in the Tranche A Credit Agreement. NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS ----------- 1.1 Definitions. As used herein, the following terms shall have the ----------- meanings herein specified unless the context otherwise requires. Defined terms herein shall include in the singular number the plural and in the plural number the singular: "Additional Credit Party" means each Person that becomes a Guarantor ----------------------- after the Closing Date by execution of a Joinder Agreement. "Affiliate" means, with respect to any Person, any other Person --------- directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control an entity if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities or other ownership interests having ordinary voting power for the election of directors of such corporation or the members of the managing body of such Person or (ii) to direct or cause direction of the management and policies of such corporation or other entity, whether through the ownership of voting securities, by contract or otherwise. "Agent" means NationsBank, N.A. (Carolinas) and any successors and ----- permitted assigns in such capacity. "Agent's Fee Letter" means the letter agreement dated as of March 1, ------------------ 1995 among NationsBank, N.A. (Carolinas), NationsBanc Capital Markets, Inc., Promus Co. and Embassy Suites, as amended, modified, supplemented or replaced from time to time. "Agent's Fees" means such term as defined in Section 3.4(c). ------------ 2 "Applicable Percentage" means, for any day, the rate per annum set --------------------- forth below opposite the applicable Level Period then in effect, it being understood that the Applicable Percentage for (i) Base Rate Loans shall be the percentage set forth under the column "Base Rate Margin", (ii) Eurodollar Loans shall be the percentage set forth under the column "Eurodollar Margin" and (iii) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee": Level Base Eurodoll Commitme Period Rate ar nt Margin Margin Fee Level I Period 0% .275% .100% Level II Period 0% .325% .125% Level III Period 0% .400% .150% Level IV Period 0% .550% .200% Level V Period 0% .6875% .3125% In the event the applicable Level Period is determined by reference to clause (i) of the definitions of "Level I Period", "Level II Period", "Level III Period", "Level IV Period" and "Level V Period", the Applicable Percentage shall be adjusted for all purposes as soon as reasonably practicable, but in no event later than 5 days, after the date of receipt by the Agent of notice of a change in the applicable debt rating. In the event the applicable Level Period is determined by reference to clause (ii) of the definitions of "Level I Period", "Level II Period", "Level III Period", "Level IV Period" and "Level V Period", the Applicable Percentage shall be adjusted for all purposes quarterly as soon as reasonably practicable, but not later than 5 days, after the date of receipt by the Agent of the quarterly financial information in accordance with the provisions of Section 7.1(b) together with a calculation by the Borrower of the Leverage Ratio for the period ending on the last day of the most recent fiscal quarter. "Assignment and Assumption" means the assignment of the obligations of ------------------------- Embassy Suites hereunder by Embassy Suites and the assumption of such obligations by Hotel Inc. pursuant to the terms of Section 11.3(b). "Audobon Woods" means such term as defined in the Proxy Statement. ------------- "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United --------------- States Code, as amended, modified, succeeded or replaced from time to time. "Base Rate" means, for any day, the rate per annum (rounded upwards, --------- if necessary, to the nearest whole 3 multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate in effect on ---- such day. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. "Base Rate Loan" means any Loan bearing interest at a rate determined -------------- by reference to the Base Rate. "Borrower" means, prior to the time of effectiveness of the Assignment -------- and Assumption, Embassy Suites, and after the time of effectiveness of the Assignment and Assumption, Hotel Inc. "Business" means such term as defined in Section 6.17(a). -------- "Business Day" means a day other than a Saturday, Sunday or other day ------------ on which commercial banks in Charlotte, North Carolina and New York, New York are authorized or required by law to close, except that, when used in ------ ---- connection with a Eurodollar Loan, such day shall also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England and New York, New York. "Capital Expenditures" means all expenditures for property, plant and -------------------- equipment which in accordance with GAAP would be so classified on a Statement of Cash Flows (or Statement of Sources and Uses). "Capital Lease" means any lease of property, real or personal, the ------------- obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP. "Closing Date" means the date of the occurrence of the Distribution, ------------ but not in any event later than 90 days after the date of this Credit Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time. "Commitment" means the Revolving Commitment. ---------- 4 "Commitment Fee" means such term as defined in Section 3.4(a). -------------- "Commitment Percentage" means the Revolving Commitment Percentage. --------------------- "Committed Revolving Loans" means such term as defined in Section 2.1. ------------------------- "Committed Revolving Note" or "Committed Revolving Notes" means the ------------------------ ------------------------- promissory notes of the Borrower in favor of each of the Lenders evidencing the Committed Revolving Loans provided pursuant to Section 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Commonly Controlled Entity" means an entity, whether or not -------------------------- incorporated, which is under common control with the Borrower within the meaning of Section 4001(a)(14)(B) of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b), (c) or (m) of the Code. "Competitive Bid" means an offer by a Lender to make a Competitive --------------- Loan pursuant to the terms of Section 2.4(c). "Competitive Bid Rate" means, as to any Competitive Bid made by a -------------------- Lender in accordance with the provisions of Section 2.4, the fixed rate of interest offered by the Lender making the Competitive Bid. "Competitive Bid Request" means a request by the Borrower for ----------------------- Competitive Bids in accordance with the provisions of Section 2.4(b), a form of which is attached as Schedule 2.4(b)-1. ----------------- "Competitive Bid Request Fee" means the administrative fee payable to --------------------------- the Agent, if any, in connection with a Competitive Bid Request as provided in the Agent's Fee Letter. "Competitive Loan" means a loan made by a Lender pursuant to the ---------------- provisions of Section 2.4. "Competitive Loan Lenders" means, at any time, those Lenders which ------------------------ have Competitive Loans outstanding. "Competitive Loan Maximum Amount" means such term as defined in ------------------------------- Section 2.4(a). "Competitive Loan Note" or "Competitive Loan Notes" means the --------------------- ---------------------- promissory notes of the Borrower in favor of each of the Lenders evidencing the Competitive Loans, if any, provided pursuant to Section 2.4(h), individually or 5 collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Consolidated Adjusted EBITDA" means, for any period, the amount equal ---------------------------- to (i) the sum of Consolidated Net Income for such period plus Consolidated ---- Interest Expense for such period to the extent deducted in the calculation of Consolidated Net Income plus all provisions for any Federal, state or ---- other income taxes plus depreciation and amortization, in each case for the ---- Parent Company and its Subsidiaries on a consolidated basis, but excluding in each case the portion of such components attributable to Joint Ventures, determined in accordance with GAAP plus (ii) all cash distributions from ---- Joint Ventures received by the Parent Company, the Borrower or any of their respective Subsidiaries for such period. For the portion of any such period which is prior to the Closing Date, Consolidated Adjusted EBITDA shall be calculated with respect to the Hotel Inc. Business. "Consolidated Fixed Charge Coverage Ratio" means the ratio of ---------------------------------------- Consolidated Net Income Available for Fixed Charges to Consolidated Fixed Charges. "Consolidated Fixed Charges" means, for any period, without -------------------------- duplication, the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period, (ii) the cash portion of Consolidated Interest Expense during such period, (iii) the cash payment portion of current maturities of Funded Debt, and (iv) all cash Dividends paid in such period, in each case for the Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP. For the portion of any such period which is prior to the Closing Date, Consolidated Fixed Charges shall be calculated with respect to the Hotel Inc. Business. "Consolidated Funded Debt" means Funded Debt of the Parent Company and ------------------------ its Subsidiaries on a consolidated basis determined in accordance with GAAP. "Consolidated Interest Expense" means, for any period, all interest ----------------------------- expense, including the amortization of debt discount and premium and the interest component under Capital Leases for the Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP. For the portion of any such period which is prior to the Closing Date, Consolidated Interest Expense shall be calculated with respect to the Hotel Inc. Business based upon an annualization of actual interest expense for the portion of such period elapsed since the Closing Date. "Consolidated Legal Entity Assets" means, for any Person and its -------------------------------- Subsidiaries as of any date of determination, 6 the total assets of such Person and its Subsidiaries on a consolidated basis as reflected in the most recent tax return of such Person. "Consolidated Legal Entity EBITDA" means, for any Person and its -------------------------------- Subsidiaries as of any date of determination, the sum of (i) net income (excluding for purposes hereof extraordinary gains or losses and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses), plus (ii) interest expense (including the ---- amortization of debt discount and premium and the interest component under Capital Leases), plus (iii) Federal, state or other income taxes, plus (iv) ---- ---- depreciation and amortization, in each case for such Person and its Subsidiaries on a consolidated basis as reflected in the most recent tax return of such Person and for the period covered by such tax return. "Consolidated Legal Entity Gross Revenues" means, for any Person and ---------------------------------------- its Subsidiaries as of any date of determination, the gross revenues of such Person and its Subsidiaries on a consolidated basis as reflected in the most recent tax return of such Person and for the period covered by such tax return. "Consolidated Net Income" means, for any period, the net income of the ----------------------- Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP, but excluding for purposes hereof extraordinary gains or losses, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses. For the portion of any such period which is prior to the Closing Date, Consolidated Net Income shall be calculated with respect to the Hotel Inc. Business. "Consolidated Net Income Available for Fixed Charges" means, for any --------------------------------------------------- period, the sum of Consolidated Adjusted EBITDA minus Capital Expenditures ----- made or incurred (excluding, for purposes hereof, up to $27,000,000 of Capital Expenditures for Audobon Woods during fiscal year 1995) plus ---- Rentals, in each case for the Parent Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP. For the portion of any such period which is prior to the Closing Date, Consolidated Net Income Available for Fixed Charges shall be calculated with respect to the Hotel Inc. Business. "Consolidated Net Worth" means total stockholders' equity for the ---------------------- Parent Company and its Subsidiaries on a consolidated basis as determined in accordance with GAAP. "Contractual Obligation" means, as to any Person, any provision of any ---------------------- material security issued by such Person or of any material agreement, instrument or other undertaking 7 to which such Person is a party or by which it or any of its property is bound. "Credit Date" means (i) the date of each request for Extension of ----------- Credit pursuant to a Notice of Borrowing or a Notice of Conversion, in the case of Committed Revolving Loans, and a Competitive Bid Request, in the case of Competitive Loans, and (ii) the date of any such Extension of Credit relating thereto. "Credit Documents" means this Credit Agreement, the Notes, the Pledge ---------------- Agreement, the Assignment and Assumption, any Joinder Agreement and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Credit Party" means any of the Borrower and the Guarantors. ------------ "Credit Party Obligations" means, without duplication, all of the ------------------------ obligations of the Borrower and the other Credit Parties to the Lenders and the Agent, whenever arising, under this Credit Agreement, the Notes or any of the other Credit Documents to which the Borrower or any other Credit Party is a party. "Currency Protection Agreement" shall mean any foreign exchange ----------------------------- contract, currency swap agreement or other financial agreement or arrangement designed to protect against fluctuations in currency values. "Default" means any event, act or condition which with notice or lapse ------- of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that, at such time ----------------- (a) has failed to make a Loan or fund a Participation Interest required pursuant to the term of this Credit Agreement, (b) has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. "Disapproving Lenders" means such term as defined in Section 2.5. -------------------- "Disqualified Stock" means any capital stock which, by its terms (or ------------------ by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part on, or prior to, or is exchangeable for debt securities of the Parent Company or 8 any of its Subsidiaries prior to, the first anniversary of the Termination Date under the Tranche A Credit Agreement. "Distribution" means such term as defined in the Recitals hereto. ------------ "Dividends" means any payment, distribution or dividend (other than a --------- dividend or distribution payable solely in stock of the Person making such payment, distribution or dividend) on, or any payment on account of the purchase, redemption or retirement of, or any other distribution in respect of, any shares of any class of stock or other ownership interest in a Person (including any such payment or distribution in cash or in property or obligations). "Dollars" and "$" means dollars in lawful currency of the United ------- - States of America. "Effective Date of Assignment" means such term as defined in Section ---------------------------- 11.3(b). "Eligible Assignee" means (A) (i) a commercial bank organized under ----------------- the laws of the United States or any state thereof and (ii) a commercial bank organized under the laws of any other country, or a political subdivision thereof, provided that (a) such bank is acting through a branch or agency located in the United States or (b) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, in each case (under clauses (i) and (ii) above) that is reasonably acceptable to the Agent and the Borrower and (B) any Lender or its parent company or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company. It shall be deemed reasonable for the Borrower to refuse to accept as an "Eligible Assignee" any entity the inclusion of which as a Lender hereunder would be reasonably likely to increase amounts payable by the Borrower under Sections 3.5, 3.8, 3.9 or 3.10 or give rise to the circumstances described in Section 3.6. "Eligible Participant" means any entity satisfying the requirements -------------------- set forth in the first sentence of the definition of "Eligible Assignee" other than the requirement for Borrower's approval. "Embassy Suites" means Embassy Suites, Inc., a Delaware corporation -------------- and the initial Borrower under this Credit Agreement subject to release upon satisfaction of the conditions set out in Section 5.2. "Environmental Laws" shall mean any and all lawful and applicable ------------------ Federal, state, local and foreign statutes, laws, regulations, ordinances, codes, rules, judgments, orders, decrees, permits, licenses or other governmental 9 restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Transaction" means (i) the issuance by the Borrower or any of ------------------ its Subsidiaries of new shares of its capital stock, unless such new shares are being issued in exchange for an ownership interest in another Person or in exchange for substantially all of the assets of another Person in connection with an acquisition permitted by Section 8.4(c), (ii) an issuance by the Borrower or any of its Subsidiaries of any shares of its capital stock pursuant to the exercise of options or warrants and (iii) an issuance by the Borrower or any of its Subsidiaries of any shares of its capital stock pursuant to the conversion of any debt securities (including without limitation any Subordinated Debt) to equity. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, and the regulations promulgated and the rulings issued thereunder. "Eurodollar Loan" means any Loan bearing interest at a rate determined --------------- by reference to the Eurodollar Rate. "Eurodollar Rate" means, for the Interest Period for each Eurodollar --------------- Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined pursuant to the following formula: Eurodollar Rate = Interbank Offered Rate ---------------------------------- 1 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage" means for any Interest Period, the ----------------------------- average daily percentage (expressed as a decimal) which is in effect from time to time during such Interest Period under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be 10 deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means such term as defined in Section 9.1. ---------------- "Excluded Taxes" means such term as is defined in Section 3.9(a). -------------- "Extension of Credit" means, as to any Lender, the making of a Loan by ------------------- such Lender. "Federal Funds Rate" means, for any day, the rate of interest per ------------------ annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 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 by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (A) if such day is not a Business Day, the Federal Funds Rate -------- for such day shall be such rate on such transactions on the next preceding Business Day and (B) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent. "Form 10" means the registration statement on Form 10 filed with and ------- declared effective by the Securities and Exchange Commission in respect of the Distribution. "Former Plan" means any employee benefit plan in respect of which the ----------- Borrower or a Commonly Controlled Entity has engaged in a transaction described in Section 4069 or Section 4212(c) of ERISA and with respect to which transaction the Borrower or Commonly Controlled Entity, as applicable, has as its principal purpose the evasion of liability described in such sections. "Funded Debt" shall mean, with respect to any Person, without ----------- duplication, (i) all indebtedness of such Person for borrowed money, (ii) all purchase money indebtedness of such Person, including, without limitation, the principal portion of all obligations of such Person under Capital Leases and (iii) the amount of any Qualified Stock; provided that, -------- "Funded Debt" shall not include indebtedness owing under or in connection ----------- with Joint Ventures to the extent such indebtedness is Non-Recourse Indebtedness. The Funded Debt of any Person shall include the Funded Debt of any partnership or joint venture in which such Person is a 11 general partner (except as set forth in the preceding proviso). "GAAP" means generally accepted accounting principles in the United ---- States. "Governmental Authority" means any Federal, state, local or foreign ---------------------- court or governmental agency, authority, instrumentality or regulatory body. "Guarantor" means Promus Co. as an initial Guarantor subject to --------- release upon satisfaction of the conditions set out in Section 5.2 and each of the other Persons identified as a "Guarantor" on the signature pages hereto, and each other Additional Credit Party, together with their successors and permitted assigns. "Guaranty Obligations" means, with respect to any Person, without -------------------- duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including, without limitation, any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "Hotel Corp." means Promus Hotel Corporation, a Delaware corporation ----------- and a Guarantor under this Credit Agreement upon satisfaction of the conditions set out in Section 5.2. "Hotel Facility" means such term as defined in the Recitals hereto. -------------- "Hotel Inc." means Promus Hotels, Inc., a Delaware corporation and the ---------- subsequent Borrower under this Credit Agreement upon satisfaction of the conditions set out in Section 5.2. 12 "Hotel Inc. Assignment and Assumption Agreement" means the Assignment, ---------------------------------------------- Assumption and Release Agreement among Embassy Suites, Hotel Inc. and the Agent, substantially in the form of Schedule 11.3(b). ---------------- "Hotel Inc. Business" means the "Hotel Business" described under the ------------------- subheading "PHC Business and Properties" under the heading "The Distribution" in the Proxy Statement. "Indebtedness" of any Person shall mean, without duplication, (i) all ------------ obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (iii) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations, including, without limitation, intercompany items, of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt incurred in the ordinary course of business) which would appear as liabilities on a balance sheet of such Person, (v) all obligations of such Person under take-or-pay arrangements or under commodities agreements, (vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds or production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (vii) all Guaranty Obligations of such Person, (viii) the principal portion of all obligations of such Person under Capital Leases, (ix) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements, (x) the maximum amount of all letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), and (xi) the amount of any Disqualified Stock. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner (except to the extent any such Indebtedness is Non-Recourse Indebtedness). "Insolvency" means with respect to any Multiemployer Plan, the ---------- condition that such Plan is insolvent within the meaning of Section 4245(b)(i) of ERISA. "Insolvent" means pertaining to a condition of Insolvency. --------- 13 "Interbank Offered Rate" means, with respect to any Eurodollar Loan ---------------------- for the Interest Period applicable thereto, (i) the interest rate per annum for deposits in Dollars for a maturity most nearly comparable to such Interest Period which appears on page 3740 or 3750, as applicable, of the Dow Jones Telerate Screen as of 11:00 A.M. (Charlotte, North Carolina time) on the day that is two (2) Business Days prior to the first day of such Interest Period or (ii) if such a rate does not appear on page 3750 of the Dow Jones Telerate Screen an interest rate per annum (rounded to the next 1/1000th of 1%) equal to the rate at which deposits in Dollars approximately equal in principal amount to the Eurodollar Loan of the Agent, in its capacity as a Lender, included in such Eurodollar Loan, and for a maturity comparable to such Interest Period are offered to the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 A.M. (London time) on the date that is two (2) Business Days prior to the first day of such Interest Period. If no such offers or quotes are generally available for such amount, then the Agent shall be entitled to determine the Eurodollar Rate by estimating in its reasonable judgment the per annum rate (as described above) that would be applicable if such quote or offers were generally available. "Intercompany Indebtedness" means any Indebtedness of the Parent ------------------------- Company, the Borrower or any of their respective Subsidiaries which is owing to another of such Persons. "Interest Payment Date" means (i) as to any Base Rate Loan, the last --------------------- day of each March, June, September and December, the date of repayment of principal of such Loan and the Termination Date, (ii) as to any Eurodollar Loan or any Competitive Loan, the last day of each Interest Period for such Loan and the Termination Date or the Term Loan Maturity Date, if applicable and in addition where the applicable Interest Period is more than 3 months, then also on the date 3 months from the beginning of the Interest Period, and each 3 months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar ------ ---- Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day. "Interest Period" means (i) with respect to any Eurodollar Loan, a --------------- period of one, two, three or six months' duration, as the Borrower may elect, commencing in each case on the date of the borrowing (including extensions and conversions) and (ii) with respect to any Competitive Loan, a period beginning on the date of borrowing and ending on the date specified in the respective Competitive Bid whereby the offer to make such Competitive Loan was extended, which 14 shall be not less than 7 days nor more than 180 days' duration; provided, -------- however, (A) if any Interest Period would end on a day which is not a ------- Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that in the case of Eurodollar Loans, where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Termination Date or if the Borrower has elected to amortize the payment of the principal balance of Committed Revolving Loans and Competitive Loans outstanding as of the Termination Date, in accordance with the provisions of Section 2.6, then no Interest Period may extend beyond a Term Loan Amortization Date (including the Term Loan Maturity Date) unless the portion of Term Loans consisting of Base Rate Loans together with the Eurodollar Loans and Competitive Loans with Interest Periods expiring prior to or concurrently with the date such Term Loan Amortization Date is due, is at least equal to the amount of such principal amortization payment due on such date; and (C) in the case of Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall, subject to clause (A) above, end on the last Business Day of such calendar month. "Interest Rate Protection Agreement" means any interest rate swap ---------------------------------- agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect against fluctuations in interest rates. "Investment", in any Person, shall mean any loan or advance to such ---------- Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of such Person, or any capital contribution to such Person or any other similar investment in such Person. "Joinder Agreement" means a Joinder Agreement substantially in the ----------------- form of Schedule 7.12 hereto, executed and delivered by an Additional ------------- Credit Party in accordance with the provisions of Section 7.12. "Joint Venture" means any corporation, general or limited partnership ------------- or limited liability company in which the Parent Company, the Borrower or any of their respective Subsidiaries is a shareholder, partner or member which is not a Subsidiary of the Parent Company or the Borrower. "Lenders" means each of the Persons identified as a "Lender" on the ------- signature pages hereto, and each Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. 15 "Level I Period" means a period during which (i) the Parent Company -------------- and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BBB+" or better by S&P or "Baa1" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 1.25:1.0. "Level II Period" means a period during which a Level I Period does --------------- not exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BBB" or better by S&P or "Baa2" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 1.75:1.0 but greater than or equal to 1.25:1.0. "Level III Period" means a period during which neither a Level I ---------------- Period nor a Level II Period shall exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long- term debt rating (without third party credit enhancement) of "BBB-" or better by S&P or "Baa3" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 2.25:1.0 but greater than or equal to 1.75:1.0. "Level IV Period" means a period during which none of a Level I --------------- Period, a Level II Period nor a Level III Period shall exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BB+" or better by S&P or "Ba1" or better by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be less than 2.75:1.0 but greater than or equal to 2.25:1.0. "Level V Period" means a period during which none of a Level I Period, -------------- a Level II Period, a Level III Period nor a Level IV Period shall exist and (i) the Parent Company and its consolidated Subsidiaries have an actual or implied senior unsecured long-term debt rating (without third party credit enhancement) of "BB" or worse by S&P or "Ba2" or worse by Moody's, or (ii) the Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the most recent fiscal quarter shall be greater than or equal to 2.75:1.0. "Leverage Ratio" means, for any period, the ratio of Consolidated -------------- Funded Debt as of the end of such period to Consolidated Adjusted EBITDA for such period. 16 "Lien" means any mortgage, pledge, hypothecation, assignment, deposit ---- arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means a Committed Revolving Loan and/or a ---- ----- Competitive Loan, as appropriate. "Material Adverse Effect" shall mean a material adverse effect on (i) ----------------------- the financial condition, operations, business or prospects of the Parent Company, the Borrower and their Subsidiaries taken as a whole, (ii) the ability of the Borrower and the Guarantors taken as a whole to perform any material obligation under the Credit Documents or (iii) the material rights and remedies of the Agent and the Lenders under the Credit Documents. "Material Asset Sale" means the sale, lease or other disposition of an ------------------- asset (other than non-hotel property or assets sold, leased or disposed of in the normal course of business) which either (i) together with all other such sales, leases or other dispositions of assets in the then current calendar year has a net book value in excess of ten percent (10%) of the consolidated assets of the Parent Company and its Subsidiaries at such time, or (ii) together with all other such sales, leases or other dispositions of assets since the Closing Date has a net book value in excess of twenty-five percent (25%) of the consolidated assets of the Parent Company and its Subsidiaries at such time; provided, however, that -------- ------- leases with a term of ten (10) years or less or which demise less than 100% of the subject asset shall not constitute leases of assets for purposes of this subparagraph. An Investment shall not constitute a "disposition" for purposes of this definition. "Material Environmental Amount" means any amount payable by the Parent ----------------------------- Company, the Borrower or their Subsidiaries not subject to payment or reimbursement by another Person in respect of or under any Environmental Law for remedial costs, compliance costs, compensatory damages, punitive damages, fines, penalties or any combination thereof, that has a Material Adverse Effect. "Materials of Environmental Concern" means any gasoline or petroleum ---------------------------------- (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, 17 asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Moody's" means Moody's Investors Service, Inc., or any successor or ------- assignee of the business of such company in the business of rating securities. "Multiemployer Plan" means a Plan which is a multiemployer plan as ------------------ defined in Section 4001(a)(3) of ERISA. "NationsBank" means NationsBank, N.A. (Carolinas) and its successors. ----------- "Net Sale Proceeds" means for any Material Asset Sale, the gross cash ----------------- proceeds (including any cash received by way of deferred payment pursuant to a promissory note receivable or otherwise, but only as and when received) received from such Material Asset Sale, net of reasonable transaction costs and payments of unassumed liabilities relating to the asset sold at the time of, or within sixty (60) days after, the date of such Material Asset Sale and the amount of such gross cash proceeds required to be used to repay any Indebtedness (other than Indebtedness owing under the Hotel Facility) which is secured by the respective assets which were sold. "Non-Excluded Taxes" means such term as defined in Section 3.9(a). ------------------ "Non-Guarantor Subsidiaries" means such term as defined in Section -------------------------- 7.12. "Non-Investment Grade" means debt or equity interests which are not -------------------- rated by S&P or Moody's or have a rating of less than "BBB-" by S&P or "Baa3" by Moody's. "Non-Recourse Indebtedness" means Indebtedness with respect to which ------------------------- recourse for payment is limited to specific assets encumbered by a Lien securing such Indebtedness; provided, however, that personal recourse of a -------- ------- holder of Indebtedness against any obligor with respect thereto for fraud, misrepresentation, misapplication of cash, waste and other circumstances customarily excluded from non-recourse provisions in non-recourse financing of real estate shall not, by itself, prevent any Indebtedness from being characterized as Non-Recourse Indebtedness. "Note" or "Notes" means the Committed Revolving Notes and/or the ---- ----- Competitive Notes, collectively, separately or individually, as appropriate. "Notice of Borrowing" means the written notice of borrowing as ------------------- referenced and defined in Section 2.1(b)(i). 18 "Notice of Conversion/Extension" means the written notice of extension ------------------------------ or conversion as referenced and defined in Section 3.2. "Obligations" means the Loans. ----------- "PBGC" means the Pension Benefit Guaranty Corporation established ---- under ERISA, and any successor thereto. "Parent Company" means, prior to the time of effectiveness of the -------------- Assignment and Assumption, Promus Co., and after the time of effectiveness of the Assignment and Assumption, Hotel Corp. "Participation Interest" means the purchase by a Lender of a ---------------------- participation interest in Committed Revolving Loans as provided in Section 3.12. "Permitted Liens" shall mean: --------------- (i) Liens in favor of the Agent on behalf of the Lenders hereunder and under the Tranche A Credit Agreement; (ii) Liens (other than Liens created or imposed by the PBGC under ERISA) for taxes, assessments or governmental charges or levies not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business, provided that such -------- Liens secure only amounts not yet due and payable or, if due and payable, are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iv) Liens (other than Liens created or imposed by the PBGC under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, bids, leases, operating, reciprocal easement or similar agreements, government contracts, performance and 19 return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Liens in connection with attachments or judgments (including judgment or appeal bonds) in respect of which the Parent Company or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceeding; (vi) easements, rights-of-way, restrictions (including zoning restrictions and operating, reciprocal easement or similar agreements), and minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered Property for its intended purposes; (vii) Liens on Property securing purchase money Indebtedness (including Capital Leases) to the extent permitted under Section 8.1(c), provided that any such Lien attaches to such Property -------- concurrently with or within 90 days after the acquisition thereof; (viii) leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (ix) any interest or title of a lessor (including Liens and underlying leases to which such lessor or its property may be subject) under, and Liens arising from Uniform Commercial Code financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases permitted by this Credit Agreement; (x) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 8.5; (xi) Liens on assets at the time such assets are acquired in accordance with Section 8.4(a) or 8.4(c), including continuations or renewals thereof in connection with the extension, renewal, refunding or refinancing of the Indebtedness 20 secured thereby; provided that such Liens are not created in -------- contemplation of such acquisition; (xii) Liens on assets of any Person at the time such Person becomes a Subsidiary in accordance with Section 8.4(a) or 8.5, including continuations or renewals thereof in connection with the extension, renewal, refunding or refinancing of the Indebtedness secured thereby; provided that such Liens are not created in -------- contemplation of such Person becoming a Subsidiary; (xiii) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xiv) Liens existing as of the Closing Date and set forth on Schedule 8.2, including continuations or renewals thereof in ------------ connection with the extension, renewal, refunding or refinancing of the Indebtedness secured thereby to the extent permitted under Section 8.1; provided that no such Lien shall at any time be extended to or -------- cover any property of the Parent Company, the Borrower or any of their respective Subsidiaries other than the property subject thereto on the Closing Date, except by virtue of an after acquired property provision set forth in the current documentation of such Liens; (xv) Liens securing Non-Recourse Indebtedness of any Specified Subsidiaries permitted pursuant to Section 8.1(k) hereof so long as such Liens only encumber the hotel properties owned by the Specified Subsidiary being developed or financed with such Non- Recourse Indebtedness, including any real property and furniture, fixtures and equipment related thereto, it being understood and agreed that such assets of such Specified Subsidiary also may secure Non- Recourse Indebtedness incurred by other Subsidiaries or Joint Ventures pursuant to Section 8.1(k); (xvi) Liens securing any Interest Rate Protection Agreements or Currency Protection Agreements entered into, in either case, with a Lender or an Affiliate of a Lender hereunder, permitted by Section 8.1(d), which obligations may be equally and ratably secured with the Obligations; (xviii) Liens on the Parent Company's, the Borrower's or any of their respective Subsidiaries' equity interest in any Specified Subsidiary or Joint Venture so long as such Liens only secure Indebtedness of such Specified Subsidiary or Joint Venture, it being understood and agreed that such equity interests in any Specified Subsidiaries or Joint Ventures also may secure Indebtedness incurred by other Specified Subsidiaries or Joint Ventures permitted under Section 8.1; and (xix) Liens not otherwise permitted hereunder securing amounts in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding. 21 "Person" means any individual, partnership, joint venture, firm, ------ corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan as defined in Section 3(3) of ---- ERISA which is not a Multiemployer Plan and in respect of which the Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA. "Plan Reorganization" means with respect to any Multiemployer Plan, ------------------- the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Pledge Agreement" means the Pledge Agreement substantially in the ---------------- form of Schedule 5.1(a) attached hereto, dated as of the Closing Date and --------------- executed and delivered by Hotel Corp., Hotel Inc. and certain other Credit Parties existing after the Assignment and Assumption, in favor of the Agent, for the benefit of the Lenders, to secure their obligations under the Credit Documents, as amended, modified, extended, renewed or replaced from time to time. "Prime Rate" means the per annum rate of interest established and ---------- announced from time to time by the Agent at its principal office in Charlotte, North Carolina as its Prime Rate. Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of 12:01 a.m. of the Business Day on which each change in the Prime Rate is announced by the Agent. The Prime Rate is a reference rate used by the Agent in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. "Pro Forma Basis" shall mean, with respect to any transaction, that --------------- such transaction shall be deemed to have occurred as of the first day of the four fiscal-quarter period ending as of the last day of the fiscal quarter most recently ended preceding the date of such transaction with respect to which the Agent has received annual or quarterly financial information, accompanied by an officer's certificate, in accordance with the provisions of Section 7.1. As used herein, "transaction" shall mean any merger or consolidation as referred to in Section 8.4(a) and 8.4(c). "Projections" means such term as is defined in Section 6.1(c). ----------- "Promus Co." means The Promus Companies Incorporated, a Delaware ---------- corporation and an initial Guarantor under this Credit Agreement subject to release upon satisfaction of the conditions set out in Section 5.2. 22 "Property" means any interest in any kind of property or asset, -------- whether real, personal or mixed, or tangible or intangible. "Proxy Statement" means the Proxy Statement dated April 25, 1995 of --------------- Promus Co. describing the Distribution and mailed to the shareholders of Promus Co. for purposes of its May 26, 1995 shareholders meeting. "Qualified Stock" means any capital stock which, by its terms (or by --------------- the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part on, or on or after, or is exchangeable for debt securities of the Parent Company or any of its Subsidiaries on or after, the first anniversary of the Termination Date under the Tranche A Credit Agreement. "Regulation D, G, T, U, or X" means Regulation D, G, T, U or X, --------------------------- respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Rentals" means, as of the date of determination, all fixed payments ------- (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by a Person as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid (whether designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross rents. "Reorganization" means such term as defined in the Recitals. -------------- "Reorganization Agreement" means the Distribution Agreement between ------------------------ Embassy Suites and Hotel Inc., as more particularly described in the Proxy Statement. "Reorganization Documents" means, collectively, the Reorganization ------------------------ Agreement and the Tax Sharing Agreement, the Trademark Assignment Agreement and the Employee Benefits Allocation Agreement, as such terms are defined in the Proxy Statement. "Reportable Event" means a "reportable event" as defined in Section ---------------- 4043(b) of ERISA with respect to which the notice requirements to the PBGC have not been waived. 23 "Required Lenders" means Lenders holding in the aggregate at least ---------------- fifty-one percent (51%) of the Commitments, or if the aggregate Commitments have been terminated, Lenders in the aggregate holding at least fifty-one (51%) of the principal amount of Obligations then outstanding; provided, -------- however, that if any Lender shall be a Defaulting Lender at such time then ------- there shall be excluded from the determination of Required Lenders the amount of such Defaulting Lender's Commitments or Obligations, as appropriate. "Requirements of Law" means, as to any Person, the certificate of ------------------- incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its material property or assets. "Revolving Commitment" means, with respect to each Lender, the -------------------- commitment of such Lender to make Committed Revolving Loans in an aggregate principal amount at any time outstanding up to such Lender's Revolving Committed Amount as specified in Schedule 2.1(a), as such amount may be --------------- reduced from time to time in accordance with the provisions hereof. "Revolving Commitment Percentage" means, for each Lender, a fraction ------------------------------- (expressed as a percentage) the numerator of which is the Revolving Commitment of such Lender at such time and the denominator of which is the Revolving Committed Amount at such time, provided that if the Revolving -------- Commitment Percentage of any Lender is to be determined after the Revolving Committed Amount has been terminated, then the Revolving Commitment Percentage of such Lender shall be determined immediately prior (and without giving effect) to such termination. "Revolving Committed Amount" means (i) prior to the Termination Date, -------------------------- collectively, the aggregate amount of all of the Revolving Commitments as referenced in Section 2.1(a) and, individually, the amount of each Lender's Revolving Commitment as specified in Schedule 2.1(a) and (ii) on or after --------------- the Termination Date, as provided in Section 2.6(a). "S&P" means Standard & Poor's Ratings Group, a division of McGraw --- Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "Single Employer Plan" means any Plan which is covered by Title IV of -------------------- ERISA. "Solvent" and "Solvency" means with respect to any Person on a ------- -------- particular date, the condition that on such 24 date, (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small amount of capital. "Specified Subsidiary" means any Subsidiary of the Borrower so long as -------------------- such Subsidiary has no material assets other than the hotel property to be developed and financed with Non-Recourse Indebtedness incurred pursuant to Section 8.1(k). "Subject Properties" means such term as defined in Section 6.17(a). ------------------ "Subordinated Debt" means such term as defined in Section 8.6. ----------------- "Subsidiary" means, as to any Person, (a) any corporation more than ---------- 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than 50% of the equity interest at any time and in which such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such partnership, association, joint venture or other entity, whether through the ownership of equity interests, by contract or otherwise. Unless otherwise specified, any reference to a Subsidiary is intended as a reference to a Subsidiary of the Borrower. "Term Loan Amortization Date" means such term as defined in Section --------------------------- 2.6(a). "Term Loan Maturity Date" means such term as defined in Section ----------------------- 2.6(a). "Term Loans" means such term as defined in Section 2.6(a). ---------- 25 "Termination Date" means such term as defined in Section 2.1(a). ---------------- "Third Party Investment Basket Amount" means such term as defined in ------------------------------------ Section 8.1(1). "Threshold Requirement" means such term as defined in Section 7.12. --------------------- "Tranche A Credit Agreement" means that Tranche A Credit Agreement -------------------------- dated as of the date hereof among Embassy Suites, Promus Co., certain subsidiaries as now or hereafter may become a party thereto, the lenders named therein and party thereto and NationsBank, N.A. (Carolinas), as Agent, as amended, modified, extended, renewed or restated from time to time. "Tranche B Credit Agreement" means this Credit Agreement. -------------------------- "Underfunding" means an excess of all accrued benefits under a Plan ------------ (based on those assumptions used to fund such Plan), determined as of the most recent annual valuation date, over the value of the assets of such Plan allocable to such accrued benefits. "Wholly Owned Subsidiary" means, as to any Person, any Subsidiary 100% ----------------------- of whose voting stock or other equity interests and control is at the time owned by such Person directly or indirectly through other Wholly Owned Subsidiaries. 1.2 Computation of Time Periods. For purposes of computation of periods --------------------------- of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 Accounting Terms. The financial statements to be furnished by the ---------------- Borrower pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Agent); provided, that, except as otherwise specifically provided herein, all -------- computations determining compliance with Section 7.11 shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements delivered to the Agent on or before the Closing Date. 26 SECTION 2 CREDIT FACILITIES ----------------- 2.1 Committed Revolving Loans. ------------------------- (a) Revolving Commitment. Subject to the terms and conditions hereof -------------------- and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make revolving credit loans ("Committed --------- Revolving Loans") to the Borrower from time to time from the Closing Date --------------- until the day 364 days after the date hereof, or such earlier date as the Revolving Commitments shall have been terminated as provided herein (such date, as extended, if extended from time to time in the sole discretion of the Lenders as provided herein, hereinafter being referred to as the "Termination Date") for the purposes hereinafter set forth; provided, ---------------- -------- however, that (i) with regard to each Lender individually, such Lender's ------- share of outstanding Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Competitive Loans but not yet so applied) shall not exceed such Lender's Revolving Committed Amount, and (ii) with regard to the Lenders collectively, the sum of the aggregate amount of outstanding Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Competitive Loans but not yet so applied) plus the aggregate amount of Competitive Loans (other than ---- Competitive Loans made for the purpose of repaying Committed Revolving Loans but not yet so applied) shall not exceed FIFTY MILLION DOLLARS ($50,000,000) (as such aggregate maximum amount may be reduced from time to time, the "Revolving Committed Amount"). Committed Revolving Loans may -------------------------- consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be repaid, prepaid and reborrowed in accordance with the provisions hereof; provided, however, that no more than -------- ------- ten (10) Eurodollar Loans shall be outstanding hereunder at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date and have the same duration, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. (b) Committed Revolving Loan Borrowings. ----------------------------------- (i) Notice of Borrowing. The Borrower shall request a ------------------- Committed Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing in the case of Base Rate Loans, and on the third Business 27 Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Committed Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. A form of Notice of Borrowing (a "Notice of Borrowing") is attached as Schedule 2.1(b)(i). ------------------- ------------------ If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Committed Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder. Promptly upon receipt of each Notice of Borrowing, the Agent shall give notice to each Lender of the contents thereof and each such Lender's Revolving Commitment Percentage thereof. (ii) Minimum Amounts. Each Committed Revolving Loan --------------- borrowing shall be in a minimum aggregate amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining available amount of the Revolving Commitment, if less, provided, however, no Eurodollar Loan shall be permitted for a -------- ------- principal amount less than $5,000,000). (iii) Advances. Each Lender will make its Revolving -------- Commitment Percentage of each Committed Revolving Loan borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Schedule 11.1, or at such other ------------- office as the Agent may designate in writing, by 10:00 A.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars (or by 1:00 P.M. (Charlotte, North Carolina time) on such date if the applicable Notice of Borrowing is received on the same date) and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. (c) Repayment. The principal amount of all Committed Revolving Loans --------- shall be due and payable in full on the 28 Termination Date except as otherwise provided in Section 2.6. (d) Interest. Subject to the provisions of Section 3.1, Committed -------- Revolving Loans shall bear interest at a per annum rate equal to: (i) Base Rate Loans. During such periods as Committed --------------- Revolving Loans shall be comprised of Base Rate Loans, the sum of the Base Rate plus the Applicable Percentage; and ---- (ii) Eurodollar Loans. During such periods as Committed ---------------- Revolving Loans shall be comprised of Eurodollar Loans, the sum of the Eurodollar Rate plus the Applicable Percentage. ---- Interest on Committed Revolving Loans shall be payable in arrears on each Interest Payment Date. (e) Committed Revolving Notes. The Committed Revolving Loans made by ------------------------- each Lender shall be evidenced by a duly executed promissory note of the Borrower to each Lender substantially in the form of Schedule 2.1(e). --------------- 2.2 [Intentionally Left Blank]. 2.3 [Intentionally Left Blank]. 2.4 Competitive Loan Subfacility. ---------------------------- (a) Competitive Loans. Subject to the terms and conditions and ----------------- relying upon the representations and warranties herein set forth, from such time as the Borrower shall have attained, and for so long as the Borrower shall maintain, a senior unsecured long-term debt rating of "BBB-" or better by S&P or "Baa3" or better by Moody's, the Borrower may, from time to time from the Closing Date until the Termination Date, request and each Lender may, in its sole discretion, agree to make, Competitive Loans to the Borrower; provided, however, (i) the aggregate amount of Competitive Loans -------- ------- shall not at any time exceed the lesser of FIFTY MILLION DOLLARS ------ ($50,000,000) or the Revolving Committed Amount (the "Competitive Loan ---------------- Maximum Amount"), and (ii) the sum of the aggregate amount of Committed -------------- Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Competitive Loans but not yet so applied) plus the aggregate ---- amount of Competitive Loans (other than Competitive Loans made for the purpose of repaying Committed Revolving Loans but not yet so applied) shall not at any time exceed the aggregate Revolving Committed Amount. Each Competitive Loan shall be not less than $5,000,000 in the aggregate and integral multiples of $1,000,000 in excess thereof (or the remaining available portion of the Competitive Loan Maximum Amount, if less). 29 Competitive Loans may be repaid and reborrowed in accordance with the provisions hereof. (b) Competitive Bid Requests. The Borrower may solicit Competitive ------------------------ Bids by delivery of a Competitive Bid Request substantially in the form of Schedule 2.4(b)-1 to the Agent by 12:00 Noon (Charlotte, North Carolina ----------------- time) on a Business Day not less than two (2) nor more than ten (10) Business Days prior to the date of a requested Competitive Loan borrowing. A Competitive Bid Request shall specify (i) the date of the requested Competitive Loan borrowing (which shall be a Business Day), (ii) the amount of the requested Competitive Loan borrowing and (iii) the applicable Interest Periods requested and shall be accompanied by payment of the Competitive Bid Request Fee, if any. The Agent shall promptly notify the Lenders of its receipt of a Competitive Bid Request and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto. A form of such notice is provided in Schedule 2.4(b)-2. No more ----------------- than three Competitive Bid Requests (e.g., the Borrower may request Competitive Bids for no more than three different Interest Periods at a time) shall be submitted at any one time and Competitive Bid Requests may be made no more frequently than once every ten (10) Business Days. (c) Competitive Bid Procedure. Each Lender may, in its sole ------------------------- discretion, make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid must be received by the Agent not later than 10:00 A.M. (Charlotte, North Carolina time) on the proposed date of a Competitive Loan borrowing; provided, however, that -------- ------- should the Agent, in its capacity as a Lender, desire to submit a Competitive Bid it shall notify the Borrower of its Competitive Bid and the terms thereof not later than 9:30 A.M. (Charlotte, North Carolina time) on the proposed date of a Competitive Loan borrowing. A Lender may offer to make all or part of the requested Competitive Loan borrowing and may submit multiple Competitive Bids in response to a Competitive Bid Request. The Competitive Bid shall specify (i) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (ii) the minimum (which shall be not less than $1,000,000 and integral multiples of $500,000 in excess thereof) and maximum principal amounts of the requested Competitive Loan or Loans as to which the Lender is willing to make, and (iii) the applicable interest rate or rates and Interest Period or Periods therefor. A form of such Competitive Bid is provided in Schedule 2.4(c). A Competitive Bid --------------- submitted by a Lender in accordance with the provisions hereof shall be irrevocable (absent manifest error). The Agent shall promptly notify the Borrower of all Competitive Bids made and the terms thereof. The Agent shall send a copy of each of the Competitive Bids to the Borrower for its records as soon as practicable. 30 (d) Acceptance of Competitive Bids. The Borrower may, in its sole ------------------------------ and absolute discretion, subject only to the provisions of this subsection (d), accept or refuse any Competitive Bid offered to it. To accept a Competitive Bid, the Borrower shall give written notification (or telephone notice promptly confirmed in writing) of its acceptance of any or all such Competitive Bids to the Agent by 11:00 A.M. (Charlotte, North Carolina time) on the proposed date of a Competitive Loan advance; provided, -------- however, (i) the failure by the Borrower to give timely notice of its ------- acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (ii) the Borrower may accept Competitive Bids only in ascending order of rates, (iii) the aggregate amount of Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) the Borrower may accept a portion of a Competitive Bid in the event, and to the extent, acceptance of the entire amount thereof would cause the Borrower to exceed the principal amount specified in the Competitive Bid Request, subject however to the minimum amounts provided herein (and provided that where two or more such Lenders may submit such a Competitive Bid at the same such Competitive Bid Rate, then pro rata between or among such Lenders) and (v) no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof, except that where a portion of a Competitive Bid is accepted in accordance with the provisions of subsection (iv) hereof, then in a minimum principal amount of $100,000 and integral multiples thereof (but not in any event less than the minimum amount specified in the Competitive Bid), and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to subsection (iv) hereof, the amounts shall be rounded to integral multiples of $100,000 in a manner which shall be in the discretion of the Borrower. A notice of acceptance of a Competitive Bid given by the Borrower in accordance with the provisions hereof shall be irrevocable. The Agent shall, not later than 12:00 Noon (Charlotte, North Carolina time) on the proposed date of a Competitive Loan borrowing, notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted. (e) Funding of Competitive Loans. Each Lender which is to make a ---------------------------- Competitive Loan shall make its Competitive Loan borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Schedule 11.1, or at such other office as the Agent may designate in ------------- writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the Competitive Bid Request in Dollars and in funds immediately available to the Agent. Such 31 borrowing will then be made available to the Borrower by crediting the account of the Borrower on the books of such office with the aggregate of the amount made available to the Agent by the Competitive Loan Lenders and in like funds as received by the Agent. (f) Maturity of Competitive Loans. Each Competitive Loan shall ----------------------------- mature and be due and payable in full on the last day of the Interest Period applicable thereto. Unless the Borrower shall give notice to the Agent otherwise, the Borrower shall be deemed to have requested a Committed Revolving Loan borrowing in the amount of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan. (g) Interest on Competitive Loans. Subject to the provisions of ----------------------------- Section 3.1, Competitive Loans shall bear interest in each case at the Competitive Bid Rate applicable thereto. Interest on Competitive Loans shall be payable in arrears on each Interest Payment Date. (h) Competitive Loan Notes. The Competitive Loans shall be evidenced ---------------------- by a duly executed promissory note of the Borrower to each Lender in an original principal amount equal to the Competitive Loan Maximum Amount and substantially in the form of Schedule 2.4(h). --------------- 2.5 Extension of Termination Date. The Borrower may, within 90 days prior ----------------------------- to the Termination Date, by notice to the Agent, make written request of the Lenders to extend the Termination Date for an additional period of 364 days. The Agent will give prompt notice to each of the Lenders of its receipt of any such request for extension of the Termination Date. Each Lender shall make a determination not later than 30 days prior to the then applicable Termination Date as to whether or not it will agree to extend the Termination Date as requested; provided, however, that failure by any Lender to make a timely -------- ------- response to the Borrower's request for extension of the Termination Date shall be deemed to constitute a refusal by the Lender to extend the Termination Date. If, in response to a request for an extension of the Termination Date, one or more Lenders shall fail to agree to the requested extension (the "Disapproving ------------ Lenders"), then the Borrower may, at its own expense with the assistance of the - ------- Agent, make arrangements for a Replacement Lender in accordance with Section 3.15 to acquire, in whole or in part, the Obligations and Commitments of the Disapproving Lenders. 2.6 Amortization of Loans Outstanding at the Termination Date. --------------------------------------------------------- (a) Election to Amortize. The Borrower shall have the option to pay all -------------------- or a portion of the outstanding principal balance of the Committed Revolving Loans and Competitive Loans outstanding as of the Termination Date in eight (8) equal consecutive quarterly installments on the last day of each March, 32 June, September and December commencing with the first of such dates to occur after the Termination Date (each such date referred to herein as a "Term Loan --------- Amortization Date" and the last such date referred to herein as the "Term Loan - ----------------- --------- Maturity Date"). The Borrower may exercise such option by giving written notice - ------------- to the Agent at least fifteen (15) days prior to the Termination Date. If the Agent does not receive such notification within the time period specified in the preceding sentence, the principal amount of all Committed Revolving Loans and Competitive Loans shall be due and payable on the Termination Date. All Committed Revolving Loans and Competitive Loans remaining outstanding after the Termination Date in accordance with the terms of this Section 2.6 shall be referred to collectively as the "Term Loans". The Term Loans may be comprised ---------- of Base Rate Loans, Eurodollar Loans and Competitive Loans as the Borrower may elect in accordance with the provisions hereof. Amounts repaid or prepaid on the Term Loans may not be reborrowed by the Borrower. For purposes of this Credit Agreement, where the Borrower shall elect to amortize amounts outstanding under the Committed Revolving Loans and the Competitive Loans in accordance herewith, then on and after the Termination Date, references herein to the "Revolving Committed Amount" shall mean the aggregate principal amount of the -------------------------- Term Loans as of the Termination Date less all payments made or required to be ---- made with respect to the Term Loans hereunder, whether scheduled amortization payment, voluntary or optional prepayment, mandatory prepayment or otherwise. (b) Interest on Term Loans. It is the intention of the parties hereto ---------------------- that the Term Loans bear interest on the same terms as apply to Committed Revolving Loans and Competitive Loans prior to the Termination Date. In furtherance thereof, the parties hereto agree that upon and after the occurrence of the Termination Date and the Borrower's election to amortize the payment of the outstanding principal balance of the Term Loans, the Borrower shall continue to have all of the same rights as it had prior to the Termination Date to (i) obtain Committed Revolving Loans under Section 2.1, (ii) obtain Competitive Loans under Section 2.4 and (iii) extend and/or convert Committed Revolving Loans under Section 3.2, in each case subject to the limitations of Section 2.6 (a). SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES ---------------------------------------------- 3.1 Default Rate. Overdue principal and, to the extent permitted by law, ------------ overdue interest in respect of each Loan and any other overdue amount payable hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then 2% greater than the Base Rate). 33 3.2 Extension and Conversion. The Borrower shall have the option, on any ------------------------ Business Day, to extend existing Committed Revolving Loans into a subsequent permissible Interest Period or to convert Committed Revolving Loans of one type into Committed Revolving Loans of another type; provided, however, that (i) -------- except as provided in Section 3.7, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest -------- Period" set forth in Section 1.1 and shall be in such minimum amounts as - ------ provided in Section 2.1(b)(ii), (iv) no more than ten (10) separate Eurodollar Loans shall be outstanding hereunder at any one time and (v) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Competitive Loans may not be extended or converted pursuant to this Section 3.2. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Committed Revolving Loans to be so extended or converted, the types of Committed Revolving Loans into which such Committed Revolving Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Multiple Eurodollar Loans with Interest Periods ending on the same date may be combined and extended as one Eurodollar Loan, and a single Eurodollar Loan may be extended as multiple Eurodollar Loans. Each request for extension of, or conversion into, Eurodollar Loans, shall constitute a representation and warranty by the Borrower of the matters specified in Section 5.3(b), (c), (d) and (e). In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Loans shall be automatically converted into Base Rate Loans at the end of their Interest Period. The Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 Reductions In Commitments and Prepayments. ----------------------------------------- (a) Voluntary Reduction of Commitments. The Borrower may from time ---------------------------------- to time permanently reduce the Revolving Committed Amount in whole or in part (in each such case in a minimum aggregate amount of $5,000,000 and integral 34 multiples of $1,000,000 in excess thereof) upon three (3) Business Days' prior written notice to the Agent. (b) Mandatory Reduction of Commitments. On each date after the ---------------------------------- Closing Date upon which the Parent Company, the Borrower or any of their respective Wholly Owned Subsidiaries receives proceeds from any Material Asset Sale, the Revolving Committed Amount shall be reduced by an amount equal to 100% of the Net Sale Proceeds thereof. Notwithstanding anything contained herein to the contrary, reductions on account of Material Asset Sales shall be applied (i) prior to the Termination Date, first to the Revolving Committed Amount under the Tranche A Credit Agreement until such Revolving Committed Amount is reduced to zero and terminated, and then to the Revolving Committed Amount hereunder and (ii) after the Termination Date, first to the Term Loans outstanding hereunder, if any, to Base Rate Loans, Eurodollar Loans and Competitive Loans as the Borrower may specify, or if the Borrower shall fail to specify then in the order provided in Section 3.3(f), with any such payments being also applied to (and serving to reduce) principal amortization payments due under Section 2.6(a) in direct order of installment maturity, and then to the Revolving Committed Amount under the Tranche A Credit Agreement. (c) [Intentionally Left Blank]. (d) Termination of Individual Lender Commitment. In the event of ------------------------------------------- certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as provided in Section 11.6(b), the Borrower shall have the right, upon three (3) Business Days' prior written notice to the Agent, to terminate the Commitments of such Lender, so long as (i) all Loans, together with accrued and unpaid interest, fees and all other amounts owing to such Lender are repaid, and (ii) the amount of Commitments (including for purposes hereof Commitments hereunder and under the Tranche A Credit Agreement) terminated pursuant to this Section 3.3(d), after giving effect to termination of the Commitments of any such non-consenting Lender, shall not exceed $70,000,000 in the aggregate. At such time as any such termination shall become effective in accordance with the terms hereof, such Lender shall no longer constitute a "Lender" for purposes of this Agreement, except with respect to indemnifications under this Agreement which shall survive as to such repaid Lender. (e) Voluntary Prepayments. The Borrower shall have the right to --------------------- prepay Loans in whole or in part from time to time without premium or penalty; provided, however, that (i) Competitive Loans and Committed -------- ------- Revolving Loans which are Eurodollar Loans may only be prepaid on three Business Days' 35 prior written notice to the Agent and any prepayment of such Competitive Loans or Eurodollar Loans will be subject to Section 3.10; and (ii) each such partial prepayment of Loans shall be in the minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof for all Competitive Loans and Committed Revolving Loans. (f) Mandatory Prepayments. If at any time (i) the sum of the --------------------- aggregate amount of outstanding Committed Revolving Loans (other than Committed Revolving Loans made for the purpose of repaying Competitive Loans but not yet so applied) plus the aggregate amount of Competitive ---- Loans (other than Competitive Loans made for the purpose of repaying Committed Revolving Loans but not yet so applied) shall exceed the aggregate Revolving Committed Amount; or (ii) the aggregate amount of Competitive Loans shall exceed the Competitive Loan Maximum Amount, the Borrower shall immediately make payment on the Loans in an amount sufficient to eliminate such excess. In the case of a mandatory prepayment required on account of subsection (ii) above, the amount required to be prepaid hereunder shall serve to temporarily reduce the Revolving Committed Amount (for purposes of borrowing availability hereunder, but not for purposes of computation of fees) by the amount of the payment required until such time as the situation described in subsection (ii) above shall no longer exist. Payments required to be made hereunder shall be applied to Committed Revolving Loans or Competitive Loans, as appropriate, and with respect to the types of Loans, first to Base Rate Loans and then to Eurodollar Loans in direct order of their Interest Period maturities. To the extent that the Borrower is required to make a mandatory prepayment of the Loans which is required to be applied to Competitive Loans or to Committed Revolving Loans which are Eurodollar Loans (following the operation of the immediately preceding sentence) on a date other than the last day of an Interest Period applicable thereto, at the option of the Borrower, the Agent shall hold the amount of such prepayment in an account in the Agent's sole dominion and control. The Agent shall invest the amounts held by it in such account as directed by the Borrower. On the last day of the Interest Period relating to the next-maturing Competitive Loans or to Committed Revolving Loans which are Eurodollar Loans, as appropriate, the Agent shall apply the amounts held by it in such account to the prepayment of such maturing Loan and the Agent shall notify the Borrower of the application of such amounts. Upon the direction of the Borrower, the Agent shall apply any earnings on amounts held in such account to the payment of accrued interest on such Loans or shall release such earnings to the Borrower. (g) Prepayment of Loans of Individual Lender. In the event of ---------------------------------------- certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the 36 Required Lenders as provided in Section 11.6(b), the Borrower shall have the right, upon three (3) Business Days' prior written notice to the Agent, to repay all Loans, together with accrued and unpaid interest, fees and all other amounts owing to such Lender, each in accordance with said Section 11.6(b) so long as (A) the Commitments of such Lender are terminated concurrently with such repayment in accordance with, and to the extent permitted under, the provisions of Section 3.3(d), and (B) the consents required by Section 11.6(b) in connection with such repayment have been obtained. (h) Notice. The Borrower will provide notice to the Agent of any ------ prepayment by 11:00 A.M. (Charlotte, North Carolina time) on the day prior to the date of prepayment. Amounts paid on the Loans under subsection (e) and (f)(i) hereof may be reborrowed in accordance with the provisions hereof. 3.4 Fees. ---- (a) Commitment Fee. In consideration of the Commitments by the -------------- Lenders hereunder, the Borrower agrees to pay to the Agent for the ratable benefit of the Lenders a commitment fee (the "Commitment Fee") equal to the -------------- Applicable Percentage per annum on (i) prior to the Termination Date, the aggregate Revolving Committed Amount in effect from time to time for the applicable period and (ii) after the Termination Date, the Term Loans outstanding from time to time during the applicable period. The Commitment Fee shall accrue from the date hereof and shall be payable quarterly in arrears on the 15th day following the end of each calendar quarter and on the Termination Date or, if the Borrower has elected to amortize payment of the principal balance of Committed Revolving Loans and Competitive Loans outstanding as of the Termination Date in accordance with the provisions of Section 2.6(a), then the Term Loan Maturity Date, as appropriate. (b) [Intentionally Left Blank]. (c) Administrative Fees. The Borrower agrees to pay to the Agent, ------------------- for its own account, the administrative and other fees referred to in the Agent's Fee Letter (the "Agent's Fees"). ------------ (d) Competitive Bid Request Fee. The Borrower shall make payment to --------------------------- the Agent of the applicable Competitive Bid Request Fee, if any, concurrently with delivery of such Competitive Bid Request (whether or not any Competitive Bid is offered by a Lender, accepted by the Borrower or extended by the offering Lender pursuant thereto). 3.5 Capital Adequacy. If, after the date hereof, any Lender has ---------------- determined that the adoption after the date hereof of 37 any applicable law, rule or regulation regarding capital adequacy, or any change therein after the date hereof, or any change in the interpretation or administration thereof after the date hereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive arising after the date hereof regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or will have the effect of reducing the rate of return on such Lender's or its parent company's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender or its parent company could have achieved but for such adoption or change (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender and its parent company for such reduction; provided, however, that a Lender shall not be -------- ------- entitled to avail itself of the benefit of this Section 3.5 to the extent that any such reduction in return was incurred more than ninety (90) days prior to the time it gives notice to the Borrower of the relevant circumstances. In determining the additional amount payable under this Section 3.5, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided, that such Lender's determination of -------- compensation owing under this Section 3.5 shall, absent manifest error, be final and conclusive and binding on all parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 3.5, will give prompt written notice thereof to the Borrower, through the Agent, which notice shall show the basis for calculation of such additional amounts. 3.6 Inability To Determine Interest Rate. If prior to the first day of ------------------------------------ any Interest Period, the Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (y) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. This Section 3.6 shall not apply to Competitive Loans. 3.7 Illegality. Notwithstanding any other provision herein, if the ---------- adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring 38 after the Closing Date shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 3.10. Notwithstanding the foregoing, to the extent a circumstance described above relates to a Eurodollar Loan then being requested by the Borrower pursuant to a Notice of Borrowing or a Notice of Conversion, the Borrower shall have the option to rescind such Notice of Borrowing or Notice of Conversion as to all Lenders by giving notice (in writing or by telephone confirmed in writing) to the Agent of such rescission on the date on which the Lender affected by such circumstances gives notice thereof as described above. This Section 3.7 shall not apply to Competitive Loans. 3.8 Requirements of Law. If the adoption of or any change in any ------------------- Requirement of Law or in the interpretation or application thereof applicable to any Lender, or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Closing Date (or, if later, the date on which such Lender becomes a Lender): (i) shall subject such Lender to any tax of any kind whatsoever with respect to any Eurodollar Loans made by it or its obligation to make Eurodollar Loans, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 3.9 (including Non-Excluded Taxes imposed solely by reason of any failure of such Lender to comply with its obligations under subsection 3.9(b)) and Excluded Taxes; (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or 39 (iii) shall impose on such Lender any other condition (excluding any tax of any kind) whatsoever; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from such Lender, through the Agent, in accordance herewith, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable, provided that, in any such case, the Borrower may elect to convert -------- the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the Agent at least one Business Day's notice of such election, in which case the Borrower shall promptly pay to such Lender, upon demand, without duplication, such amounts, if any, as may be required pursuant to Section 3.10; provided, -------- further, however, that a Lender shall not be entitled to avail itself of the - ------- ------- benefit of this Section 3.8 to the extent that any such additional amounts were incurred more than ninety (90) days prior to the time it gives notice to the Borrower as provided in the next sentence. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall provide prompt notice thereof to the Borrower, through the Agent, certifying (x) that one of the events described in this Section has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Agent, to the Borrower shall be conclusive in the absence of manifest error. This Section 3.8 shall not apply to Competitive Loans. 3.9 Taxes. (a) Except as provided below in this subsection (a), all ----- payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding taxes measured by or imposed upon the overall net income or profits of any Lender or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between 40 the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes (such excluded taxes being herein referred to as "Excluded Taxes"). If any such non-excluded taxes, -------------- levies, imposts, duties, charges, fees, deductions or withholdings ("Non- ---- Excluded Taxes") are required to be withheld from any amounts payable to the - -------------- Agent or any Lender hereunder or under any Notes, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that the Borrower shall -------- ------- be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of subsection (b) below. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Agent or any Lender as a result of any such failure. The agreements in this subsection (a) shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (X)(i) on or before the date of any payment by the Borrower under this Credit Agreement or the Notes to such Lender, deliver to the Borrower and the Agent (A) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and its Notes without deduction or withholding of any United States federal income taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; (ii) deliver to the Borrower and the Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of 41 any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Agent; or (Y) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the Borrower (for the benefit of the Borrower and the Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Agent (A) a certificate substantially in the form of Schedule 3.9 hereto (any such certificate a "U.S. Tax Compliance ------------ ------------------- Certificate") and (B) two accurate and complete original signed ----------- copies of Internal Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Code with respect to payments to be made under this Credit Agreement and its Notes (and to deliver to the Borrower and the Agent two further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and its Notes; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Agent. Each Person that shall become a Lender or a participant pursuant to Section 11.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a Participant the obligations of such -------- Participant pursuant to this subsection (b) shall be 42 determined as if the Participant were a Lender except that such Participant shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. (c) If the Borrower pays any additional amount under Section 3.9(a) to a Lender and such Lender determines that it has received or realized in connection therewith any refund or any reduction of, or credit against, its tax liabilities in or with respect to the taxable year in which the additional amount is paid, such Lender shall pay to the Borrower an amount that the Lender shall determine is equal to the net benefit, after tax, which was obtained by the Lender in such taxable year as a consequence of such refund, reduction or credit. 3.10 Indemnity. The Borrower agrees to indemnify each Lender and to hold --------- each Lender harmless from any reasonable loss or expense which such Lender may sustain or incur (other than through such Lender's gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Competitive Loans or Committed Revolving Loans which are Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Competitive Loan or a Committed Revolving Loan which is a Eurodollar Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement or (c) the making of a prepayment of Competitive Loans or Committed Revolving Loans which are Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto other than pursuant to Section 3.11(c). Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Competitive Loan or a Committed Revolving Loan which is a Eurodollar Loan provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.11 Pro Rata Treatment. Except to the extent otherwise provided herein: ------------------ (a) Committed Revolving Loans. Each Committed Revolving Loan ------------------------- advance, each payment or prepayment of 43 principal of any Committed Revolving Loan, each payment of interest on the Committed Revolving Loans, each payment of the Commitment Fee, each reduction of the Revolving Committed Amount, and each conversion or continuation of any Committed Revolving Loan, shall be allocated pro rata among the relevant Lenders in accordance with the respective applicable Revolving Committed Amounts (or, if the Commitments of such Lenders have expired or been terminated, in accordance with the respective principal amounts of the outstanding Loans and Participation Interests of such Lenders). (b) [Intentionally Left Blank]. (c) Funding. Unless the Agent shall have been notified in writing by ------- any Lender prior to a Committed Revolving Loan borrowing that such Lender will not make the amount that would constitute its Revolving Commitment Percentage of such borrowing available to the Agent, the Agent may assume that such Lender is making such amount available to the Agent, and the Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Agent by the required time on the borrowing date therefor, such Lender shall pay to the Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for the period until such Lender makes such amount immediately available to the Agent. A certificate of the Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Revolving Commitment Percentage of such borrowing is not made available to the Agent by such Lender within three Business Days of such borrowing date, (i) the Agent shall notify the Borrower of the failure of such Lender to make such amount available to the Agent and the Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower and (ii) the Borrower may, without waiving any rights it may have against such Lender, borrow a like amount on an unsecured basis from any commercial bank for a period ending on the date upon which such Lender does in fact make such borrowing available, provided that at the time such -------- borrowing is made and at all times while such amount is outstanding the Borrower would be permitted to borrow such amount pursuant to Section 2.1 of this Credit Agreement. 3.12 Sharing of Payments. The Lenders agree among themselves that, in the ------------------- event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, 44 such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or any other Lender an amount payable by such Lender or the Agent to the Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.12 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.12 to share in the benefits of any recovery on such secured claim. 3.13 Place and Manner of Payments. Except as otherwise specifically ---------------------------- provided herein, all payments hereunder shall be made to the Agent in Dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at its offices specified in Schedule 2.1(a) not later --------------- than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Agent the Loans, fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to 45 specify, or if such application would be inconsistent with the terms hereof, the Agent shall distribute such payment to the Lenders in the manner set forth in Section 3.3(f) for mandatory prepayments). The Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. 3.14 [Intentionally Left Blank]. 3.15 Replacement of Lenders. If any Lender either (i) becomes a Defaulting ---------------------- Lender, (ii) a Disapproving Lender or (iii) delivers a notice to the Borrower pursuant to Sections 3.5 or 3.8, the Borrower shall have the right, if no Default or Event of Default then exists, to replace such Lender (the "Replaced -------- Lender") with one or more Eligible Assignees (collectively, the "Replacement - ------ Lender"), provided that (A) at the time of any replacement pursuant to this -------- Section 3.15, the Replacement Lender shall enter into one or more assignment agreements substantially in the form of Schedule 11.3(c) pursuant to, and in ---------------- accordance with the terms of, Section 11.3(c) (and with all fees payable pursuant to said Section 11.3(c) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the rights and obligations of the Replaced Lender hereunder and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (a) the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, and (b) all accrued but theretofore unpaid, fees and other amounts owing to the Replaced Lender pursuant to Section 3.4, and (B) all obligations of the Borrower owing to the Replaced Lender (including all obligations, if any, owing pursuant to Section 3.5 or 3.8, but excluding those obligations specifically described in clause (A) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full by the Borrower to such Replaced Lender concurrently with such replacement. 3.16 Change of Lending Office. Each Lender agrees that on the occurrence ------------------------ of any event giving rise to the operation of 46 Sections 3.5, 3.8 or 3.9 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts to designate another lending office for any Loans affected by such event, provided that such designation is made on such -------- terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. SECTION 4 GUARANTY -------- 4.1 The Guarantee. Each of the Guarantors hereby jointly and severally ------------- guarantees to each Lender and the Agent as hereinafter provided the prompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, in the event of a bankruptcy or other similar insolvency proceeding of a Guarantor, the obligations of each such Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its Obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 4.2 Obligations Unconditional. The obligations of the Guarantors under ------------------------- Section 4.1 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall 47 not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of any of the Credit Documents or any other agreement or instrument referred to therein shall be done or omitted; (iii) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents or any other agreement or instrument referred to therein shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien granted to, or in favor of, the Agent or any Lender or Lenders as security for any of the Obligations shall fail to attach or be perfected; or (v) any of the Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Credit Documents or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. 4.3 Reinstatement. The obligations of the Guarantors under this Section 4 ------------- shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 48 4.4 Certain Additional Waivers. Without limiting the generality of the -------------------------- provisions of this Section 4, each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. Sec.Sec. 26-7 through 26-9, inclusive. Each of the Guarantors further agrees that it shall have no right of subrogation, reimbursement or indemnity, nor any right of recourse to security, if any, for the Obligations so long as any amounts payable to the Agent or the Lenders in respect of the Obligations shall remain outstanding and until all of the Commitments shall have expired or been terminated. 4.5 Remedies. The Guarantors agree that, to the fullest extent permitted -------- by law, as between the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.2 hereof (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or such Obligations being deemed to have become automatically due and payable), such Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of said Section 4.1. 4.6 Continuing Guarantee. The guarantee in this Section 4 is a continuing -------------------- guarantee, and shall apply to all Obligations whenever arising. 4.7 Discharge of Guarantor. If all of the stock of any Guarantor or any ---------------------- of its successors in interest under this Section 4 shall be sold or otherwise disposed of (including by merger or consolidation) in a transaction not prohibited by this Agreement, or if a Guarantor shall no longer satisfy the conditions for being a Guarantor under Section 7.12, the guaranty of such Guarantor or such successor in interest, as the case may be, hereunder and the pledge of the capital stock or other ownership interest in such Guarantor or such successor in interest, as the case may be, pursuant to the Pledge Agreement shall automatically be discharged and released without any further action by the Agent, any Lender or any other Person effective as of the date of such transaction or as of the date the Agent receives evidence reasonably satisfactory to the Agent that such conditions are not longer satisfied. The Borrower will give prompt notice to the Agent of any discharge and release pursuant to this Section 4.7. SECTION 5 CONDITIONS ---------- 5.1 Conditions to Initial Extensions of Credit. The obligation of each ------------------------------------------ Lender to make its initial Extensions of 49 Credit to Embassy Suites, as the initial Borrower, is subject to the satisfaction of the following conditions on or prior to the Closing Date: (a) Executed Credit Documents. Receipt by the Agent of executed ------------------------- counterparts of this Credit Agreement, the Notes and the other Credit Documents. (b) Tranche A Credit Agreement. Receipt by the Agent of copies of -------------------------- the executed Tranche A Credit Agreement, the promissory notes issued thereunder and the other collateral, security and other documents relating thereto. (c) No Default; Representations and Warranties. As of the Closing ------------------------------------------ Date (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects. (d) Opinion of Counsel. Receipt by the Agent of an opinion, or ------------------ opinions, satisfactory to the Agent, addressed to the Agent and the Lenders and dated as of the Closing Date, from legal counsel to the Credit Parties and in form reasonably acceptable to the Agent and the Credit Parties. (e) Corporate Documents. Receipt by the Agent of the following: ------------------- (i) Charter Documents. Copies of the articles or ----------------- certificates of incorporation or other charter documents of each Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (ii) Bylaws. A copy of the bylaws of each Credit Party ------ certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (iii) Resolutions. Copies of resolutions of the Board of ----------- Directors of each Credit Party approving and adopting the Credit Documents to which it is a party and the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Credit Party to be true and correct and in force and effect as of the Closing Date. (vi) Good Standing. Copies of (a) certificates of good ------------- standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental 50 Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing would have a Material Adverse Effect and (b) to the extent available, a certificate indicating payment of all corporate franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. (f) Fees and Expenses. Provided the Borrower has received proper ----------------- documentation and support therefor, payment by the Borrower of all fees and expenses owed by it to the Lenders and the Agent, including, without limitation, payment to the Agent of the fees set forth in the Agent's Fee Letter. (g) Distribution. Receipt by the Agent of evidence satisfactory to ------------ the Agent that (i) all conditions precedent to the consummation of the Distribution have been satisfied and (ii) the Distribution will be consummated immediately after the making of such initial Extensions of Credit in the manner contemplated by the Proxy Statement. (h) Other. Receipt by the Lenders of such other documents, ----- instruments, agreements or information as reasonably requested by the Agent or the Required Lenders. 5.2 Conditions to Assignment to Hotel Inc., Release of Embassy Suites and --------------------------------------------------------------------- Promus Co. and Initial Extensions of Credit to Hotel Inc. The obligation of the - --------------------------------------------------------- Lenders to accept the assignment to and the assumption by Hotel Inc. of the rights and obligations of Embassy Suites under this Credit Agreement and to release Embassy Suites and Promus Co. of their respective obligations, direct and indirect, present and future, under this Credit Agreement pursuant to Section 11.3(b) and to make its initial Extensions of Credit to Hotel Inc. shall be subject to satisfaction of the following conditions on or prior to the Effective Date of Assignment: (a) Assignment and Assumption Agreement. Receipt by the Agent of ----------------------------------- executed counterparts of the Hotel Inc. Assignment and Assumption Agreement. (b) Pledge Agreement and Stock Certificates. Receipt by the Agent of --------------------------------------- the executed Pledge Agreement and all of the stock certificates evidencing the stock pledged to the Lenders pursuant to the Pledge Agreement, along with duly executed undated stock powers executed in blank attached thereto. (c) Reorganization Resolution. Receipt by the Agent of (i) a copy of ------------------------- corporate resolutions of the directors of Promus Co. and Embassy Suites approving the Reorganization, (ii) copies of the Reorganization Documents, certified by a secretary or assistant secretary of Hotel Corp. and (iii) such other information regarding the structure, tax 51 treatment, existing and projected tax liabilities and other matters relating to the Reorganization as the Agent may reasonably request. (d) Solvency Certificate. Receipt by the Agent of a certificate of -------------------- the chief financial officer of Embassy Suites as of the Effective Date of the Assignment stating that, immediately after giving effect to the Reorganization, the Distribution and Hotel Inc. Assignment and Assumption Agreement, Embassy Suites is Solvent. (e) Reorganization. The Agent shall have received a certificate -------------- executed by the chief financial officer of Hotel Corp. as of the Effective Date of Assignment stating that (i) the terms of the Reorganization and the final corporate organization and structure of Hotel Corp. and Hotel Inc. are consistent in all material respects with the Proxy Statement; (ii) the transactions described in clause (i) of the first recital hereof have been consummated in a manner consistent in all material respects with the terms of the Proxy Statement on or before the execution of the Hotel Inc. Assignment and Assumption Agreement; (iii) no material adverse change has occurred since December 31, 1994, with respect to the combined financial condition of the Hotel Inc. Businesses; (iv) there does not exist any order, decree, judgment, ruling or injunction which restrains the consummation of the Reorganization or the Distribution in the manner contemplated by the Proxy Statement, and there does not exist any action, suit or proceeding, pending or threatened, in which there is a reasonable possibility of an adverse decision, which would materially adversely affect the ability of Hotel Inc. or any of the Guarantors (including Hotel Corp.) to perform its obligations under the Credit Documents or the ability of the Lenders to exercise their rights thereunder; and (v) immediately after giving effect to the Reorganization, the Distribution and the Hotel Inc. Assignment and Assumption Agreement, (A) no Default or Event of Default shall have occurred and be continuing and (B) the representations and warranties set forth in Section 6 will be true and correct in all material respects. (f) NYSE Listing. Receipt by the Agent of evidence satisfactory to ------------ it that the shares of Hotel Corp.'s common stock shall have been approved for listing on the New York Stock Exchange. (g) Form 10 Filing. Receipt by the Agent of evidence satisfactory to -------------- it that the Form 10 shall have been filed with the Securities and Exchange Commission together with a certification by the chief financial officer of Embassy Suites that Embassy Suites has received no stop order regarding the Form 10 from the Securities and Exchange Commission and that the Form 10 shall have become effective. 52 (h) Other Documents. Receipt by the Agent of all documents it and --------------- the Required Lenders may reasonably request relating to the existence of each of Hotel Corp., Hotel Inc. and the other Guarantors, the corporate authority for and the validity of Hotel Inc. Assignment and Assumption Agreement and any other matters relevant thereto, all in form and substance reasonably satisfactory to the Agent. (i) Legal Opinions. Receipt by the Agent of legal opinions addressed -------------- to the Agent and the Lenders from (i) counsel to Embassy Suites and Promus Co. satisfactory to Agent, dated as of the Effective Date of Assignment and in a form reasonably acceptable to the Agent, Promus Co. and Embassy Suites and (ii) counsel to Hotel Corp. and Hotel Inc. satisfactory to Agent, dated as of the Effective Date of Assignment and in form reasonably acceptable to the Agent, Promus Co. and Embassy Suites. (j) Other Information. Receipt by the Agent of such other documents, ----------------- agreements or information which may be reasonably requested by the Agent and the Required Lenders. The Agent's execution and delivery of the Hotel Inc. Assignment and Acceptance Agreement shall constitute the agreement of the Agent binding upon the Lenders that all of the conditions set forth in this Section 5.2 have been either satisfied or waived. 5.3 Each Extension of Credit. The obligation of each Lender to make any ------------------------ Extension of Credit, including the conversion to or extension of any Eurodollar Loan is subject to satisfaction of the following conditions in addition to (i) with respect to any Extension of Credit to be made, converted or extended on a date occurring prior to the Effective Date of Assignment, satisfaction on the Closing Date of the conditions set forth in Section 5.1 and (ii) with respect to any Extension of Credit to be made, converted or extended on a date occurring on or after the Effective Date of Assignment, satisfaction on the Closing Date of the conditions set forth in Section 5.1 and satisfaction on the Effective Date of Assignment of the conditions set forth in Section 5.2: (a) (i) In the case of any Committed Revolving Loan, the Agent shall have received an appropriate Notice of Borrowing or Notice of Conversion; and (ii) in the case of any Competitive Loan, the applicable Competitive Loan Lender shall have received an appropriate notice of acceptance of its related Competitive Bid; (b) The representations and warranties set forth in Section 6 hereof and in the Pledge Agreement shall be true and correct in all material respects as of such date (except for those which expressly relate to an earlier date); 53 (c) There shall not have been commenced against the Parent Company, the Borrower or any Guarantor an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Parent Company, the Borrower or any Guarantor or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded; (d) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; and (e) Since December 31, 1994, there shall not have been a material adverse change in or event or condition materially adversely affecting the financial condition, operations, business or prospects of the hotel business of the Parent Company, the Borrower and their Subsidiaries, taken as a whole. The delivery of each Notice of Borrowing and each Notice of Conversion relating to an extension of or conversion into Eurodollar Loans and each request for a Competitive Bid pursuant to a Competitive Bid Request shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c), (d) and (e) above. SECTION 6 REPRESENTATIONS AND WARRANTIES ------------------------------ To induce the Agent and each Lender to make the Extensions of Credit requested to be made by it on the Closing Date and on each Credit Date thereafter, the Credit Parties hereby represent and warrant, on the Closing Date, and on every Credit Date thereafter (except to the extent the following representations warranties relate to a specific date), to the Agent and each Lender that: 6.1 Financial Condition. (a) The audited consolidated balance sheet of ------------------- Promus Co. and its consolidated Subsidiaries as of December 31, 1994 and the audited consolidated statements of earnings and statements of cash flows for the year ended December 31, 1994 have heretofore been furnished to the Agent. Such financial statements (including the notes thereto) (i) have been audited by Arthur Andersen LLP, (ii) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (iii) (on the basis disclosed in the footnotes to such financial statements) present fairly, in all material respects, the consolidated financial condition, results 54 of operations and cash flows of Promus Co. and its consolidated Subsidiaries as of such date and for such periods. The unaudited interim balance sheets of Promus Co. and its consolidated Subsidiaries as at the end of, and the related unaudited interim statements of earnings and of cash flows for, each fiscal month and quarterly period ended after December 31, 1994 and prior to the Closing Date have heretofore been furnished to the Agent. Such interim financial statements for each such quarterly period, (i) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (ii) (on the basis disclosed in the footnotes to such financial statements) present fairly, in all material respects, the consolidated financial condition, results of operations and cash flows of Promus Co. and its consolidated Subsidiaries as of such date and for such periods subject to year-end and audit adjustments. During the period from December 31, 1994 to and including the Closing Date, there has been no sale, transfer or other disposition by Promus Co. or any of its Subsidiaries of any material part of the business or property of Promus Co. and its consolidated Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any capital stock of any other person) material in relation to the consolidated financial condition of Promus Co. and its consolidated Subsidiaries, taken as a whole, in each case, which, is not reflected in the foregoing financial statements or in the notes thereto and has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date. (b) The pro forma balance sheet of Hotel Corp. and its consolidated --- ----- Subsidiaries set forth in the Proxy Statement (the "Pro Forma Balance Sheet") is ----------------------- the balance sheet of Hotel Corp. and its consolidated Subsidiaries as of December 31, 1994 (the "Pro Forma Date"), adjusted to give effect (as if such -------------- events have occurred on such date) to (i) the consummation of the Reorganization and Distribution on the Closing Date and of the Assignment and Assumption, (ii) the Extension of Credit under the Tranche A Credit Agreement and/or this Agreement to be made on the Closing Date in an aggregate principal amount of not more than $225,000,000, and (iii) the payment of estimated fees, expenses and financing costs related to the transactions contemplated hereby and thereby. The Pro Forma Balance Sheet was prepared on the same basis as the balance sheets included in the financial statements described in the first sentence of subsection 6.1(a), except as set forth in Schedule 6.1(b). --------------- (c) On and as of the Closing Date, (i) the financial projections (the "Projections") prepared by the Parent Company and the Borrower and contained in ----------- the Confidential Offering Memorandum delivered to the Lenders by the Agent prior to the Closing Date were prepared based upon the assumptions concerning various industry trends described therein for the periods presented, (ii) the Projections were based on good faith assumptions and estimates, and (iii) although a range of possible different assumptions and estimates might also be reasonable, the 55 Parent Company and the Borrower are not aware of any facts that would lead them to believe that the assumptions and estimates on which the Projections were based are not reasonable; provided that no assurance can be given that the -------- projected results will be realized or with respect to the ability of the Parent Company and the Borrower to achieve the projected results, and while the Projections are necessarily presented with numerical specificity, the actual results achieved during the periods presented in all likelihood will differ from the projected results and such differences may be material. 6.2 No Change; Solvent. Since December 31, 1994, (a) there has been no ------------------ development or event relating to or affecting the Parent Company, the Borrower or any of their Subsidiaries which has had or would be reasonably expected to have a Material Adverse Effect and (b) except as permitted under this Credit Agreement no dividends or other distributions have been declared, paid or made upon the capital stock of the Borrower nor has any of the capital stock of the Borrower been redeemed, retired, purchased or otherwise acquired for value by the Borrower or any of its Subsidiaries. As of the Closing Date, after giving effect to (i) the consummation of the Assignment and Assumption, (ii) the making of the Extensions of Credit under the Tranche A Credit Agreement and/or this Agreement to be made on the Closing Date in an aggregate principal amount of not more than $225,000,000 and (iii) the payment of estimated fees, expenses and financing costs related to the transactions contemplated hereby and thereby, Hotel Corp., Hotel Inc. and each Guarantor is Solvent. 6.3 Corporate and Partnership Existence; Compliance with Law. Each of the -------------------------------------------------------- Parent Company, the Borrower and their Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or partnership power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, except to the extent that the failure to have such legal right would not be reasonably expected to have a Material Adverse Effect, (c) is duly qualified and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not be reasonably expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.4 Corporate and Partnership Power; Authorization; Enforceable ----------------------------------------------------------- Obligations. The Parent Company, the Borrower and each of the other Credit - ----------- Parties has the corporate or partnership power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and to borrow and accept Extensions of Credit hereunder or to issue the 56 guarantee or to pledge stock hereunder, and have taken all necessary corporate or partnership action to authorize the borrowings and Extensions of Credit or guarantee such borrowings and Extensions of Credit, as appropriate, on the terms and conditions of this Credit Agreement and any Notes and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of the Borrower or any Guarantor in connection with the borrowings or guarantees hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower is a party, except for (i) consents, authorizations, notices and filings described in Schedule 6.4, all of which have been obtained or made ------------ or have the status described in such Schedule 6.4. This Credit Agreement has ------------ been, and each other Credit Document to which it is a party will be, duly executed and delivered on behalf of the Borrower and the Guarantors. This Credit Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower and the Guarantors enforceable against them in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 No Legal Bar. The execution, delivery and performance of the Credit ------------ Documents by the Borrower, the Parent Company and the other Credit Parties, the borrowings and extensions of credit and the guarantees thereof hereunder and the use thereof and the pledge of stock in connection therewith (a) will not violate any Requirement of Law or Contractual Obligation of the Borrower, the Parent Company or the other Credit Parties in any respect that would reasonably be expected to have a Material Adverse Effect and (b) will not result in, or require, the creation or imposition of any Lien (other than the Liens created by the Pledge Agreement) on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 6.6 No Material Litigation. No litigation, investigation or proceeding of ---------------------- or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Parent Company, the Borrower or any of their Subsidiaries or against any of its or their respective properties or revenues which would be reasonably expected to have a Material Adverse Effect. 6.7 No Default. Neither the Parent Company, the Borrower nor any of their ---------- Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which would 57 be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 6.8 Ownership of Property; Liens. Except as would not have a Material ---------------------------- Adverse Effect or as set forth in Schedule 6.8 hereto, the Parent Company, the ------------ Borrower and each of their Subsidiaries has good record and sufficient title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property. None of such property is subject to any Lien, except for Permitted Liens. 6.9 Intellectual Property. The Parent Company, the Borrower and each of --------------------- their Subsidiaries owns, or has the legal right to use, all United States trademarks, tradenames, copyrights, service marks, technology, know-how and processes necessary for each of them to conduct its business as currently conducted (the "Intellectual Property") except for those the failure to own or --------------------- have such legal right to use would not be reasonably expected to have a Material Adverse Effect. Except as provided on Schedule 6.9, no claim has been asserted ------------ and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any such claim, and the use of such Intellectual Property by the Parent Company, the Borrower and their Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that in the aggregate, would not be reasonably expected to have a Material Adverse Effect. 6.10 No Burdensome Restrictions. No Requirement of Law of the Borrower or -------------------------- any of its Subsidiaries would be reasonably expected to have a Material Adverse Effect. 6.11 Taxes. The Parent Company, the Borrower and each of their ----- Subsidiaries that are corporations have filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the knowledge of the Borrower, are required to be filed, and have paid (a) all taxes shown to be due and payable on said returns and (b) any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect and (ii) taxes, fees or other charges the amount or validity of which are currently being contested and with respect to which reserves in conformity with GAAP have been provided on the books of the Parent Company, the Borrower or such Subsidiaries, as the case may be). 6.12 Federal Regulations. No part of the proceeds of any Loans will be ------------------- used in any manner which might cause the Loans or the application of such proceeds to violate Regulation U of the Board of Governors of the Federal Reserve System as now and from 58 time to time hereafter in effect. If requested by any Lender or the Agent, the Parent Company, the Borrower and the other Credit Parties will furnish to the Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. The parties hereto acknowledge that the use of proceeds of the Loans by the Borrower to purchase $25,000,000 of shares in Felcor Suites Hotels, Inc. or units in Felcor Suites Hotels Limited Partnership will not cause a violation of said Regulation U. 6.13 ERISA. During the five year period prior to each date as of which ----- this representation is made, or deemed made (or, with respect to (vi) or (viii) below, as of the date such representation is made or deemed made), none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a liability to the Parent Company, the Borrower or any of their Subsidiaries which would be reasonably expected to have a Material Adverse Effect: (i) a Reportable Event with respect to any Single Employer Plan; (ii) an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) with respect to any Single Employer Plan which has not been waived; (iii) any material noncompliance with the application of ERISA or the Code with respect to any Plan; (iv) a termination of a Single Employer Plan (other than a standard termination pursuant to Section 4041(b) of ERISA); (v) a Lien in favor of the PBGC with respect to any Single Employer Plan or a Plan pursuant to Section 4068 or Section 302(f) of ERISA, respectively; (vi) Underfunding with respect to any Single Employer Plan; (vii) a complete or partial withdrawal from any Multiemployer Plan by the Parent Company, the Borrower or any Commonly Controlled Entity; (viii) any liability of the Parent Company, the Borrower or any Commonly Controlled Entity under ERISA if the Parent Company, the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the annual valuation date most closely preceding the date on which their representation is made or deemed made; (ix) the Plan Reorganization or Insolvency of any Multiemployer Plan; (x) the excess of the present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the aggregate liability of the Parent Company, the Borrower or any of their Subsidiaries for post-retirement benefits to be provided to their current and former employees (excluding benefits provided pursuant to Section 4980B of the Code or Section 601 of ERISA), under Plans which are welfare benefit plans (as determined in Section 3(1) of ERISA) over the assets under all such Plans; and (xi) an event or condition with respect to which the Parent Company, the Borrower or any Commonly Controlled Entity could incur any liability in respect of a Former Plan. 6.14 Investment Company Act; Other Regulations. The Borrower is not an ----------------------------------------- "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is 59 not subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness as contemplated hereby. 6.15 Subsidiaries. Set forth in Schedule 6.15 is a complete and accurate ------------ ------------- list of all Subsidiaries of the Parent Company and the Borrower both immediately prior to, and immediately after giving effect to, the Assignment and Assumption. Information on the attached Schedule includes jurisdiction of incorporation or organization; the number of shares of each class of capital stock or other equity interest outstanding; the number and percentage of outstanding shares of each class owned (directly or indirectly) by such Person; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and similar rights. The outstanding capital stock of all such corporate Subsidiaries is validly issued, fully paid and non-assessable and is owned by such Person, directly or indirectly, free and clear of all Liens other than Permitted Liens. 6.16 Purpose of Loans. The Extensions of Credit and the proceeds therefrom ---------------- shall be used for working capital and general corporate purposes (including, without limitation, the support of commercial paper), to finance the costs and expenses of the Reorganization, including the repayment of certain indebtedness of Embassy Suites outstanding immediately prior to the Reorganization, and to finance hotel development and other investments not prohibited hereunder. 6.17 Environmental Matters. (a) To the knowledge of the Borrower, the --------------------- facilities and properties owned, leased or operated by the Parent Company, the Borrower or any of their Subsidiaries (the "Subject Properties") and all ------------------ operations at the Subject Properties are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the business operated by the Parent Company, the Borrower or any of their Subsidiaries (the "Business"), and there are no conditions relating to the -------- Business or Subject Properties that would be reasonably likely to give rise to liability under any applicable Environmental Law, except for any failure so to comply or violation or condition, or any aggregation thereof, that would not be reasonably likely to result in the payment of a Material Environmental Amount. (b) To the knowledge of the Borrower, the Subject Properties do not contain any Materials of Environmental Concern at, on or under the Subject Properties in amounts or concentrations that constitute a violation of, or could reasonably give rise to liability under, Environmental Laws, except insofar as the presence of any Materials of Environmental Concern is not reasonably likely to result in the payment of a Material Environmental Amount. (c) Neither the Parent Company, the Borrower nor any of their Subsidiaries has received any written notice of, or inquiry 60 from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Subject Properties or the Business, nor does the Borrower have knowledge that any such notice will be received or is being threatened, except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that is or are reasonably likely to result in the payment of a Material Environmental Amount. (d) The Borrower has not, nor to the knowledge of the Borrower have any other Persons, transported or disposed of Materials of Environmental Concern from the Subject Properties, or generated, treated, stored or disposed of at, on or under any of the Subject Properties or any other location, in each case by or on behalf of the Parent Company, the Borrower or any of their Subsidiaries in violation of, or in a manner that would be reasonably likely to give rise to liability under, any applicable Environmental Law, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Parent Company, the Borrower or any of their Subsidiaries is named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Parent Company, the Borrower, any of their Subsidiaries, the Subject Properties or the Business, except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (f) To the knowledge of the Borrower, there has been no release or threat of release of Materials of Environmental Concern at or from the Subject Properties, or arising from or related to the operations (including, without limitation, disposal) of the Parent Company, the Borrower or any of their Subsidiaries in connection with the Subject Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that would be reasonably likely to give rise to liability under Environmental Laws, except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (g) To the knowledge of the Borrower, neither the Parent Company, the Borrower nor any of their Subsidiaries has voluntarily assumed any liability of any Person under any Environmental Law that is not subject to indemnification and is 61 reasonably likely to result in the payment of a Material Environmental Amount. Notwithstanding any provision herein to the contrary, all references in Sections 6.1 through 6.17 to the "Parent Company" shall mean Hotel Corp., all references -------------- in this Section 6 to the "Borrower" shall mean Hotel Inc. and all references in -------- this Section 6 to "Credit Parties" or "Guarantors" shall mean only Hotel Corp. -------------- ---------- and its Subsidiaries which are included in the definitions of such terms. SECTION 7 AFFIRMATIVE COVENANTS --------------------- Each Credit Party hereby covenants and agrees that commencing with the Closing Date and so long as this Credit Agreement is in effect and until the Obligations, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated: 7.1 Information Covenants. The Parent Company and the Borrower will --------------------- furnish, or cause to be furnished, to the Agent: (a) Annual Financial Statements. As soon as available, and in any --------------------------- event within 120 days after the close of each fiscal year of the Parent Company, a consolidated balance sheet and income statement of the Parent Company and its consolidated subsidiaries (including the Borrower), as of the end of such fiscal year, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal year, setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by Arthur Anderson LLP or other independent certified public accountants of recognized national standing reasonably acceptable to the Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Credit Parties as a going concern. (b) Quarterly Financial Statements. As soon as available, and in any ------------------------------ event within 45 days after the close of each fiscal quarter of the Parent Company (other than the fourth fiscal quarter, in which case 120 days after the end thereof) a consolidated balance sheet and income statement of the Parent Company and its consolidated subsidiaries (including the Borrower), as of the end of such fiscal quarter, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal quarter in each case setting forth in comparative 62 form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by a certificate of the chief financial officer, treasurer or controller of the Parent Company to the effect that such quarterly financial statements fairly present in all material respects the financial condition and results of operations of the Parent Company and its consolidated subsidiaries (including the Borrower), and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. (c) Officer's Certificate. At the time of delivery of the financial --------------------- statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of the chief financial officer, treasurer or controller of the Parent Company substantially in the form of Schedule 7.1(d) attached hereto, (i) --------------- demonstrating compliance with the financial covenants contained in Section 7.11 by calculation thereof as of the end of each such fiscal period and (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Parent Company proposes to take with respect thereto. (d) Accountant's Report. Within the period for delivery of the ------------------- annual financial statements provided in Section 7.1(a), a report of the accountants conducting the annual audit stating that they have reviewed Section 7.11 and stating further whether, in the course of their audit, anything came to their attention to cause them to believe that the Parent Company and its consolidated Subsidiaries were not in compliance with Section 7.11, in so far as such Section 7.11 relates to accounting matters, on the date of such statements. (e) Reports. Promptly upon transmission or receipt thereof, (a) ------- copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalent) which the Parent Company or any of its Subsidiaries shall file with the Securities and Exchange Commission, or any successor agency, (b) copies of all financial statements, proxy statements, notices and reports as the Parent Company, the Borrower or any of their Subsidiaries shall send to its shareholders or to a holder of any Indebtedness with a maximum principal amount exceeding $25,000,000 owed by the Parent Company, the Borrower or any of their Subsidiaries in its capacity as such a holder (other than reports of a routine or ministerial nature which are not material) and (c) upon the request of the Agent, all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for enforcement of 63 Environmental Laws (other than reports of a routine or ministerial nature which are not material). (f) Notices. Upon the Borrower obtaining knowledge thereof, the ------- Borrower will give written notice to the Agent immediately of (a) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrower proposes to take with respect thereto, and (b) the occurrence of any of the following (i) the pendency or commencement of any litigation, arbitration or governmental proceeding against the Parent Company, the Borrower or any of their Subsidiaries which is reasonably likely to have a Material Adverse Effect, (ii) the institution of any proceedings against the Parent Company, the Borrower or any of their Subsidiaries with respect to, or the receipt of notice by such Person of potential liability or responsibility for, violation, or alleged violation of any Environmental Laws, the violation of which would likely have a Material Adverse Effect, or (iii) any notice or determination concerning the imposition of any withdrawal liability by a Multiemployer Plan against the Parent Company, the Borrower or any of their Subsidiaries or any of their Commonly Controlled Entities, the determination that a Multiemployer Plan is, or is expected to be, in a Plan Reorganization or the termination of any Plan in a distress termination under Section 4041(c) of ERISA. (g) Other Information. With reasonable promptness upon any such ----------------- request, such other information regarding the business, properties or financial condition of the Parent Company, the Borrower or any of their Subsidiaries as the Agent or the Required Lenders may reasonably request. 7.2 Preservation of Existence and Franchises. Each of the Credit Parties ---------------------------------------- will do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority except as permitted under Section 8.4 or where failure to do so would not reasonably be expected to have a Material Adverse Effect. 7.3 Books and Records. Each of the Credit Parties will, and will cause ----------------- their Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 7.4 Compliance with Law. Each of the Credit Parties will, and will cause ------------------- their Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property if noncompliance with any such law, rule, regulation, order or restriction would have a Material Adverse Effect. 64 7.5 Payment of Taxes and Other Indebtedness. Each of the Credit Parties --------------------------------------- will, and will cause their Subsidiaries that are corporations to, pay and discharge (i) all material taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before a material penalty begins to accrue, (ii) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (iii) except as prohibited hereunder, all of its other Indebtedness as it shall become due; provided, however, that there shall be no requirement to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in accordance with GAAP, unless the failure to make any such payment (i) would give rise to an immediate right to foreclose on a Lien securing such amounts or (ii) would have a Material Adverse Effect. 7.6 Insurance. Each of the Credit Parties will, and will cause their --------- Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice. 7.7 Maintenance of Property. Each of the Credit Parties will, and will ----------------------- cause their Subsidiaries to, maintain and preserve its properties and equipment material to the conduct of its business in good repair, working order and condition, normal wear and tear excepted, except where failure to do so would not have a Material Adverse Effect and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may be needed or proper, to the extent and in the manner customary for companies in similar businesses except where failure to do so would not have a Material Adverse Effect. 7.8 Performance of Obligations. Each of the Credit Parties will, and will -------------------------- cause their Subsidiaries to, perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other debt instruments to which it is a party or by which it is bound, except where failure to do so would not have a Material Adverse Effect. 7.9 Use of Proceeds. The Extensions of Credit and the proceeds thereof --------------- may be used solely for the purposes provided in Section 6.16. 7.10 Audits/Inspections. Upon reasonable prior notice, with reasonable ------------------ frequency and during normal business hours, each Credit Party will, and will cause their Subsidiaries to, permit 65 representatives appointed by the Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect their property, including their books and records, their accounts receivable and inventory, their facilities and their other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers of the Credit Parties and their Subsidiaries. 7.11 Financial Covenants. ------------------- (a) Consolidated Net Worth. There shall be maintained at all times ---------------------- determined at the end of each fiscal quarter Consolidated Net Worth of at least $125,000,000; provided, however, that the minimum Consolidated Net -------- ------- Worth required hereunder shall be increased by (i) on the last day of each fiscal quarter to occur after the Closing Date, an amount equal to 50% of Consolidated Net Income for the fiscal quarter then ended (or if Consolidated Net Income is a deficit, then zero), and (ii) immediately upon receipt, 100% of the net proceeds received by the Borrower or any Subsidiary pursuant to any Equity Transaction occurring after the Closing Date. (b) Leverage Ratio. The Leverage Ratio, as determined at the end of -------------- each fiscal quarter for the four consecutive fiscal quarter period then ended, shall not at any time exceed: Period Ending ------------- Closing Date through the last day of fiscal year 1995 3.5:1.0 First day of fiscal year 1996 through last day of fiscal year 1996 3.25:1.0 First day of fiscal year 1997 and thereafter 3.0:1.0 (c) Consolidated Fixed Charge Coverage Ratio. The Consolidated Fixed ---------------------------------------- Charge Coverage Ratio, as determined at the end of each fiscal quarter for the four consecutive fiscal quarter period then ended, shall be not less than: Period Ending ------------- Closing Date through the last day of fiscal year 1996 1.25:1.0 First day of fiscal year 1997 through the last day of fiscal year 1997 2.0:1.0 66 First day of fiscal year 1998 and thereafter 2.5:1.0 7.12 Additional Credit Parties. Where the Wholly Owned Subsidiaries of the ------------------------- Parent Company or the Borrower (other than a Wholly Owned Subsidiary formed solely to provide insurance to the Parent Company, its Subsidiaries and Joint Ventures) which are not Guarantors hereunder (the "Non-Guarantor Subsidiaries") -------------------------- shall at any time (i) individually in any instance constitute more than either (A) 10% of Consolidated Legal Entity Assets of the Parent Company, the Borrower and their Subsidiaries, or (B) 10% of Consolidated Legal Entity Gross Revenues of the Parent Company, the Borrower and their Subsidiaries, or (C) 10% of Consolidated Legal Entity EBITDA of the Parent Company, the Borrower and their Subsidiaries, the Parent Company and the Borrower will promptly notify the Agent thereof, and promptly cause any such Non-Guarantor Subsidiary to become a "Guarantor" hereunder by way of execution of a Joinder Agreement; or (ii) as a group constitute more than either (i) 25% of Consolidated Legal Entity Assets of the Parent Company, the Borrower and their Subsidiaries, or (ii) 25% of Consolidated Legal Entity Gross Revenues of the Parent Company, the Borrower and their Subsidiaries, or (iii) 25% of Consolidated Legal Entity EBITDA of the Parent Company, the Borrower and their Subsidiaries (collectively, the "Threshold Requirement"), the Parent --------------------- Company and the Borrower will promptly notify the Agent thereof, and promptly cause one or more of the Non-Guarantor Subsidiaries to become a "Guarantor" hereunder by way of execution of a Joinder Agreement, such that immediately after the joinder of such Subsidiaries as Guarantors hereunder, the remaining Non-Guarantor Subsidiaries shall not, as a group, exceed the Threshold Requirement. The Borrower may at any time, at its option, cause a Non-Guarantor Subsidiary to execute a Joinder Agreement at which time such Subsidiary shall become a Guarantor hereunder. The Borrower will cause to be delivered with any such Joinder Agreement such other documentation as the Agent may reasonably request, including specifically without limitation, certified corporate resolutions, other corporate documentation and legal opinions (covering, among other things, the legality, validity, binding effect and enforceability of the Joinder Agreement) of or relating to such Additional Credit Party, all in form and substance reasonably satisfactory to the Agent. With respect to any Non- Guarantor Subsidiary that becomes a Guarantor pursuant to this Section 7.12, the Borrower shall promptly cause all of the capital stock or other ownership interest of such Non-Guarantor Subsidiary to be pledged to the Agent pursuant to the Pledge Agreement. 67 SECTION 8 NEGATIVE COVENANTS ------------------ Each Credit Party hereby covenants and agrees that commencing with the Closing Date and so long as this Credit Agreement is in effect and until the Obligations, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated: 8.1 Indebtedness. Neither the Parent Company or the Borrower will, nor ------------ will they permit any of their Subsidiaries to, contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising under this Credit Agreement and the other Credit Documents; (b) Indebtedness existing as of the Closing Date and disclosed in the financial statements referenced in Section 6.1(a) or set forth in Schedule -------- 8.1 (and renewals, refinancings and extensions thereof in a principal --- amount not in excess of the amount then outstanding on terms and conditions no less favorable to such Person than such existing Indebtedness); (c) purchase money Indebtedness (including Capital Leases) hereafter incurred to finance the purchase of fixed assets provided that (i) the -------- total of all such Indebtedness incurred after the Closing Date for the Parent Company, the Borrower and their Subsidiaries taken together shall not exceed an aggregate principal amount of $20,000,000 at any one time outstanding; (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (d) obligations in respect of Interest Rate Protection Agreements, Currency Protection Agreements and commodity purchase or option agreements entered into in order to manage existing or anticipated interest rate, exchange rate or commodity price risks and not for speculative purposes; (e) Intercompany Indebtedness; provided that all such Intercompany -------- Indebtedness owed by any Credit Party to any Subsidiary of the Borrower or the Parent Company which is not a Credit Party shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of an intercompany subordination agreement reasonably satisfactory to the Agent; (f) Indebtedness acquired in connection with mergers and acquisitions permitted under Sections 8.4(a) or 8.4(c) and not incurred in contemplation of their becoming 68 Subsidiaries (and renewals, refinancings and extensions thereof in a principal amount not in excess of the amount then outstanding on terms and conditions no less favorable to such Person than such existing Indebtedness); (g) Indebtedness arising under the Tranche A Credit Agreement and other related agreements and documents issued or delivered thereunder or pursuant thereto; (h) accrued expenses and current trade accounts payable incurred in the ordinary course of business; (i) unsecured Indebtedness under performance bonds and completion guarantees in respect of the construction of any properties in accordance with the plans or standards as agreed with the obligee of such guarantee so long as such bonds or guarantees are incurred in the ordinary course of business; (j) Indebtedness consisting of (i) reimbursement obligations on letters of credit (other than Letters of Credit under the Tranche A Credit Agreement), bankers acceptances or similar instruments, provided that the -------- aggregate amount thereof at any one time outstanding shall not exceed $5,000,000 and (ii) surety, performance or appeal bonds to the extent permitted by Section 8.2; (k) Non-Recourse Indebtedness of any Specified Subsidiary to finance the development of hotel properties so long as the aggregate amount thereof at any time outstanding does not exceed $100,000,000, it being understood and agreed, however, that (i) a Specified Subsidiary which has incurred outstanding Non-Recourse Indebtedness pursuant to this Section 8.1(k) may guaranty the Non-Recourse Indebtedness incurred pursuant to this Section 8.1(k) by other Specified Subsidiaries, and (ii) such Non-Recourse Indebtedness may be guaranteed by the Parent Company, the Borrower and their respective Subsidiaries to the extent otherwise permitted under this Section 8.1; (l) Unsecured Guaranty Obligations in relation to Indebtedness of Specified Subsidiaries, Joint Ventures and parties to management or franchise agreements with the Borrower or its Subsidiaries or such Joint Ventures engaged in each case primarily in the hotel business or other reasonably related business, but only if, and to the extent, that the sum of (i) the aggregate amount of such Guaranty Obligations under this subsection (l) incurred after the Closing Date plus (ii) the aggregate ---- amount of cash Investments permitted under Section 8.5(g) made after the Closing Date, shall not at any time exceed $150,000,000 at any time, provided that the limitation set forth above shall be (A) increased (or -------- decreased if Consolidated Net Income is negative) on the first day of each fiscal year of the Parent Company (commencing with the first day of fiscal year 1996) 69 by 100% of the Consolidated Net Income for the fiscal year last ended and (B) decreased from time to time by the aggregate amount of cash Dividends paid by the Parent Company on and after the Closing Date and prior to the date of determination (such limitation, as increased and decreased from time to time, herein referred to as the "Third Party Investment Basket ----------------------------- Amount"); ------ (m) Subordinated Debt with a final maturity beyond the Termination Date under the Tranche A Credit Agreement which is subordinated in a manner, and with subordination language, reasonably acceptable to the Required Lenders; (n) commercial paper borrowings of the Borrower supported by the Hotel Facility in an amount not to exceed $100,000,000 in the aggregate at any time outstanding; (o) unsecured Guaranty Obligations of the Parent Company, the Borrower or any of their respective Subsidiaries in relation to Indebtedness (other than Non-Recourse Indebtedness) of Subsidiaries of the Parent Company or the Borrower otherwise permitted under this Section 8.1; (p) Indebtedness permitted under Section 3.11(c) of this Agreement or the Tranche A Credit Agreement; and (q) Indebtedness not otherwise permitted under this Section 8.1 in an aggregate principal amount not to exceed $25,000,000 at any one time outstanding. 8.2 Liens. Neither the Parent Company or the Borrower will, nor will they ----- permit any of their Subsidiaries to, contract, create, incur, assume or permit to exist any Lien with respect to any of their Property, whether now owned or after acquired, except for Permitted Liens. 8.3 Nature of Business. Neither the Parent Company, the Borrower nor any ------------------ other Credit Party will substantively alter the character or conduct of the business conducted by them as of the Closing Date other than to enter into other reasonably related businesses. 8.4 Consolidation, Merger, Sale or Purchase of Assets. Except in relation ------------------------------------------------- to the Reorganization and the Distribution, neither the Parent Company or the Borrower will, nor will they permit any of their Subsidiaries to: (a) dissolve, liquidate or wind up its affairs, or enter into any transaction of merger or consolidation; provided, however, that, so long as -------- ------- no Default or Event of Default then exists or would be directly or indirectly caused as a result thereof, (i) any Credit Party may merge or consolidate with another Credit Party; 70 (ii) any Subsidiary of the Borrower or the Parent Company which is not a Credit Party may merge or consolidate with another such Subsidiary; (iii) any Subsidiary of the Parent Company or the Borrower may merge or consolidate with any other Person provided that either (A) such Subsidiary is the surviving corporation, (B) such Subsidiary is not the surviving corporation but the surviving corporation is a Subsidiary of the Borrower or the Parent Company, or (C) such Subsidiary is not the surviving corporation and the surviving corporation is not a Subsidiary of the Borrower or the Parent Company, but no more than 25% of the gross consideration received in connection therewith consists of Non- Investment Grade debt or equity interests, and subject to the additional conditions, (I) in the case of any individual transaction (or series of related transactions) described in subsections (A) or (B) above, where the acquisition price for such transaction (whether a single transaction or a series of related transactions) exceeds $75,000,000, then the Borrower must first demonstrate compliance with the financial covenants under Section 7.11 on a Pro Forma Basis after giving effect to such transaction and (II) after giving effect to such transaction, the Threshold Requirement set forth in Section 7.12 shall not be exceeded; and (iv) any Subsidiary of the Parent Company or the Borrower may dissolve, liquidate or wind up its affairs at any time; (b) sell, transfer or otherwise dispose of any of its Property (including without limitation pursuant to any sale and leaseback transaction) except that the following shall be permitted: (i) the sale of inventory for fair value in the ordinary course of business, (ii) the sale or disposition of machinery and equipment no longer useful in the conduct of such Person's business, (iii) transfers of Property to Credit Parties, (iv) non-cash Investments permitted under Section 8.5(d) and (e), and (v) sales, transfers and dispositions for fair value in the reasonable determination of the Borrower, so long as (A) no Default or Event of Default then exists or would exist after giving effect thereto and (B) no more than 25% of the gross consideration received in connection therewith consists of Non-Investment Grade debt or equity interests. Sales, 71 leases, transfers and other dispositions constituting Material Asset Sales will be subject to a mandatory reduction in the Commitments hereunder as provided in Section 3.3(b). (c) purchase or otherwise acquire (in a single transaction or a series of related transactions) all or substantially all of the Property of any other Person except where (i) no Default or Event of Default then exists or would exist after giving effect thereto, (ii) the purchase or acquisition does not require the solicitation of the consent of the shareholders or other equity owners of the Person which is the subject thereof against the recommendation of management, the board of directors or other managing entity of such Person, (iii) the Person, division, operations or Property which is the subject of the acquisition is in a reasonably related line of business to that of the Parent Company and the Borrower, and (iv) the acquisition price for such transaction (whether a single transaction or a series of related transactions) shall exceed $75,000,000, the Borrower must first demonstrate compliance with the financial covenants under Section 7.11 on a Pro Forma Basis after giving effect to such acquisition. 8.5 Investments. The Parent Company and the Borrower will not, and will ----------- not permit any of their Subsidiaries to, directly or indirectly, make Investments other than (a) existing Investments set forth on Schedule 8.5, ------------ (b) Investments in the ordinary course of the hotel business (or other reasonably related businesses) not otherwise described in Section 8.5 (specifically excluding for purposes hereof loans and advances to Subsidiaries which are separately dealt with in this Section 8.5), (c) Investments in Credit Parties, (d) Investments in Wholly-Owned Subsidiaries of the Borrower or the Parent Company, (e) non-cash Investments in Subsidiaries which are not Wholly-Owned Subsidiaries of the Borrower or the Parent Company or Credit Parties and in Joint Ventures made after the Closing Date, provided that no such non-cash -------- Investment shall individually (i) involve the transfer of assets (A) with a book value in excess of 10% of the Consolidated Legal Entity Assets of the Parent Company and its Subsidiaries at such time, (B) generating more than 10% of the Consolidated Legal Entity Gross Revenues of the Parent Company and its Subsidiaries or (C) generating more than 10% of Consolidated Legal Entity EBITDA for the Parent Company and its Subsidiaries or (ii) cause the Subsidiaries and Joint Ventures in which non-cash Investments have been made 72 pursuant to this clause (e) (including the subject non-cash Investment) plus all Non-Guarantor Subsidiaries, as a group, to exceed the Threshold Requirement, (f) Investments received in connection with a merger or disposition permitted by Sections 8.4(a) and 8.4(b), and (g) cash Investments in Subsidiaries of the Parent Company or the Borrower which are not Wholly-Owned Subsidiaries of the Parent Company or the Borrower, Joint Ventures, parties to management or franchise agreements with the Borrower or its Subsidiaries or such Joint Ventures engaged primarily in the hotel business or other reasonably related business, but only if, and to the extent, that the sum of (i) the aggregate amount of such Investments under this subsection (g) made after the Closing Date plus ---- (ii) the aggregate amount of Guaranty Obligations permitted under Section 8.1(l) incurred after the Closing Date, shall not at any time exceed the Third Party Investment Basket Amount. 8.6 Prepayments of Indebtedness. Neither the Parent Company or the --------------------------- Borrower will, nor will they permit any of their Subsidiaries to, (a) amend or modify, or permit the amendment or modification of, any of the subordination provisions of any Subordinated Debt or any other material term relating to any Subordinated Debt the amendment or modification of which would be materially adverse to the interests of the Lenders hereunder as the holders of indebtedness senior thereto, or (b) make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due) or exchange any Subordinated Debt permitted pursuant to Section 8.1. As used herein, "Subordinated Debt" means any Indebtedness of the Parent ----------------- Company, the Borrower or any of their Subsidiaries for borrowed money which by its terms is subordinated in right of payment to the indebtedness hereunder and other amounts owing hereunder or in connection herewith. 8.7 Transactions with Affiliates. Neither the Parent Company or the ---------------------------- Borrower will, nor will they permit any of their Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any officer, director, shareholder or Affiliate of the Parent Company, the Borrower or any of their Subsidiaries other than on terms and conditions substantially as favorable as would be obtainable in a comparable arm's-length transaction with a Person other than an officer, director, shareholder or Affiliate, except that the restriction contained in this Section 8.7 shall 73 not apply to (i) Investments permitted under Section 8.5, (ii) transactions and transfers among and between the Parent Company, the Borrower and their Wholly- Owned Subsidiaries, (iii) the payment of reasonable compensation and benefits and reimbursement of reasonable expenses of officers and directors, (iv) the Reorganization and the Distribution and (v) Dividends permitted hereunder. 8.8 Fiscal Year. Neither the Parent Company nor the Borrower will, nor ----------- will they permit any of their Subsidiaries to, change its fiscal year. 8.9 No Dividend Restrictions. No Credit Party shall agree to or permit to ------------------------ exist, any restrictions or limitations on the declaration or payment of Dividends. SECTION 9 EVENTS OF DEFAULT ----------------- 9.1 Events of Default. An Event of Default shall exist upon the ----------------- occurrence of any of the following specified events (each an "Event of -------- Default"): - ------- (a) Payment. Any Credit Party shall ------- (i) default in the payment when due of any principal of any of the Loans, or the payment of any guaranty obligations in respect thereof; (ii) default, and such default shall continue for five (5) or more days, in the payment when due of any interest on the Loans or the payment of any guaranty obligations in respect thereof; or (iii) default, and such default shall continue for five (5) or more days after notice from the Agent, in the payment when due of any amounts hereunder or under any of the other Credit Documents other than as provided in subsections (i) and (ii) above, or the payment of any guaranty obligations in respect thereof; or (b) Representations. Any representation, warranty or statement --------------- made or deemed to be made by any Credit Party herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or 74 (c) Covenants. Any Credit Party shall --------- (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.11 or 8.1 through 8.9, inclusive; or (ii) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.1(g) or 7.10 and such default shall continue unremedied for a period of at least 5 days; or (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained in this Credit Agreement or any of the other Credit Documents and such default shall continue unremedied for a period of at least 30 days after notice thereof by the Agent; or (d) Other Credit Documents. Any Credit Document shall fail to ---------------------- be in full force and effect or to give the Agent and/or the Lenders the material liens, rights, powers and privileges purported to be created thereby; or (e) Guaranties. The guaranty given by the Credit Parties ---------- hereunder or by any Additional Credit Party hereafter or any material provision thereof shall cease to be in full force and effect, or any guarantor thereunder or any Person acting by or on behalf of such guarantor shall deny or disaffirm such guarantor's obligations under such guaranty, or any guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty; or (f) Bankruptcy, etc. The Parent Company, the Borrower or any --------------- other Credit Party shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case is commenced against the Parent Company, the Borrower or any other Credit Party under the Bankruptcy Code and the petition is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of all or substantially all of the property of the Parent Company, the Borrower or other Credit Party; or the Parent Company, the Borrower or any other Credit Party commences any other proceeding under any reorgani- zation, arrangement, adjustment of the debt, relief of creditors, dissolution, insolvency or similar law of any jurisdiction whether now or hereafter in effect relating to the Parent Company, the Borrower or any 75 other Credit Party; or there is commenced against the Parent Company, the Borrower or other Credit Party any such proceeding which remains undismissed for a period of 60 days; or the Parent Company, the Borrower or any other Credit Party is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Parent Company, the Borrower or any other Credit Party suffers appointment of any custodian or the like for it or for any substantial part of its property to continue unchanged or unstayed for a period of 90 days; or the Parent Company, the Borrower or any other Credit Party makes a general assignment for the benefit of creditors; or any corporate action is taken by the Parent Company, the Borrower or any other Credit Party for the purpose of effecting any of the foregoing; or (g) Defaults under Other Agreements. With respect to any ------------------------------- Indebtedness (other than Non-Recourse Indebtedness and Indebtedness outstanding under this Credit Agreement) for which there is recourse against the Parent Company, the Borrower and their Subsidiaries in excess of $10,000,000 in the aggregate, (i) the Parent Company, the Borrower or any of their Subsidiaries shall (A) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (B) default in the observance or performance of any covenant relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause, any such Indebtedness to become due prior to its stated maturity; or (ii) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (h) Judgments. One or more judgments or decrees shall be --------- entered against the Parent Company, the Borrower or any of their Subsidiaries involving a liability of $5,000,000 or more in the aggregate (to the extent not paid or covered by insurance) and any such judgments or decrees shall not have been vacated, discharged, satisfied or stayed or bonded pending appeal within 30 days from the entry thereof; or (i) ERISA. The Parent Company, the Borrower or any of their ----- Subsidiaries shall engage in any "prohibited transaction" (as defined 76 in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), which has not been waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan pursuant to Section 4068 or Section 302(f) of ERISA, respectively, shall arise on the assets of the Parent Company, the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence by the PBGC to have a trustee appointed, or a trustee shall be appointed by the PBGC, to administer or terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA (other than a standard termination pursuant to Section 4041(b) of ERISA), (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA in a distress termination under Section 4041(c), (v) the Parent Company, the Borrower or any Commonly Controlled Entity shall, or is reasonably likely to, incur any liability in connection with a withdrawal by the Parent Company, the Borrower or any Commonly Controlled Entity from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (vi) the occurrence or expected occurrence of any event or condition which results or is reasonably likely to result in the Parent Company's, the Borrower's or any Commonly Controlled Entity's becoming responsible for any liability in respect of a Former Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, would be reasonably expected to result in liability which could have a Material Adverse Effect; provided, however, that the fact that a Plan is underfunded -------- ------- shall not by itself constitute an Event of Default unless and until another event or condition described in clause (i) through (vi) affecting such underfunded Plan occurs and has a Material Adverse Effect; or (j) Change of Control. Either (i) a "person" or a "group" (within ----------------- the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more than 25% of the then outstanding voting stock of the Parent Company or (ii) a majority of the Board of Directors of the Parent Company shall consist of individuals who are not Continuing Directors; "Continuing ---------- Director" means, as of any date of determination, (i) an individual who on -------- the Closing Date or the 77 date two years prior to the date of determination was a member of the Parent Company's Board of Directors and (ii) any new director whose nomination for election by the Parent Company's shareholders was approved by a vote of a majority of the directors then still in office who either were directors on the Closing Date or the date two years prior to such determination date or whose nomination for election was previously so approved. 9.2 Acceleration; Remedies. Upon the occurrence of an Event of Default, ---------------------- and at any time thereafter unless and until such Event of Default has been waived by the Required Lenders or cured to the satisfaction of the Required Lenders (pursuant to the voting procedures in Section 11.6), the Agent shall, upon the request and direction of the Required Lenders, by written notice to the Borrower take any of the following actions without prejudice to the rights of the Agent or any Lender to enforce its claims against the Credit Parties, except as otherwise specifically provided for herein: (i) Termination of Commitments. Declare the Commitments -------------------------- terminated whereupon the Commitments shall be immediately terminated. (ii) Acceleration of Loans. Declare the unpaid principal of and --------------------- any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Borrower to any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. (iii) Enforcement of Rights. Enforce any and all rights and --------------------- interests created and existing under the Credit Documents and all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur, then the Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid fees and other indebtedness or obligations owing to the Lenders hereunder shall immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders. SECTION 10 AGENCY PROVISIONS ----------------- 10.1 Appointment. Each Lender hereby designates and appoints NationsBank, ----------- N.A. (Carolinas) as administrative agent (in such capacity hereunder, the "Agent") of such Lender to act as specified herein and the other Credit ----- Documents, and each such Lender hereby authorizes the Agent, as the agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein 78 and in the other Credit Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Agent. The provisions of this Section (other than Section 10.9) are solely for the benefit of the Agent and the Lenders, and the Borrower and the other Credit Parties shall not have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any other Credit Party. 10.2 Delegation of Duties. The Agent may execute any of its duties -------------------- hereunder or under the other Credit Documents by or through agents or attorneys- in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 10.3 Exculpatory Provisions. Neither the Agent nor any of its officers, ---------------------- directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any of the Credit Parties contained herein or in any of the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower or any Credit Party in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Credit Parties to the Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence 79 or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Credit Parties. 10.4 Reliance on Communications. The Agent shall be entitled to rely, and -------------------------- shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of the other Credit Parties, independent accountants and other experts selected by the Agent with reasonable care). The Agent may deem and treat the Lenders as the owner of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent in accordance with Section 11.3(b) hereof. The Agent (solely in its capacity as the Agent) shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 10.5 Notice of Default. The Agent shall not be deemed to have knowledge ----------------- or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or a Credit Party referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders. 10.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly --------------------------------------- acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent or any affiliate thereof hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it 80 has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Credit Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 10.7 Indemnification. The Lenders agree to indemnify the Agent in its --------------- capacity as such (to the extent not reimbursed by the Borrower or another Credit Party and without limiting the obligation of the Borrower or another Credit Party to do so), ratably according to their respective Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent in its capacities as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be -------- liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section shall survive the payment of the Obligations and all other amounts payable hereunder and under the other Credit Documents. 10.8 Agent in its Individual Capacity. The Agent and its affiliates may -------------------------------- make loans to, accept deposits from and generally engage in any kind of business with the Borrower or any other Credit Party as though the Agent were not Agent hereunder. With respect to the Loans made and all Obligations owing to it, the 81 Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though they were not Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 10.9 Successor Agent. (a) The Agent may resign from the performance of --------------- all its functions and duties hereunder at any time by giving fifteen (15) Business Day's prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the appointment of a successor Agent pursuant to clause (b) or (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Borrower shall appoint a successor Agent hereunder who shall be commercial bank or trust company reasonably acceptable to the Required Lenders (it being understood and agreed that any Lender is deemed to be acceptable to the Required Lenders), provided that if a Default or an Event of Default exists at the time of such resignation, the Required Lenders shall appoint such successor Agent. (c) If a successor Agent shall not have been so appointed within such fifteen (15) Business Day period, the Agent, with the consent of the Borrower, shall then appoint a successor Agent who shall serve as the Agent hereunder until such time, if any, as the Borrower or Required Lenders, as the case may be, appoint a successor Agent as provided above. (d) If no successor Agent has been appointed pursuant to clause (b) or (c) above by the thirtieth (30th) Business Day after the date such notice of resignation was given by the Agent, the Agent's resignation shall become effective and the Lenders shall thereafter perform all the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor Agent. (e) Upon the acceptance of any appointment as Agent hereunder by a successor, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent, and the resigning Agent shall be discharged from its duties and obligations as Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Credit Agreement. SECTION 11 MISCELLANEOUS ------------- 11.1 Notices. Except as otherwise expressly provided herein, all notices ------- and other communications shall have been duly 82 given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower and the Agent, set forth below, and in the case of the Lenders, set forth on Schedule 11.1, or at such other address as such party may specify by ------------- written notice to the other parties hereto: if to the Borrower or Guarantors: Prior to the Effective Date of Assignment ----------------------------------------- c/o Embassy Suites, Inc. 1023 Cherry Road Memphis, Tennessee 38117 Attn: William S. McCalmont Telephone: (901) 762-8861 Telecopy: (901) 762-8695 After the Effective Date of Assignment -------------------------------------- c/o Promus Hotels, Inc. 850 Ridgelake Boulevard Memphis, Tennessee 38120 Attn: Carol G. Champion Telephone: (901) 762-4052 Telecopy: (901) 680-7220 if to the Agent: NationsBank, N.A. (Carolinas) Independence Center, 15th Floor NC1-001-15-04 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Agency Services Telephone: (704) 386-9368 Telecopy: (704) 386-9923 83 with a copies to: NationsBank, N.A. (Carolinas) Corporate Bank 1 NationsBank Plaza Nashville, Tennessee 37329-1697 Attn: J.E. Ball Telephone: (615)749-3469 Telecopy: (615)749-4640 Christopher C. Kupec, Esq. Moore & Van Allen, PLLC NationsBank Corporate Center 47th Floor 100 North Tryon Street Charlotte, North Carolina 28202-4003 Telephone: (704) 331-1046 Telecopy: (704) 331-1159 11.2 Right of Set-Off. In addition to any rights now or hereafter granted ---------------- under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set- off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or affiliates of such Lender which are at least 50% owned by such Lender or its parent company wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of the Borrower to such Lender hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. The Borrower hereby agrees that any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 11.3(c) or Section 3.12 may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder. 11.3 Benefit of Agreement. -------------------- (a) Generally. This Credit Agreement shall be binding upon and inure --------- to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that, except for the assignment by -------- Embassy Suites to Hotel Inc. contemplated by subsection (b) below, the Borrower may not assign or transfer any of its interests without prior written consent of the Lenders; provided further that the rights of each -------- ------- Lender to transfer, assign 84 or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 11.3, provided, however, that nothing -------- ------- herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or participations in such Lender's Loans and/or Commitments hereunder to its parent company and/or to any affiliate of such Lender which is at least fifty percent (50%) owned by such Lender or its parent company. To the extent required in connection with a pledge of Loans by any Lender to a Federal Reserve Bank, the Borrower agrees that, upon request of any such Lender, it will promptly provide such Lender a promissory note evidencing the repayment obligations of the Borrower with respect to the principal of and interest on the Loans of such Lender arising under Section 2.1 and/or 2.4, as applicable, such promissory note to be in a form reasonably satisfactory to the Borrower and the applicable Lender. (b) Assignment to the Hotel Inc.. At such time as the Agent shall ---------------------------- have determined that each of the conditions set forth in Section 5.2 shall have been satisfied, then, at the request of Embassy Suites and Hotel Inc., the Agent, on behalf of the Lenders, shall execute and deliver the Hotel Inc. Assignment and Assumption Agreement. Each Lender hereby (i) irrevocably authorizes the Agent to execute and deliver the Hotel Inc. Assignment and Assumption Agreement on behalf of such Lender on the terms set forth in the immediately preceding sentence and (ii) acknowledges and agrees that such execution and delivery by the Agent of the Hotel Inc. Assignment and Assumption Agreement shall be binding upon and enforceable against such Lender. Upon execution and delivery by the Agent of the Hotel Inc. Assignment and Assumption Agreement (i) Hotel Inc. shall succeed to all of the rights and obligations of Embassy Suites as "Borrower" under this Credit Agreement, and all references to the "Borrower" in the Credit Documents henceforth shall be deemed to refer to Hotel Inc. and (ii) Embassy Suites and Promus Co. shall be released and discharged from any obligation or liability arising under or relating to this Credit Agreement, in each case on the terms more fully set forth in the Hotel Inc. Assignment and Assumption Agreement. The date as of which the Agent executes and delivers the Hotel Inc. Assignment and Assumption Agreement shall be referred to herein as the "Effective Date of Assignment." ---------------------------- (c) Assignments by Lenders. Each Lender may assign all or a portion ---------------------- of its rights and obligations hereunder and under the Tranche A Credit Agreement pursuant to an assignment agreement substantially in the form of Schedule 11.3(c) to one or more Eligible Assignees, provided that any such ---------------- -------- assignment shall be in a minimum aggregate amount of $10,000,000 of the Commitments and in integral multiples of 85 $1,000,000 above such amount, and that each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Credit Agreement and under the Tranche A Credit Agreement; provided, however, that the Agent and its affiliates -------- ------- which are at least 50% owned by the Agent or its parent company, as a group, shall continue to hold Commitments hereunder and under the Tranche A Credit Agreement in a minimum aggregate amount of $20,000,000 at all times. Any assignment hereunder shall be effective upon delivery to the Agent of written notice of the assignment together with a transfer fee of $5,000 payable to the Agent for its own account; provided that no such transfer -------- fee shall be payable in connection with an assignment by any Lender to its affiliates which are at least 50% owned by such Lender or its parent company. The assigning Lender will give prompt notice to the Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. By executing and delivering an assignment agreement in accordance with this Section 11.3(c), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of any Credit Party or the performance or observance by any Credit Party of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem 86 appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. (d) Participations. Each Lender may sell, transfer, grant or assign -------------- participations in all or any part of such Lender's interests and obligations hereunder to one or more Eligible Participants; provided that -------- (i) such selling Lender shall remain a "Lender" for all purposes under this Credit Agreement and the other Credit Documents (such selling Lender's obligations under this Credit Agreement remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or any of the other Credit Documents except with respect to any such amendment or waiver which would, under the terms of Section 11.8, require the consent of all of the Lenders, (iii) sub-participations by the participant (except to an affiliate, parent company or affiliate of a parent company of the participant) shall be prohibited and (iv) any such participations shall be in a minimum aggregate amount of $5,000,000 of the Commitments and in integral multiples of $1,000,000 in excess thereof. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or under any of the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.5 and 3.8 on the same basis as if it were a Lender (limited to the extent that the selling Lender would be able to receive additional amounts under Sections 3.5 and 3.8); provided, further, in the event such participant -------- ------- exercises any rights under Sections 3.5 or 3.8, the Borrower shall be permitted to exercise its rights pursuant to Section 3.15 with respect to the selling Lender. (e) Disclosure of Confidential Information. Any Lender may, in -------------------------------------- connection with any assignment pursuant to paragraph (c) above or a participation pursuant to paragraph (d) above, disclose to the assignee or the proposed assignee or the participant or the proposed participant any information relating to Embassy Suites, Hotel Corp., Hotel 87 Inc., any Subsidiary of Embassy Suites or the Hotel Corp., the Reorganization or the Distribution furnished to such Lender by or on behalf of Embassy Suites, the Hotel Corp., Hotel Inc. or any Subsidiary of Embassy Suites or the Hotel Corp. in connection with this Credit Agreement, provided that, prior to any such disclosure each such assignee or proposed -------- assignee or participant or proposed participant shall execute an agreement containing substantially the terms of all then existing confidentiality agreements entered into by the assigning or selling Lender with respect to the Borrower and its Subsidiaries, in each case whereby such assignee or proposed assignee or participant or proposed participant shall agree to preserve the confidentiality of any non-public, confidential or proprietary information relating to Embassy Suites, the Hotel Corp., Hotel Inc., any Subsidiary of Embassy Suites or the Hotel Corp., the Reorganization or the Distribution. 11.4 No Waiver; Remedies Cumulative. No failure or delay on the part of ------------------------------ the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any Guarantor and the Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower or any Guarantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or demand. 11.5 Payment of Expenses, etc. The Borrower agrees to: (i) pay all ------------------------ reasonable out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery and administration (but as to administration, only administration of the credit as among the Agent, the Borrower, the other Credit Parties and the Lenders and not as to any internal administration within the Agent) of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Moore & Van Allen, special counsel to the Agent) and any amendment, waiver or consent relating hereto and thereto requested or required by the Borrower including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement and of the Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the 88 reasonable fees and disbursements of counsel for the Agent and each of the Lenders) provided, that for the purposes of this Credit Agreement, "reasonable -------- attorneys' fees" shall be limited by the actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the Commitments; (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary and mortgage recording taxes and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified). 11.6 Amendments, Waivers and Consents. (a) Neither this Credit Agreement -------------------------------- nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing signed by the Required Lenders, provided that no such amendment, change, waiver, discharge or -------- termination shall, without the consent of each Lender adversely affected, (i) extend the Termination Date or reduce the rate or extend the time of payment of interest or principal (other than as a result of waiving the applicability of any post-default increase in interest rates) on any Loan or portion thereof or fees hereunder or reduce the principal amount thereof, or increase the Commitments of the Lenders over the amount thereof in effect (it being understood and agreed that a waiver of any condition for an Extension of Credit, Default or Event of Default or of a mandatory reduction in the total commitments shall not constitute a change in the terms of any Commitment of any Lender), (ii) release any Guarantor from its guaranty obligations hereunder except in accordance with the provisions hereof, (iii) amend, modify or waive any provision of this Section or of subsection (ii) of Section 3.3(d) (provided that -------- any Lender to be terminated pursuant to Section 3.3(d) shall not be required to consent to any such amendment, modification or waiver of subsection (ii) of Section 3.3(d) necessary to effect such termination), (iv) reduce any percentage specified in, or 89 otherwise modify, the definition of Required Lenders, (v) release all or substantially all of the collateral subject to the Pledge Agreement or (vi) consent to the assignment or transfer by the Borrower (or Guarantor) of any of its rights and obligations under (or in respect of) this Credit Agreement except as permitted hereunder. No provision of Section 10 may be amended without the consent of the Agent. (b) If, in connection with any proposed change, waiver, discharge or termination of any of the provisions of this Agreement as contemplated by subclauses (i) through (v), inclusive, of clause (a) above, the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, the Borrower shall have the right (so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below) to either (A) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 3.15 so long as at the time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender's Commitment and repay all outstanding Loans of such Lender in accordance with Sections 3.3(d) and 3.3(g), provided that, unless the Commitments terminated and -------- Loans repaid pursuant to the preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to the preceding clause (B), the Required Lenders (determined before giving effect to the proposed action) shall specifically consent thereto, provided further, that ---------------- in any event the Borrower shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the withholding of any required consent by such Lender to any increase in the Commitment of such Lender. 11.7 Counterparts. This Credit Agreement may be executed in any number of ------------ counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 11.8 Headings. The headings of the sections and subsections hereof are -------- provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 Survival of Indemnification. All indemnities set forth herein, --------------------------- including, without limitation, in Sections 3.5, 3.8, 3.9, 3.10, 10.7 and 11.5 shall survive the execution and delivery of this Credit Agreement, and the making of the Loans, the repayment of the Obligations and other obligations and the termination of the Commitment hereunder. 90 11.10 Governing Law; Submission to Jurisdiction; Venue. ------------------------------------------------ (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of North Carolina in Mecklenburg County, or of the United States for the Western District of North Carolina, and, by execution and delivery of this Credit Agreement, each of the Credit Parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Each of the Credit Parties further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 11.1, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Borrower in any other jurisdiction. (b) Each of the Credit Parties hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) EACH OF THE AGENTS, EACH OF THE LENDERS AND EACH OF THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.11 Severability. If any provision of any of the Credit Documents is ------------ determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 Entirety. This Credit Agreement together with the other Credit -------- Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 91 11.13 Survival of Representations and Warranties. All representations and ------------------------------------------ warranties made by the Borrower herein shall survive delivery of the Notes and the making of the Loans hereunder. 11.14 Knowledge Standard. As used herein, the phrase "to the knowledge of ------------------ the Borrower" or any similar phrase shall mean the knowledge of any of the following persons: Raymond E. Schultz, President and Chief Executive Officer; David C. Sullivan, Executive Vice President and Chief Operating Officer; Donald H. Dempsey, Senior Vice President and Chief Financial Officer; Ralph B. Lake, Senior Vice President, General Counsel, and Secretary; Thomas L. Keltner, Senior Vice President, Development; Carol G. Champion, Vice President, Treasurer; and Jeffery M. Jarvis, Vice President and Controller; or any other person succeeding to the responsibilities of any such individual. 11.15 Confidentiality. Each Lender agrees that it will use its best --------------- efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors or counsel) any information with respect to the Parent Company, the Borrower or any of their respective Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated by the Parent Company, the Borrower or any of their respective Subsidiaries as confidential, provided that any Lender may disclose -------- any such information (a) as has become generally available to the public, (b) as may be required in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender (including bank examiners) or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organi- zations (whether in the United States or elsewhere) or their successors, (c) as may be required in respect to any summons or subpoena or in connection with any investigation by a Governmental Authority or litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, and (e) to any prospective or actual transferee or participant of any rights and interests hereunder provided such prospective transferee or participant executes an agreement containing provisions substantially identical to those contained in this Section. 11.16 Agent's and Lender's Covenant. The Agent and each Lender hereby ----------------------------- covenants that neither any Extension of Credit nor any part of any Extension of Credit constitutes assets of an "employment benefit plan" within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Code. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 92 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Tranche B Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: - -------- EMBASSY SUITES, INC., a Delaware corporation By____________________________ Title_________________________ GUARANTORS: THE PROMUS COMPANIES INCORPORATED, - ---------- a Delaware corporation By____________________________ Title_________________________ PROMUS HOTEL CORPORATION, a Delaware corporation By____________________________ Title_________________________ PROMUS HOTELS, INC., a Delaware corporation By____________________________ Title_________________________ HAMPTON INNS, INC., a Delaware corporation By____________________________ Title_________________________ EMBASSY EQUITY DEVELOPMENT CORPORATION, a Delaware corporation By____________________________ Title_________________________ S-1 Signature Pages to Embassy Suites, Inc/ Promus Hotels, Inc. Tranche B Credit Agreement LENDERS: - ------- NATIONSBANK, N.A. (CAROLINAS), individually in its capacity as a Lender and in its capacity as Agent By_____________________________ Title__________________________ THE BANK OF NEW YORK By_____________________________ Title__________________________ THE BANK OF NOVA SCOTIA By_____________________________ Title__________________________ CIBC INC. By_____________________________ Title__________________________ THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By_____________________________ Title__________________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA By_____________________________ Title__________________________ S-2 Signature Pages to Embassy Suites, Inc/ Promus Hotels, Inc. Tranche B Credit Agreement LTCB TRUST COMPANY By_____________________________ Title__________________________ THE NIPPON CREDIT BANK, LTD. - LOS ANGELES AGENCY By_____________________________ Title__________________________ SOCIETE GENERALE, SOUTHWEST AGENCY By_____________________________ Title__________________________ CREDIT LYONNAIS By_____________________________ Title__________________________ FIRST AMERICAN NATIONAL BANK By_____________________________ Title__________________________ FIRST NATIONAL BANK OF COMMERCE By_____________________________ Title__________________________ FIRST TENNESSEE BANK NATIONAL ASSOCIATION By_____________________________ Title__________________________ THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY By_____________________________ Title__________________________ THIRD NATIONAL BANK By_____________________________ Title__________________________ U.S. NATIONAL BANK OF OREGON By_____________________________ Title__________________________ S-3 Schedule 2.1(a) --------------- Schedule of Lenders and ----------------------- Commitments ----------- Revolving Revolving Committed Commitment Lender Amount Percentage ------ --------- ---------- NationsBank, N.A. $5,000,000.00 10.00000000% (Carolinas) The Bank of New York $4,285,714.29 8.57142857% The Bank of Nova Scotia $4,285,714.29 8.57142857% CIBC Inc. $4,285,714.29 8.57142857% The Sumitomo Bank, $4,285,714.29 8.57142857% Limited, New York Branch First Union National $3,214,285.71 6.42857143% Bank of North Carolina LTCB Trust Company $3,214,285.71 6.42857143% The Nippon Credit Bank, $3,214,285.71 6.42857143% Ltd. - Los Angeles Agency Societe Generale, $3,214,285.71 6.42857143% Southwest Agency Credit Lyonnais $2,142,857.14 4.28571429% First American National $2,142,857.14 4.28571429% Bank First National Bank of $2,142,857.14 4.28571429% Commerce First Tennessee Bank $2,142,857.14 4.28571429% National Association The Industrial Bank of $2,142,857.14 4.28571429% Japan, Limited, Atlanta Agency Third National Bank $2,142,857.14 4.28571429% U.S. National Bank of $2,142,857.14 4.28571429% Oregon ------------- ----------- $50,000,000.00 100.00000000% 1 Schedule 2.1(b)(i) ------------------ TRANCHE B CREDIT AGREEMENT FORM OF NOTICE OF BORROWING NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, EMBASSY SUITES, INC./PROMUS HOTELS, INC. (the "Borrower"), -------- refers to the Tranche B Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among ---------------- Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice that it requests a Committed Revolving Loan borrowing pursuant to the provisions of Section 2.1(b) of the Credit Agreement and in connection herewith sets forth below the terms on which such borrowing is requested to be made: (A) Date of Borrowing (which is a Business Day) _______________________ (B) Principal Amount of Borrowing1 _______________________ (C) Interest rate basis2 _______________________ (D) Interest Period and the last day thereof3 _______________________ In accordance with the requirements of Section 5.3, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (ii) of such Section, and confirms that the matters referenced in subsections (b), (c), (d) and (e) of such Section, are true and correct. Very truly yours, EMBASSY SUITES, INC./PROMUS HOTELS, INC. By: ------------------------------------- Title: ---------------------------------- -------------------- 1 In the case of Committed Revolving Loans, minimum of $5,000,000 and $1,000,000 increments in excess thereof (or the remaining available Revolving Committed Amount, if less). 2 In the case of Committed Revolving Loans, Eurodollar and Base Rate Loans available. 3 Interest Periods of one, two, three and six months' duration for Eurodollar Loans. Schedule 2.1(e) --------------- Form of Tranche B Committed Revolving Note $_________________ June __, 1995 FOR VALUE RECEIVED, EMBASSY SUITES, INC./PROMUS HOTELS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of -------- __________________________, its successors and assigns (the "Lender"), at the ------ office of NationsBank, N.A. (Carolinas), as Agent (the "Agent"), at 101 N. Tryon ----- Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Tranche B Credit Agreement dated as of June 7, 1995 among Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and the Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all ---------------- capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date or, if applicable, the Term Loan Maturity Date, in Dollars and in immediately available funds, the principal amount of ________________________DOLLARS ($____________) or, if less than such principal amount, the aggregate unpaid principal amount of all Committed Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.1(d) of the Credit Agreement. Overdue principal and, to the extent permitted by law, overdue interest owing hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition the principal and interest, all costs of collection, including reasonable attorneys' fees; provided, that for purposes of this note, -------- "reasonable attorneys' fees" shall be limited to actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the principal amount hereof. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on Schedule A attached hereto and incorporated ---------- herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such -------- ------- information (or an error in such endorsement) on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. EMBASSY SUITES, INC./ PROMUS HOTELS, INC. By____________________________ Title_________________________ 1 SCHEDULE A TO THE TRANCHE B COMMITTED REVOLVING NOTE OF EMBASSY SUITES, INC./PROMUS HOTELS, INC. DATED JUNE __, 1995 Unpaid Name of Type Principal Person of Interest Payments Balance Making Date Loan Period Principal Interest of Note Notation ---- ---- -------- --------- -------- --------- -------- 2 Schedule 2.4(b)-1 ----------------- Form of Tranche B Competitive Bid Request NationsBank, N.A. (Carolinas) as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-005-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, PROMUS HOTELS, INC. (the "Borrower"), refers to the -------- Tranche B Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among ---------------- Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives you notice pursuant to Section 2.4(b) of the Credit Agreement it requests solicitation of Competitive Bids under the Credit Agreement, and in connection herewith sets forth below the terms on which such Competitive Loan borrowing is requested to be made: (A) Date of Competitive Loan Borrowing (which is a Business Day) __________________ (B) Principal Amount of Competitive Loan Borrowing4 __________________ (C) Interest Period and the last day thereof5 __________________ In accordance with the requirements of Section 5.3, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (ii) of such Section, and confirms that the matters referenced in subsections (b), (c), (d) and (e) of such Section, are true and correct. Very truly yours, PROMUS HOTELS, INC. By:____________________________ Title:_________________________ -------------------- 4 A minimum of $5,000,000 and $1,000,000 increments in excess thereof. 5 Subject to the provisions and definitions of the Credit Agreement, but generally not less than 7 days nor more than 180 days. 3 Schedule 2.4(b)-2 ----------------- Form of Notice of Tranche B Competitive Bid Request [Name of Lender] [Address] Attention: Ladies and Gentlemen: Reference is made to the Tranche B Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among Embassy Suites, Inc., as initial borrower, (the ---------------- "Borrower"), certain subsidiaries and related parties as guarantors, the -------- Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower made a Competitive Bid Request on _____________, 19__, pursuant to Section 2.4(b) of the Credit Agreement, and in that connection you are invited to submit a Competitive Bid by 10:00 A.M. (Charlotte, North Carolina time) ______________, 19__ [Date of Proposed Competitive Loan Borrowing] Your Competitive Bid must comply with Section 2.4(c) of the Credit Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Date of Competitive Loan Borrowing __________________ (B) Principal amount of Competitive Loan Borrowing __________________ (C) Interest Period and the last day thereof __________________ Very truly yours, NATIONSBANK, N.A. (CAROLINAS), as Agent By________________________________ Title:____________________________ 1 Schedule 2.4(c) --------------- Form of Tranche B Competitive Bid NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, [Name of Lender], refers to the Tranche B Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among Embassy Suites, ---------------- Inc., as initial borrower, (the "Borrower"), certain subsidiaries and -------- related parties, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section 2.4(c) of the Credit Agreement, in response to the Competitive Bid Request made by the Borrower on ________________, 19__, and in that connection sets forth below the terms on which such Competitive Bid is made: (A) Principal Amount6 ____________________ (B) Competitive Bid Rate ____________________ (C) Interest Period and last day thereof ____________________ The undersigned hereby confirms that it is prepared, subject to the conditions set forth in the Credit Agreement, to extend credit to the Borrower upon acceptance by the Borrower of this bid in accordance with Section 2.4(e) of the Credit Agreement. Very truly yours, [NAME OF LENDER] By:______________________________ Title:___________________________ -------------------- 6 Acceptance in a minimum principal amount of $1,000,000 and $500,000 increments in excess thereof. 1 Schedule 2.4(d) --------------- Form of Tranche B Competitive Bid Accept/Reject Letter NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: Agency Services Ladies and Gentlemen: The undersigned, PROMUS HOTELS, INC. (the "Borrower"), refers to the -------- Tranche B Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among ---------------- Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. In accordance with Section 2.4(d) of the Credit Agreement, we have received Competitive Bids in connection with our Competitive Bid Request dated ______________ and in accordance with Section 2.4(d) of the Credit Agreement, we hereby accept the following bids for maturity on [date]: Interest Principal Amount Competitive Bid Rate Paid Lender ---------------- -------------------- -------- ------ $ [%] $ [%] We hereby reject the following bids: Interest Principal Amount Competitive Bid Rate Paid Lender ---------------- -------------------- -------- ------ $ [%] $ [%] The Competitive Loans accepted as provided above should be deposited in the general deposit account maintained by the Borrower with NationsBank, N.A. (Carolinas) on the date hereof in accordance with Section 2.4(e) of the Credit Agreement. Very truly yours, PROMUS HOTELS, INC. By:_____________________________ Name:________________________ Title:_______________________ 1 Schedule 2.4(h) --------------- Form of Tranche B Competitive Loan Note $50,000,000 June __, 1995 FOR VALUE RECEIVED, PROMUS HOTELS, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of -------- __________________________, its successors and permitted assigns (the "Lender"), at the office of NationsBank, N.A. (Carolinas), as Agent (the ------ "Agent"), at 101 N. Tryon Street, Independence Center, NC1-001-15-04, ----- Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Tranche B Credit Agreement dated as of June 7, 1995 among Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and the Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms ---------------- not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date or, if applicable, the Term Loan Maturity Date, in Dollars and in immediately available funds, the principal amount of FIFTY MILLION DOLLARS ($50,000,000) or, if less than such principal amount, the aggregate unpaid principal amount of all Competitive Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.4(g) of the Credit Agreement and in the respective Competitive Bid applicable to each Competitive Loan borrowing evidenced hereby. Overdue principal and, to the extent permitted by law, overdue interest owing hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition the principal and interest, all costs of collection, including reasonable attorneys' fees; provided, that for -------- purposes of this note, "reasonable attorneys' fees" shall be limited by actual attorneys' fees incurred by a party without application of N.C. Gen. Stat. Sec. 6-21.2 and without any presumption that such reasonable attorneys' fees shall be a fixed percentage of the principal amount hereof. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on Schedule A attached ---------- hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, -------- ------- that any failure to endorse such information (or an error in such endorsement) on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. PROMUS HOTELS, INC. By____________________________ Title_________________________ 1 SCHEDULE A TO THE TRANCHE B COMPETITIVE LOAN NOTE OF PROMUS HOTELS, INC. DATED JUNE __, 1995 Unpaid Name of Type Principal Person of Interest Payments Balance Making Date Loan Period Principal Interest of Note Notation ---- ---- -------- --------- -------- -------- -------- 2 Schedule 3.2 ------------ Form of Notice of Tranche B Conversion or Extension NationsBank, N.A. (Carolinas), as Agent for the Lenders 101 N. Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Ladies and Gentlemen: The undersigned, PROMUS HOTELS, INC. (the "Borrower"), refers to the -------- Tranche B Credit Agreement dated as of June 7, 1995 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among ---------------- Embassy Suites, Inc., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders and NationsBank, N.A. (Carolinas), as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an extension or conversion of one or more Committed Revolving Loans outstanding under the Credit Agreement, and in connection herewith sets forth below the terms on which such extension or conversion is requested to be made: (A) Date of Extension or Conversion (which is the last day of the _______________________ the applicable Interest Periods) (B) Principal Amount of Extension or Conversion7 _______________________ (C) Interest rate basis8 _______________________ (D) Interest Period and the last day thereof9 _______________________ In accordance with the requirements of Section 5.3, except in the case of extension of or conversion to Base Rate Loans, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (ii) of such Section, and confirms that the matters referenced in subsections (b), (c), (d) and (e) of such Section, are true and correct. Very truly yours, PROMUS HOTELS, INC. By:__________________________________ Title:_______________________________ -------------------- 7 A minimum of $5,000,000 and $1,000,000 increments in excess thereof (or the remaining available Revolving Committed Amount, if less). 8 Eurodollar and Base Rate Loans available. 9 Interest Periods of one, two, three and six months' duration for Eurodollar Loans. 1 Schedule 5.1(a) --------------- Form of Pledge Agreement 1 Schedule 6.15 ------------- Subsidiaries 2 Schedule 7.1(d) --------------- Form of Officer's Compliance Certificate For the fiscal quarter ended _________________, 19___. I, ______________________, [Title] of PROMUS HOTELS, INC. (the "Borrower") hereby certify that, to the best of my knowledge and belief, -------- with respect to that certain Tranche A Credit Agreement dated as of June 7, 1995 and that certain Tranche B Credit Agreement dated as of June 7, 1995 (each as may be as amended, modified, extended or restated from time to time, collectively, the "Hotel Facility"; all of the defined terms in the -------------- Hotel Facility are incorporated herein by reference) among Promus Hotels, Inc., a wholly-owned subsidiary of Promus Hotel Corporation, as Borrower, Promus Hotel Corporation, as Guarantor, the Lenders party thereto and NationsBank, N.A. (Carolinas), as Agent: a. The company-prepared financial statements which accompany this certificate are true and correct in all material respects and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, subject to changes resulting from normal year-end audit adjustments; and b. Since ___________ (the date of the last similar certification, or, if none, the Closing Date) (i) the Credit Parties have kept, observed, performed and fulfilled each and every agreement binding on them contained in the Credit Documents and (ii) no Default or Event of Default has occurred under the Hotel Facility. Delivered herewith are detailed calculations demonstrating compliance by the Credit Parties with the financial covenants contained in Section 7.11 of the Hotel Facility as of the end of the fiscal period referred to above. This ______ day of ___________, 19__. PROMUS HOTEL CORPORATION ________________________________ Title: 1 Attachment to Officer's Certificate ----------------------------------- Computation of Financial Covenants 2 Schedule 7.12 ------------- Form of Joinder Agreement THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 19__, --------- is by and between _____________________, a ___________________ (the "Subsidiary"), and NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under ---------- that Tranche A Credit Agreement and that Tranche B Credit Agreement (as amended, modified, extended or restated from time to time, the "Tranche A Credit ---------------- Agreement" and the "Tranche B Credit Agreement", respectively, and sometimes - --------- -------------------------- hereafter referred to collectively as the "Credit Agreements"), in each case ----------------- dated as of June 7, 1995 by and among EMBASSY SUITES, INC., as initial borrower, certain subsidiaries and related parties as guarantors, the Lenders party thereto and NationsBank, N.A. (Carolinas), as Agent. All of the defined terms in the Credit Agreements are incorporated herein by reference. The Subsidiary is an Additional Credit Party, and, consequently, the Credit Parties are required by Section 7.12 of each of respective the Credit Agreements to cause the Subsidiary to become a "Guarantor". --------- Accordingly, the Subsidiary hereby agrees as follows with the Agent, for the benefit of the Lenders: 1. The Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Subsidiary will be deemed to be a party to each of the Credit Agreements and a "Guarantor" for all purposes of the Credit Agreements, and shall have all of the obligations of a Guarantor thereunder as if it had executed the Credit Agreements. The Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in each of the Credit Agreements, including without limitation (i) all of the representations and warranties set forth in Section 6 of each of the Credit Agreements as they relate to such Subsidiary, (ii) all of the affirmative and negative covenants set forth in Sections 7 and 8 of each of the Credit Agreements and (iii) all of the undertakings and waivers set forth in Section 4 of each of the Credit Agreements (subject to the limitations set forth therein). Without limiting the generality of the foregoing terms of this paragraph 1, the Subsidiary hereby (i) subject to the limitation set forth in Section 4.1 of each of the Credit Agreements, jointly and severally together with the other Guarantors, guarantees to each Lender and the Agent, as provided in Section 4 of each of the Credit Agreements, the prompt payment and performance of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof and (ii) agrees that if any of the Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the Subsidiary will, jointly and severally together with the other Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2. The undersigned Credit Party, being the parent company of the Subsidiary, joins in the execution of the Joinder Agreement for purposes of (i) acknowledging, and agreeing to be bound by the terms of, the Pledge Agreement as a Pledgor thereunder as if it had been an original party thereto, (ii) acknowledging, representing and affirming to the Collateral Agent that the Pledged Securities (as such term is defined in the Pledge Agreement) hereby delivered to the Collateral Agent and which are subject to the pledge and security interest under the Pledge Agreement are as follows: 1 Nominal Certificate No. of Percentage Issuer Owner No. Shares of Total ------ ------- -------- ------ Ownership --------- and (iii) acknowledging that its notice address and the address of its chief executive office for purposes of the Pledge Agreement is c/o Promus Hotels, Inc., 850 Ridgelake Boulevard, Memphis, Tennessee 38120, Attn: Carol G. Champion, Telephone: (901) 680-7201, Telecopy: (901) 680-7270. 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be duly executed by its authorized officers, and the Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. [SUBSIDIARY] By____________________________ Title_________________________ PLEDGOR [PARENT COMPANY] - ------- By____________________________ Title_________________________ Acknowledged and accepted: NATIONSBANK, N.A. (CAROLINAS), as Agent By______________________________ Title___________________________ 2 Schedule 8.1 ------------ Existing Indebtedness 1 Schedule 8.2 ------------ Existing Liens 1 Schedule 11.1 ------------- Schedule of Addresses
Address for Funding Address for Lender and Payments Other Notices ------ ------------ ------------- NationsBank, N.A. NationsBank, N.A. (Carolinas) NationsBank, N.A. (Carolinas) 101 N. Tryon St. (Carolinas) Independence Center Corporate Bank NC1-001-15-04 1 NationsBank Plaza Charlotte, NC 28255 Nashville, TN 37329-1697 Attn: Agency Services Attn: J.E. Ball Phone: (704) 386-9368 Phone: (615) 749-3469 Fax: (704) 386-9923 Fax: (615) 749-4640 with a copy to: Christopher C. Kupec, Esq. Moore & Van Allen, PLLC NationsBank Corporate Center, Floor 47 100 N. Tryon Street Charlotte, NC 28202-4003 Phone: (704) 331-1046 Fax: (704) 331-1159 The Bank of New The Bank of New York The Bank of New York York One Wall Street, 22nd Floor One Wall Street, 22nd Floor New York, NY 10286 New York, NY 10286 Attn: Greg Batson Attn: Greg Batson Phone: (212) 635-6898 Phone: (212) 635-6898 Fax: (212) 635-6434 Fax: (212) 635-6434 Credit Lyonnais Credit Lyonnais Cayman Branch Credit Lyonnais Cayman Branch Cayman Branch 1301 Avenue of the Americas 1301 Avenue of the Americas 18th Floor 18th Floor New York, NY 10019 New York, New York 10019 Attn: Alex Larrinaga Attn: Mischa Zabofin Phone: (212) 261-7833 Phone: (212) 261-7872 Fax: (212) 261-7890 Fax: (212) 261-7890 The Sumitomo Bank, The Sumitomo Bank, Limited, New The Sumitomo Bank, Limited, Limited, New York York Branch New York Branch Branch 277 Park Avenue 277 Park Avenue New York, NY 10172 New York, New York 10172 Attn: Christine Bonifacic Attn: Christine Bonifacic Phone: (212) 224-4138 Phone: (212) 224-4129 Fax: (212) 224-5197 Fax: (212) 224-5188 The Bank of Nova The Bank of Nova Scotia The Bank of Nova Scotia Scotia 1100 Louisiana 1100 Louisiana Suite 3000 Suite 3000 Houston, TX 77002 Houston, Texas 77002 Attn: Paul Gonin Attn: Paul Gonin Phone: (713) 759-3443 Phone: (713) 759-3443 Fax: (713) 752-2425 Fax: (713) 752-2425 CIBC Inc. CIBC Inc. CIBC Inc. 300 South Grand Avenue 300 South Grand Avenue Suite 2700 Suite 2700 Los Angeles, CA 90071 Los Angeles, CA 90071 Attn: Paul Chakmak Attn: Paul Chakmak Phone: (213) 617-6226 Phone: (213) 617-6226 Fax: (213) 346-0157 Fax: (213) 346-0157
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Address for Funding Address for Lender and Payments Other Notices ------ ------------ ------------- First Tennessee First Tennessee Bank National First Tennessee Bank National Bank National Association Association Association 165 Madison Avenue 165 Madison Avenue National Department, 9th Floor National Department, Memphis, TN 38103 9th Floor Attn: Steve Wade Memphis, TN 38103 Phone: (901) 523-4118 Attn: Steve Wade Fax: (901) 523-4267 Phone: (901) 523-4118 Fax: (901) 523-4267 First American First American National Bank First American National Bank National Bank 4894 Poplar Avenue, 2nd Floor 4894 Poplar Avenue, 2nd Floor Memphis, TN 38117 Memphis, TN 38117 Attn: David May/Beth Vaughn Attn: David May/Beth Vaughn Phone: (901) 762-5688/762-5671 Phone: (901) 762-5688/762-5671 Fax: (901) 762-5665 Fax: (901) 762-5665 The Industrial Bank The Industrial Bank of Japan, The Industrial Bank of of Japan, Limited, Limited, Atlanta Agency Japan, Limited, Atlanta Agency Atlanta Agency 191 Peachtree Street, Suite 3600 191 Peachtree Street, Suite 3600 Atlanta, GA 30303 Atlanta, GA 30303 Attn: Jackie Brunetto Attn: Jackie Brunetto Phone: (404) 420-3325 Phone: (404) 420-3325 Fax: (404) 524-8509 Fax: (404) 524-8509 LTCB Trust Company LTCB Trust Company The Long-Term Credit Bank 165 Broadway of Japan, Limited New York, NY 10006 45 Peachtree Center Avenue Attn: Winston Brown Suite 2801 Phone: (212) 335-4854 Atlanta, GA 30303 Fax: (212) 608-3081 Attn: Rebecca Sedlar Silbert Phone: (404) 659-7210 Fax: (404) 658-9751 The Nippon Credit The Nippon Credit Bank, Ltd. - The Nippon Credit Bank, Bank, Ltd. - Los Los Angeles Agency Ltd. - Los Angeles Agency Angeles Agency 550 South Hope Street Suite 2500 550 South Hope Street Suite 2500 Los Angeles, CA 90071 Los Angeles, CA 90071 Attn: Helen Rhee/Jay Schwartz Attn: Helen Rhee/Jay Schwartz Phone: (213) 243-5723/243-5722 Phone: (213) 243-5723/243-5722 Fax: (213) 243-892-0111 Fax: (213) 243-892-0111
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Address for Funding Address for Lender and Payments Other Notices ------ ------------ ------------- Societe Generale, Societe Generale, Southwest Societe Generale, Southwest Southwest Agency Agency Agency 4800 Trammell Crow Center 1111 Bagby Street 2001 Ross Avenue Suite 2020 Dallas, TX 75201 Houston, TX 77002 Attn: Terry Jones Attn: Paul Cornell/Thierry Namuroy Phone: (214) 979-2777 Phone: (713) 759-6301/759-6313 Fax: (214) 979-1104 Fax: (713) 650-0824 with a copy to: Societe Generale, Southwest Agency 4800 Trammell Crow Center 2001 Ross Avenue Dallas, TX 75201 Attn: Terry Jones Phone: (214) 979-2777 Fax: (214) 979-1104 U.S. National Bank U.S. National Bank of Oregon U.S. National Bank of of Oregon 555 SW Oak Street Oregon Suite 400 555 SW Oak Street Portland, Oregon 97204 Suite 400 Attn: Claire C. Jones Portland, Oregon 97204 Phone: (503) 275-3192 Attn: Claire C. Jones Fax: (503) 275-5428 Phone: (503) 275-3192 Fax: (503) 275-5428 First Union First Union National Bank of First Union National Bank National Bank of North Carolina of North Carolina North Carolina One First Union Center One First Union Center 301 South College Street 301 South College Street Charlotte, NC 28288 Charlotte, NC 28288 Attn: Leo Leitner Attn: Leo Leitner Phone: (704) 383-5210 Phone: (704) 383-5210 Fax: (704) 374-2802 Fax: (704) 374-2802 First National Bank First National Bank of Commerce First National Bank of of Commerce Suite 751 Commerce 210 Baronne Street Suite 751 New Orleans, LA 70112 210 Baronne Street Attn: Louis Ballero New Orleans, LA 70112 Phone: (504) 561-1989 Attn: Louis Ballero Fax: (504) 561-1738 Phone: (504) 561-1989 Fax: (504) 561-1738 Third National Bank Third National Bank Third National Bank 6000 Poplar 6000 Poplar Suite 145 Suite 145 Memphis, TN 38119 Memphis, TN 38119 Attn: Carol Yochem/Saul Komisar Attn: Carol Yochem/Saul Phone: (901) 766-7561 Komisar Fax: (901) 766-7565 Phone: (901) 766-7561 Fax: (901) 766-7565
3 Schedule 11.3(b) ---------------- Form of Hotel Inc. Tranche B Assignment and Assumption Agreement THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of June __, 1995 (the "Agreement"), among EMBASSY SUITES, INC., a Delaware corporation --------- ("Embassy Suites"), PROMUS HOTELS, INC., a Delaware corporation (the "Hotel -------------- ----- Inc."), THE PROMUS COMPANIES INCORPORATED, a Delaware corporation ("Promus Co.") - ---- ---------- and NATIONSBANK, N.A. (CAROLINAS), in its capacity as Agent under the Credit Agreement hereinafter described. Embassy Suites and Promus Co. have agreed to transfer to Hotel Inc. certain hotel related assets and liabilities in contemplation of the Reorganization and the Distribution. In consideration therefor, the parties hereto agree as follows: SECTION 1. Definitions. Terms capitalized but not defined herein shall ----------- have the meanings assigned thereto in that certain Tranche B Credit Agreement dated as of June 6, 1995 (the "Credit Agreement") among Embassy Suites, as ---------------- initial borrower, certain subsidiaries and related parties as guarantors, the Lenders party thereto and the Agent. SECTION 2. Assignment and Assumption. Effective as of the date hereof, ------------------------- Embassy Suites hereby irrevocably and unconditionally assigns to Hotel Inc. all of its rights as "Borrower" under the Credit Agreement. Effective as of the date hereof, Hotel Inc. hereby irrevocably and unconditionally agrees with the Agent and the Lenders to be bound by all of the terms and conditions of the Credit Agreement and to perform all of the obligations and discharge all of the liabilities of the Borrower existing at or accrued prior to the date hereof or hereafter arising under the Credit Agreement and (ii) and ratifies, and agrees to be bound by, (A) the representations and warranties set forth in Section 6 of the Credit Agreement and (B) all of the affirmative and negative covenants set forth in Sections 7 and 8 of the Credit Agreement. Without limiting the generality of the foregoing terms of this Section 2, Hotel Inc. hereby promises to pay to each Lender the principal balance of, and accrued interest on, each Loan outstanding (and to pay all other Obligations) at, or advanced on or after, the date hereof. SECTION 3. Release. The Agent, acting on behalf of the Lenders, hereby ------- fully and unconditionally releases and forever discharges (i) Embassy Suites as of the date hereof from any and all liabilities, claims, charges, choses in actions, causes of action, damages, and other obligations, in each case whether known or unknown, absolute or contingent, at law or in equity, now existing or hereafter arising and whether arising under contract, by operation of law or otherwise (collectively, "Claims") arising under and relating to the Credit ------ Agreement and (ii) Promus Co. from any Claims arising under or relating to its guaranty obligations relating thereto under or relating to the Credit Agreement. SECTION 4. References in the Credit Documents. From and after the ---------------------------------- Effective Date of Assignment, (a) Hotel Inc. shall have succeeded Embassy Suites as the "Borrower" under the Credit Agreement, and all references to the "Borrower" in the Credit Agreement shall refer to Hotel Inc. and not to Embassy Suites and (b) all references to the "Credit Agreement" in any Credit Documents shall refer to the Credit Agreement, as amended and modified by this Agreement. Except as expressly amended and modified by this Agreement, all of the terms and provisions of the Credit Agreement shall remain in full force and effect. SECTION 5. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ------------- OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. 1 SECTION 6. WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE LENDERS, EMBASSY -------------------- SUITES AND HOTEL INC. HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 7. Successors and Assignees. Subject to the terms of Section 11.4 ------------------------ of the Credit Agreement, this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of Embassy Suites, Hotel Inc., the Agent and each of the Lenders. SECTION 8. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which when executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. EMBASSY SUITES, INC. By:___________________________ Title:________________________ PROMUS HOTELS, INC. By:___________________________ Title:________________________ THE PROMUS COMPANIES INCORPORATED By:___________________________ Title:________________________ NATIONSBANK, N.A. (CAROLINAS), as Agent as aforesaid for the Lenders By____________________________ Title_________________________ 2 Schedule 11.3(c) ---------------- Form of Tranche B Assignment and Acceptance THIS ASSIGNMENT AND ACCEPTANCE dated as of ________, 199_ is entered into between ________________ ("Assignor") and ____________________ ("Assignee"). -------- -------- Reference is made to the Tranche B Credit Agreement dated as of June 6, 1995, as amended and modified from time to time thereafter (the "Credit ------ Agreement") among EMBASSY SUITES, INC., as initial borrower, certain - --------- subsidiaries and related parties as guarantors, the Lenders party thereto and NationsBank, N.A. (Carolinas), as Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and ----------------- obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Commitments of the Assignor on the effective date of the assignment designated below (the "Effective Date") and the Committed -------------- Revolving Loans and Competitive Loans owing to the Assignor which are outstanding on the Effective Date, together with unpaid interest accrued on the assigned Loans to the Effective Date and the amount, if any, set forth below of the fees accrued to the Effective Date for the account of the Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 11.3(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee, if it is not already a Lender under the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests (except for its right to seek indemnification under the Credit Agreement) assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of North Carolina. 3. Terms of Assignment (a) Date of Assignment: (b) Legal Name of Assignor: (c) Legal Name of Assignee: (d) Effective Date of Assignment: (e) Revolving Loan Commitment Percentage Assigned (expressed as a percentage of the total Commitment of the Lenders to make Committed Revolving Loans and set forth to at least 8 decimals) % (f) Revolving Loan Commitment Percentage of Assignor after Assignment (set forth to at least 8 decimals) % (g) Total Committed Revolving Loans outstanding as of Effective Date $_____________ 1 (h) Principal Amount of Committed Revolving Loans assigned on Effective Date (the amount set forth in (g) multiplied by the percentage set forth in (e)) $_____________ The terms set forth above are hereby agreed to: ____________________, as Assignor By:_____________________________________ Title:__________________________________ _____________________, as Assignee By:_____________________________________ Title:__________________________________ CONSENTED TO: NATIONSBANK, N.A. (CAROLINAS), as Agent By:____________________________________ Title:_________________________________ PROMUS HOTELS, INC. By:____________________________________ Title:_________________________________ 2 Schedule 2.2(a) Existing Letters of Credit -------------------------- None. Schedule 6.1(b) Special Provisions Regarding Pro Forma Balance Sheets ----------------------------------------------------- The pro forma adjustments made in the preparation of the Pro Forma Balance Sheet are as set forth in the Proxy Statement dated April 25, 1995 of Promus Co. describing the Distribution and mailed to the shareholders of Promus Co. for purposes of its May 26, 1995 shareholders meeting. Schedule 6.4 Consents, Authorizations, Notices and Filings --------------------------------------------- None. Schedule 6.8 Excluded Assets --------------- After giving effect to the Reorganization, Distribution and the Hotel Inc. Assignment and Assumption Agreement, those certain hotel-related assets of Promus Co. and its Subsidiaries that will be retained by Promus Co. and its Subsidiaries but which shall be managed by Hotel Inc. pursuant to that certain Asset Management Agreement by and between Embassy Suites and Hotel Inc. to be executed as of June 30, 1995. Schedule 6.9 Claims Regarding Intellectual Property -------------------------------------- None. Schedule 8.1 Existing Indebtedness --------------------- (as of March 31, 1995) Capital Leases - -------------- Embassy - Tucson $ 44,350 Embassy - Orlando $ 31,362 Embassy - Thomas Road $ 35,072 Embassy - Philadelphia Airport $ 41,031 Information Technology $ 1,773,302 Marketing Services Center $ 68,061 Notes - ----- Embassy - DeBanks Henwood $ 917,641 Hampton - San Francisco land $ 296,724 Guarantees - ---------- Meadowlands Land Lease $29,356,749 Chicago Lombard $ 500,000 Embassy Pacific Partner LP, Embassy Atlanta Buckhead Partners LP and Embassy LaJolla Partners LP $ 4,000,000 Executive Life Guarantee [Not to exceed $8,100,000] Schedule 8.2 Existing Liens -------------- (as of March 31, 1995) Capital Leases - -------------- Embassy - Tucson $ 44,350 Embassy - Orlando $ 31,362 Embassy - Thomas Road $ 35,072 Embassy - Philadelphia Airport $ 41,031 Information Technology $1,773,302 Marketing Services Center $ 68,061 Schedule 8.5 Existing Investments -------------------- Name (percent ownership interest) - --------------------------------- ATM Hotels Pty Limited (75%) Barshop-HII Joint Venture (50%) Embassy Akers Venture (50%) Embassy Atlanta Buckhead Partners Limited Partnership (5%) Embassy/GACL Lombard Joint Venture (50%) Embassy LaJolla Partners Limited Partnership (10%) Embassy Pacific Partners Limited Partnership (10%) Embassy/Shaw Parsippany Venture (50%) Embassy/Shaw Rochester Venture (50%) Embassy Suites Club No. Two, Inc. (49%) EPT Atlanta-Perimeter Center Limited Partnership (50%) EPT Austin Joint Venture (50%) EPT Bloomington Joint Venture (50%) EPT Covina Joint Venture (50%) EPT Crystal City Land Limited Partnership (50%) EPT Kansas City Joint Venture (50%) EPT Meadowlands Limited Partnership (50%) EPT Omaha Joint Venture (50%) EPT Overland Park Limited Partnership (50%) EPT Raleigh Limited Partnership (50%) EPT San Antonio Joint Venture (50%) ES/PA, L.P. (98%) E.S. Philadelphia Airport Joint Venture (99.8%) GOL (Texas) Inc. (49%) Granada Royale Hometel-Tucson, a limited partnership (50.003%) Granada Royale Hometel-West, a limited partnership (65%) Hampton/GHI Associates #1 (20%) Hampton/GHI Associates #2 (20%) Hospitality Capital Group (33.3%) Hospitality Capital Group II (33.3%) King Street Station Hotel Associates, L.P. (50%) MHV Joint Venture (50%) Pacific Market Investment Company Joint Venture (50%) Riverview/Embassy Joint Venture (50%) SES/D.C. Venture (25%) Existing Investments (Notes Receivable) --------------------------------------- (as of March 31, 1995) Embassy Suites - -------------- El Paso $ 133,503 Richmond $ 1,000,000 LaJolla $ 687,970 Santa Clara $ 611,428 Crystal City $ 638,375 Charleston $ 682,461 Hampton Inn - ----------- Secaucus $ 50,637 San Antonio - Downtown $ 1,000,000 San Diego $ 57,954 Hampton Inn & Suites - -------------------- Newport News $ 1,000,000 Homewood Suites - --------------- Lane/Raymond/Smith $ 500,000 Santa Fe $ 1,500,000 San Antonio - Downtown $ 1,000,000 Harrisburg $ 939,105 Alexandria $ 529,588 Information Technology $ 750,000 - ---------------------- Marketing Services Center $ 125,725 - ------------------------- ----------- $11,206,746 =========== SCHEDULE 6.15 ------------- Subsidiaries
# of Outstanding # of Shares of Each Options, Warrants, Class of Capital Stock Rights of Jurisdiction of Percentage or Other Equity Conversion or Incorporation or of Interest Outstanding Purchase and Similar Name Organization Ownership (# Owned) Rights (Effect if Exercised) Ziwa Insurance Ltd. (to be formed) None Promus Hotels, Inc.*/ Delaware 100% None - Buckleigh, Inc. Delaware 100% 100 (100) None ATM Hotels Pty Limited Australia 50% 2 (1) None Compass, Inc. Tennessee 100% 1000 (1000) None EJP Corporation Delaware 100% 1000 (1000) None Suite Life, Inc. Delaware 100% 1000 (1000) None Embassy Development Corporation Delaware 100% 100 (100) None Embassy Suites De Mexico, S.A., de C.V. Mexico 1% 10,000 (100) None ES/PA, L.P. [Pennsylvania] 98% [Not Applicable] None E.S. Philadelphia Airport Joint Venture Pennsylvania 10% [Not Applicable] None Embassy Equity Development Corporation Delaware 100% 100 (100) None Embassy Suites De Mexico S.A., de C.V. Mexico 1% 10,000 (100) None Embassy Syracuse Development Corporation Delaware 100% 100 (100) None - -------------------------------- */ Indicates Subsidiaries of the Parent Company and the Borrower immediately prior to the Assignment and Assumption. - -
# of Outstanding # of Shares of Each Options, Warrants, Class of Capital Stock Rights of Jurisdiction of Percentage or Other Equity Conversion or Incorporation or of Interest Outstanding Purchase and Similar Name Organization Ownership (# Owned) Rights (Effect if Exercised) Embassy Suites De Mexico, S.A., de C.V. Mexico 1% 10,000 (100) None Southfield Hotel Management, Inc. Florida 100% 1000 (1000) None Embassy Memphis Corporation Tennessee 100% 100 (100) None Embassy Pacific Equity Corporation Delaware 100% 100 (100) None Embassy Suites Club No. 1, Inc. Kansas 100% 1000 (1000) None Embassy Suites Club No. Three, Inc. Louisiana 100% 1000 (1000) None Embassy Suites De Mexico, S.A., De C.V. Mexico 97% 10,000 (9,700) None Embassy Suites (Isla Verde), Inc. Delaware 100% 1000 (1000) None Embassy Suites (Puerto Rico), Inc. Delaware 100% 1000 (1000) None Embassy Vacation Resorts, Inc. Delaware 100% 1000 (1000) None EPAM Corporation Delaware 100% 100 (100) None ESI Development, Inc. Tennessee 100% 1000 (1000) None ESI Mortgage Development Corporation Delaware 100% 1000 (1000) None ESI Mortgage Development Corporation II Delaware 100% 100 (100) None E.S. Philadelphia Airport Joint Venture Pennsylvania 90% [Not Applicable] None GOL Columbia Limited Partnership Maryland 1% [Not Applicable] None GOL (Heathrow), Inc. Tennessee 100% 1000 (1000) None
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# of Outstanding # of Shares of Each Options, Warrants, Class of Capital Stock Rights of Jurisdiction of Percentage or Other Equity Conversion or Incorporation or of Interest Outstanding Purchase and Similar Name Organization Ownership (# Owned) Rights (Effect if Exercised) Granada Royale Hometel-West, a limited Arizona 50.003% [Not Applicable] None partnership Granada Royale Hometel-Tucson, a limited Arizona 65% [Not Applicable] None partnership Hampton Inns, Inc. Delaware 100% 1000 (1000) None GOL Columbia Limited Partnership Maryland 99% [Not Applicable] None Old Town Hotel Corporation Delaware 100% 1000 (1000) None Pacific Hotels, Inc. Tennessee 100% 1000 (1000) None ATM Hotels Pty Limited Australia 50% 2 (1) None Promus Hotel Services, Inc. Delaware 100% 1000 (1000) None Promus Hotels Florida, Inc. Delaware 100% 1000 (1000) None
3 EX-10.7 4 Exhibit 10(7) PROMUS HOTEL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN TABLE OF CONTENTS PAGE ---- ARTICLE I - PURPOSE 1 ARTICLE II - DEFINITIONS 1 2.1 Account 1 2.2 Beneficiary 1 2.3 Board 1 2.4 Change of Control 1 2.5 Committee 3 2.6 Compensation 3 2.7 Deferral Commitment 3 2.8 Deferral Period 3 2.9 Determination Date 3 2.10 Employer 3 2.11 Employment 4 2.12 Hardship 4 2.13 Interest 4 2.14 Participant 5 2.15 Participation Agreement 5 2.16 Plan Benefit 5 2.17 Retirement 5 2.18 Total and Permanent Disability 5 Article III - PARTICIPATION AND DEFERRAL COMMITMENTS 6 3.1 Eligibility and Participation 6 3.2 Form of Deferral; Maximum and Minimum Deferral 7 3.3 Modification of Deferred Commitment 7 ARTICLE IV - DEFERRED COMPENSATION ACCOUNTS 8 4.1 Elective Deferred Compensation 8 4.2 Types of Account 8 4.3 Matching Contributions 8 4.4 Vesting of Accounts 8 4.5 Determination of Accounts 9 4.6 Statement of Accounts 9 ARTICLE V - PLAN BENEFITS 9 5.1 Pre-Termination Withdrawals 9 5.2 Retirement Benefit 10 5.3 Termination Benefit 10 5.4 Death Benefit 10 5.5 Disability Benefits 11 5.6 Hardship Distributions 11 5.7 Form of Benefit Payment 12 5.8 Withholding; Payroll Taxes 12 5.9 Commencement of Payments 12 i TABLE OF CONTENTS (Continued) PAGE ---- 5.10 Full Payment of Benefits 13 5.11 Payment to Guardian 13 5.12 Spin-Off Transactions 13 ARTICLE VI - BENEFICIARY DESIGNATION 14 6.1 Beneficiary Designation 14 6.2 Amendments 14 6.3 No Beneficiary Designation 15 6.4 Effect of Payment 15 ARTICLE VII - ADMINISTRATION 15 7.1 Committee; Duties 15 7.2 Agents 15 7.3 Binding Effect of Decisions 15 7.4 Indemnity of Committee 15 ARTICLE VIII - CLAIMS PROCEDURE 16 8.1 Claim 16 8.2 Denial of Claim 16 ARTICLE IX - AMENDMENT AND TERMINATION OF PLAN 17 9.1 Amendment 17 9.2 Employer's Right to Terminate Future Deferrals 17 ARTICLE X - MISCELLANEOUS 17 10.1 Unfunded Plan 17 10.2 Unsecured General Creditor 18 10.3 Nonassignability 18 10.4 Not a Contract of Employment 18 10.5 Protective Provisions 18 10.6 Terms 19 10.7 Captions 19 10.8 Governing Law 19 10.9 Validity 19 10.10 Notice 19 10.11 Successors 19 ii PROMUS HOTEL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN ARTICLE I PURPOSE The purpose of this Executive Deferred Compensation Plan (hereinafter referred to as the "Plan") is to provide supplemental funds for retirement or death for certain Directors and key management employees (and their beneficiaries) of Promus Hotel Corporation (hereinafter referred to as "Promus") and certain of its subsidiaries which elect to participate in the Plan. It is intended that the Plan will aid in retaining and attracting Directors and employees of exceptional ability by providing such individuals with these benefits. This plan shall be effective as of the later of June 30, 1995 or the date of the distribution of a dividend of common stock in Promus to the shareholders of the Promus Companies Incorporated. ARTICLE II DEFINITIONS For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 Account. "Account" means the Retirement Account and the ------- Termination Account maintained by the Employer with respect to each Participant's deferred compensation pursuant to Article IV, including accounts transferred from The Promus Companies Incorporated Executive Deferred Compensation Plan (The "Promus Predecessor Plan"). The existence of these accounts shall not require any segregation of assets. 2.2 Beneficiary. "Beneficiary" means the person, persons or ----------- entity designated by the Participant, or as provided in Article VI, to receive any Plan benefits payable after the Participant's death. 2.3 Board. "Board" means the Board of Directors of Promus or ----- the Human Resources Committee (or its successor committee) of such Board of Directors or any other Committee designated by the Board of Directors of Promus. 2.4 Change of Control. A "Change of Control" shall be deemed ----------------- to have occurred, subject to subparagraph (iv) hereof, if any of the events in subparagraphs (i), (ii) or (iii) occur: 1 (i) Any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than an employee benefit plan of Promus, or a trustee or other fiduciary holding securities under an employee benefit plan of Promus, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 25% or more of Promus's then outstanding voting securities carrying the right to vote in elections of persons to the Board of Directors, regardless of comparative voting power of such voting securities, and regardless of whether or not the Board of Directors shall have approved such Change in Control; or (ii) During any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who shall have entered into an agreement with Promus to effect a transaction described in subparagraphs (i) or (iii) of this paragraph) whose election by the Board of Directors or nomination for election by Promus's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) The holders of securities of Promus entitled to vote thereon approve the following: (A) A merger or consolidation of Promus with any other corporation regardless of which entity is the surviving company, other than a merger or consolidation which would result in the voting securities of Promus carrying the right to vote in elections of persons to the Board of Directors outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of Promus's then outstanding voting securities carrying the right to vote in elections of persons to the Board of Directors, or such securities of such surviving entity outstanding immediately after such merger or consolidation, or (B) A plan of complete liquidation of Promus or an agreement for the sale or disposition by Promus of all or substantially all of Promus's assets. (iv) Notwithstanding the definition of a "Change in Control" of Promus as set forth in this paragraph 2.4, the Human Resources Committee of the Board of Directors (the "Committee") shall have full and final authority, which 2 shall be exercised in its discretion, to determine conclusively whether a Change in Control of Promus has occurred, and the date of the occurrence of such Change in Control and any incidental matters relating thereto, with respect to a transaction or series of transactions which have resulted or will result in a substantial portion of the assets or business of Promus (as determined immediately prior to the transaction or series of transactions by the Committee in its sole discretion which determination shall be final and conclusive) being held by a corporation at least 80% of whose voting securities are held, immediately following such transaction or series of transactions, by holders of the voting securities of Promus (determined immediately prior to such transaction or series of transactions). The Committee may exercise such discretionary authority without regard to whether one or more of the transactions in such series of transactions would otherwise constitute a Change in Control of Promus under the definition set forth in this paragraph 2.4. 2.5 Committee. "Committee" means the Deferred Compensation --------- Committee appointed to administer the Plan pursuant to Article VII. 2.6 Compensation. "Compensation" means the base salary and ------------ bonus or director's fees paid to the Participant by the Employer during the calendar year, before reduction for amounts deferred pursuant to this Plan or any other plan. Compensation does not include expense reimbursements, or any form of non-cash compensation and benefits. 2.7 Deferral Commitment. "Deferral Commitment" means a Salary ------------------- Deferral Commitment, a Bonus Deferral Commitment, or a Fee Deferral Commitment made by the Participant pursuant to Article III and for which a Participation Agreement has been filed. A Deferral Commitment shall include any deferral commitment made by a Participant for 1995 under the Promus Predecessor Plan. 2.8 Deferral Period. "Deferral Period" means the single --------------- calendar year for which the Participant has made a Deferral Commitment. The initial Deferral Period shall commence as soon as administratively feasible after the effective date of this Plan. 2.9 Determination Date. "Determination Date" means the last ------------------ day of each calendar month. 2.10 Employer. "Employer" means Promus, and directly or -------- indirectly affiliated or subsidiary corporations, any other affiliate designated by the Board, or any successors to the businesses thereof. 3 2.11 Employment. "Employment," in the case of an employee, ---------- means the period of time that a Participant is on the Employer's payroll. A leave of absence approved by the Committee shall not be deemed a termination of Employment. A Participant who enters salary continuation status shall not be deemed to have terminated Employment. In the case of a director, Employment means the active service on the Board by the Participant. 2.12 Hardship. "Hardship" means the immediate and heavy -------- financial need of the Participant as determined by the Committee. Financial needs shall be limited to the following situations: (a) Financial obligations incurred by the Participant because of sickness, accident, death, disability, or other medical need in the Participant's immediate family which the Participant is not able to pay out of liquid assets or current cash flow. (b) Financial requirements to purchase necessary shelter and related necessities for the Participant and the Participant's immediate family which the Participant is unable to purchase out of liquid assets or current cash flow or otherwise reasonably finance. (c) Financial requirements for education for the Participant or a member of the Participant's immediate family which the Participant is unable to pay out of liquid assets or current cash flow. For purposes of this definition, the term "immediate family" means wife, husband, child, father, mother, or a related dependent residing with the Participant. 2.13 Interest. -------- (a) Termination Account Interest. The interest rate ---------------------------- applicable to a Termination Account on each monthly Determination Date shall be the greater of one-twelfth (1/12) of the rate approved by the Board prior to January 1 of each plan year or one-twelfth (1/12) of the rate announced by Citibank, N.A. as its prime rate at the beginning of each calendar quarter during the plan year. The rate to be approved by the Board shall be submitted by Company management to the Board for review and approval prior to January 1 of each plan year. If the Citibank Prime rate is no longer available, the Committee shall select a substantially similar index. (b) Retirement Account Interest. The effective annual --------------------------- yield applicable to a Retirement Account shall be determined prior to January 1 of each year and be effective for the calendar year following the date it is determined. Such rate shall be submitted by Company management for 4 review and approval by the Board prior to January 1 each year. The annual yield under this paragraph 2.13(b) for each plan year shall not be less than one hundred fifty percent (150%) of the annual average of the Moody's Average Corporate Bond Yield for such year as published by Moody's Investors Service, Inc. (or any successor hereto) or, if such index is no long published, a substantially similar index selected by the Committee; provided, however, that for Participants who are entitled to the Retirement Account Interest who retire or terminate active service during 1995, such rate will be locked-in at the retirement rate approved for 1995 until such Participants' Account is fully distributed. 2.14 Participant. "Participant" means any individual who is ----------- participating or has participated in this Plan as provided in Article III or has participated in the Promus Predecessor Plan and whose account in the Promus Predecessor Plan (in whole or in part) has been transferred to this Plan. 2.15 Participation Agreement. "Participation Agreement" means ----------------------- the agreement filed by the Participant prior to the beginning of the Deferral Period. A new Participation Agreement shall be filed by the Participant for each Deferral Period. 2.16 Plan Benefit. "Plan Benefit" means the benefit payable to ------------ the Participant as calculated in Article V. 2.17 Retirement. "Retirement" means termination of Employment ---------- with the Employer on or after the earlier of the date the Participant attains age fifty five (55) with ten (10) years of credited service or on or after the date the Participant attains age sixty (60). For purposes of this definition, years of credited service will be credited in accordance with the provisions of The Promus Hotel Corporation Savings and Retirement Plan. The Board reserves the right to provide different retirement requirements for different participants. 2.18 Total and Permanent Disability. "Total and Permanent ------------------------------ Disability" means that due to sickness or accidental bodily injury the Participant: (a) is completely unable to perform any and every duty pertaining to his occupation with the Employer, and (b) after a twenty-four (24) month period of disability, is completely unable to engage in any and every gainful occupation for which he is reasonably fitted by education, training and experience. For purposes of this Plan, the Committee shall determine whether or not a condition renders the Participant to 5 be Totally and Permanently Disabled based on evidence satisfactory to the Committee. Such determination by the Committee shall be final and binding. ARTICLE III PARTICIPATION AND DEFERRAL COMMITMENTS 3.1 Eligibility and Participation. ----------------------------- (a) Eligibility. Eligibility to participate in the Plan ----------- is limited to those employees of the Employer who are: (i) in Job Grades 1-12 (or equivalent grades) or in other Job Grades which may be declared eligible by the Board's Human Resources Committee, and (ii) designated as a Participant by the Chief Executive Officer of Promus. Non-employee Directors of the Board whose accounts have been transferred to the Plan from the Promus Predecessor Plan are also Participants except that no non-employee Directors may make further deferrals into the Plan after June 30, 1995. (b) Participation. An eligible employee may elect to ------------- participate in the Plan with respect to any Deferral Period by filing a Participation Agreement with the Committee by December 15 of the calendar year immediately preceding the Deferral Period. In the event that an individual first becomes eligible to Participate during a calendar year, a Participation Agreement must be filed no later than thirty (30) days following notification of the individual by the Committee of his eligibility to Participate, and such Participation Agreement shall be effective only with regard to Compensation earned and payable following the filing of the Participation Agreement with the Committee. Employees whose accounts are transferred to this Plan from the Promus Predecessor Plan are also Participants and their deferred elections for 1995 will carry over for the remainder of 1995 under this Plan. (c) Unless an exception is specifically made by the Committee, in its sole discretion, and except for the purpose described in paragraph 5.4(b) below, a Participant shall not be permitted to defer under this Plan amounts payable to the Participant after (i) the Participant's death; or (ii) if a Participant is placed on salary continuation during a Deferral Period, the earlier of the date the Participant ceases to receive a continuation of salary or the commencement of a new Deferral Period; or (iii) the Employer has terminated future deferrals pursuant to paragraph 9.2 of this Plan. 6 (d) Deferrals into the Plan will not be allowed after 1995. 3.2 Form of Deferral; Maximum and Minimum Deferral. The ---------------------------------------------- Participant may elect in the Participation Agreement any of the following Deferral Commitments: (a) Salary and Bonus Commitment. During the Deferral --------------------------- Period following the calendar year in which the Participation Agreement is filed, the Participant may elect to defer, except as provided in (b) below, (1) up to twenty-five percent (25%) of base salary payable during the Deferral Period, and (2) up to one hundred per cent (100%) of bonus (fifty percent (50%) of bonus for Job Grades 9-12 or equivalent grades) payable during the Deferral Period; provided, however, that commencing with the 1991 Deferral Period with -------- ------- respect to bonus deferrals, all participants will be limited to deferring a maximum of 50% of bonus. (b) Savings and Retirement Plan Exception. In addition ------------------------------------- to the deferral permitted under (a) above, any Participant that participates at the maximum before-tax percentage allowed by the Employer's Savings and Retirement Plan maintained by the Employer shall be deemed to have elected to defer under this Plan that portion of eligible Savings and Retirement Plan earnings which the Participant elected to defer under the Savings and Retirement Plan, up to six percent (6%) (or such other maximum before-tax percentage allowed by the Savings and Retirement Plan), which could not be deferred on a before-tax basis under the Savings and Retirement Plan due to any law or regulation as determined by the Committee, but excluding any amount which was actually deferred into the Savings and Retirement Plan but distributed back to the employee in a following Plan year. (c) Limitation on Deferrals. Notwithstanding anything ----------------------- herein: (i) an employee who has five (5) years of active deferrals of salary and/or bonus into this Plan including deferrals under the Predecessor Promus Plan or the Holiday Corporation plan which was the predecessor to the Predecessor Promus Plan (the "Predecessor Holiday Plan") shall not be permitted to defer any further bonus into this Plan, and (ii) a director on the Board of Directors of Promus shall not be permitted to defer any further director's fees into this Plan. 3.3 Modification of Deferred Commitment. A Deferral ----------------------------------- Commitment shall be irrevocable except that the Committee may reduce the amount to be deferred or waive the remainder of the Deferral Commitment upon a finding, based upon uniform standards established by the Committee, that the Participant has suffered a Hardship or that a bona fide mistake occurred in filling out a form or responding to instructions. 7 ARTICLE IV DEFERRED COMPENSATION ACCOUNTS 4.1 Elective Deferred Compensation. The amount of ------------------------------ Compensation that the Participant elects to defer shall be withheld and credited to the Participant's Account as the Compensation becomes payable. Any withholding of taxes or other amounts with respect to deferred Compensation which is required by state, federal or local law may be withheld from the Participant's non-deferred Compensation. 4.2 Types of Account. For record-keeping purposes only, a ---------------- Retirement Account and a Termination Account shall be maintained for each Participant. The amount of Compensation elected to be deferred shall be credited to both the Retirement Account and the Termination Account. 4.3 Matching Contributions. ---------------------- (a) Eligibility. Matching contributions shall be ----------- credited to Participants in this Plan who are eligible to participate in the Employer's Savings and Retirement Plan and elect to make a Basic Contribution equal to the maximum rate at which a Participant may elect before-tax contributions under the Employer's Savings and Retirement Plan and such before-tax contribution is limited due to any law or regulation. (b) Amount. The Employer shall credit to each employee ------ Participant's Account a matching contribution for each calendar year equal to one hundred percent (100%) of the Participant's Compensation elected to be deferred under this Plan for the year, such Compensation being limited for purposes of this calculation to a maximum of six percent (6%) of the Participant's eligible Savings and Retirement Plan earnings (which shall not include bonus amounts or board fees). The matching contribution amount shall be offset by the actual matching contribution allocated to the Participant for the year under the Employer's Savings and Retirement Plan. (c) Time of Credit. The Employer matching contribution -------------- shall be credited to a Participant's Account as of the last day of the calendar year or the date the Participant's employment ends, if earlier. 4.4 Vesting of Accounts. Each Participant shall be vested in ------------------- the amounts credited to such Participant's Account and earnings thereon as follows: (a) Amounts Deferred. A Participant shall be one hundred ---------------- percent (100%) vested at all times in the amount of Compensation elected to be deferred under this Plan. 8 (b) Employer Matching Contributions. A Participant who ------------------------------- terminates Employment for reasons other than Retirement, Total and Permanent Disability or Death shall be vested in the Employer matching contributions made for any particular year in accordance with the vesting provisions in the Employer's Savings and Retirement Plan and as it may be amended from time to time. (c) Retirement, Disability or Death. A Participant shall ------------------------------- be one hundred percent (100%) vested in all amounts at Retirement, or upon Total and Permanent Disability or Death. 4.5 Determination of Accounts. Each Participant's Retirement ------------------------- Account and Termination Account as of each Determination Date shall consist of the balance of the Participant's Account as of the immediately preceding Determination Date, plus the Participant's elective deferred Compensation credited, matching contributions and Interest earned, minus the amount of any distributions made since the immediately preceding Determination Date. Interest earned shall be calculated as of each Determination Date based upon the average daily balance of the account since the preceding Determination Date. Interest earned on the Retirement Account shall be calculated so as to achieve the annual yield provided by paragraph 2.13(b). 4.6 Statement of Accounts. The Committee shall submit to each --------------------- Participant, within one hundred twenty (120) days after the close of each calendar year and at such other time as determined by the Committee, a statement setting forth the balance to the credit of each Account maintained for the Participant. ARTICLE V PLAN BENEFITS 5.1 Pre-Termination Withdrawals. --------------------------- (a) Amount. At the time the Participation Agreement is ------ filed, the Participant may elect to receive fifty percent (50%) of the Deferral Commitment during each of the 8th, 9th, 10th, and 11th years after the year during which the Participation Agreement is filed. The total Pre-Termination Withdrawal shall be limited to the Termination Account balance at the time of the withdrawal. (b) Remaining Account Balance. The amount of the ------------------------- withdrawal shall reduce the Retirement Account and Termination Account balances. Any remaining Account balances shall continue to be credited with Interest in accordance with paragraph 4.5. Any amounts remaining in the 9 Retirement Account or Termination Account after all PreTermination Withdrawals shall be paid in accordance with this Article V. 5.2 Retirement Benefit. The Employer shall pay a Plan Benefit ------------------ equal to the amount of the Participant's Retirement Account to each Participant who terminates Employment: (a) by reason of Retirement, (b) by reason of Total and Permanent Disability, (c) within a twenty-four (24) month period after a Change of Control, (d) while participating as a director and terminates from Employment on the Employer's Board due to: (i) not being re-elected as a director, (ii) Total and Permanent Disability, or (iii) termination within a twenty-four (24) month period after a Change of Control. A non-employee director whose account in the Promus Predecessor Plan (in whole or in part) was transferred to the Plan from the Promus Predecessor Plan will be entitled to the Retirement Account benefit upon resigning, retiring or otherwise terminating Board service. 5.3 Termination Benefit. The Employer shall pay a Plan ------------------- Benefit equal to the amount of the Participant's Termination Account to each Participant who terminates Employment for all reasons other than those for which a Retirement Benefit or Death Benefit shall be paid. 5.4 Death Benefit. Upon the death of the Participant, the ------------- Employer shall pay to the Participant's Beneficiary an amount determined as follows: (a) If the Participant dies prior to termination of Employment with the Employer, the amount payable under this paragraph shall be in lieu of any other benefit payment under this Plan and shall equal: (i) the Participant's Retirement Account Balance, plus; (ii) if the Participant died during active Employment (or if such participant's death occurs after active employment has ceased by reason of a sickness or injury which thereafter results in the participant's 10 death), three (3) times the sum of all amounts deferred by the Participant under this Plan (not including interest or earnings thereon) until the date of death. (b) For purposes of calculating the Death Benefit under paragraph 5.4(a): (i) "amounts deferred" shall include salary, bonus, and any other Compensation that the Participant may be permitted to defer hereunder which the Participant shall have elected in writing to defer under this Plan from inception of the Plan (including the Predecessor Promus Plan) to the date of death including any deferred bonus or other deferred Compensation hereunder which would be payable to the Participant or to the Participant's estate or beneficiary after the Participant's death, except that "amounts deferred" shall not include any salary elected to be deferred under this Plan but not yet payable at the time of the Participant's death. (ii) the Participant's Retirement Account Balance shall not include any Compensation which is not payable on the day before the Participant's death even if such amounts become payable on or after the Participant's death and even if the Participant had elected in writing to defer such amounts under this Plan. (c) If the Participant dies after termination of Employment with the Employer, the amount payable shall be equal to the remaining unpaid balance of the Participant's appropriate Account. 5.5 Disability Benefits. If the Participant terminates ------------------- Employment by reason of Total and Permanent Disability, the amount payable shall equal the Retirement Account balance. 5.6 Hardship Distributions. Upon a finding that the ---------------------- Participant has suffered a Hardship, the Committee may, in its sole discretion, allow distributions from the Participant's Account prior to the time otherwise specified for payment of benefits under the Plan. The amount of such distribution shall be limited to the amount reasonably necessary to meet the Participant's requirements during the Hardship. The amount of such distribution shall reduce the Termination Account balance and Retirement Account balance. 5.7 Form of Benefit Payment. The Plan Death Benefit payable ----------------------- under paragraph 5.4(a)(ii) of this Plan shall be paid within 90 days of death in a lump sum with no interest accruing from the date of death until the date of payment. The Plan Retirement Benefit, Death Benefit payable under paragraph 11 5.4(a)(i) or 5.4(c), Disability Benefits, and Termination Benefit shall be paid in one of the following forms as elected by the Participant in the Participation Agreement: (a) Installments. Equal monthly installments of the ------------ Account and Interest amortized over a period of time elected by the Participant not to exceed 15 years unless a longer period up to 20 years for an individual Participant is or has been authorized by the Board including prior authorization by The Promus Companies Incorporated. Interest shall be credited to the remaining portion of the Account Balance in accordance with paragraph 4.5. If the Participant is receiving the Retirement Account, Interest shall be equal to an amount in accordance with paragraph 2.12(b). If the Participant is receiving the Termination Account, Interest shall be equal to an amount in accordance with paragraph 2.13(a); and/or (b) A lump sum payment. (c) Any other form selected by the Participant, which has written approval of the Committee. (d) If the Participant fails to elect the form of benefit payment, the benefits shall be paid in accordance with 5.7(a) over a period of fifteen (15) years. However, the Committee may, in its sole discretion, provide for an alternate form of benefit payment to the Participant, if payment is made pursuant to paragraph 5.2(c) or 5.2(d)(3). (e) If a Plan Death Benefit is payable in installments under paragraph 5.4(a)(i), the Committee may, in its sole discretion, determine that payment of the Death Benefit shall be accelerated and paid in a lump sum to the Beneficiary. 5.8 Withholding; Payroll Taxes. The Employer shall withhold -------------------------- from payments made hereunder any taxes required to be withheld from the Participant's wages for the federal or any state or local government. 5.9 Commencement of Payments. Payment shall commence at the ------------------------ discretion of the Committee, but not later than sixty (60) days after the end of the month in which the Participant Retires, dies, becomes Totally and Permanently Disabled or otherwise terminates Employment with the Employer and is entitled to payment pursuant to his or her Participation Agreement (unless a later commencement date not later than age 60 is or has been authorized by the Board for an individual Participant including prior authorization by The Promus Companies Incorporated). For purposes of this paragraph 5.9, termination of Employment shall include when a Participant is no longer entitled to any payments of salary or salary continuation. 12 5.10 Full Payment of Benefits. Notwithstanding any other ------------------------ provision of this Plan, all benefits shall be paid no later than the date of the Participant attains age eighty five (85). 5.11 Payment to Guardian. If a Plan benefit is payable to ------------------- minor or a person declared incompetent or to a person incapable of handling the disposition of property, the Committee may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such minor or incompetent person. The Committee may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan benefit. Such distribution shall completely discharge the Committee and the Employer from all liability with respect to such benefit. 5.12 Spin-Off Transactions. Notwithstanding anything in the --------------------- Plan to the contrary, in the event of any business of Promus or its subsidiaries is spun-off and a Participant becomes an employee or director of the company owning the spun-off business (the "Spin-Off Company") which adopts a deferred compensation plan that is substantially the same as the Plan, then the Human Resources Committee of the Board of Directors of Promus in its discretion may determine as follows prior to the spin-off: (a) any director-Participant who resigns as a director the Company and who, within 90 days, commences service as a director of the Spin-Off Company will not be treated as having terminated service or employment as a director for purposes of paying Plan benefits, and his or her entire Account balance and all obligations associated therewith will be transferred to the corresponding Plan of the Spin-Off Company; (b) a transfer of employment of a Participant to the Spin-Off Company in connection with the spin-off will not be considered a termination of employment for purposes of paying Plan benefits or of forfeiting matching contributions and interest thereon; (c) a transferred Participant's Account balance as of the effective date of the spin-off and all obligations related thereto will be transferred to the corresponding plan of the Spin-Off Company; (d) any Participant who will immediately after the effective date of the spin-off continue to be employed by Promus (or a subsidiary thereof) and will also be employed by the Spin-Off Company (or a subsidiary thereof) will have the right to designate in writing (to be signed prior to the effective date of the spin-off) a percentage (from zero to 100%) of his or her Account Balance as of such effective date that will be transferred to the Spin-Off Company (such percentage being applied to the balances 13 attributable to each year of deferral) which transfer will include the transfer of all obligations associated therewith. (To the extent such designation is not made, the Participant's Account will remain in the Plan pursuant to its terms.); and (e) Any employee or director transferring to the Spin-Off Company will receive credit for and will be vested in the Retirement Account Interest Rate under the Plan and under the Spin-Off Company's corresponding plan if such Rate is earned or otherwise vested or credited under the Plan on or prior to the effective date of the spin- off; (f) Except to the extent related to that portion of a Participant's Account balance that is retained in the Plan pursuant to the above Section 5.12(e), no benefits will be payable under the Plan to a Participant whose Account balance (or portion thereof) is transferred to the Spin-Off Company. ARTICLE VI BENEFICIARY DESIGNATION 6.1 Beneficiary Designation. Each Participant shall have the ----------------------- right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as contingent) to whom payment under this Plan shall be paid in the event of his death prior to complete distribution to the Participant of the benefits due him under the Plan. Each beneficiary designation shall be in a written form prescribed by the Committee and will be effective only when filed with the Committee during the Participant's lifetime. If the Participant's Compensation is community property, any Beneficiary Designation shall be valid or effective only as permitted under applicable law. 6.2 Amendments. Any Beneficiary designation may be changed by ---------- the Participant without the consent of any designated Beneficiary by the filing of a new Beneficiary Designation with the Committee. The filing of a new Beneficiary Designation form will cancel all Beneficiary Designations previously filed. 6.3 No Beneficiary Designation. If any Participant fails to -------------------------- designate a Beneficiary in the manner provided above, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participant's benefits, the Committee, in its discretion, may direct the Employer to distribute such Participant's benefits (or the balance thereof) to either: (a) The surviving spouse; 14 (b) The Participant's children, except that if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share the parent would have taken if living; (c) The Participant's estate. 6.4 Effect of Payment. The payment to the Beneficiary shall ----------------- completely discharge the Employer's obligations under this Plan. ARTICLE VII ADMINISTRATION 7.1 Committee; Duties. This Plan shall be administered by the ----------------- Employer's Deferred Compensation Committee, which shall consist of not less than three (3) individuals selected by the Chief Executive Officer of Promus. Members of the Committee may be the Participants under this Plan. 7.2 Agents. The Committee shall appoint an individual to be ------ the Committee's agent with respect to the day-to-day administration of the Plan. In addition, the Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer. 7.3 Binding Effect of Decisions. The decision or action of --------------------------- the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 7.4 Indemnity of Committee. The Employer shall indemnify and ---------------------- hold harmless the members of the Committee or any agents or employees of the Employer against any and all claims, loss, damage, expense, or liability arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, Committee member, or such agent or employee of the Employer. ARTICLE VIII CLAIMS PROCEDURE 8.1 Claim. Any Participant, former Participant, Beneficiary, ----- or legal representative thereof, may file a claim for benefits under the Plan by submitting to the Committee a 15 written statement describing the nature of the claim and requesting a determination of its validity under the terms of the Plan. The Committee shall issue a ruling and written notice with respect to the claim within 30 days after such claim is received. If the claim is wholly or partially denied, written notice shall be furnished to the claimant, which notice shall set forth in a manner calculated to be understood by the claimant; (a) the specific reason or reasons for denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) a description of any additional materials or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedures. 8.2 Denial of Claim. Any Participant, former Participant, or --------------- Beneficiary (or their authorized representatives) whose claim for benefits has been denied, may appeal such denial be resubmitting to the Committee a written statement requesting a further review of the decision within sixty (60) days of the date the claimant receives notice of such denial. The statement shall set forth the reasons supporting the claim, the reasons such claim should not have been denied, and any other issues or comments which the claimant deems appropriate with respect to the claim. The Committee shall, if requested, make copies of the Plan documents available for examination by the claimant. The Committee shall issue a ruling and written notice within sixty (60) days after the date the claim is resubmitted. Such written notice shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provisions on which the decision is based. The Committee's decision of the appeal may be reviewed by the Board, which shall have the right to overrule the Committee. 16 ARTICLE IX AMENDMENT AND TERMINATION OF PLAN 9.1 Amendment. --------- (a) The Board may at any time amend the Plan in whole or in part, and may impose different requirements for different Participants, provided, however, that (i) no amendment shall be effective to decrease or restrict the amount accrued to that date on any Account maintained pursuant to any existing Deferral Commitment under the Plan; and (ii) on amounts that have been deferred up to the date of amendment, no amendment shall be effective to reduce the minimum interest credited or to be credited to Termination Accounts until their payment date or reduce the minimum interest credited or to be credited to Retirement Accounts until their payment date as provided in paragraph 2.13, without the consent of all Participants (or a Beneficiary in case a Participant is then deceased) who may be affected by such change; and (iii) no amendment shall be effective to alter the form of payment as elected by a Participant in any Participation Agreement. (b) The Committee may make administrative amendments to the Plan including but not limited to amendments to clarify the Plan language and to simplify and implement various administrative procedures, including matters relating to the calculation of death benefits and payments to Beneficiaries, which the Committee determines are consistent with the purpose and intent of the Plan. 9.2 Employer's Right to Terminate Future Deferrals. The Board ---------------------------------------------- may at any time terminate further deferrals into the Plan, by any person and may reject additional Participants in the Plan, if, in its sole judgment, such termination would be in the best interest of the Employer. Benefits from deferrals up to the point of termination of further deferrals shall be paid in the form elected by the Participant in his or her Participation Agreement and otherwise in accordance with this Plan, including crediting of interest, until all payments are complete. ARTICLE X MISCELLANEOUS 10.1 Unfunded Plan. This Plan is an unfunded plan maintained ------------- primarily to provide Deferred Compensation benefits for a select group of management employees or highly compensated employees. This Plan is not intended to create an investment contract, but to provide tax planning opportunities and retirement benefits to eligible individuals who have elected to participate in the Plan. Eligible individuals are select members 17 of management who, by virtue of their position with the Employer, are uniquely informed as to the Employer's operations and have the ability to materially affect the Employer's profitability and operations. 10.2 Unsecured General Creditor. The Participants and their -------------------------- Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of the Employer, nor shall they be Beneficiaries of, or have any rights, claims, or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer ("Policies"). Such Policies or other assets of the Employer shall not be held as collateral security for the fulfilling of the obligations of the Employer under this Plan. The Policies shall be the general, unpledged, unrestricted assets of the Employer, and the Employer may transfer, assign, sell, or use such policies without restriction. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. No Employer shall have any obligation under this Plan with respect to individuals other than that of the Employer's employees or directors or Beneficiaries thereof. 10.3 Nonassignability. Neither the Participant nor any other ---------------- person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate, or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by the Participant or any other person, nor be transferable by operation of law in the event of the Participant's or any other person's bankruptcy or insolvency. 10.4 Not a Contract of Employment. The terms and conditions of ---------------------------- this Plan shall not be deemed to constitute a contract of employment between the Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give the Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge the Participant at any time. 10.5 Protective Provisions. The Participant will cooperate --------------------- with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer. Notwithstanding the other provisions of this Plan, no death benefits in excess of the 18 Retirement Account balance shall be paid if during the first two (2) years of participation (including participation under the Promus Predecessor Plan) death occurs as a result of suicide. The Committee shall have sole discretion to determine whether death occurs as a result of suicide. 10.6 Terms. Whenever any words are used herein in the ----- masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 10.7 Captions. The captions of the articles, sections, and -------- paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 10.8 Governing Law. The provisions of this Plan shall be ------------- construed and interpreted according to the laws of the State of Tennessee. 10.9 Validity. In case any provision of this Plan shall be -------- held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 10.10 Notice. Any notice or filing required or permitted to be ------ given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to any member of the Committee, the Chief Executive Officer of the Employer, or the Employer's Statutory Agent. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 10.11 Successors. The provisions of this Plan shall bind and ---------- inure to the benefit of the Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Employer, and successors of any such corporation or other business entity. 19 IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors of the respective undersigned corporations, such corporations have caused this instrument to be executed by its duly authorized officers effective as of June 30, 1995. PROMUS HOTEL CORPORATION By: -------------------------------------------------- -------------------------------------------------- Title Attest: -------------------------------------------------- -------------------------------------------------- Title 20 EX-10.8 5 Exhibit 10(8) PROMUS HOTEL CORPORATION DEFERRED COMPENSATION PLAN This is an unfunded deferred compensation plan (referred to as the "Plan" or "DCP") for a select group of management or highly compensated employees ("Employees") of subsidiaries and affiliates of Promus Hotel Corporation ("Hotel"). The Plan is an amended continuation of the "DCP" offered by The Promus Companies Incorporated ("Promus"). This Plan will become effective the later of June 30, 1995, or the distribution date of the stock dividend for the spin-off of Hotel from Promus. The terms and provisions of the Plan are as follows: 1. Eligibility. ----------- 1.1 Only key Employees and members of the Board of Directors of Hotel who are not employees ("Directors") are eligible to participate. Key employees are generally those in grades 23 or higher. The "Company" or "participating Company" in this Plan refers to Hotel or to any subsidiary or affiliate of Hotel, as the case may be, whose Employees or former employees are Participants in the Plan. For Directors who are Participants in the Plan, references to the "Company" or "participating Company" refers to Hotel. Each respective corporation shall, as the participating Company, have the obligation under the Plan to effectuate the deferrals of its Participants, to make distributions to its Participants, and to otherwise perform the Company's obligations to its Participants. References to "Participants" in the Plan refers to a participating Company's actively participating Employees and Directors and also refers, where the context requires, to its former Employees and former Directors and beneficiaries of Employees and Directors who are receiving or entitled to receive benefits under the Plan. 2. Election of Amount of Deferred Compensation. ------------------------------------------- 2.1 Prior to a Year of Deferral, a Participant may elect to defer up to 12% of BASE SALARY and 100% of any CASH BONUS under the Company's annual -- --- bonus plan which would otherwise be payable to the Employee in the Year of Deferral. CASH BONUS refers to annual bonuses paid in March and does not include bonuses or incentive payments made at other times. A Director may defer up to 100% of his or her Director's cash fees during the Year of Deferral. The Company may permit new Directors or new Employees to participate for the remainder of a Year of Deferral by electing to participate prior to their commencement of service or employment or prior to receipt of their first payment of compensation. Amounts deferred are referred to as "Deferred Compensation." The amounts deferred under this Plan are not included as eligible earnings under the Hotel Savings and Retirement Plan (the "S&RP"). If an Employee is placed on salary continuation, deferrals under this Agreement will continue until the earlier of (a) the end of the Year of Deferral or (b) the end of the salary - ---------- continuation period, unless otherwise agreed by the Company. 2 2.2 Savings and Retirement Plan Exception. In addition to the ------------------------------------- deferrals permitted under 2.1 above, any Participant who participates at the maximum before-tax percentage allowed by the S&RP shall be deemed to have elected to defer under this Plan that portion of eligible S&RP earnings which the Participant elected to defer under the S&RP, up to six percent (6%) (or such other maximum before-tax percentage allowed by the S&RP for the Participant), which could not be deferred on a before-tax basis under the S&RP, by reason of DCP deferrals, under any law or regulation as determined by Hotel, but excluding any amount which was actually deferred into the S&RP but distributed back to the Participant in a following Plan year as an excess deferral. 2.3 Matching Contributions. ---------------------- (a) Eligibility. Matching contributions shall be credited to ----------- Participants in this Plan who are eligible to participate in the S&RP and elect to make a Basic Contribution (before-tax) equal to the maximum rate at which a Participant may elect before-tax contributions under the S&RP and such before-tax contribution is limited, by reason of DCP deferrals, under any law or regulation as determined by Hotel. (b) Amount. The Employer shall credit to each employee Participant's ------ Account a matching contribution for each calendar year equal to one hundred percent (100%) of the Participant's compensation elected to be deferred under this Plan for the year, such compensation being limited for purposes of this calculation to a maximum of six percent (6%) of the Participant's eligible S&RP earnings (which shall not include bonus 3 amounts or board fees). The matching contribution amount shall be offset by the actual matching contribution allocated to the Participant for the year under the S&RP. (c) Time of Credit. The Employer matching contribution shall be -------------- credited to a Participant's Account as of the last day of the calendar year or the date the Participant's employment ends, if earlier. Such amount shall commence accruing interest when it is credited to the account. 2.4 Vesting of Accounts. Each Participant shall be vested in the ------------------- amounts credited to such Participant's Account and earnings thereon as follows: (a) Amounts Deferred. A Participant shall be one hundred percent ---------------- (100%) vested at all times in the amount of salary, bonus and board fees deferred under this Plan. (b) Employer Matching Contribution. An Employee who leaves ------------------------------ employment for reasons other than Retirement (as defined in the S&RP), Total and Permanent Disability (as defined in the S&RP) or death shall be vested in the Employer matching contributions and interest thereon made for any particular year in accordance with the vesting provisions in the S&RP as it may be amended from time to time. Matching amounts and earnings thereon that are not vested 4 upon leaving employment shall be forfeited. The term "Deferred Compensation" in this Plan shall include vested matching amounts and interest thereon for distribution purposes. (c) Retirement, Disability or Death. An Employee shall become one ------------------------------- hundred percent (100%) vested in the matching amounts at Retirement (as defined in the S&RP), or upon Total and Permanent Disability (as defined in the S&RP) or death. 3. Deferred Compensation Account. ----------------------------- 3.1 The Company shall establish a bookkeeping account (the "Account") to evidence the Company's liability to the Employee or Director for each Year of Deferral. The Account shall be credited at the end of each accounting period month with an amount equal to the portion of Deferred Compensation payable during that month and with accrued interest. 3.2 Interest on Deferrals. Interest on the Account shall accrue and --------------------- be credited to the Account at the end of each calendar year in an amount equal to the Average Balance times the Average Prime Rate where: "Average Balance" equals the sum of the Account balances on each day during the year, divided by the number of days in the year; and "Average Prime Rate" equals the sum of the rates announced by Citibank, N.A. as its prime rate on the first business day of each calendar quarter during the year, divided by four. 5 3.3 The Company will notify each Participant quarterly of the value of his or her Account. 3.4 For periods shorter than a year, interest shall be calculated in a similar manner using the Average Balance during the short period and the Average Prime Rate applicable during the previous plan year. 4. Unfunded Plan. ------------- 4.1 The Company or Hotel is not required to earmark any assets for payment of, or make any investment with respect to, the Account. Any assets allocated to pay the Account will at all times remain the unrestricted assets of the Company, subject to the claims of its general creditors, and will at all times be available for the Company's use for whatever purpose it desires. The Company shall have, in general, the power to do and perform any and all acts with respect to any such assets in the same manner and to the same extent as an individual might or could do with respect to his or her own property. Without limiting the generality of the foregoing, the Company may invest in any and all types of property, whether real or personal, without regard to its location, including stock, securities, and property of the Company and any business entity controlling, controlled by or under common control with the Company. No enumeration of specific powers herein made shall be construed as a limitation upon the foregoing general power, nor shall any of the powers herein conferred upon the Company be exhausted by the use thereof, but each shall be continuing. 6 Title to and beneficial ownership of any assets, whether cash or investments, which the Company may earmark to pay the Account, shall at all times remain in the Company, and the Participant shall have no property interest whatsoever in any assets or investments of the Company. The Company's obligations under the Plan are unsecured and unfunded, and no assurances are given with respect to the Company's or Hotel's present or future financial condition. 5. Distributions from Deferred Compensation Account. ------------------------------------------------ 5.1 Lump Sum or Annual Distributions. (a) Lump sums and annual ------------------------------- installments for deferral elections made before January 1, 1995 (including deferrals for the year 1995) under the Promus Deferred Compensation Plan by Employees and Directors of Hotel who were at the time Employees or Directors of Promus or its affiliates will be governed by the deferral agreements signed for those years. The Company has assumed the obligations under such deferral agreements. For deferrals of compensation payable to Directors after June 30, 1995 and to Employees in plan years 1996 and thereafter, a Participant may elect (a) a lump sum to be paid upon leaving employment/service or upon a specified date but not later than leaving employment/service, or (b) annual installments of two to ten years. 7 (b) Payments of an Account will be paid or will start within 30 days after the elected date(s). The amount of any annual distribution from the Account shall be the balance of the Account on the date of distribution divided by the number of remaining years (including the annual distribution being made) over which distribution is to be made. In the case of a lump sum distribution or payment of an installment, the payment will include interest accrued on the Account since the end of the preceding interest accrual date until the date that the payment is calculated, computed on a per annum basis at the Average Prime Rate for the previous plan year. At the time of each annual distribution, the Company will provide the Participant with a valuation of the Account showing the amount remaining in the Account after the distribution. 5.2 Withholding Taxes. Under current law, Federal income taxes are ----------------- not withheld on Deferred Compensation when deferred. However, FICA (social security taxes) will be withheld from an Employee's Deferred Compensation if an Employee's maximum FICA withholding has not been reached. The Company will endeavor to take applicable FICA from other nondeferred compensation that is payable to the Employee at the same time that the deferral occurs but, if necessary, the amount of deferred salary and/or deferred bonus may be subject to reduction by reason of the FICA taxes. In addition, if any other law requires withholding on Deferred Compensation, the Company will apply this withholding to Deferred Compensation. 8 5.3 Election of Commencement of Distribution. The Participant shall ---------------------------------------- be required to elect the method and timing of distributions at the time a Participation Agreement is signed. The available distribution options will be determined by the Company and will be set forth in the Participation Agreement. 5.4 Leaving Employment or Service. Leaving employment will be deemed ----------------------------- to occur upon discontinuation or removal from the payroll; upon death; or upon disability if a licensed physician selected by or satisfactory to the Company certifies to the Company that, because of such disability, the Employee is not able to perform the duties of his or her position and will be unable to do so for a period of at least 12 months. For Directors, leaving service means resignation from the Board of Directors of Hotel or termination of active service on the Hotel Board of Directors. If the Employee enters an authorized leave of absence (such as temporary sick leave), this shall not be deemed ceasing to be an employee. If and when the Employee commences salary continuation, then he or she shall be deemed to have ceased to be an employee, for distribution purposes, at the end of the salary continuation period unless otherwise agreed by Hotel, with the first payment to be made within 30 days after leaving employment. The foregoing definition of leaving employment shall not necessarily have application to any other situation or benefit plan. 5.5 Date of Payment(s). If the Participant elects a lump sum ------------------ distribution, the entire value of the Account on the date of distribution shall be paid to the 9 Participant within 30 days after the date elected by the Participant for the payment from the Account. If distribution is to be made over a period of years, the first payment will be made within 30 days of the date elected by the Participant for the commencement of payments from the Account (i.e., the first payment will be made not later than 30 days after the date of leaving employment or service), and each successive annual payment will be made on or about the anniversary of the first payment. The Company may in its discretion accelerate any annual payment in a taxable year to an earlier date in the same taxable year. The Company may withhold applicable taxes as determined by the Company from any payment. 5.6 Selection of and Payment to Beneficiary. The Participant will be --------------------------------------- given the opportunity to designate a Primary Beneficiary and an Alternate Beneficiary in case of the Participant's death. Such designation will be effective when a signed beneficiary designation is submitted to the Company or Hotel. Such designation will remain in effect until changed by the Participant by submitting a new signed designation to the Company or Hotel. If the Participant dies prior to distribution of the entire Account, payment of the Account shall be made to the Primary Beneficiary, or, in the event the Primary Beneficiary has predeceased the Participant, to the Alternate Beneficiary. If the Participant qualifies for a distribution because of disability or termination of employment/service and thereafter dies before the payment of any distribution is made by the Company, 10 then the payment or payments will be made to the Primary Beneficiary or Alternate Beneficiary, if applicable, if the Company's payroll department has been notified of the death before the payment is released. Payments to a Beneficiary shall be in the manner elected in the deferral agreement signed by the Participant provided that the Company in -------- its sole discretion may at any time, at its own election or upon receipt of a written request from the Beneficiary, convert annual installments to a lump sum payment of the entire account. The Company has no obligation to convert installments to a lump sum if requested by a Beneficiary. However, such a change in distribution will be given consideration following a written request. Upon payment of a lump sum to the Beneficiary with respect to any deferral agreement, all obligations of the Company under the deferral agreement shall be terminated. A Participant may change a Beneficiary(ies) at any time by submitting written notice of the new Beneficiary(ies) to the Company or Hotel. If the Participant dies and has not designated a Beneficiary, or if all named Beneficiaries have predeceased him or her, payment from the Account shall be made to the Participant's estate in which case the estate shall be deemed the Beneficiary hereunder. 5.7 Irrevocable Elections. A Participant's elections are irrevocable --------------------- by the Participant and, subject to paragraph 9 "Termination by Company" hereof, cannot be amended, except amendments may be made by the Company in the case of 11 mistake or in case of a Participant's financial hardship as determined by the Company in its sole discretion. 5.8 Spin-off Transactions. Notwithstanding anything in the Plan to --------------------- contrary, in the event any business of Hotel or its subsidiaries is spun- off and a Participant becomes an employee or director of the company owning the spun-off business (the "Spin-Off Company") which adopts a deferred compensation plan that is substantially the same as the Plan, then the Human Resources Committee of the Board of Directors of Hotel may in its discretion determine as follows prior to such spin-off: (a) any director-Participant who resigns as a director of Hotel and who, within 90 days, commences service as a director of the Spin- Off Company will not be treated as having terminated service as a director for purposes of paying Plan benefits, and his or her entire Account balance and all obligations associated therewith will be transferred to the corresponding Plan of the Spin-Off Company; (b) a transfer of employment of a Participant to the Spin-Off Company will not be considered a termination of employment for purposes of paying Plan benefits or of forfeiting matching contributions and interest thereon; (c) a transferred Participant's Account balance as of the effective date of the spin-off and all obligations related thereto will be transferred to the corresponding plan of the Spin-Off Company; and 12 (d) any Participant who will immediately after the effective date of the spin-off be employed by Hotel (or a subsidiary thereof) and also by the Spin-Off Company (or a subsidiary thereof) will have the right to designate in writing (to be signed prior to the effective date of the spin-off) a percentage (from zero to 100%) of his or her Account balance that will be transferred to the Spin-Off Company (such percentage being applied to the balances attributable to each year of deferral) which will include the transfer of all obligations associated therewith. (To the extent such designation is not made, the Account Balance will remain in the Plan pursuant to its terms); and (e) Except to the extent related to that portion of a Participant's Account balance that is retained in the Plan pursuant to the above Section 5.8(d), no benefits will be payable under the Plan to a Participant whose Account balance (or portion thereof) is transferred to the Spin-Off Company. 6. Correction of Errors. -------------------- 6.1 In the event deferrals are not made or excessive deferrals are made due to a mistake or error including payroll errors, then the Company or Hotel will have discretion to correct the error in such manner as it deems appropriate. If the Participant does not object within 30 days of the occurrence of any mistake or 13 error regarding deferrals, then the Company or Hotel in its discretion may decide that the deferral mistake shall not be corrected or the Company or Hotel may elect to take such action as it deems necessary to correct or partially correct the mistake or error. The Company or Hotel may elect not to pay interest on amounts contributed to correct a nondeferral mistake or error if the Participant had not objected to the nondeferral within 30 days of the occurrence of the mistake or error. 7. Restriction Against Transfers and Assignments. --------------------------------------------- 7.1 Neither the Participant nor any Beneficiary shall have any right to commute, sell, assign, transfer, pledge, hypothecate or otherwise convey or encumber any right to receive any payment hereunder, and all such payments and all rights thereto are expressly declared to be non-assignable and non-transferable. The Account shall not be subject to the claims of the Participant's or a Beneficiary's creditors and the Company or Hotel shall not be obligated to disburse any funds from the Account to any creditor of the Participant or of a beneficiary. 8. Deferral Agreement Not An Employment Agreement. ---------------------------------------------- 8.1 A deferral agreement does not constitute a contract for continued employment of an Employee by the Company or Hotel. The Company or Hotel 14 reserves the same rights to modify the Employee's compensation and to terminate the Employee's employment with the Company or Hotel which it had prior to the execution of a deferral agreement. 9. Administration. -------------- 9.1 Committee; Duties. This Plan may be administered by a Committee, ----------------- which shall consist of not less than three (3) individuals selected by the Chief Executive Officer of Hotel or his designee. Members of the Committee may be Participants under this Plan. Hotel, the Committee and its agents have discretionary authority to decide all questions arising under the Plan including questions as to eligibility, correction of errors, and interpretation of the Plan and deferral agreements. 9.2 Agents. The Committee may appoint an individual to be the ------ Committee's agent with respect to the day-to-day administration of the Plan. In addition, the Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Company. 9.3 Binding Effect of Decisions. The decision or action of the --------------------------- Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 15 9.4 Indemnity of Committee. The Company and Hotel shall indemnify ---------------------- and hold harmless the members of the Committee or any agents or employees of the Company or Hotel against any and all claims, loss, damage, expense, or liability arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, Committee member, or such agent or employee of the Company or Hotel. 10. Claims Procedure. ---------------- 10.1 Claim. Any Participant or legal representative thereof may file ----- a claim for benefits under the Plan by submitting to the Committee a written statement describing the nature of the claim and requesting a determination of its validity under the terms of the Plan. The Committee shall issue a ruling and written notice with respect to the claim within 30 days after such claim is received. If the claim is wholly or partially denied, written notice shall be furnished to the claimant, which notice shall set forth in a manner calculated to be understood by the claimant; (a) the specific reason or reasons for denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) a description of any additional materials or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and 16 (d) an explanation of the claims review procedures. 10.2 Denial of Claim. Any Participant or legal representative --------------- thereof whose claim for benefits has been denied, may appeal such denial by resubmitting to the Committee a written statement requesting a further review of the decision within sixty (60) days of the date the claimant receives notice of such denial. The statement shall set forth the reasons supporting the claim, the reasons such claim should not have been denied, and any other issues or comments which the claimant deems appropriate with respect to the claim. The Committee shall, if requested, make copies of the Plan documents available for examination by the claimant. The Committee shall issue a ruling and written notice within sixty (60) days after the date the claim is resubmitted. Such written notice shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provisions on which the decision is based. Such decision shall be conclusive and binding on the Participant. 11. Amendment; Termination of Further Deferrals. -------------------------------------------- 11.1 Hotel may at any time amend the Plan in whole or in part, and may provide or agree to different requirements for different Participants, provided, however, that (i) no amendment shall be effective to decrease or restrict the amount accrued to that date on any Account maintained pursuant to any existing 17 deferral under the Plan; (ii) on amounts that have been deferred up to the date of amendment, no amendment shall be effective to reduce the interest credited or to be credited as provided in paragraph 3 of this Plan, and (iii) no amendment shall be effective to accelerate the payment of any Account relating to deferrals during 1992 and thereafter except Hotel retains the right to cause acceleration of payment to a Beneficiary pursuant to Section 5.7. 11.2 Right to Terminate Future Deferrals. The Company or Hotel may ----------------------------------- for any new calendar year terminate further deferrals into the Plan by any person or persons for that year and/or may reject additional Participants in the Plan, if, in its sole judgment, such termination or rejection would be in the best interest of the Company or Hotel. Benefits from deferrals up to the point of termination of further deferrals shall be paid in the form elected by the Participant in his or her Participation Agreement or otherwise in accordance with this Plan, including crediting of interest, until all payments are complete. 12. Miscellaneous. ------------- 12.1 Delivery of Notice. Any notice to a Participant may be given ------------------ either by delivery to the Participant or by deposit in the United States Mail, postage prepaid, addressed to his or her last-known address. Any notice to the Company or Hotel hereunder may be given either by delivery, in person or by deposit in the United States Mail, postage prepaid, addressed to Promus Hotel Corporation, 6800 Poplar Avenue, Memphis, Tennessee 38138, Attn: Corporate Secretary. 18 12.2 Governing Law. This Agreement shall be governed by the laws of ------------- Tennessee. 12.3 Immunity. So long as they act in good faith, the Company's and -------- Hotel's officers, directors, agents, or employees may act pursuant to this Agreement without any liability to a Participant or any other person. 12.4 Payment To Guardian. If a Plan benefit is payable to minor or a ------------------- person declared incompetent or to a person incapable of handling the disposition of property, the Company may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such minor or incompetent person. The Company may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit. 12.5 Captions. The captions of the articles, sections and paragraphs -------- of this Plan are for convenience only and shall not control the meaning or construction of any of its provisions unless the context clearly requires such control. 12.6 Validity. In case any provision of this Plan shall be held -------- illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 19 13. Successors and Assigns. ---------------------- A participating Company may assign its rights and obligations under any deferral agreement to any company or person that acquires all or substantially all of the stock or assets of the Company or that is a successor to the Company by merger. Hotel may assign its rights and obligations under this Plan to any successor to Hotel. PROMUS HOTEL CORPORATION By: ----------------------------------------- Title: -------------------------------------- Attest: ------------------------------------- Title: ------------------------------------- Dated as of May 26, 1995 20 EX-10.9 6 Exhibit 10(9) ESCROW AGREEMENT ---------------- ESCROW AGREEMENT, effective on the later of June 30, 1995 or the date of the distribution of the dividend shares in Promus Hotel Corporation to the shareholders of The Promus Companies Incorporated (the Spin-Off Date), by and between Promus Hotel Corporation, a Delaware corporation (the "Company"), the subsidiaries of the Company listed on the execution page of this Agreement ("Subsidiaries"), and NationsBank, formerly Sovran Bank, (the "Escrow Agent"). WHEREAS, the Company and certain Subsidiaries are, or may become, obligated under various employee plans and agreements to pay certain compensation which has been or may be deferred by their employees, certain other compensation which would be payable upon a change in control of the Company and certain supplemental retirement benefits to employees at such times as such compensation and benefits become payable; and WHEREAS, the aforesaid obligations of the Company and Subsidiaries are not funded or otherwise secured and the Company and Subsidiaries desire to assure the future payment of said deferred compensation and certain other compensation and retirement benefits for certain of its employees ("Participants") notwithstanding, except as herein specifically provided, any event that may occur in the future, including a dispute between the Company and an employee, a change in the Company's management or policies or a change in control of the Company; and WHEREAS, for purposes of assuring payments of said deferred compensation and certain other compensation and retirement benefits, the Company and the Subsidiaries which are obligated for such payments desire to deposit in an escrow account, subject only to the claims of the Company's creditors and, to the extent of funds contributed to the Escrow Fund by a Subsidiary, creditors of such Subsidiary obligated for such payments, as the case may be, amounts sufficient to fund such payments as they become payable; and WHEREAS, this Escrow Agreement shall be treated as if it were a grantor trust under the Internal Revenue Code and, accordingly, it is intended and expressly recognized that the income, deduction, and credits associated with the assets transferred to the Escrow Agent shall be passed through to the Company and shall be included in computing the Company's taxable income. NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the parties hereto agree as follows: ARTICLE I THE PLANS --------- SECTION 1.1 Plans and Agreements. The following Company -------------------- employee plans and agreements ("Plans") shall be subject to this Agreement: (a) Executive Deferred Compensation Plan effective as of the later of June 30, 1995 or the Spin-Off Date, as the same may be amended from time to time, including, without limitation, agreements of Participants relating to deferrals under such plan ("EDCP"). (b) Deferred Compensation Plan effective as of the later of June 30, 1995 or the Spin-Off Date, as the same may be amended from time to time, including, without limitation, individual Deferred Compensation Agreements of Participants relating to the deferral of salary or bonus ("DCP"). (c) Individual agreements as the same may be amended from time to time, relating to the retirement of any Participant. 2 (d) Severance Agreements, as the same may be amended from time to time, effective as of the later of June 30, 1995 or the Spin-Off Date between the Company and the Participants. SECTION 1.2 Participants. The Participants are: ------------ Employees --------- Champion, Carol G. Ralph B. Lake Dempsey, Donald H. Rose, Michael Halpern, M. Ronald Schultz, Raymond E. Jarvis, Jeffery M. Sullivan, David C. Keltner, Thomas L. Wells, Mark C. Outside Directors ----------------- Ellis, U. Bertram Jr. Peternell, Ben C. Fields, Debra J. Roth, Michael I. Hart, Christopher W. Stein, Jay Neel, C. Warren Terry, Ronald The Company may add Participants upon written notice to the Escrow Agent. For purposes of this Agreement, the beneficiary of any Participant who dies shall be deemed a Participant under this Agreement to the extent such beneficiary is entitled to then accrued benefits under the Plans. ARTICLE II ESCROW AND ESCROW FUND ---------------------- SECTION 2.1 Escrow. ------ (a) The Escrow Agent holds (i) the sum of $10.00 in cash, and (ii) life insurance policies described on Exhibit A attached hereto ("Life Insurance Policies"). In addition, the Company is delivering to the Escrow Agent concurrently herewith a summary, attached hereto as Exhibit B, of all of the benefits available under the Plans described in Section 1.01 hereof and a schedule, attached hereto as Exhibit C, of the 3 current Participants and the amounts credited or payable to each Participant under each Plan as of the date hereof. The Company shall also deliver to the Escrow Agent concurrently herewith, as Exhibit D, copies of the Plans as in effect on the date hereof and the election forms and agreements that identify the date(s) when the benefits are to commence and the method in which they are to be paid. Each year thereafter the Company will update these reports so that the Escrow Agent has an account and record at all times of the benefits to be paid and when they are to be paid. (b) In addition to the foregoing, the Company shall make payments or contributions to the Escrow Agent equal in value to any additional amount which is determined at the end of each calendar year, or at more frequent times as may be determined by the Company, by an actuary or certified public accountant selected by the Company to be necessary or sufficient to provide for or otherwise assure the payment of benefits then accrued, payable, or to be payable under the Plans based on deferrals up to that point in time (and also including severance payments then payable into escrow under any Severance Agreement of a Participant), which payment or contribution may be cash and/or property including life insurance policies (which shall then be included under the defined term "Life Insurance Policies" hereunder) and shall be made as promptly as practicable after the end of each calendar year or such other more frequent times as determined by the Company. Each such payment or contribution by the Company pursuant hereto shall be accompanied by a schedule of the individual Participants, including any new Participants, for whose accounts such payment is being made, which sets forth both the estimated liability with respect to each such Participant in respect of each Plan. 4 (c) The Company may, at any time or from time to time, deposit into escrow additional monies to pay premiums on specific Life Insurance Policies designated by the Company and to pay interest on any policy loans which interest is incurred and payable during the first seven years of any such policy. Upon the occurrence of such deposit, the Escrow Fund shall be deemed enlarged so that the Escrow Fund will thereafter be maintained at a level to pay accrued benefits to the Participants under the Plans based on deferrals to that point in time and also to pay premiums on the designated policies and to pay interest on such policy loans. (d) If at any time or from time to time a certified public accountant or actuary selected by the Company (which actuary may be a representative of Management Compensation Group) determines that the then present value of the Escrow Fund (including, but not limited to, the cash surrender value of any Life Insurance Policies and any proceeds from Life Insurance Policies), using an annual discount rate equal to the Company's then current long-term annual borrowing rate, is larger than necessary to pay benefits then accrued, payable, or to be payable under the Plans based on deferrals up to that point in time, and to pay policy premiums and make interest payments on policy loans if the Company shall have made a deposit under Section 2.01(c), then the Escrow Agent shall forthwith transfer, deliver, and assign to the Company such funds or property (including, but not limited to, any proceeds from Life Insurance Policies or Life Insurance Policies themselves) as may be specified in a written instruction to the Escrow Agent from the Company so that the Escrow Fund is not overfunded. Said written instruction shall be in the form of a letter signed by the Controller or Assistant Controller of the Company and shall be accompanied by an affidavit of the Controller or Assistant 5 Controller which shall state to the effect that, based on the opinion of the aforesaid actuary or certified public accountant selected by the Company, after the delivery of such funds or property to the Company, the Escrow Fund will not be underfunded or overfunded (i) for purposes of paying accrued benefits under the Plans (assuming that payment of such benefits were to commence as of the date of the letter or within 10 days thereof) to Participants when such benefits become due and payable based on deferrals up to the end of the month prior to the date of said written instruction and (ii) for purposes of Section 2.01(c) if the Company shall have made a deposit under Section 2.01(c). Upon receipt of the foregoing written instruction, the Escrow Agent shall forthwith deliver, transfer, and assign to the Company the funds and/or property (including but not limited to any Life Insurance Policies together with all incidents of ownership relating thereto) specified in the written instruction. (e) Any actuary or certified public accountant that provides an opinion or advice in connection with this Agreement shall have discretion to use such assumptions as he or she deems reasonably appropriate in providing any opinions or advice. In addition, any such opinion or advice may be based upon reasonable estimates or may use estimated numbers or projections which are deemed reasonable. Notwithstanding the foregoing, such actuary or accountant shall assume, for EDCP liabilities, that all EDCP Participants (other than those who have already terminated and are receiving the Termination Rate) will be entitled to an interest rate of not less than the minimum Retirement Interest Rate specified in the EDCP with respect to their account balances until paid. Any such accountant or actuary shall have no liability to the Company, the Escrow Agent, or any Participant or beneficiary if such assumptions, projections, or 6 estimates are subsequently held erroneous (other than by reason of fraud or intentional miscalculation). SECTION 2.2 Escrow Fund. ----------- (a) As used herein, the term "Escrow Fund" shall mean (i) the cash and Life Insurance Policies held by the Escrow Agent as described in Section 2.01(a) hereof plus all amounts delivered hereafter pursuant to Sections 2.01(b) and 2.01(c) hereof, in whatever form held or invested as provided herein, (ii) subject to Section 2.02(b) below, any income or earnings derived from amounts delivered to the Escrow Agent pursuant to Sections 2.01(a), 2.01(b), and 2.01(c), and (iii) the Life Insurance Policies delivered to the Escrow Agent including, but not limited to, the cash surrender value thereof and any and all proceeds derived from such policies. Subject to the provisions of Section 2.01, the Escrow Fund shall be held, invested and reinvested by the Escrow Agent only in accordance with this Section 2.02. The Escrow Agent shall use the Escrow Fund to pay benefits and amounts payable to the Participants under the Plans when due if and to the extent that such benefits are not paid by the Company. For this purpose, the Escrow Agent shall, to the extent necessary to pay unpaid benefits, cancel any or all of the Life Insurance Policies and obtain and use the cash surrender value thereof to pay such benefits, provided, however, the Escrow Agent shall first give the Company 10 business days prior written notice specifying which policy or policies will be cancelled. Such policies shall then not be cancelled if the Controller or Assistant Controller of the Company or any Vice President of the Company informs the Escrow Agent during the 10-day notice period that such benefits have been paid. The Escrow Agent shall use its good faith efforts to invest or reinvest from time to time all, or such part, of any cash 7 in the Escrow Fund as it believes prudent under the circumstances (taking into account, among other things, anticipated cash requirements for the potential payment of amounts due under the Plans as provided in Section 3.01 hereof and any other amounts payable under this Agreement) in either one or a combination of the following investments: (i) investments in direct obligations of the United States of America or agencies of the United States of America or obligations unconditionally and fully guaranteed as to principal and interest by the United States of America, in each case maturing within one year or less from the date of acquisition; or (ii) investments in negotiable certificates of deposit issued by a commercial bank organized and existing under the laws of the United States of America or any state thereof having a combined capital and surplus of at least $500 million; (iii) investments in guaranteed funding agreements of insurance companies having total assets in excess of $2 billion, provided such investments shall have withdrawal provisions -------- appropriate for paying benefits to Participants when due and other payments required under this Agreement; or (iv) investments in money market funds, including, but not necessarily limited to, the money market fund maintained by the Escrow Agent, provided, however, that the Escrow Agent shall not -------- ------- be liable for any failure to maximize the income earned on that portion of the Escrow Fund as is from time to time invested or reinvested as set forth above, nor for any loss of income due to liquidation of any investment which the Escrow Agent, in its sole discretion, 8 believes necessary to make any payments or to reimburse expenses under the terms of this Agreement. The Escrow Agent shall be named as the owner and beneficiary of the Life Insurance Policies and, subject to Section 2.02(a), shall have the right to cancel such policies and receive the cash surrender value, and shall further have the right to borrow against cash policies. If any policy is reassigned back to the Company, the Company shall then be the owner and beneficiary thereof. If the Company makes a deposit under Section 2.01(c) for the purpose of paying premiums and interest on policy loans with respect to any specified Life Insurance Policies in escrow, then the Escrow Agent shall pay the premiums due on such policies as may be necessary or appropriate to keep the policies in force. If the Escrow Agent borrows against such policies, it will engage in such borrowing and will pay interest on loans in a manner that assures that interest payable on policy loans will be deductible by the Company for Federal income tax purposes to the extent that such interest would otherwise be deductible to the Company under the law in effect at such time if the Company was the owner and beneficiary of such policies. If the Company makes a deposit under Section 2.01(c), the Escrow Agent may borrow from the Life Insurance Policies to pay premiums so long as the interest on such loans is deductible by the Company for Federal income tax purposes. The Escrow Agent shall inform the Company of the need to borrow on such policies (without limiting the Company's right to direct such borrowings) and the Company shall advise the Escrow Agent as to whether the interest to be paid on such loans will be deductible. 9 (b) Except as hereinafter provided, all net interest and other net income credited on the investments of the Escrow Fund, to the extent not necessary to provide for any payments or expenses required or contemplated by this Agreement, shall be the property of the Company and shall not constitute a part of the Escrow Fund. Such net interest and other net income credited as of the end of any calendar quarter shall be paid over to the Company by the Escrow Agent as promptly as practicable, or, at the option of the Company exercisable by delivering written notice to the Escrow Agent, shall be contributed to the Escrow Fund and applied towards the Company's obligation, pursuant to Section 2.01(b) hereof, to deliver further amounts to the Escrow Fund. Notwithstanding anything herein to the contrary, the Company's Chief Executive Officer and Chief Financial Officer, jointly, shall have authority to direct the Escrow Agent in writing, from time to time, to borrow from any Life Insurance Policies in the Escrow Fund and use the funds received from such borrowing to purchase other life insurance policies, including variable insurance or annuity contracts, as may be directed in writing by the Company's Chief Executive Officer and Chief Financial Officer, jointly, which other insurance policies shall be assets of the Escrow Fund subject to the terms and provisions of the Escrow Agreement, as amended. The Escrow Agent shall act only as an administrative agent in carrying out directed investment transactions in accordance with this paragraph and shall not be responsible for the investment decision. If a directed investment transaction violates any duty to diversify, to maintain liquidity or to meet any other investment standard or other requirement under this Escrow Agreement or applicable law, the entire responsibility shall rest upon the Company. The Escrow Agent 10 shall be fully protected in acting upon or complying with any restrictions or directions provided in accordance with this paragraph. (c) All losses of income or principal in respect of, and expenses (including, as provided in Section 4.01(g) hereof, any expenses of the Escrow Agent) charged against, the Escrow Fund shall be for the account of the Company and the Company shall be obligated to promptly reimburse the Escrow Fund for any loss in principal amount of, or expense charged against, the Escrow Fund. ARTICLE III RELEASE OF ESCROW FUND ---------------------- SECTION 3.1 Deliveries to Participants. The Escrow Agent -------------------------- shall hold the Escrow Fund in its possession under the provisions of this Agreement until authorized to deliver the Escrow Fund or any specified portion thereof as follows: (a) If the Company does not make any payments under the Plans when due, the Escrow Agent shall deliver to individual Participants from the Escrow Fund the amounts that are payable to the Participants, at such times as such amounts become payable in accordance with the terms of the Plans. The Escrow Agent is authorized to comply with such terms as may be reasonably explained by the Company in writing. The Company will inform the Escrow Agent in writing from time to time as to the timing and amounts of payments due under the Plans. If the Company does not instruct the Escrow Agent as to amounts of payments due under the Plans or if the Escrow Agent reasonably deems such instructions to be erroneous or improper, then the Escrow Agent is authorized to take such steps as it deems necessary to determine the correct amounts 11 and payments including, but not limited to, obtaining such information from Management Compensation Group of Portland, Oregon. (b) In the event a Participant reasonably believes that he or she has not received timely payment of any amount or benefit payable to such participant from the Escrow Fund in respect of a Plan, the Participant shall be entitled to deliver to the Escrow Agent written notice (the "Participant's Notice") setting forth payment instructions for the amount or benefit the Participant believes is due under a Plan. The Escrow Agent shall deliver a copy of the Participant's Notice to the Company within ten business days of receipt thereof. If the Company does not deliver written notice to the Escrow Agent objecting to the payment instructions contained in the Participant's Notice within ten business days of receipt thereof from the Escrow Agent, the Escrow Agent shall make the payment set forth in the Participant's Notice. If it is necessary to cancel any Life Insurance Policies for this purpose, the Escrow Agent shall follow the 10-day notice procedure set forth in Section 2.02(a) hereof regarding the cancellation of Life Insurance Policies. If the Company delivers timely written notice to the Escrow Agent objecting to the payment to the Participant requested in the Participant's Notice, which notice shall be delivered by the Escrow Agent to the Participant within five business days of receipt thereof, the Escrow Agent shall be obligated to make the payment or provide the benefit set forth in the Participant's Notice (unless the Company objects on the grounds that the payment has already been made in which event the procedures at the end of this Section 3.01(b) shall apply) upon receipt from the Participant of a written undertaking, in the form attached hereto as Exhibit E, to indemnify and hold harmless the Escrow Agent and the Company from and against all losses or claims which may 12 result from any incorrect payment or benefit which is made to the Participant pursuant to the Participant's Notice. If the Company objects on the grounds that the requested payment has already been made, the Escrow Agent shall not make the payment upon confirming that the payment has already been made. If the Escrow Agent does not, after due inquiry and investigation, confirm that such payment or payments have been made, then the Escrow Agent shall make the requested payment or payments. (c) To the extent that the Company or a Subsidiary from time to time makes payments under the Plans which payments the Escrow Fund is intended to protect, the Escrow Agent shall upon request of the Company, using the Escrow Fund, promptly reimburse the Company for any such payment, together with interest as provided below. The Company may specify that such reimbursement and interest payment shall be in the form of the cash surrender value of Life Insurance Policies and in that instance the Escrow Agent shall assign, transfer, and deliver to the Company Life Insurance Policies designated by the Company as representing not less than such value. Such reimbursement and interest payment shall be made within 60 business days after a written notice is delivered by an officer of the Company to the Escrow Agent setting forth the specific amounts paid by the Company or the Subsidiary and specifying who received such payments and the date thereof. Said reimbursement amount shall bear interest, at the rate specified in Section 2.01(d) hereof, from the date the Company or the Subsidiary made such payment. SECTION 3.2 Claims of Company Creditors in Event of Bankruptcy -------------------------------------------------- or Insolvency. It is the intent of the parties hereto that the Escrow Fund - ------------- is and shall remain at all times subject to the claims of the general creditors of the Company (and of any applicable 13 Subsidiary to the extent of funds contributed to the Escrow Fund by such Subsidiary) in the event of bankruptcy or insolvency of the Company or any applicable Subsidiary. Accordingly, the Company or the Subsidiaries shall not create a security interest in the Escrow Fund in favor of the Participants or any creditor. The Company's Board of Directors or Chief Executive Officer shall provide the Escrow Agent with written notice of the Company's or any applicable Subsidiary's bankruptcy or insolvency. In the case of bankruptcy, such notice is to be accompanied by a certified copy of the petition commencing the bankruptcy proceeding under the Bankruptcy Code, 11 U.S.C. 11 et seq. When so notified, the Escrow Agent will suspend -- ---- any further payment from the Escrow Fund to any Participants to whom the bankrupt entity is obligated under the Plans, and will hold the Escrow Fund for the benefit of the Company's general creditors (or the general creditors of any applicable Subsidiary to the extent of funds contributed to the Escrow Fund by such Subsidiary) only as directed by a court of competent jurisdiction. The Company or a Subsidiary will be considered insolvent if the sum of its debt is greater than all its property at a fair market valuation. ARTICLE IV ESCROW AGENT ------------ SECTION 4.1 Escrow Agent. ------------ (a) The duties and responsibilities of the Escrow Agent shall be limited to those expressly set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Escrow Agent. (b) If, pursuant to Section 3.02 hereof or otherwise, all or any part of the Escrow Fund is at any time attached, garnished, or levied upon by any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property 14 shall be stayed or enjoined by any court order, or in case any order, writ, judgment or decree shall be made or entered by a court affecting such property or any part thereof, then and in any of such events the Escrow Agent is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree, and it shall not be liable to the Company or any Participant by reason of such compliance even though such order, writ, judgment or decree subsequently may be reversed, modified, annulled, set aside or vacated. (c) The Escrow Agent shall maintain such books, records and accounts as may be necessary for the proper administration of the Escrow Fund, including, without limitation, as provided in Section 2.01 hereof, and shall render to the Company, on or prior to each January 31 following the date of this Agreement until the termination of this Agreement (and on the date of such termination), an accounting with respect to the Escrow Fund as of the end of the then most recent calendar year (and as of the date of such termination). (d) The Escrow Agent shall not be liable for any act taken or omitted to be taken hereunder if taken or omitted to be taken by it in good faith. The Escrow Agent shall also be fully protected in relying upon any notice given hereunder which it in good faith believes to be genuine and executed and delivered in accordance with this Agreement. (e) The Escrow Agent may consult with legal counsel to be selected by it, and the Escrow Agent shall not be liable for any action taken or suffered by it in accordance with the advice of such counsel. 15 (f) The Escrow Agent shall be reimbursed by the Company for its reasonable expenses incurred in connection with the performance of its duties hereunder and shall be paid reasonable fees for the performance of such duties in the manner provided by paragraph (g) of this Section 4.01. (g) The Company agrees to indemnify and hold harmless the Escrow Agent from and against any and all damages, losses, claims or expenses as incurred (including expenses of investigation and fees and disbursements of counsel to the Escrow Agent) arising out of or in connection with the performance by the Escrow Agent of its duties hereunder. Any amount payable to the Escrow Agent under paragraph (f) of this Section 4.01 or this paragraph (g) shall be paid by the Company promptly upon notice by the Escrow Agent to the Company. If such payment is not made within 60 days of the Company's receipt of such notice, then the Escrow Agent may pay such fees from the Escrow Fund. If it is necessary to use the cash surrender value of any Life Insurance Policies for this purpose, the Escrow Agent shall use the 10-day notice procedure set forth in Section 2.02(a) hereof prior to cancellation of any policy. In the event payment is made hereunder to the Escrow Agent from the Escrow Fund, the Escrow Agent shall promptly notify the Company in writing of the amount of such payment. The Company agrees that, upon receipt of such notice, it will deliver to the Escrow Fund an amount of money or property equal to any payments made from the Escrow Fund to the Escrow Agent pursuant to paragraph (f) of this Section 4.01 or this paragraph (g). The failure of the Company to transfer any such amount shall not in any way impair the Escrow Agent's right to indemnification, reimbursement and payment pursuant to paragraph (f) of this Section 4.01 or this paragraph (g). 16 (h) Notwithstanding any other provisions of the Agreement, the Escrow Agent shall not be required to pay any benefits, premiums on insurance policies or expenses from funds other than the Escrow Fund. If there are not sufficient funds in the Escrow Fund to meet any one or more of the foregoing obligations that are due, then the Escrow Agent shall notify the Company of the amount needed to meet such obligations. Upon receipt of the funds from the Company, and not before then, the Escrow Agent shall pay for such obligations. SECTION 4.2 Successor Escrow Agent. The Escrow Agent may ---------------------- resign and be discharged from its duties hereunder at any time by giving notice in writing of such resignation to the Company and each Participant specifying a date (not less than 30 days after the giving of such notice) when such resignation shall take effect. Promptly after such notice, the Company and Participants having at least 50 percent of all amounts then accounted for in the Escrow Fund with respect to their accounts shall appoint a successor Escrow Agent, such successor Escrow Agent to become Escrow Agent hereunder upon the resignation date specified in such notice. If the Company and the Participants are unable to so agree upon a successor Escrow Agent within 30 days after such notice, the Escrow Agent shall be entitled, at the expense of the Company, to petition the United States District Court for the Western District of Tennessee or any of the courts of the State of Tennessee having jurisdiction to appoint its successor. The Escrow Agent shall continue to serve until its successor accepts the escrow and receives the Escrow Fund. The Company and Participants having at least 50 percent of all amounts then accounted for in the Escrow Fund with respect to their accounts may agree at any time to substitute a new Escrow Agent by giving fifteen days' notice thereof to the Escrow Agent then acting. The Escrow Agent and any successor thereto appointed hereunder shall be 17 a bank or trust company located in the United States having a combined capital and surplus of at least $500 million. Upon the appointment of a successor, the Escrow Agent shall transfer the Escrow funds to the successor and be relieved of any further liability to the Company, Participants or any other parties that may otherwise have a claim against any of the plans described in Section 1.01 hereof. ARTICLE V TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 5.1 Termination. This Agreement shall be terminated ----------- upon the earliest of the four following events: (i) the exhaustion of the Escrow Fund; (ii) the final payment of all amounts payable to the Participants pursuant to the Plans; (iii) upon the vote of a majority of the directors of the Company then in office, but only with the written consent of Participants having at least 50 percent of all amounts then accounted for in the Escrow Fund with respect to their accounts, or (iv) 50 years from the date hereof. Promptly upon termination of this Agreement, any remaining portion of the Escrow Fund shall be assigned, transferred, and delivered to the Company. SECTION 5.2 Amendment and Waiver. This Agreement may not be -------------------- amended except by an instrument in writing signed on behalf of the parties hereto together with the written consent of Participants having at least 50 percent of all amounts then accounted for in the Escrow Fund with respect to their accounts. The parties hereto, together with the consent of Participants having at least 50 percent of all amounts then accounted for in the Escrow Fund with respect to their accounts, may at any time waive compliance with any of the agreements or conditions herein. Any agreement on the part of a party hereto or a Participant to any such waiver shall be valid if set forth in an instrument in writing signed on behalf of such party or 18 Participant. Notwithstanding the foregoing, any such amendment or waiver may be made by written agreement of the parties hereto without obtaining the consent of the Participants if such amendment or waiver does not adversely affect the rights of the Participants hereunder. No such amendment or waiver relating to this Agreement may be made with respect to a particular Participant unless said Participant has agreed in writing to such amendment or waiver. ARTICLE VI GENERAL PROVISIONS ------------------ SECTION 6.1 Further Assurances. The Company shall, at any ------------------ time and from time to time, upon the reasonable request of the Escrow Agent, execute and deliver such further instruments and do such further acts as may be necessary or proper to effectuate the purposes of this Agreement. SECTION 6.2 Certain Provisions Relating to this Agreement. --------------------------------------------- (a) This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all prior agreements, arrangements and understandings relating thereto. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives. (b) This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee, other than and without reference to any provisions of such laws regarding choice of laws or conflict of laws. (c) In the event any provision of this Agreement or the application thereof to any person or circumstances shall be determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the 19 application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. (d) Notwithstanding any of the provisions of this Agreement, this Agreement shall not create on behalf of a Participant or any beneficiary of a Participant any preferred right or secured interest in any asset held under this Agreement; and a Participant and any beneficiary of a Participant shall at all times be a general, unsecured creditor of the Company and of any applicable Subsidiary, subject to such rights and preferences as may otherwise exist under applicable law. SECTION 6.3 Notices. Any notice, demand or waiver required or ------- permitted hereunder shall be in writing and shall be given personally or by prepaid registered or certified mail, return receipt requested, or by Federal Express, addressed as follows: If to the Company: Promus Hotel Corporation 6800 Poplar Avenue, Suite 200 Memphis, TN 38138 ATTN: Secretary If to the Escrow Agent: NationsBank Trust Department 1 NationsBank Plaza Nashville, Tennessee 37239-1697 If to a Participant, to the last given address of such Participant. A notice shall be deemed received upon the date of delivery if given personally or, if given by mail, upon the receipt thereof. SECTION 6.4 Third Party Beneficiaries. Each present ------------------------- Participant or future Participant, and each beneficiary of a Participant in case of the death of a Participant, is an intended third party beneficiary under this Agreement, and shall be entitled to enforce all terms and provisions hereof with the same force and effect as if such person had been a party hereto. 20 SECTION 6.5 Non-Assignment. Participants and their -------------- beneficiaries may not assign, pledge, encumber, or otherwise transfer any of their rights hereunder and no creditor of any Participant or of any beneficiary of a Participant shall have any claim or right to the funds under this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PROMUS HOTELS, INC. PROMUS HOTEL CORPORATION BY: BY: ------------------------- ----------------------------------- TITLE: TITLE: ---------------------- -------------------------------- NATIONSBANK (formerly Sovran Bank) BY: ------------------------- TITLE: ---------------------- ______________________ 21 EXHIBIT E --------- Indemnity Agreement ------------------- The undersigned, ____________________________, in consideration of receiving certain disputed benefit payments pursuant to an Escrow Agreement dated ________________, 1995, between Promus Hotel Corporation (the "Company") and __________________ _________________ ("Escrow Agent") hereby agrees to indemnify and hold harmless the Company and the Escrow Agent from and against any and all losses, damages, expenses, or claims which may result from any incorrect payment or incorrect benefit which is made to the undersigned pursuant to a notice delivered by the undersigned to the Escrow Agent. Dated: _______________________ _________________________________ Participant EX-10.10 7 Exhibit 10(10) PROMUS HOTEL CORPORATION ------------------------ SAVINGS AND RETIREMENT PLAN --------------------------- TRUST AGREEMENT --------------- THIS TRUST AGREEMENT made and entered into at Memphis, Tennessee, as of May 26, 1995, by and between Promus Hotel Corporation, a corporation duly organized and existing under the laws of the State of Delaware having its principal place of business in Memphis, Tennessee, and Robert S. Davis, Donald H. Dempsey, Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins, Frederick G. Schultz and Mark C. Wells, Memphis, Tennessee, acting in their fiduciary capacities as co-trustees (hereinafter referred to as the "Trustees"); RECITALS -------- A. DEFINITIONS. Wherever used herein, the following terms shall ----------- (unless the context clearly requires otherwise) have the following meanings: 1. "Corporation" shall mean Promus Hotel Corporation. 2. "Employer" shall mean any company which has adopted or hereafter adopts the Plan (as hereafter defined), including, but not limited to, the Corporation and those affiliates of the Corporation participating in the Plan. 3. "ERISA" shall mean the Employment Retirement Income Security Act of 1974, as amended from time to time. 4. "Fund" shall mean the trust assets held by the Trustees pursuant to the terms of this Agreement and the Plan. 5. "Plan" shall mean the Promus Hotel Corporation Savings and Retirement Plan as amended from time to time. 6. "Trust" shall mean the trust established by this Agreement. B. BACKGROUND ---------- 1. The Corporation adopted and established the Plan. The Plan will commence on the effective date of the spin-off of the Corporation from The Promus Companies Incorporated scheduled for June 30, 1995. Said Plan provides for contributions by the Corporation to be held in trust, invested and paid out by the Trustees to Participants and their Beneficiaries or representatives for the accomplishment of the purposes of the Plan. The Corporation desires to provide a trust pursuant to the Plan which is intended to qualify under Sections 401 and 501 of the Internal Revenue Code, and regulations issued thereunder, as a tax-exempt trust, and to comply with the requirements of ERISA. NOW, THEREFORE, in consideration of the premises and the covenants herein contained, the Corporation and the Trustees agree as follows: SECTION I Trust and Fund -------------- 1.1 The Trust created by this agreement shall hereafter be known as the "Promus Hotel Corporation Savings and Retirement Trust" or "Trust" and shall continue without interruption to be part of the Plan, which Plan is intended to continue to be qualified under Section 401(a) of the Internal Revenue Code. 2 1.2 The definitions set forth in Section 2 and elsewhere in the Plan are incorporated herein by reference, and terms not otherwise defined herein shall have the same meanings given them in said Plan. 1.3 This Trust Agreement, as hereafter modified or amended, shall constitute the Trust Agreement referred to in paragraph 2.51 of the Plan. SECTION 2 Plan ---- 2.1 The Corporation shall deliver to the Trustees a copy of the Plan and each amendment thereto for convenience of reference, but the rights, powers, titles, duties, discretion and immunities of the Trustees shall be governed solely by this Trust Agreement. SECTION 3 Administration -------------- 3.1 A majority of the Trustees then serving shall constitute a quorum for the transaction of business, provided prior notice of the meeting has been given to all Trustees then serving. All actions taken by the Trustees shall be by vote of a majority of those present at a meeting of the Trustees at which a quorum is present, or without a meeting by a written instrument signed by all Trustees then serving. 3.2 The Trustees shall administer their duties under the Plan and with respect to the Fund in accordance with the provisions of the Plan and this Agreement, except to the extent their responsibilities have been properly delegated 3 pursuant to the provisions of the Plan and this Agreement and except to the extent the Corporation and its delegees have been given administrative responsibilities under the Plan. No Trustee shall participate in making or implementing any decision of the Trustees with respect to the personal pecuniary interest of such Trustee or the interests of such Trustee's beneficiaries. 3.3 The Trustees shall have complete authority to determine the existence of rights and interests in the Fund of all persons having or claiming any rights under the Plan. SECTION 4 Contributions ------------- 4.1 The Trustees shall be accountable for all contributions received by them but shall have no duty to require any contributions to be made to them, or to determine that the amounts received comply with the Plan, or to determine that the fund is adequate to provide the benefits payable pursuant to the Plan. The Trustees shall be responsible for the maintenance of records which will clearly reflect each payment received from each employer. SECTION 5 Payments from the Fund ---------------------- 5.1 Benefit payments to Participants and Beneficiaries under the Plan shall be made from the Fund by the Trustees in such manner, at such times and in such amounts as shall be provided by the Plan. The Trustees shall have no responsibility to see to the application of payments so made. 4 5.2 The Trustees shall be reimbursed for any expenses incurred by them that are reasonably necessary and incident to the administration of the Plan and the Trust. The Trustees shall be paid such reasonable compensation for their services as shall be agreed upon from time to time by the Corporation and the Trustees. To the extent the Employer does not pay such expenses and compensation, they shall be paid from the Fund. The Employer or the Corporation may advance or temporarily pay such expenses and compensation which the Fund will repay upon request of the Employer or Corporation. 5.3 The Trustees are authorized, but not required, to withhold from distribution to any payee such sums as may reasonably be necessary to cover federal and state taxes which are, or may be, assessed with regard to the amount distributable to such payee and for which the Trustees or the Fund may be liable. Upon discharge or settlement of such tax liability, the Trustees shall pay or cause to be paid any remaining balance of the sums so withheld to such payee or to his estate. Prior to making any payment or distribution hereunder, the Trustees may require such releases or other documents from any lawful taxing authority, and may require such indemnity from any payee or distributee, as the Trustees shall reasonably deem necessary for their protection or for the protection of the Fund. 5.4 Subject to the proviso at the end of this Section 5.4, no one other than Participants and their Beneficiaries shall have any interest in the Fund and the following restrictions shall apply to distributions: (a) Distributions payable from the Fund shall not be subject in any manner to anticipation, alienation, sale, 5 transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including liability for alimony or other payments for property settlement or support of a spouse or former spouse or any other relative of the Employee prior to actually being received by the person entitled to the benefit under the terms of the Plan, excluding transfer by death or mental incompetency. (b) Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable under the Plan shall be void. (c) The Fund shall not be in any manner liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder. (d) None of the Plan benefits or Trust assets shall be considered an asset of the Employee in event of his divorce, insolvency or bankruptcy. PROVIDED, HOWEVER, the restrictions of this Section 5.4 shall have no application to (1) distributions under a qualified domestic relations order that meets the requirements of ERISA Section 206(d) (which may be a lump sum distribution of vested amounts irrespective of the age of the Employee or the alternate payee), (2) circumstances in which an Employee has obtained a loan from the plan secured by his vested account balance in which case the Employee's vested balance shall be subject to offset and attachment by the Trust and the Plan upon default in the loan, or (3) to the extent permitted by applicable law, Federal tax liens or levies pursuant to Federal law. 6 5.5 The fees payable by the Employer for actuarial, legal, accounting or other necessary and proper services relating to the administration of the Plan and Trust (including fees for the Trustees) shall be paid by the Employer if the Employer elects to pay them. If the Employer does not elect to pay such fees and expenses (or advances them temporarily) or if they are not so paid, they shall be payable or reimbursed by the Trustees out of the Fund, and until paid shall constitute a first and prior charge and lien against the Fund. The Trustees may also on their own volition employ, for purposes of managing or administering the Fund, accountants, attorneys, actuaries, consultants, advisers, and any other persons, firms, or corporations as the Trustees may designate and may pay from the Fund the reasonable fees, expenses, and compensation of such parties. The Trustees may also contract or make reasonable arrangements with the Corporation, an Employer or other parties in interest for office space, or legal, accounting or other services necessary for the establishment or operation of the Trust, if no more than reasonable compensation is paid therefor. SECTION 6 Management of the Fund ---------------------- 6.1 The Trustees may employ an Investment Manager or Managers to manage the Fund or any part thereof or to advise the Trustees. "Investment Manager" shall mean a person who is registered as an investment adviser under the Investment Advisers Act of 1940, a bank as defined in such Act, or an insurance 7 company which is qualified to manage the assets of employee benefit plans under the laws of more than one state, or any other entity or person permitted by applicable law to be an Investment Manager for the Fund. No person shall be employed as Investment Manager unless he has first acknowledged in writing that he is a fiduciary with respect to the Plan, and unless the extent of his authority and responsibility with respect to the management of the Fund has been identified by written agreement with the Trustees. Such authority and responsibility may extend to the making, acquisition, retention, sale or other disposition of Fund investments to the same extent that the Trustees are authorized and empowered so to do under the terms of this Agreement. If an Investment Manager is employed pursuant to this Section, the Trustees shall not have any discretionary authority or responsibility with respect to Fund investments to the extent that such authority and responsibility has been given to the Investment Manager, but rather shall act upon and pursuant to the direction of the Investment Manager. The Trustees may change Investment Managers at any time, as the Trustees deem appropriate, and the Trustees may choose to manage the Fund, or any part of the Fund, without employing an Investment Manager. The Trustees may also appoint an investment adviser. 6.2 The Trustees, whether acting pursuant to the direction or advice of a duly appointed Investment Manager or investment adviser, or upon their own 8 discretion with respect to Fund investments not subject to such direction, shall, except as otherwise restricted by law and the provisions hereof and the Plan, be authorized and empowered: (a) to invest the assets of the Trust in such securities and properties as they may determine; (b) to invest assets of the Trust in any corporate master notes maintained by any of the Trustees or an Investment Manager; (c) to keep such portion of the fund in cash or cash balances as they deem to be in the best interest of the trust; (d) to sell, exchange, convey, transfer or otherwise dispose of any property held by them, by private contract or at public auction; (e) with respect to any stock or other securities owned by them: (1) to exercise or refrain from exercising any voting rights associated therewith; (2) to give general or special proxies or powers of attorney with or without power of substitution; (3) to exercise any conversion privileges, subscription rights or other options and to make any payments incidental thereto; (4) to consent to or respond to or otherwise participate in corporate reorganizations, recapitalizations, tender offers, mergers or consolidations, and to delegate discretionary powers and to pay any assessments or charges in connection therewith; 9 (5) to deposit such stock or other securities in any voting trust or protective committee or like committee or trustee or with the depositories designated thereby; (f) to make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (g) to register any investment of the Fund in their own name or in the name of a nominee or nominees and to hold any investment in bearer form, provided that the books and records of the Trustees shall at all times show that all such investments are part of the Fund; (h) to employ suitable agents, accountants, advisers, consultants, and counsel, and to pay their reasonable expenses and compensation; (i) to borrow money from time to time for the purposes of the Trust on such terms and conditions as may be deemed to be advisable, and for any sum so borrowed to issue their promissory note as Trustees and to secure the repayment thereof by pledging all or any part of the Fund; and (j) to exercise all of the powers of an owner with respect to any stock or other securities or property. The Trustees shall not be restricted with respect to the forms of property which may be held or acquired by the Trustees, other than by the restrictions set forth 10 herein or in the Plan or by applicable law. Subject to the limitations contained in Section 407 of ERISA and other limitations expressed herein and in the Plan, the Trustees may invest assets of the Trust in any common or preferred stock, securities or other obligations of the Employer. Without limiting the generality of any other provision hereof, it is expressly provided that the Trust assets may be invested in a pooled fund maintained by any of the Trustees or any Investment Manager. 6.3 Cash received under any of the provisions hereof may be deposited by the Trustees in accounts with such banking institutions as may be selected by the Trustees, including a banking division of any Trustee, under such provisions with respect to interest as may be permitted by law. For the purposes of this Section 6.3, the word "accounts" shall be construed to mean not only demand deposit accounts, but also savings accounts and time deposit accounts without regard to whether the amount on deposit is evidenced by a statement, passbook or certificate. 6.4 The Trustees shall comply with ERISA and with any funding policy established in writing by the Employer, but the Trustees shall be solely responsible for the selection and retention or disposal of the investments to comply with such funding policy. 11 SECTION 7 Powers of Trustees ------------------ 7.1 Subject only to the provisions of Section 5 and 6 of this Agreement, the Trustees are further authorized and empowered; (a) to hold, manage, improve, repair and control all real and personal property at any time forming part of the Fund; to sell, convey, transfer, exchange, partition, lease for any term, even extending beyond the duration of this Trust, and otherwise dispose of the same from time to time in such manner, for such consideration and upon such terms and conditions as the Trustees shall determine; (b) to employ such agents, accountants, advisers, consultants, and counsel as may be reasonably necessary in managing and protecting the Fund and to pay them reasonable compensation; to settle, compromise or abandon all claims, questions or demands in favor of or against the Fund; to charge any premium on bonds purchased above par value to the principal of the Fund and to charge fees and expenses of investments against the principal of the Fund without amortization, regardless of any law relating thereto; (c) to exercise all the powers set out in Section 35-618 of the Tennessee Code Annotated, the provisions thereof being hereby adopted by reference specifically and as fully and in the same manner as if they 12 were set out herein verbatim, and to exercise all the further rights, powers, options and privileges granted, provided for, or vested in trustees generally under the laws of the State of Tennessee as amended from time to time, it being intended that, except as herein otherwise provided, the powers herein conferred upon the Trustee shall not be construed as in limitation of any authority conferred by law, but shall be construed as in addition thereto; (d) to vote upon any stocks, bonds or other securities, except that the Trustees shall not vote stock to which any Participant is entitled to direct the vote under Plan Section 6.4(d) except pursuant to confidential written instructions from such Participants; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights or other options, and to make any payments incidental thereto; to consent to or otherwise participate in corporation reorganizations or other changes affecting corporate securities and to delegate discretionary powers to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities or other property held in the Trust Funds. The Trustee shall maintain the strict confidentiality of any instructions received from Participants pursuant to Plan Section 6.4(d); and 13 (e) in addition to the powers enumerated herein, to do all other acts which, in their judgment, are necessary or desirable for the proper administration of the Fund. 7.2 The Trustees shall be fully protected in taking any action in reliance upon a certified copy of a resolution of the Board of Directors of the Employer or any other committee or body authorized to act on behalf of the Corporation regarding the Plan which the Trustees in good faith believe to be genuine, if this instrument provides that such action is within the scope of the authority of such Board, committee or other body. 7.3 The Trustees may consult with legal counsel, who may be counsel for the Employer or the Corporation, regarding any of their duties or obligations hereunder, and shall be fully protected in acting or refraining from acting in accordance with the advice of such counsel. 7.4 The Trustees shall incur no personal liability for any act done or omitted to be done in good faith in the administration of the Trust other than as may otherwise be required by law. To the maximum extent allowed by law and to the extent otherwise not indemnified, the Corporation shall indemnify each Trustee (and former Trustee) against any and all claims, losses, damages, expenses, including counsel fees, incurred by any such person on account of such person's action, or failure to act, in connection with the Plan, including, in the case of amounts paid in settlement, only such amounts as are paid with the Corporation's approval. 14 7.5 If at any time the Fund shall consist in whole or in part of assets located in a jurisdiction in which the Trustees are not authorized to act, the Trustees may appoint a corporation in such jurisdiction as ancillary trustee and may confer upon such ancillary trustee power to act solely with reference to such assets, and such ancillary trustee shall remit all net income from or proceeds from the sale of such assets to the Trustees. The Trustees may pay such ancillary trustee reasonable compensation and may absolve it from any requirement that it make accounting to any court or furnish bond or other security. 7.6 The Trustees shall not be required to receive any order or consent of any court as a prerequisite to taking any action hereunder, or to file any court return or report or make accounting to any court. 7.7 Subject to applicable provisions of the Plan regarding treatment of contributions conditioned upon initial Internal Revenue Service qualification of the Plan, the Trustees and the Employer shall discharge their respective duties under the Plan solely in the interest of Participants and their Beneficiaries and for the exclusive purpose of providing Plan benefits and defraying the reasonable expenses of administering the Plan and Trust. 7.8 In discharging their duties, the Trustees shall: (a) act with care, skill, prudence and diligence that a prudent man acting in a like capacity and familiar with such matters would use in similar circumstances in the conduct of an enterprise of like character and with like aims; 15 (b) to the extent the Trustees have the discretionary authority and responsibility for Trust investments, diversify investments so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (c) act in accordance with the documents and instruments governing the Plan insofar as such documents and instruments are consistent with the provisions of ERISA. 7.9 The Trustees shall not cause the Plan to engage in any transaction if they know or should know that such transaction constitutes, directly or indirectly, a prohibited transaction under ERISA. 7.10 The Trustees shall not: (a) deal with the assets of the Trust in their own interest or for their own account; (b) in their individual capacity or in any other capacity, act in any transaction involving the Plan or in behalf of a party, where there interests of the Trustees or such party are adverse to the interest of the Plan, the Participants or Beneficiaries; or (c) receive any consideration for their own account from any party dealing with the Plan in connection with a transaction involving the Plan, the Trust or the Fund; provided, however, that nothing -------- ------- in this section shall be construed to preclude the Trustees from receiving reasonable 16 compensation for services rendered or reimbursement of expenses properly and actually incurred in the performance of their duties under the Plan and Trust. 7.11 Except as authorized by regulations issued by the Secretary of Labor, the Trustee shall not maintain the indicia of ownership of any assets of the Fund outside the jurisdiction of the District Courts of the United States. 7.12 Nothing in this Section shall be construed to preclude a transaction which is otherwise prohibited hereunder or under ERISA, if the Trustees, or any other interested party or parties, have first secured from the Secretary of Labor an exemption with respect to such transaction. 7.13 The Trustees or the Corporation may purchase insurance to insure themselves, the Fund, or other fiduciaries against liability or losses occurring by reason of an act or omission of any fiduciary, provided that such insurance if purchased by the Plan shall permit recourse by the insurer against the fiduciary in the case of a breach of fiduciary duty. SECTION 8 Accounts of the Trustees ------------------------ 8.1 The Trustees shall maintain accurate and detailed records and accounts of all transactions hereunder, which shall be available at all reasonable times for inspection or audit by any person or persons designated by the Employer. 17 8.2 The Trustees, at the direction of the Employer, shall submit to the auditors of the Employer and to the Enrolled Actuary for the Plan such valuations, reports or other information as such persons may reasonably require. 8.3 The accounting year of the Trust shall be the calendar year. Within ninety days after the close of each accounting year and at such other times as may be required by law, the Trustees shall file or caused to be filed with the Employer a written accounting setting forth all transactions effected by them subsequent to the end of the period covered by their latest previous accounting, and listing the assets of the Fund at the close of the period covered by such accounting. 8.4 Upon the earlier of the receipt by the Trustees of the Employer's written approval of any such accounting or the expiration of ninety days after delivery of any such accounting to the Employer, such accounting, as originally stated or as theretofore adjusted pursuant to agreement between the Employer and the Trustees, shall be deemed to be approved by the Employer except as to matters, if any covered by written objections theretofore delivered to the Trustees by the Employer which the Trustees have not explained or adjusted in a manner satisfactory to the Employer. The Trustees shall be released and discharged as to all items, matters and things set forth in such accounting which are not covered by such written objections as if such accounting had been settled and allowed by a decree of a court having jurisdiction regarding such accounting and the Trustees, the Employer and all persons having or claiming to have any interest in the Fund. 18 The Trustees, nevertheless, shall have the right to have its accounts settled by judicial proceedings if they so elect, in which event the Corporation and the Trustees shall be the only necessary parties to such proceeding. SECTION 9 Resignation, Removal and Succession of Trustees ----------------------------------------------- 9.1 At any time, the Board of Directors of the Corporation or other committee or body authorized to act for the Corporation regarding the Plan, by duly adopted resolution, may remove any of the Trustees and appoint additional or successor Trustees. Any such removal shall become effective when a copy of said resolution certified by an officer of the Corporation (and, if no other trustee is then serving, an acceptance of the trust signed by the successor Trustee so appointed) is delivered to the Trustee to be removed. Appointments of additional or successor Trustees shall otherwise become effective when the newly-appointed Trustee accepts such appointment in writing or upon the Trustee's attendance at a Trustees' meeting. 9.2 Any Trustee may resign by delivering to the Corporation a written resignation and such resignation shall become effective on the date of such resignation. If the resigning Trustee is the only Trustee then serving, such resignation shall not be effective until the Corporation appoints a successor Trustee by resolution of its Board of Directors or its Executive Committee and delivers to the resigning Trustee copies of said resolution certified by any officer of the 19 Corporation and an acceptance of the Trust signed by the successor Trustee so appointed. If any Trustee terminates employment with any Employer, such person shall be deemed to have resigned as Trustee on the effective date of his termination unless he or she advises the other Trustees in writing that he or she does not wish to resign. 9.3 All of the provisions set forth herein with respect to the Trustees shall relate to each additional or successor Trustee with the same force and effect as if such additional or successor Trustee had been named herein as a Trustee. 9.4 If the removed or resigning Trustee is the only Trustee then serving, he shall transfer and deliver the Fund to such successor Trustee appointed to replace him. No successor Trustee shall be liable for the acts or omissions of any prior Trustee or be obliged to examine the accounts, records or acts of any prior Trustee or Trustees. 9.5 In the event that any corporate Trustee hereunder shall be converted into, shall merge or consolidate with, or shall sell or transfer substantially all its assets and business to another corporation, the corporation resulting from such conversion, merger or consolidation, or the corporation to which such sale or transfer shall be made, shall thereupon become and be a Trustee under this Agreement with the same effect as though originally so named. 20 SECTION 10 Termination ----------- 10.1 The Trust created by this Agreement is intended to be permanent unless otherwise prohibited by law, and in such event, it shall last only so long as one day short of the maximum time permitted by the statutes and laws of the State of Tennessee. The Trust may, however, be terminated at any time by any Employer insofar as it relates to such Employer, in accordance with and as provided in the Plan pursuant to resolution or decision of the Board of Directors or other governing authority of such terminating Employer, by giving notice in writing to the Trustees, which notice shall recite the date upon which the termination shall be effective. After receipt of such notice the Trustees shall continue to hold, invest, administer, liquidate, and distribute the assets of the Fund attributable to such terminating Employer pursuant to the provisions of this Trust Agreement. The Trust shall terminate as to an Employer only when no assets of the Trust attributable to the terminating Employer remain in the possession of the Trustee. 10.2 In no event shall any assets be returned to the Corporation or any Employer except: (a) contributions made in error by reason of a mistake in fact, provided that any such refund is made within one year of the date such contribution was made; 21 (b) contributions made conditioned upon the contribution being allowed as a deduction for federal income tax purposes and such deduction is disallowed, provided the disallowed portion is returned within one year of the date of disallowance; (c) contributions made conditioned upon the qualification of the Plan and such qualification is denied, provided such contribution is returned within one year of the date of denial; or (d) upon termination of the Plan or complete discontinuance of contributions thereto, any unallocated Company contributions or forfeiture being held in suspense because of the limitation of Section 415 of the Code. SECTION 11 Amendments ---------- 11.1 The Corporation shall have the right at any time to amend this Trust Agreement, in whole or in part, without the Consent of the Trustees or any employer except that the Corporation may not: (a) amend this Trust Agreement (with or without such consent) at any time prior to the satisfaction of all liabilities under the Plan with respect to Employees of the Employer and their beneficiaries, to permit any part of the Fund to be used for, or diverted to, purposes other than for the exclusive benefit of Employees of the Employer or their beneficiaries; or 22 (b) amend this Trust Agreement to increase the duties or liabilities of the Trustees without their written consent. 11.2 Each amendment to this Trust Agreement shall be effective upon delivery of a copy of such amendment to the Trustees by the Corporation. 11.3 Upon delivery to any Employer of an amendment hereto duly authorized and adopted by the Corporation, the Trust shall be thereby amended as to such Employer. SECTION 12 Governing Law and Legal Actions ------------------------------- 12.1 The Trust and Fund shall have a situs in, and this instrument and the Trust shall be construed, enforced and administered according to the laws of, the State of Tennessee. 12.2 All provisions of this Trust Agreement shall be fully severable, and if any provision hereof is held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Trust Agreement, and the Trust Agreement shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 12.3 The Corporation shall have the authority to enforce this Trust Agreement on behalf of any and all persons having or claiming any interest in the Fund. In any action or proceeding affecting the Fund or the administration thereof, or for instructions to the Trustees, the Corporation and the Trustees shall be the 23 only necessary parties, and no Employees or former Employees of the Employer, their beneficiaries, or any other person having or claiming to have an interest in the Fund, shall be entitled to any notice or process in connection with such action or proceedings. Any judgment that may be entered in such action or proceeding shall be binding on all persons having or claiming to have any interest in the Fund. SECTION 13 Adoption by Other Organizations ------------------------------- 13.1 Any corporation or other organization, now in existence or hereafter formed or acquired, which is not already as of the date hereof an Employer under this Plan and Trust and that is affiliated with the Corporation may, with the approval of the Corporation's Chief Executive Officer, adopt the Trust hereby created and the plan of which it is a part, for all or any classification of persons in its employment and thereby, from and after the specified effective date, become an "Employer" as defined in the Plan. Such adoption shall be effectuated by and evidenced by resolution or decision by the adopting organization and by approval of the Corporation's Chief Executive Officer. The adoption resolution or decision may contain such specific changes and variations in the Plan and Trust terms and provisions as may be acceptable to the Corporation and the Trustees. The adoption resolution or decision shall become, as to such adopting organization and its Employees, a part of this Trust and related Plan, as then or thereafter amended. It shall not be necessary for the adopting organization to sign or execute the 24 original or then amended Plan and Trust documents or any other instrument. The effective date of the Plan and Trust for any such adopting organization shall be that stated in the resolution or decision of adoption, and from and after such effective date such adopting organization shall assume all the obligations of an individual employer entity hereunder and under the Plan. The administrative powers and control of the Corporation provided in the Plan and this Trust Agreement, including the sole right of amendment and of appointment and removal of the Trustees and their successors, shall not be diminished by reason of the participation of any such adopting organization in the Plan and Trust. Any participating employer may withdraw from the Plan and Trust at any time without affecting other Employers not so withdrawing, by complying with the withdrawal provisions of the Plan and this Trust Agreement. The Corporation may, in its absolute discretion, terminate an adopting Employer's participation at any time when in its judgment such adopting employer fails or refuses to discharge its obligations under the Plan. 13.2 The merger or consolidation with, or transfer of assets and liabilities from or to, any other qualified plan shall be permitted only if the Corporation approves such transaction and if the benefit each participant, former participant, or beneficiary of the Plan and the other plan would receive, if either the Plan or the other plan terminated immediately after such merger, consolidation or transfer, would be at least as great as the benefit they each would have received had the Plan or the other plan been terminated immediately before any such transaction. 25 13.3 The Corporation may require any other participating Employer to pay its proportionate share of all expenses incurred in the administration of the Plan and Trust. SECTION 14 Trustee Actions During Tender Offer ----------------------------------- 14.1 In the event of any transaction involving one or more offers to purchase Stock which is evidenced by the filing of a Statement on Schedule 14D-1 with the Securities and Exchange Commission ("SEC") or any other similar transaction (such transaction referred to herein as a "Tender Offer" and the date of filing with the SEC referred to herein as the "Filing Date"), paragraphs (a) through (j) shall apply. (a) Notwithstanding anything in the Plan to the contrary, after the Filing Date, (i) no option to receive cash instead of Stock under any of the Plan's distribution provisions shall be honored unless the Trustees otherwise direct, and the Stock portion of any distribution shall be limited to amounts of Stock credited, on or before the Filing Date, to the Accounts of the Participant in question; and (ii) no Participant election to invest additional amounts in Investment Fund III shall be honored after the Filing Date. The 26 portion of any Account which otherwise would have been invested in Investment Fund III shall instead be invested in Investment Fund I. (b) The Corporation shall promptly, and at its own expense, engage the services of an Outside Independent Plan Administrator ("OIPA") experienced in administration of like plans. The OIPA shall, on a standby basis, perform those functions (and only those functions) which are set forth in paragraphs (c) and (g) and which are necessary to preserve the strict confidentiality of (i) the identity of Participants delivering instructions to the Trustees and (ii) any other information which would reveal to the Corporation or, if the Trustees are Employees of the Corporation, the Trustees, whether or not (A) Stock representing the proportionate share of Investment Fund III of a Participant's Accounts (excluding Account 10) and (B) Stock allocated to a Participant's Account 10 (collectively referred to as his "Company Shares") has or has not ben tendered. (c) (i) The Trustees shall seek by mail confidential written instructions from each Participant, as to whether his Company shares should be tendered pursuant to the Tender Offer. (ii) The Trustees shall distribute to each such Participant, copies of all relevant material filed with the SEC with respect to the Tender Offer. The Trustees shall have the power to require that 27 payment for such distributions of materials be made in advance and in any event, the Trustees shall be entitled to reimbursement out of the Trust Fund for its reasonable out- of-pocket expenses for services rendered in the performance of its responsibilities and duties described in this Section 14.1 (including any expenses not reimbursed by the filing party). (iii) The identify of each Participant and the number of his Shares shall be determined from the list of Participants delivered to the Trustees or, if an OIPA has previously been appointed under this Section and if the Trustees do not have such information because of the confidentiality rules contained herein, by that OIPA. (iv) Any Stock in the Exempt Loan Suspense Account or any Stock which is forfeited and unreallocated shall be tendered or not tendered in the same proportions as Stock is tendered or not tendered pursuant to Subsection (c)(i). (d) Each Participant, shall be entitled to instruct the Trustee, with respect to his Company Shares, either (i) to tender all (but not less than all) such Company Shares, or (ii) not to tender any such Company Shares, and the Trustee shall follow such instructions. 28 (e) The Trustee shall make such follow-up efforts, through additional mailings, bulletins to be posted in areas where notices to Participants are normally posted and otherwise, as it finds to be reasonable under the time constraints and other circumstances at hand, to assure that materials referred to in Paragraph (c) have been received by Participants, and obtain instructions from Participants who have not otherwise responded to the Trustees request for instructions. The Company shall provide full cooperation to the Trustees in this regard. (f) If, after the Trustee has made the follow-up effort set out in Paragraph (e), a Participant does not respond to the Trustees request for instructions, the nonresponding Participant shall be deemed to have made the election set out in Paragraph (d)(ii). (g) If some but less than all of the Participants' Company Shares are tendered and sold or exchanged by the Trustees, the OIPA shall thereafter perform all functions with respect to all Accounts as constituted on or after the Filing Date. Records and administration for all contributions after the Filing Date shall be maintained by the Trustees unless that duty has also been delegated to the OIPA. (h) At such time as events (e.g., termination of the Plan or ---- placement of all Plan assets in investments other than Stock) occur which obviate 29 the need for the OIPA in order to preserve confidentiality, the services of the OIPA shall be terminated and, to the extent necessary to preserve confidentiality, its records relating to the Plan destroyed. (i) The proceeds of the sale of any Stock from Investment Fund III sold by the Trustees pursuant to an instruction from a Participant in accordance with Paragraph (d)(i) herein, shall be invested in the other investment funds (other than the ESOP fund) in the same proportions as such Participant's Accounts are invested in such funds as of the Filing Date; provided, however, that if such Participant's Accounts are not invested in any of such funds as of the Filing Date, the sale proceeds shall be invested in Investment Fund VI. The proceeds of the sale of any Stock from Investment Fund V including unallocated Stock held in the Exempt Loan Suspense Account shall be reinvested as the Plan Administrator directs. 14.2 Except as provided in Section 14.1(g), the Trustees functions under Section 14.1 are and shall be solely custodial and ministerial. The Trustee shall have no powers or duties with respect to a Tender Offer except as expressly set forth in Section 14.1 and specifically shall have no power or duty (a) to manage or to control the assets of the Plan in connection with any Tender Offer, (b) to evaluate any Tender Offer, 30 (c) to advise any Participant, as to the fairness or other features of a Tender Offer, (d) to tender or vote any Stock held under the Plan, except as instructed by Participants, or (e) to monitor or police the activities of the tendering entity or the Corporation in promoting or resisting any Tender Offer; provided, however, that if the Trustees become aware of any such activity which reasonably appears to the Trustees to be coercive or misleading in any material way to Participants, the Trustees shall promptly demand that the offending party take appropriate corrective action. The Trustees shall, in the event of refusal or failure of such party to take such corrective action as the Trustees reasonably find appropriate, communicate with Participants as to the matter. SECTION 15 Miscellaneous ------------- 15.1 No person dealing with the Trustees in the administration of the Plan and Trust shall be required or entitled to see to the application of any money paid or property delivered to the Trustees, or to determine whether or not the Trustees are acting pursuant to authority granted to them hereunder or to authorizations or directions herein required. The certificate of the Trustees that they are acting in accordance with this Trust Agreement shall protect any person relying thereon. 31 The Trustees shall have full authority to delegate to one or more persons the duties and responsibilities of the Trustees hereunder to the extent not prohibited by applicable law. 15.2 The Trust is hereby designated as constituting a part of the Plan intended to continue to qualify and to be tax exempt under applicable sections of the Internal Revenue Code of 1986, as amended from time to time, and to comply with ERISA. The Trustees may conclusively assume that this Trust is so qualified, is exempt from federal income taxes and is in compliance with ERISA. 15.3 Neither the creation of this Trust nor anything contained in this Trust Agreement shall be construed as giving any person entitled to benefits hereunder or any Employee of an Employer any equity or other interest in the assets, business, or affairs of the Employer. 15.4 It shall be impossible by operation of this Trust, by natural termination thereof, by power of revocation or amendment, by the happening of any contingency, by collateral arrangement, or by any other means, prior to the satisfaction of any and all liability under the Plan with respect to the Participants and Beneficiaries, for any part of the Fund and the income therefrom to be used for or inverted to purposes other than for the exclusive benefit of the Participants and Beneficiaries. The term "liability" as used in this Section includes both fixed and contingent obligations to the Participants and Beneficiaries. 32 15.5 The Trustees shall be under no obligation to see to the separation of the Fund between the individual Employers other than to record separately the contributions from the respective Employers made with respect to the Plan and the benefits paid under the Plan to the Participants and Beneficiaries attributable to the respective Employers. 15.6 All provisions of this Agreement shall apply separately to each of the Employers, provided however, that an individual Employer may, by resolution of its Board of Directors, or other governing body, appoint another Employer as its agent for all dealings with the Trustees and the Trustees are hereby authorized to recognize such appointment. 15.7 In the event of an Employer's liquidation, bankruptcy, insolvency or sale, or of its consolidation or merger to or with another organization, the assets of the Fund attributable to such employer shall be treated as follows: (a) if the Plan is terminated insofar as such Employer is concerned, the assets of the Fund attributable to such Employer and its Employees shall be held or distributed as provided in Section 10 of this Agreement; or (b) if a successor or surviving organization assumes the duties and responsibilities of an Employer under the Plan and this Trust, the Trust with respect to the Employees of the Employer and their beneficiaries shall continue on behalf of the successor or surviving organization; or 33 (c) if a successor or surviving organization establishes a separate Plan and Trust for the continuation of the benefits of the Employees of an Employer and their beneficiaries, then with the consent of the Corporation the Trust assets held in behalf of such Employees and the beneficiaries may be transferred to the Trustees thereof. If such assets are not so transferred, they shall be distributed to Participants and their beneficiaries according to the provisions of the Plan. 15.8 No bond, surety or security shall be required of the Trustees except as may be required by law or by the Corporation, in which case the Corporation shall pay the premium therefor. SECTION 16 Execution --------- 16.1 This Agreement may be executed in any number of counterparts, each of which shall be considered an original, and no other counterpart need be produced. IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument creating the Trust, Promus Hotel Corporation as the Corporation, and Robert S. Davis, Donald H. Dempsey, Patricia R. Ferguson, Jeffery M. Jarvis, Kelly R. Jenkins, Frederick G. Schultz and Mark C. Wells as 34 Trustees, have executed or caused these presents to be duly executed by proper officer thereunto authorized on the date and year first written above. PROMUS HOTEL CORPORATION By: _________________________________ Vice President THE TRUSTEES OF PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN By: _________________________________ Robert S. Davis By: _________________________________ Donald H. Dempsey By: _________________________________ Patricia R. Ferguson By: _________________________________ Jeffery M. Jarvis By: _________________________________ Kelly R. Jenkins By: _________________________________ Frederick G. Schultz By: _________________________________ Mark C. Wells 35 EX-10.11 8 Exhibit 10(11) PROMUS HOTEL CORPORATION , 1995 ------------ - -------------------- Promus Hotel Corporation 6800 Poplar Avenue, Suite 200 Memphis, TN 38138 Re: Severance Agreement ------------------- Dear : --------------- Promus Hotel Corporation (the "Company") considers it essential to the best interest of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated. In order to induce you to remain in the employ of the Company and in consideration of your agreements set forth in Subsection 2(b) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("this Agreement") in the event your employment with the Company terminates subsequent to a "Change in Control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. Term of Agreement. This Agreement shall commence on ----------------- ________________, 1995 and shall continue in effect through December 31, 19___; provided, however, that commencing on January 1, 19___ and each ----------------- January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, if a Change in Control of the ----------------- Company shall have occurred during the original or extended term of this Agreement, this Agreement shall automatically continue in effect for a period of twenty-four months beyond the month in which such Change in Control occurred. [Name of Executive] , 1995 - ------ --- Page 2 2. Change in Control. ----------------- (a) No benefit shall be payable to you hereunder unless there shall have been a Change in Control of the Company, as set forth below. For purposes of this Agreement, a "Change in Control of the Company" shall be deemed to have occurred, subject to subparagraph (iv) hereof, if any of the events in subparagraphs (i), (ii) or (iii) occur: (i) Any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 25% or more of the Company's then outstanding voting securities carrying the right to vote in elections of persons to the Board, regardless of comparative voting power of such voting securities, and regardless of whether or not the Board shall have approved such Change in Control; or (ii) During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clauses (i) or (iii) of this Subsection) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) The holders of securities of the Company entitled to vote thereon approve the following: (A) A merger or consolidation of the Company with any other corporation regardless of which entity is the surviving company, other than a merger or consolidation which would result in the voting securities of the Company carrying the right to vote in elections of persons to the Board outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the Company's then outstanding voting securities carrying the right to vote in elections of persons to the Board, or [Name of Executive] , 1995 - ------ --- Page 3 such securities of such surviving entity outstanding immediately after such merger or consolidation, or (B) A plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (iv) Notwithstanding the definition of a "Change in Control" of the Company as set forth in this Section 2(a), the Human Resources Committee of the Board (the "Committee") shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred, and the date of the occurrence of such Change in Control and any incidental matters relating thereto, with respect to a transaction or series of transactions which have resulted or will result in a substantial portion of the assets or business of the Company (as determined immediately prior to the transaction or series of transactions by the Committee in its sole discretion which determination shall be final and conclusive) being held by a corporation at least 80% of whose voting securities are held, immediately following such transaction or series of transactions, by holders of the voting securities of the Company (determined immediately prior to such transaction or series of transactions). The Committee may exercise such discretionary authority without regard to whether one or more of the transactions in such series of transactions would otherwise constitute a Change in Control of the Company under the definition set forth in this Section 2(a). (b) For purposes of this Agreement, a "Potential Change in Control of the Company" shall be deemed to have occurred if the following occur: (i) The Company enters into an agreement or letter of intent, the consummation of which would result in the occurrence of a Change in Control of the Company; (ii) Any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; (iii) Any person, other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the Company's then [Name of Executive] , 1995 - ------ --- Page 4 outstanding voting securities carrying the right to vote in elections of persons to the Board increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (iv) The Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company, you will remain in the employ of the Company (or the subsidiary thereof by which you are employed at the date such Potential Change in Control occurs) until the earliest of (x) a date which is six months from the occurrence of such Potential Change in Control of the Company, (y) the termination by you of your employment by reasons of Disability or Retirement (at your normal retirement age), as defined in Subsection 3(i), or (z) the occurrence of a Change in Control of the Company. 3. Termination Following Change in Control. If any of the events --------------------------------------- described in Subsection 2(a) hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Subsection 4(c) hereof upon the subsequent termination of your employment (whether or not such termination is voluntary) during the term of this Agreement unless such termination is (y) because of your death, Disability or Retirement, or (z) by the Company for Cause. (a) Disability; Retirement. If, as a result of your incapacity due ---------------------- to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six consecutive months, and within thirty days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination at age 65 (or later) with ten years of service or retirement in accordance with any retirement contract between the Company and you. (b) Cause. Termination by the Company of your employment for "Cause" ----- shall mean termination upon your engaging in willful and continued misconduct, or your willful and continued failure to substantially perform your duties with the Company (other than due to physical or mental illness), if such failure or misconduct is materially damaging or materially detrimental to the business and operations of the Company, provided that you shall have received written notice of such failure or - -------- misconduct and shall have continued to engage in such failure or misconduct after 30 days following receipt of such notice from the Board, which notice specifically identifies the manner in which the Board believes that [Name of Executive] , 1995 - ------ --- Page 5 you have engaged in such failure or misconduct. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of failure to substantially perform your duties or of misconduct in accordance with the first sentence of this Subsection, and of continuing such failure to substantially perform your duties or misconduct as aforesaid after notice from the Board, and specifying the particulars thereof in detail. (c) Voluntary Resignation. After a Change in Control of the Company --------------------- and for purposes of receiving the benefits provided in Subsection 4(c) hereof, you shall be entitled to terminate your employment by voluntary resignation given at any time during the two years following the occurrence of a Change in Control of the Company hereunder. Such resignation shall not be deemed a breach of any employment contract between you and the Company. (d) Notice of Termination. Any purported termination of your --------------------- employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (e) Date of Termination, Etc. "Date of Termination" shall mean: ------------------------ (i) If your employment is terminated for Disability, thirty days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty day period), and (ii) If your employment is terminated pursuant to Subsection (b) or (c) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (b) above shall not be less than thirty days, and in the case of a termination pursuant to [Name of Executive] , 1995 - ------ --- Page 6 Subsection (c) above shall not be less than fifteen nor more than sixty days, respectively, from the date such Notice of Termination is given); provided that if within fifteen days after any Notice of Termination is - -------- given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended ---------------- by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, bonus, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. Compensation Upon Termination or During Disability Following a -------------------------------------------------------------- Change of Control. Following a Change in Control of the Company, as - ----------------- defined in Subsection 2(a), upon termination of your employment or during a period of Disability, you shall be entitled to the following benefits: (a) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Company's Bonus Plan, Restricted Stock Plan, and other incentive compensation plans during such period, until this Agreement is terminated pursuant to Section 3(a) hereof. Thereafter, or in the event your employment shall be terminated for Retirement, or by reason of your death, your benefits shall be determined under the Company's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs, subject to Subsection 4(e) hereof. (b) If your employment shall be terminated by the Company for Cause, the [Name of Executive] , 1995 - ------ --- Page 7 Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (c) If your employment by the Company shall be terminated (y) by the Company other than for Cause, Retirement or Disability or (z) by you by voluntary resignation, then you shall be entitled to the benefits provided below: (i) The Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation or benefit plan of the Company, at the time such payments are due; (ii) In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you a lump sum severance payment (the "Severance Payment") equal to 2.99 times the average of the Annual Compensation (as defined below) which was payable to you by the Company (including for periods prior to the commencement date of your employment with the Company, The Promus Companies Incorporated or its affiliates, and for periods prior to February 7, 1990, Holiday Corporation or its affiliates), or any corporation affiliated with the Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"), for the five calendar years preceding the calendar year in which the Change in Control occurred. Such average shall be determined in accordance with proposed, temporary or final regulations promulgated under Section 280G(d) of the Code, or, in the absence of such regulations, if you were not employed by the Company (including for this purpose The Promus Companies Incorporated or its affiliates for periods prior to the commencement date of your employment with the Company and Holiday Corporation or its affiliates for the period prior to February 7, 1990) or its affiliates during the entire five calendar years preceding the calendar year in which the Change in Control occurred, then such average shall be the average of your Annual Compensation for the complete calendar years (if any) and partial calendar year (if any) during which you were so employed provided that the amount for any such partial calendar year shall be -------- an annualized amount based on the amount of Annual Compensation paid to you during the partial calendar year. If you were not employed by the Company or its affiliates, or, for periods prior to the commencement date of your employment with the Company, The Promus Companies Incorporated or its affiliates, or, for periods prior to February 7, 1990, [Name of Executive] , 1995 - ------ --- Page 8 Holiday Corporation or its affiliates during such preceding calendar year, then such average shall be an annualized amount based on the amount of Annual Compensation paid to you during the calendar year in which the Change of Control occurred. Annual Compensation is your base salary and your annual bonus under the Annual Management Bonus Plan of the Company that was payable to you by the Company or any of its affiliates (including for this purpose base salary and bonus payable to you by The Promus Companies Incorporated or its affiliates for periods prior to the commencement date of your employment with the Company and Holiday Corporation or its affiliates for periods prior to February 7, 1990) that was payable to you during a calendar year determined without any reduction for any deferrals of such salary or such bonus under any deferred compensation plan (qualified or unqualified) and without any reduction for any salary reductions used for making contributions to any group insurance plan of the Company (including for this purpose The Promus Companies Incorporated or its affiliates for periods prior to the commencement date of your employment with the Company and Holiday Corporation or its affiliates for periods prior to February 7, 1990) or its affiliates. (iii) The Company shall also pay to you the amounts of any compensation or awards payable to you or due to you in respect of any period preceding the Date of Termination under any incentive compensation plan of the Company (including, without limitation, the Company's Restricted Stock Plan and Stock Option Plan (the "Option Plan") and under any agreements with you in connection therewith, and shall make any other payments and take any other actions provided for in such plans and agreements. (iv) In lieu of shares of common stock of the Company ("Company Shares") issuable upon exercise of outstanding options, if any ("Options") granted to you under the Option Plan (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (y) the excess of, the higher of the closing price of Company Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in Company Shares is highest) or the highest per share price for Company Shares actually paid in connection with any change in control of the Company, over the per share exercise price of each Option held by you (whether or not then fully exercisable), times (z) the number of Company Shares covered by each such option. (v) The Company shall also pay to you all legal fees and expenses incurred [Name of Executive] , 1995 - ------ --- Page 9 by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). (vi) In the event that you become entitled to the payments (the "Severance Payments") provided under paragraphs (ii), (iii), and (iv), above (and Subsections (d) and (e), below), and if any of the Severance Payments will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, the Company shall pay to you at the time specified in paragraph (vii), below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Severance Payments and any federal (and state and local) income tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the amount of the Severance Payments less any Excise Tax attributable to Severance Payments in respect of those shares of restricted stock granted to you in 1990 in connection with the merger of Holiday Corporation with and into a subsidiary of Bass plc and which were issued in substitution of shares of Holiday Corporation restricted stock granted to you on or after November 11, 1986 in connection with the 1987 recapitalization of Holiday Corporation (the "Excluded Severance Payments"). For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax the following will apply: (A) Any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) shall be treated as "parachute payments" within the meaning of section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors and acceptable to you such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of section 280G(b)(4) of the Code in excess of the base amount within the meaning of section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; [Name of Executive] , 1995 - ------ --- Page 10 (B) The amount of the Severance Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (y) the total amount of the Severance Payments or (z) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (A), above); and (C) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with proposed, temporary or final regulations under Sections 280G(d)(3) and (4) of the Code or, in the absence of such regulations, in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay Federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the amount of Excise Tax attributable to Severance Payments other than the Excluded Severance Payments is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and Federal (and state and local) income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a Federal (and state and local) income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax attributable to Severance Payments other than the Excluded Severance Payments is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. (vii) The payments provided for in paragraphs (ii), (iii), (iv) and (vi) above, [Name of Executive] , 1995 - ------ --- Page 11 shall be made not later than the fifth day following the Date of Termination, provided, however, that if the amounts of such -------- ------- payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (d) If your employment shall be terminated (y) by the Company other than for Cause, Retirement or Disability or (z) by you voluntarily, then for a twenty-four month period after such termination, the Company shall arrange to provide you with life, disability, accident and health insurance benefits substantially similar to those which you are receiving immediately prior to the Notice of Termination. Benefits otherwise receivable by you pursuant to this Subsection 4(d) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four month period following your termination, and any such benefits actually received by you shall be reported to the Company. (e) In the event a Change in Control of the Company occurs after you and the Company have entered into any retirement agreement including an agreement providing for early retirement, then the present value, computed using a discount rate of 8% per annum, of the total amount of all unpaid deferred payments as payable to you in accordance with the payment schedule that you elected when the deferral was agreed to and using the plan interest rate applicable to your situation, or other payments payable or to become payable to you or your estate or beneficiary under such retirement agreement (other than payments payable pursuant to a plan qualified under section 401(a) of the Internal Revenue Code) including, without limitation, any unpaid deferred payments under the Company's Executive Deferred Compensation Plan and the Company's other deferred compensation plans shall be paid to you (or your estate or beneficiary if applicable) in cash within five business days after the occurrence of the Change in Control of the Company. If you and the Company or its affiliates have executed a retirement agreement and if the Change in Control of the Company occurs before the effective date of your retirement, then you shall receive the Severance Payment payable under Subsection 4(c)(ii) herein in addition to the present value of your unpaid deferred retirement payments and other payments under the retirement agreement as aforesaid. All other benefits to which you or your estate or any beneficiary [Name of Executive] , 1995 - ------ --- Page 12 are entitled under such retirement agreement shall continue in effect notwithstanding the Change in Control of the Company. This Subsection 4(e) shall survive your retirement. (f) Notwithstanding that a Change in Control shall not have yet occurred, if you so elect, by written notice to the Company given at any time after the date hereof and prior to the time such amounts are otherwise payable to you: (i) The Company shall deposit with an escrow agent, pursuant to an escrow agreement between the Company and such escrow agent, a sum of money, or other property permitted by such escrow agreement, sufficient in the opinion of the Company's management to fund payment of the following amounts to you, as such amounts become payable: (A) Amounts payable, or to become payable, to you or to your beneficiaries or your estate under the Company's Executive Deferred Compensation Plan and under any agreements related thereto in existence at the time of your election to make the deposit into escrow. (B) Amounts payable, or to become payable, to you or to your beneficiaries or your estate by reason of your deferral of payments payable to you prior to the date of your election to make the deposit into escrow under any other deferred compensation agreements between you and the Company in existence at the time of your election to make the deposit into escrow, including but not limited to deferred compensation agreements relating to the deferral of salary or bonuses. (C) Amounts payable, or to become payable, to you or to your beneficiaries or your estate under any agreement relating to your retirement from the Company (including payments described under Subsection 4(e) above) which agreement is in existence at the time of your election to make the deposit into escrow, other than amounts payable by a plan qualified under Section 401(a) of the Code. (D) Subject to the approval of the Committee, amounts then due and payable to you, but not yet paid, under any other benefit plan or incentive compensation plan of the Company (whether such amounts are stock or cash) other than amounts payable to you under a plan qualified under section 401(a) of the Code. [Name of Executive] , 1995 - ------ --- Page 13 (ii) Upon the occurrence of a Potential Change of Control, the Company shall deposit with an escrow agent (which shall be the same escrow agent, if one exists, acting pursuant to clause (i) of this subsection 4(f)), pursuant to an escrow agreement between the Company and such escrow agent, a sum of money, or other property permitted by such escrow agreement, sufficient in the opinion of Company management to fund the payment to you of the amounts specified in Subsection 4(c) of this Agreement. (iii) It is intended that any amounts deposited in escrow pursuant to the provisions of clause (i) or (ii) of this Subsection 4(f), be subject to the claims of the Company's creditors, as set forth in the form of such escrow agreement. (g) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise (except as specifically provided in this Section 4). (h) In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under any benefit plan of the Company in which you participate to the extent such benefits are not paid under this Agreement. 5. Successors; Binding Agreement. ----------------------------- (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment voluntarily following a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. [Name of Executive] , 1995 - ------ --- Page 14 (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other ------ communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, ------------- waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of -------- this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several ------------ counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. [Name of Executive] , 1995 - ------ --- Page 15 10. Arbitration. Any dispute or controversy arising under or in ----------- connection with this Agreement shall be settled exclusively by arbitration in Memphis, Tennessee in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 11. Similar Provisions in Other Agreement. The Severance Payment ------------------------------------- under this Agreement supersedes and replaces any other severance payment to which you may be entitled under any previous agreement between you and the Company (including for this purpose The Promus Companies Incorporated or its affiliates) or its affiliates. [Name of Executive] , 1995 - ------ --- Page 16 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our binding agreement on this subject. Very truly yours, PROMUS HOTEL CORPORATION BY: ----------------------------------------------- Agreed to as of this day ------ of , 1995. ----- - ----------------------------------------------- [Name of Executive] EX-10.12 9 Exhibit 10(12) PROMUS HOTEL CORPORATION ___________, 1995 _____________________ Promus Hotel Corporation 6800 Poplar Avenue, Suite 200 Memphis, Tennessee 38138 Re: Severance Agreement ------------------- Dear _________________: Promus Hotel Corporation (the "Company") considers it essential to the best interest of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated. In order to induce you to remain in the employ of the Company and in consideration of your agreements set forth in Subsection 2(b) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("this Agreement") in the event your employment with the Company terminates subsequent to a "Change in Control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. Term of Agreement. This Agreement shall commence on , ----------------- ----------- 1995 and shall continue in effect through December 31, 19 ; provided, --- --------- however, that commencing on January 1, 19 and each January 1 thereafter, - ------- --- the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, if a Change in Control of the Company shall ----------------- have occurred during the original or extended term of this Agreement, this Agreement shall automatically [Name of Executive] , 1995 - ------- --- Page 2 continue in effect for a period of twenty-four months beyond the month in which such Change in Control occurred. 2. Change in Control. ----------------- (a) No benefit shall be payable to you hereunder unless there shall have been a Change in Control of the Company, as set forth below. For purposes of this Agreement, a "Change in Control of the Company" shall be deemed to have occurred, subject to subparagraph (iv) hereof, if any of the events in subparagraphs (i), (ii) or (iii) occur: (i) Any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 25% or more of the Company's then outstanding voting securities carrying the right to vote in elections of persons to the Board, regardless of comparative voting power of such voting securities, and regardless of whether or not the Board shall have approved such Change in Control; or (ii) During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clauses (i) or (iii) of this Subsection) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) The holders of securities of the Company entitled to vote thereon approve the following: (A) A merger or consolidation of the Company with any other corporation regardless of which entity is the surviving company, other than a merger or consolidation which would result in the voting securities of the Company carrying the right to vote in elections of persons to the Board outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the Company's then outstanding voting securities carrying the right to vote in elections of persons to the Board, or [Name of Executive] , 1995 - ------- --- Page 3 such securities of such surviving entity outstanding immediately after such merger or consolidation, or (B) A plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (iv) Notwithstanding the definition of a "Change in Control" of the Company as set forth in this Section 2(a), the Human Resources Committee of the Board (the "Committee") shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred, and the date of the occurrence of such Change in Control and any incidental matters relating thereto, with respect to a transaction or series of transactions which have resulted or will result in a substantial portion of the assets or business of the Company (as determined immediately prior to the transaction or series of transactions by the Committee in its sole discretion which determination shall be final and conclusive) being held by a corporation at least 80% of whose voting securities are held, immediately following such transaction or series of transactions, by holders of the voting securities of the Company (determined immediately prior to such transaction or series of transactions). The Committee may exercise such discretionary authority without regard to whether one or more of the transactions in such series of transactions would otherwise constitute a Change in Control of the Company under the definition set forth in this Section 2(a). (b) For purposes of this Agreement, a "Potential Change in Control of the Company" shall be deemed to have occurred if the following occur: (i) The Company enters into an agreement or letter of intent, the consummation of which would result in the occurrence of a Change in Control of the Company; (ii) Any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; (iii) Any person, other than an employee benefit plan of the Company, or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the Company's then outstanding voting securities carrying the right to vote in elections of persons to the [Name of Executive] , 1995 - ------- --- Page 4 Board increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (iv) The Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company, you will remain in the employ of the Company (or the subsidiary thereof by which you are employed at the date such Potential Change in Control occurs) until the earliest of (x) a date which is six months from the occurrence of such Potential Change in Control of the Company, (y) the termination by you of your employment by reasons of Disability or Retirement (at your normal retirement age), as defined in Subsection 3(i), or (z) the occurrence of a Change in Control of the Company. (c) Good Reason. For purposes of this Agreement, "Good Reason" shall ----------- mean, without your express written consent, the occurrence after a Change in Control of the Company of any of the following circumstances unless, in the case of paragraphs (i), (v), (vi), (vii) or (viii), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections 3(e) and 3(d), respectively, given in respect thereof: (i) The assignment to you of any duties inconsistent with your status as an executive officer of the Company or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the Change in Control of the Company; (ii) A reduction by the Company in your annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any person in control of the Company; (iii) The relocation of the Company's principal executive offices where you are working immediately prior to the Change in Control of the Company to a location more than 50 miles from the location of such offices immediately prior to the Change in Control of the Company or the Company's requiring you to be based anywhere other than the location of the Company's principal executive offices where you were working immediately prior to the Change in Control of the Company except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; [Name of Executive] , 1995 - ------- --- Page 5 (iv) The failure by the Company, without your consent, to pay to you any portion of your current compensation except pursuant to an across-the-board compensation deferral similarly affecting all executives of the Company and all executives of any person in control of the Company, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company, within thirty days of the date such compensation is due; (v) The failure by the Company to continue in effect any compensation plan in which you are participating immediately prior to the Change in Control of the Company which is material to your total compensation, including but not limited to, the Company's Bonus Plan, Executive Deferred Compensation Plan, Restricted Stock Plan, or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to the Change in Control of the Company; (vi) The failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's pension, savings and retirement plan, life insurance, medical, health and accident, or disability plans in which you were participating at the time of the Change in Control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the Change in Control of the Company, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control of the Company; (vii) The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (viii) Any purported termination of your employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection 3(d) hereof and the requirements of Subsection 3(b) above; for purposes of this Agreement, no such purported termination shall be effective. [Name of Executive] , 1995 - ------- --- Page 6 Your right to terminate your employment pursuant to this Agreement for Good Reason shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. 3. Termination Following Change in Control. If any of the events --------------------------------------- described in Subsection 2(a) hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Subsection 4(c) hereof upon the subsequent termination of your employment if such termination is (y) by the Company other than for Cause, Retirement or Disability, or (z) by you for Good Reason. (a) Disability; Retirement. If, as a result of your incapacity due ---------------------- to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six consecutive months, and within thirty days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination at age 65 (or later) with ten years of service or retirement in accordance with any retirement contract between the Company and you. (b) Cause. Termination by the Company of your employment for "Cause" ----- shall mean termination upon your engaging in willful and continued misconduct, or your willful and continued failure to substantially perform your duties with the Company (other than due to physical or mental illness), if such failure or misconduct is materially damaging or materially detrimental to the business and operations of the Company, provided that you shall have received written notice of such failure or - -------- misconduct and shall have continued to engage in such failure or misconduct after 30 days following receipt of such notice from the Board, which notice specifically identifies the manner in which the Board believes that you have engaged in such failure or misconduct. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of failure to substantially perform your duties or of misconduct in accordance with the first sentence of this Subsection, and of continuing such failure to substantially perform your duties or misconduct as aforesaid after notice from the Board, and specifying the particulars thereof in detail. [Name of Executive] , 1995 - ------- --- Page 7 (c) Voluntary Resignation. After a Change in Control of the Company --------------------- and for purposes of receiving the benefits provided in Subsection 4(c) hereof, you shall be entitled to terminate your employment by voluntary resignation given at any time during the two years following the occurrence of a Change in Control of the Company hereunder, provided such resignation -------- is by you for Good Reason. Such resignation shall not be deemed a breach of any employment contract between you and the Company. (d) Notice of Termination. Any purported termination of your --------------------- employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (e) Date of Termination, Etc. "Date of Termination" shall mean: ------------------------ (i) If your employment is terminated for Disability, thirty days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty day period), and (ii) If your employment is terminated pursuant to Subsection (b) or (c) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (b) above shall not be less than thirty days, and in the case of a termination pursuant to Subsection (c) above shall not be less than fifteen nor more than sixty days, respectively, from the date such Notice of Termination is given); provided that if within fifteen days after any Notice of Termination is - -------- given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended ---------------- by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all [Name of Executive] , 1995 - ------- --- Page 8 compensation, bonus, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. Compensation Upon Termination or During Disability Following a -------------------------------------------------------------- Change of Control. Following a Change in Control of the Company, as - ----------------- defined in Subsection 2(a), upon termination of your employment or during a period of Disability, you shall be entitled to the following benefits: (a) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Company's Bonus Plan, Restricted Stock Plan, and other incentive compensation plans during such period, until this Agreement is terminated pursuant to Section 3(a) hereof. Thereafter, or in the event your employment shall be terminated for Retirement, or by reason of your death, your benefits shall be determined under the Company's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs, subject to Subsection 4(e) hereof. (b) If your employment shall be terminated by the Company for Cause, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (c) If your employment by the Company shall be terminated (y) by the Company other than for Cause, Retirement or Disability or (z) by you for Good Reason, then you shall be entitled to the benefits provided below: (i) The Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation or benefit plan of the Company, at the time such payments are due; (ii) In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you a lump sum severance payment (the "Severance Payment") equal to 2.99 times the average of the Annual Compensation (as defined below) which was payable to you by the [Name of Executive] , 1995 - ------- --- Page 9 Company (including for periods prior to the commencement date of your employment with the Company, The Promus Companies Incorporated or its affiliates, and, for periods prior to February 7, 1990, provided that your employment with The Promus Companies Incorporated or its affiliates commenced on or about February 7, 1990 and you were employed by Holiday Corporation or its affiliates immediately prior to your commencement of employment with The Promus Companies Incorporated or its affiliates, Holiday Corporation or its affiliates) or any corporation affiliated with the Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"), for the five calendar years preceding the calendar year in which the Change in Control occurred. Such average shall be determined in accordance with proposed, temporary or final regulations promulgated under Section 280G(d) of the Code, or, in the absence of such regulations, if you were not employed by the Company or its affiliates (including as the "Company" for this purpose The Promus Companies Incorporated or its affiliates for periods prior to the commencement date of your employment with the Company, and, provided that your employment with The Promus Companies Incorporated or its affiliates commenced on or about February 7, 1990 and you were employed by Holiday Corporation or its affiliates immediately prior to your commencement of employment with The Promus Companies Incorporated or its affiliates, Holiday Corporation or its affiliates for periods prior to February 7, 1990) during the entire five calendar years preceding the calendar year in which the Change in Control occurred, then such average shall be an average of your Annual Compensation for the complete calendar years (if any) and partial calendar year (if any) during which you were so employed provided that -------- the amount for any such partial calendar year shall be an annualized amount based on the amount of Annual Compensation paid to you during the partial calendar year. If you were not employed by the Company or its affiliates, The Promus Companies Incorporated or its affiliates or Holiday Corporation or its affiliates during such preceding calendar year, then such average shall be an annualized amount based on the amount of Annual Compensation paid to you during the calendar year in which the Change of Control occurred. Annual Compensation is your base salary and your annual bonus under the Annual Management Bonus Plan of the Company that was payable to you by the Company or any of its affiliates (including for this purpose base salary and bonus payable to you by The Promus Companies Incorporated or its affiliates for periods prior to the commencement date of your employment with the Company, and, provided that your employment with The Promus Companies Incorporated or its affiliates commenced on or about February 7, 1990 and you were employed by Holiday Corporation or its affiliates immediately prior to your commencement of employment with The Promus Companies Incorporated or its affiliates, Holiday Corporation or its affiliates for periods prior to February 7, 1990) that was payable to you during a calendar year determined without any reduction for any deferrals of such salary or such bonus [Name of Executive] , 1995 - ------- --- Page 10 under any deferred compensation plan (qualified or unqualified) and without any reduction for any salary reductions used for making contributions to any group insurance plan of the Company or its affiliates (including as the "Company" for this purpose The Promus Companies Incorporated or its affiliates for periods prior to the commencement date of your employment with the Company, and, provided that your employment with The Promus Companies Incorporated or its affiliates commenced on or about February 7, 1990 and you were employed by Holiday Corporation or its affiliates immediately prior to your commencement of employment with The Promus Companies Incorporated or its affiliates, Holiday Corporation or its affiliates for periods prior to February 7, 1990). (iii) The Company shall also pay to you the amounts of any compensation or awards payable to you or due to you in respect of any period preceding the Date of Termination under any incentive compensation plan of the Company (including, without limitation, the Company's Restricted Stock Plan and Stock Option Plan (the "Option Plan") and under any agreements with you in connection therewith, and shall make any other payments and take any other actions provided for in such plans and agreements. (iv) In lieu of shares of common stock of the Company ("Company Shares") issuable upon exercise of outstanding options, if any ("Options") granted to you under the Option Plan (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (y) the excess of, the higher of the closing price of Company Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in Company Shares is highest) or the highest per share price for Company Shares actually paid in connection with any change in control of the Company, over the per share exercise price of each Option held by you (whether or not then fully exercisable), times (z) the number of Company Shares covered by each such option. (v) The Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). [Name of Executive] , 1995 - ------- --- Page 11 (vi) In the event that you become entitled to the payments (the "Severance Payments") provided under paragraphs (ii), (iii), and (iv), above (and Subsections (d) and (e), below), and if any of the Severance Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code, the Company shall pay to you at the time specified in paragraph (vii), below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Severance Payments and any federal (and state and local) income tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the amount of the Severance Payments less any Excise Tax attributable to Severance Payments in respect of those shares of restricted stock granted to you in 1990 in connection with the merger of Holiday Corporation with and into a subsidiary of Bass plc and which were issued in substitution of shares of Holiday Corporation restricted stock granted to you on or after November 11, 1986 in connection with the 1987 recapitalization of Holiday Corporation (the "Excluded Severance Payments"). For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax the following will apply: (A) Any other payments or benefits received or to be received by you in connection with a Change in Control of the Company or your termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors and acceptable to you such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (B) The amount of the Severance Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (y) the total amount of the Severance Payments or (z) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (A), above); and [Name of Executive] , 1995 - ------- --- Page 12 (C) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with proposed, temporary or final regulations under Sections 280G(d)(3) and (4) of the Code or, in the absence of such regulations, in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay Federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Termination, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the amount of Excise Tax attributable to Severance Payments other than the Excluded Severance Payment is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and Federal (and state and local) income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a Federal (and state and local) income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax attributable to Severance Payments other than the Excluded Severance Payment is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. (vii) The payments provided for in paragraphs (ii), (iii), (iv) and (vi) above, shall be made not later than the fifth day following the Date of Termination, provided, however, that if the -------- ------- amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the [Name of Executive] , 1995 - ------- --- Page 13 amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (d) If your employment shall be terminated (y) by the Company other than for Cause, Retirement or Disability or (z) by you voluntarily for Good Reason, then for a twenty-four month period after such termination, the Company shall arrange to provide you with life, disability, accident and health insurance benefits substantially similar to those which you are receiving immediately prior to the Notice of Termination. Benefits otherwise receivable by you pursuant to this Subsection 4(d) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four month period following your termination, and any such benefits actually received by you shall be reported to the Company. (e) In the event a Change in Control of the Company occurs after you and the Company have entered into any retirement agreement including an agreement providing for early retirement, then the present value, computed using a discount rate of 8% per annum, of the total amount of all unpaid deferred payments as payable to you in accordance with the payment schedule that you elected when the deferral was agreed to and using the plan interest rate applicable to your situation, or other payments payable or to become payable to you or your estate or beneficiary under such retirement agreement (other than payments payable pursuant to a plan qualified under Section 401(a) of the Internal Revenue Code) including, without limitation, any unpaid deferred payments under the Company's Executive Deferred Compensation Plan and the Company's other deferred compensation plans shall be paid to you (or your estate or beneficiary if applicable) in cash within five business days after the occurrence of the Change in Control of the Company. If you and the Company or its affiliates have executed a retirement agreement and if the Change in Control of the Company occurs before the effective date of your retirement, then you shall receive the Severance Payment payable under Subsection 4(c)(ii) herein in addition to the present value of your unpaid deferred retirement payments and other payments under the retirement agreement as aforesaid. All other benefits to which you or your estate or any beneficiary are entitled under such retirement agreement shall continue in effect notwithstanding the Change in Control of the Company. This Subsection 4(e) shall survive your retirement. (f) Notwithstanding that a Change in Control shall not have yet occurred, if you so elect, by written notice to the Company given at any time after the date hereof and prior to the time such amounts are otherwise payable to you: (i) The Company shall deposit with an escrow agent, pursuant to an escrow agreement between the Company and such escrow agent, a sum of money, or other property permitted by such escrow agreement, sufficient in the opinion of the [Name of Executive] , 1995 - ------- --- Page 14 Company's management to fund payment of the following amounts to you, as such amounts become payable: (A) Amounts payable, or to become payable, to you or to your beneficiaries or your estate under the Company's Executive Deferred Compensation Plan and under any agreements related thereto in existence at the time of your election to make the deposit into escrow. (B) Amounts payable, or to become payable, to you or to your beneficiaries or your estate by reason of your deferral of payments payable to you prior to the date of your election to make the deposit into escrow under any other deferred compensation agreements between you and the Company in existence at the time of your election to make the deposit into escrow, including but not limited to deferred compensation agreements relating to the deferral of salary or bonuses. (C) Amounts payable, or to become payable, to you or to your beneficiaries or your estate under any agreement relating to your retirement from the Company (including payments described under Subsection 4(e) above) which agreement is in existence at the time of your election to make the deposit into escrow, other than amounts payable by a plan qualified under Section 401(a) of the Code. (D) Subject to the approval of the Committee, amounts then due and payable to you, but not yet paid, under any other benefit plan or incentive compensation plan of the Company (whether such amounts are stock or cash) other than amounts payable to you under a plan qualified under Section 401(a) of the Code. (ii) Upon the occurrence of a Potential Change of Control, the Company shall deposit with an escrow agent (which shall be the same escrow agent, if one exists, acting pursuant to clause (i) of this Subsection 4(f)), pursuant to an escrow agreement between the Company and such escrow agent, a sum of money, or other property permitted by such escrow agreement, sufficient in the opinion of Company management to fund the payment to you of the amounts specified in Subsection 4(c) of this Agreement. (iii) It is intended that any amounts deposited in escrow pursuant to the provisions of clause (i) or (ii) of this Subsection 4(f), be subject to the claims of the Company's creditors, as set forth in the form of such escrow agreement. [Name of Executive] , 1995 - ------- --- Page 15 (g) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise (except as specifically provided in this Section 4). (h) In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you under any benefit plan of the Company in which you participate to the extent such benefits are not paid under this Agreement. 5. Successors; Binding Agreement. ----------------------------- (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment voluntarily for Good Reason following a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other ------ communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the [Name of Executive] , 1995 - ------- --- Page 16 Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, ------------- waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of -------- this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several ------------ counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Arbitration. Any dispute or controversy arising under or in ----------- connection with this Agreement shall be settled exclusively by arbitration in Memphis, Tennessee in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 11. Similar Provisions in Other Agreement. The Severance Payment ------------------------------------- under this Agreement supersedes and replaces any other severance payment to which you may be entitled under any previous agreement between you and the Company (including for this purpose The Promus Companies Incorporated or its affiliates) or its affiliates. [Name of Executive] , 1995 - ------- --- Page 17 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our binding agreement on this subject. Very truly yours, PROMUS HOTEL CORPORATION BY:_________________________ Name: Title: Agreed to as of this _____ day of , 1995. ------------------------- ____________________________ [Name of Executive] EX-99.1 10 Exhibit 99(1) Ralph Berry, The Promus Companies (901) 762-8629 PROMUS ANNOUNCES THE SATISFACTION OF ------------------------------------ CONDITION TO SPIN-OFF HOTEL BUSINESS ------------------------------------ MEMPHIS, June 14, 1995 -- The Promus Companies Incorporated (NYSE:PRI) today announced the satisfaction of the final conditions to the spin-off of its wholly-owned subsidiary, Promus Hotel Corporation (NYSE:PRH). On May 26, 1995, stockholders of Promus approved the spin- off and Promus' Board of Directors declared a dividend of shares of Promus Hotel conditioned upon the occurrence of certain events prior to June 19, 1995. The Executive Committee of Promus' Board has determined that all necessary events have occurred and that the conditions to the dividend have been satisfied: First, the gaming regulatory authorities of the State on New Jersey approved the spin-off on May 31, 1995. Second, the holders of a majority of the outstanding aggregate principal amount of each of the 10 7/8 percent Senior Subordinated Notes due 2002 and the 8 3/4 percent Senior Subordinated Notes due 2000 of Embassy Suites, Inc. consented to certain indenture amendments to permit the spin-off. Third, on June 7, 1995, Promus, Embassy and Promus Hotel entered into Credit Agreement with NationsBank, N.A. (Carolinas) and NationsBanc Capital Market, Inc. to provide Promus Hotel with financing of up to $350 millon. Fourth, all other material third party consents have been received. Stockholders will receive one share of the new hotel company for each two shares of The Promus Companies owned on June 21, 1995, the record date for the dividend, The Promus Hotel shares will be distributed on June 30, 1995, and, on that date The Promus Companies will change its name it Harrah's Entertainment, Inc. (NYSE:HET). It is currently anticipated that the Promus Hotel common stock and the Harrah's Entertainment common stock (ex-distribution) will each begin trading on a "when-issued" basis on the New York Stock Exchange on or before June 19, 1995. -----END PRIVACY-ENHANCED MESSAGE-----