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Exhibit 10.5
LOAN AGREEMENT
This Loan Agreement ("Agreement") entered into the 6th day of November,
1996, by and among SHOLODGE, INC., a Tennessee corporation ("Borrower"),
SHONEY'S INN OF LEBANON, INC., a Tennessee corporation, SHONEY'S INN, INC., a
Tennessee corporation, NASHVILLE AIR ASSOCIATES, INC., a Tennessee corporation,
XXXXX AND ASSOCIATES, INC., a Tennessee corporation, SUNSHINE INNS, INC., a
Tennessee corporation, LAFLA INN, INC., a Tennessee corporation, SOUTHEAST
TEXAS INNS, INC., a Tennessee corporation, DELAWARE INNS, INC., a Tennessee
corporation, ALABAMA LODGING CORPORATION, a Tennessee corporation, FRONT RANGE
SUITES, INC., a Tennessee corporation, MIDWEST INNS, INC., a Tennessee
corporation, FAR WEST INNS, INC., a Tennessee corporation, CAROLINA INNS, INC.,
a Tennessee corporation, and SHONEY'S INN OF BATON ROUGE, a Tennessee general
partnership (collectively the "Co-Obligors" and individually a "Co-Obligor"),
jointly and severally, and NATIONSBANK OF TENNESSEE, N.A. ("Lender"), a
national banking association.
W I T N E S S E T H:
WHEREAS, to evidence the indebtedness owed by Borrower and Co-
Obligors to Lender, Borrower and Co-Obligors executed and delivered to Lender a
promissory note, being a Line of Credit Note having an original maximum
principal amount of $10,000,000 dated November 6, 1996; and
WHEREAS, Lender and Borrower and Co-Obligors hereby enter into a
comprehensive agreement setting forth the terms and conditions of Borrower's
and Co-Obligor's line of credit;
NOW, THEREFORE, as an inducement to cause Lender to extend credit to
Borrower and Co-Obligors, and for other valuable consideration, the receipt and
sufficiency of which are acknowledged, it is agreed as follows:
1. Line of Credit. Concurrently with the execution of this Agreement,
Lender shall make a line of credit (the "Line of Credit") available to Borrower
and Co-Obligors under the following terms:
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a. Amount. The principal indebtedness of Borrower and
Co-Obligors to Lender under the Line of Credit shall not
exceed Ten Million and No/100 Dollars ($10,000,000).
b. Interest Rate. The principal amount outstanding
under the Line of Credit shall bear interest at Borrower's
option at either (i) the Lender's Prime Rate, as it may change
from time to time, or (ii) Lender's LIBOR Rate for 30, 60, or
90-day periods (a "LIBOR Period") plus 190 basis points. As
more particularly described below, Borrower may elect that a portion
of the outstanding principal balance of the Line of Credit bear
interest at the Prime Rate and that a portion bear interest at a LIBOR
Rate plus the spread described above.
i. As used in this Agreement, Lender's "Prime Rate" is the fluctuating
rate of interest established by Lender from time to time as its "Prime
Rate", whether or not such rate shall be otherwise published. Such
Prime Rate is established by Lender as an index or base rate and may
or may not at any time be the best or lowest rate charged by Lender on
any loan. If at any time or from time to time the Prime Rate increases
or decreases, then the rate of interest hereunder shall be
correspondingly increased or decreased effective on the day on which
any such increase or decrease of the Prime Rate changes, unless
otherwise herein provided. In the event that Lender, during the term
hereof, shall abolish or abandon the practice of establishing a Prime
Rate, or should the same become unascertainable, Lender shall
designate a reasonably comparable reference rate which shall be deemed
to be the Prime Rate.
ii. For purposes hereof, the "LIBOR Rate" shall mean the rate per
annum announced by Lender as its LIBOR Rate for a period equal to the
length of such LIBOR Period as adjusted, without duplication, to
reflect Lender's reserve requirements, all as calculated and announced
from time to time by Lender, whose announcement shall be binding
absent manifest error. To elect the LIBOR Rate for a LIBOR Period,
Borrower shall deliver a written election to Lender at least three (3)
business days in advance of the effective date of such election, which
notice shall specify which LIBOR Period is selected and the amount of
the Line of Credit that is to bear interest based upon the
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LIBOR Rate. Interest shall be calculated based upon a 360-day year in
the case of LIBOR Rate loans and 365 days in the case of Prime Rate
loans and actual days elapsed. If the adoption of or change in any
applicable legal requirement or any change in the interpretation or
administration thereof by any governmental authority or compliance by
the Lender with any request or directive (whether or not having the
force of law) from any central bank or other governmental authority,
shall at any time as a result of any portion of the principal balance
of the Line of Credit being maintained on the LIBOR Rate:
A. Subject the Lender to any tax (including without limitation
any United States Interest Equalization Tax), levy, impost, duty,
charge, fee (collectively "Taxes"), other than income and franchise
taxes of the United States and its political subdivisions; or
B. Change the basis of taxation on payments due from the
Borrower and Co-Obligors to the Lender under any LIBOR Rate borrowing
(otherwise than by a change in the rate of taxation of the overall net
income of the Lender); or
C. Impose, modify, increase or make applicable any reserve
requirement, special deposit requirement or similar requirement
(including, but not limited to, state law requirements and Regulation
D) against assets held by the Lender, or against deposits or accounts
in or for the account of the Lender, or against any loans made by the
Lender, or against any other funds, obligations or other property
owned or held by Lender; or
D. Impose on the Lender any other condition regarding any
LIBOR Rate borrowing;
and the result of any of the foregoing is to increase the cost to the
Lender of agreeing to make or of making, renewing or maintaining such
borrowing on the basis of the LIBOR Rate, or reduce the amount of
principal or interest received by the Lender, then, upon demand by the
Lender, the Borrowers and Co-Obligors shall pay to the Lender, from
time to time as specified by the Lender, additional amounts which
shall
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reasonably compensate the Lender for such increased cost or
reduced amount relating to LIBOR Rate borrowings outstanding after
Lender's demand. The Lender's reasonable determination of the amount
of any such increased cost, increased reserve requirement or reduced
amount shall be conclusive and binding, absent manifest error.
(iv) In no event shall the interest rate charged on the Line of Credit
exceed the maximum rate allowed under applicable law. Any amounts paid in
excess of the maximum lawful rate shall be applied to reduce the principal
amount of Borrower's and Co-Obligors' obligations to Lender or shall be
refunded to Borrower and Co-Obligors, at Lender's election. After maturity (by
acceleration or otherwise), the principal amount under the Line of Credit shall
bear interest at the rate of interest in effect immediately before maturity
plus four percent (4%).
c. Payments. Payment of all obligations arising under
the Line of Credit shall be made as follows:
(1) Interest. Interest on the outstanding principal
balance under the Line of Credit shall be paid in arrears on
the 1st day of each quarter beginning on December 1, 1996
except, in the case of a LIBOR Rate borrowing at Borrower and
Co-Obligors' option, interest shall be payable on the earlier
of the quarter as set forth above or at the end of the
applicable LIBOR Period.
(2) Voluntary Prepayment. Voluntary prepayments of
principal or accrued interest may be made, in whole or in
part, at any time without penalty, except, in the case of a
LIBOR Rate borrowing, a payment prior to the end of the LIBOR
Period will require Borrower and Co-Obligors to pay Lender
any breakage costs associated with such prepayment.
(3) Mandatory Prepayment. Borrower and Co-Obligors
must immediately prepay any amount by which the principal
balance of the Line of Credit exceeds $10,000,000.
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(4) All Amounts Due. All remaining principal,
interest and expenses outstanding under the Line of
Credit shall become due January 31, 1997.
d. Use of Proceeds. Advances under the Line of Credit
shall be used by Borrower and Co-Obligors for working capital,
to finance the construction of new inns and for a one-time
repurchase of warrants with a repurchase price not to exceed
$7,500,000, and for no other purpose.
e. Revolving Loans; Disbursements. During the term of
this Agreement, Borrower and Co-Obligors may from time to time
request, repay and reborrow advances under the Line of Credit,
provided that the total principal amount outstanding under the
Line of Credit shall not at any time exceed $10,000,000 and
that no Default (as hereinafter defined) or any event which
with the giving of notice, the passage of time, or both, would
constitute a Default, then exists hereunder. Disbursements
shall be made as follows:
(1) Disbursement Requests. Lender may honor requests
for advances made on Borrower's and Co-Obligors' behalf by
Borrower's Chief Executive Officer, Chief Financial Officer,
Chief Accounting Officer, or other officer designated by
Borrower, whether such request is made in person, by
telephone, or in writing. Lender may require that requests
for advances be submitted in writing, and may also require
that Borrower submit with such requests written warranties or
other reasonable assurances acceptable to Lender showing that
Borrower and Co-Obligors are not then in default hereunder
and Borrower is otherwise entitled to receive the requested
advance.
(2) Funding. As long as Borrower and Co-Obligors
meet the conditions for funding stated herein, Lender
shall fund advances requested under the Line of Credit
within one (1) business day of the actual receipt of
Borrower's request by Lender. All funds shall be disbursed
directly into an account maintained by Borrower with Lender.
Borrower and Co-Obligors agree that if Lender elects to fund
any requested advance(s) sooner after requested than is
required of Lender hereunder,
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Lender may nevertheless use the entire response period allowed
hereunder upon receipt of any subsequent request, at Lender's
sole option.
(3) Conditions to Funding. Lender shall not be
obligated to make any advance under the Line of Credit unless
all of the following conditions are satisfied as of the time
of the request and of funding.
A. All of the Loan Documents (as
hereinafter defined) provided for herein (or
otherwise requested by Lender pursuant to the
"Further Assurances" provision hereof) to evidence
the Line of Credit must have been executed and
delivered to Lender.
B. All warranties made in the Loan
Documents must be true as of the dates of the
advance request and as of the date of funding
thereof except those that by their terms speak of a
particular date (the submission of a request for
advance by Borrower shall be deemed a reaffirmation
of such warranties as of the date of the request).
C. All covenants made in the Loan Documents
must have been complied with as of the dates of the
advance request and funding thereof.
D. Borrower and Co-Obligors must not
otherwise be in Default hereunder and no condition
shall exist which, with the giving of notice, the
passing of time, or both, would constitute a Default
hereunder.
(4) Advance Not Waiver. Lender's making of any
advance under the Line of Credit that it is not obligated to
make under Paragraph 1e(3) above shall not be construed as a
waiver of Lender's right to withhold future advances, declare
a Default, or otherwise demand strict compliance with this
Agreement.
(5) Draws by Debit Memorandum. Lender may, without
prior notice, draw amounts available under the Line of
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Credit to pay any obligation of Borrower and Co-Obligors
to Lender that is not timely paid. Lender shall notify
Borrower within two (2) days of the taking of any such
action.
(6) LIBOR Rate Election. No more than three (3)
LIBOR Rate borrowings may be outstanding at any time. Each
LIBOR Rate draw must be at least One Million and 00/100
Dollars ($1,000,000) and, if greater, shall be in $250,000
increments.
2. Loan Documents. Concurrently with the execution hereof,
Borrower and Co-Obligors shall deliver to Lender the following documents in form
and substance acceptable to Lender (the "Loan Documents"):
(a) This Agreement;
(b) Line of Credit Note made by Borrower and Co-
Obligors in the principal amount of $10,000,000 payable
to the order of Lender ("Line of Credit Note");
(c) Certificates of Borrower's and Co-Obligors'
(other than Shoney's Inn of Baton Rouge) Good Standing
under Tennessee law issued by the Tennessee Secretary of
State;
(d) Certified copy of resolutions of Borrower's and
each Co-Obligor's Board of Directors authorizing a named
officer of Borrower and each Co-Obligor to enter into this
Agreement and to execute all related documents on Borrower's
and Co-Obligors' behalf;
(e) The Lender shall have received Borrower's 10Q
Report for the period ended July 14, 1996 or such other
information as Lender may reasonably require; and
(f) Legal opinion executed by Borrower's counsel
addressing such matters as Lender shall require.
3. Capacity. Borrower and each Co-Obligor (other than Shoney's Inn of
Baton Rouge) warrants that each is and shall remain a duly organized Tennessee
corporation in good standing under the
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laws of Tennessee, and that Borrower and each Co-Obligor is and shall remain
duly qualified to do business in each state other than Tennessee in which the
failure to qualify would result in a material adverse impact on Borrower or any
Co-Obligor or their business. Borrower and each Co-Obligor warrants that its
execution of and performance under this Agreement and all related documents are
permitted under and will not violate any provision of Borrower's and each
Co-Obligor's Charter or By-Laws (or, as to Shoney's Inn of Baton Rouge, its
partnership agreement) or any agreement to which Borrower or any Co-Obligor is
a party or any law, rule, ordinance, regulation or Court Order to which
Borrower or any Co-Obligor is subject. Borrower and each Co-Obligor further
warrants that the execution of all necessary resolutions and other
prerequisites of corporate action or partnership, as applicable, have been duly
performed so that the individual executing this Agreement and related documents
on behalf of Borrower and each Co-Obligor is duly authorized to bind Borrower
and each Co-Obligor by his signature.
4. No Subsidiaries. Except as set forth in Schedule 4, Borrower and
Co-Obligors warrant that they presently have no subsidiaries or interests in
any partnership or other business entity.
5. Corporate Records. Borrower and each Co-Obligor covenants to
maintain current corporate minute books and stock ledgers and agree to allow
Lender to inspect the same at any time during normal business hours upon
reasonable notice.
6. Accounting. Borrower and Co-Obligors warrant that Borrower's and
Co-Obligors' accounting complies with applicable generally acceptable
accounting principles ("GAAP") and covenant that they will continue to apply
GAAP throughout the life of the loan.
7. ERISA. Borrower and Co-Obligors have not incurred and shall not
incur a material accumulated funding deficiency within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and have
not incurred any material liability to the Pension Benefit Guaranty Corporation
established under ERISA (or any successor thereto under ERISA) in connection
with any retirement plan, and no reportable event has occurred and is
continuing or shall occur with respect to any such plans.
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8. Books, Records and Property. Borrower and Co-Obligors covenant to
maintain financial books and records in a manner that will allow financial
statements to be prepared in accordance with GAAP, consistently applied, and
shall allow Lender to inspect such records during normal business hours upon
reasonable notice. Lender has full authority to inspect all property of
Borrower and Co-Obligors during normal business hours upon reasonable notice.
9. Insurance. In addition to any specific insurance requirements
contained herein or in any other document pertaining to the Line of Credit,
Borrower and Co-Obligors agree to generally maintain adequate insurance against
casualty and liability losses in accordance with customary practices in
Borrower's and Co-Obligors' field of enterprise. Borrower and Co-Obligors
agree to provide Lender with proof of the existence of such insurance upon
demand.
10. Chief Executive Office. Borrower and Co-Obligors warrant
that the address designated herein to which notices are to be sent
to Borrower and Co-Obligors is Borrower's and Co-Obligors' chief executive
office. Borrower and Co-Obligors agree to notify Lender in writing of any
change thereof and agree that the same shall not in any event be moved outside
Xxxxxx County, Tennessee, without Lender's prior written consent.
11. No Defaults Under Other Agreements. Borrower and Co-Obligors
warrant that neither Borrower nor any Co-Obligor, to the best of Borrower's and
Co-Obligors' knowledge, information, and belief, nor any other party thereto is
presently in default beyond any applicable notice and/or cure periods in any
material respect under any material contract or agreement to which Borrower or
any Co-Obligor is a party, and no condition presently exists which, with the
giving of notice, the passing of time, or both, would cause such a default.
12. Disclosure of Litigation. Except as disclosed on Schedule 12,
there are no actions, suits or proceedings pending (including, but not limited
to, matters relating to any Environmental Laws), or, to the best of knowledge
of Borrower or any Co-Obligor, threatened, against or affecting Borrower or any
Co-Obligor or involving the validity or enforceability of any of the Loan
Documents, at law or in equity, or before any governmental or administrative
agency, except actions, suits and proceedings
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that are covered by insurance in all material respects and that, if adversely
determined, would not impair the ability of Borrower or any Co-Obligor to
perform each and every one of its obligations under this Agreement; or
materially and adversely affect Borrower's or any Co-Obligor's business or
Borrower's or any Co-Obligor's ability to carry on its business substantially
in the manners now conducted (individually or in the aggregate).
13. Financial Statements.
a. Warranties. Borrower and Co-Obligors warrant that
Borrower's consolidated quarterly and annual financial statements
delivered to Lender in connection with the Line of Credit have been
prepared in accordance with generally accepted accounting principles,
consistently applied, and present fairly the financial condition of
Borrower as of the date or dates thereof and are true and correct in
all material respect. Without limiting the foregoing, Borrower and Co-
Obligors warrant that such financial statements disclose all known
material contingent liabilities as well as material direct
liabilities. Borrower and Co-Obligors acknowledge that Lender has
advanced (or shall advance) the Line of Credit in reliance upon such
financial statements, and Borrower and Co- Obligors warrant that no
material adverse change has occurred in the financial condition of
Borrower and Co-Obligors as set forth in the most recent financial
statements.
b. Reporting Requirements. Borrower covenants to furnish
Lender annual audited financial statements and annual budget and cash
flow projections for the upcoming year within one hundred twenty (120)
days of the close of the preceding fiscal year. Each audit must be
performed by a certified public accountant reasonably acceptable to
Lender, at Borrower's expense. In addition, Borrower covenants to
furnish to Lender, on or before the forty-fifth (45th) day following
the end of each fiscal quarter, income statements, cash flow
statements and balance sheets together with an officer's certificate
executed by the chief executive officer, chief financial officer or
chief accounting officer of Borrower certifying compliance with the
financial covenants set forth herein and further stating that, to the
best of his knowledge, information and belief, no Default exists
hereunder as of the date of the certification. Borrower and
Co-Obligors
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also covenant to furnish to Lender, upon demand, copies of
Borrower's and Co-Obligors' tax returns and additional financial
information in form and substance acceptable to Lender.
14. Notice of Changes in Financial Condition and Defaults. Borrower
and Co-Obligors covenant to give Lender prompt written notice of (i) the
creation or discovery of any material additional contingent liability or the
occurrence of any other material adverse change in the financial condition of
Borrower or Co- Obligors, and (ii) the occurrence of any event, or presence of
any condition, which constitutes a Default hereunder or which with the giving
of notice, the passing of time, or both, would constitute a Default. Borrower
and Co-Obligors covenant that they will not change their fiscal year without
obtaining the prior written consent of Lender.
15. No Unpaid Taxes. Borrower and Co-Obligors have filed all tax
returns and reports required to be filed and have paid all taxes, assessments,
fees and other governmental charges levied upon them or upon any of their
properties or income, which are due and payable, including interest and
penalties, or have provided adequate reserves for the payment thereof, other
than any taxes or assessments that could not impair the ability of Borrower and
Co- Obligors to perform each and every one of their obligations hereunder; or
materially and adversely affect the ability of Borrower or any Co-Obligor to
carry on its business in the manner as now conducted. To the best knowledge of
Borrower and each Co- Obligor, no tax liens have been filed against Borrower,
any Co- Obligor or any of their properties, that could impair the ability of
Borrower or any Co-Obligor to perform each and every one of their obligations
hereunder; or materially and adversely affect the business of Borrower or any
Co-Obligor.
16. No Untrue or Misleading Representations. Borrower and Co-Obligors
warrant that no information, exhibit or report furnished in writing by Borrower
or a Co-Obligor to Lender in connection with the Line of Credit contains any
untrue statement of material fact or omits to state a material fact necessary
to make the statements contained therein not misleading in any material
respect.
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17. Compliance with Law. To the best of their knowledge, Borrower and
Co-Obligors warrant that the business activities of Borrower and each
Co-Obligor are conducted in material compliance with all applicable laws and
regulations. Borrower and Co-Obligors covenant that such activities shall
continue to be so conducted.
18. Assistance in Litigation. Borrower and Co-Obligors covenant to,
upon request, cooperatively participate in any proceeding in which Borrower and
Co-Obligors are not an adverse party to Lender and which concerns Lender's
rights regarding the Line of Credit.
19. Name. Borrower warrants that during the past five (5) years,
Borrower has not been known under or done business under any name other than
the name used by Borrower in executing this Agreement. Borrower and Co-Obligors
agree to give Lender written notice no later than 15 days after a Borrower or
Co-Obligor begins using any name other than that used in executing this
Agreement.
20. Negative Pledge. Except for any liens permitted under Section 29
hereof, Permitted Encumbrances and easements or minor encumbrances relating to
real estate, Borrower and Co-Obligors covenant and agree that they will not
suffer, permit or grant any lien, security interest, deed of trust, mortgage,
deed to secured debt, pledge, assignment or other collateral assignment of any
of their assets in favor of any party other than Lender without the prior
written consent of Lender. For purposes of this Agreement, "Permitted
Encumbrances" will mean deposits under worker's compensation, unemployment
insurance and social security laws or to secure statutory obligations or surety
or appeal bonds or performance or other similar bonds in the ordinary course of
business; statutory liens of landlords, carriers, warehousemen, mechanics, and
materialmen and other similar liens, in respect of liabilities which are not
yet due or which are being contested in good faith (and for which adequate
reserves have been established in accordance with Generally Accepted Accounting
Principles); Liens for taxes not yet due and payable; and liens for taxes due
and payable, the validity or amount of which is currently being contested in
good faith (and for which adequate reserves have been established in accordance
with Generally Accepted Accounting Principles) by appropriate proceedings and
as to which foreclosure and other enforcement proceedings will not have been
commenced (unless fully bonded or otherwise effectively stayed).
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21. Expenses. Upon demand, Borrower and Co-Obligors will advance to
Lender or, at Lender's option, reimburse Lender for, the following expenses:
a. Taxes. All taxes (other than income taxes) that
Lender may be required to pay because of the Line of Credit;
b. Administration. All expenses that Lender may incur
in connection with the preparation, execution, or enforcement
of this Agreement or of any other document pertaining to the
Line of Credit;
c. Costs of Collection. All court costs and other costs
of collecting any debt, overdraft or other obligation included
in the Line of Credit;
d. Litigation. All costs arising from any litigation,
investigation, or administrative proceeding (whether or not Lender is
a party thereto) that Lender may incur as a result of the Line of
Credit or as a result of Lender's association with Borrower and
Co-Obligors, including, but not limited to, expenses incurred by
Lender in connection with a case or proceeding involving Borrower or
any Co-Obligor under any chapter of the Bankruptcy Code or any
successor statute thereto;
e. Attorneys Fees. Reasonable attorneys' fees incurred
in connection with any of the foregoing.
If Lender pays any of the foregoing expenses, they shall become a part of the
Line of Credit and shall bear interest at the rate of interest then in effect.
This paragraph shall remain in full effect regardless of the full payment of
the Line of Credit, the purported termination of this Agreement, the delivery
of the executed original of this Agreement to Borrower and Co-Obligors, or the
content or accuracy of any representation made by Borrower and Co-Obligors to
Lender; provided, however, Lender may terminate this Paragraph by executing and
delivering to Borrower and Co-Obligors a written instrument of termination
specifically referring to this Paragraph.
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22. Further Assurances. Borrower and Co-Obligors covenant to execute
such other documents that Lender may reasonably deem necessary to further
evidence the obligations provided for herein.
23. Default Certificates. Borrower and Co-Obligors covenant to deliver
to Lender, within five (5) business days after request, the certificate of
Borrower, of Co-Obligors or of Borrower's appropriate representative (as
specified by Lender) stating whether, to the best of the person's knowledge,
information, and belief and after due investigation, a Default exists under
this Agreement. The certificate shall describe with particularity any Default
and shall address with particularity any circumstances or subjects described by
Lender in its request. Borrower and Co-Obligors covenant that they will
promptly forward to Lender a copy of any notice of default Borrowers receives
from any party with which any Borrower has a contract, where the amount of such
contract exceeds $250,000.
24. Recitals. Borrower and Co-Obligors warrant and agree that the
recitals set forth at the beginning of this Agreement are true.
25. No Burdensome Agreements. Borrower and Co-Obligors warrant that
Borrower and each Co-Obligor is not a party to any material contract or
agreement and is not subject to any material contingent liability that does or
may impair the ability of Borrower or any Co-Obligor to perform under the terms
of this Agreement. Borrower and Co-Obligors further warrant that the execution
and performance of this Agreement will not cause a default, acceleration or
other event under any other contract or agreement to which Borrower or any
Co-Obligor or any property of Borrower or any Co-Obligor is subject, and will
not result in the imposition of any charge, penalty, lien or other encumbrance
against any property of Borrower or any Co-Obligor except in favor of Lender.
26. Legal and Binding Agreement. Borrower and Co-Obligors warrant that
the execution and performance of this Agreement will not violate any judicial
or administrative order or governmental law or regulation, and that this
Agreement is valid, binding and enforceable according to its terms, subject to
bankruptcy and other laws affecting the rights of creditors generally.
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27. No Consent Required. Borrower and Co-Obligors warrant that
Borrower's and Co-Obligors' execution, delivery and performance of this
Agreement do not require the consent of or the giving of notice to any third
party including, but not limited to, any other lender, governmental body or
regulatory authority, which has not been obtained.
28. No Default. Borrower and Co-Obligors warrant that, as of the
execution of this Agreement, no Default exits hereunder and no condition exists
which, with the giving of notice, the passing of time, or both, would
constitute such a Default.
29. Negative Covenants. Without Lender's prior written consent,
Borrower and Co-Obligors shall not do any of the following:
a. Other Debt. Incur, create, assume or permit to
exist any indebtedness for borrowed money except:
(1) Indebtedness to Lender.
(2) Debts existing as of the execution hereof and
disclosed in the financial statements delivered to Lender and
any modifications, renewals or extensions thereof and any
refinancing of such debt with no increase in the amount of
such refinanced debt.
(3) Unsecured debts on open account incurred in the
ordinary course of business.
(4) Up to $55,000,000 of subordinated indebtedness
which is subordinated to the obligations owed to Lender
hereunder pursuant to an existing subordinated debt offering.
(5) Up to $125,000,000 of additional Senior
Subordinated Notes which is subordinated to the obligations
owed to Lender hereunder and on such terms and conditions
that are satisfactory to Lender.
(6) Indebtedness incurred to acquire additional
assets or entities; provided such purchase money
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indebtedness may be secured by liens in the assets or
entities so acquired.
(7) Indebtedness arising from the negotiation and
deposit of instruments received in the ordinary course of
business.
(8) Indebtedness incurred by Borrower pursuant to
advances made under a credit facility or line of credit in
existence on the date hereof or any extension or renewal
thereof which does not increase the maximum amount available.
(9) Long-term (a maturity of more than one year)
mortgage loans which do not exceed in the aggregate
$10,000,000.
(10) Indebtedness incurred by Borrower which is used
to repay the Line of Credit and which permanently reduces the
maximum amount available under the Line of Credit dollar for
dollar by such paydown.
b. Pledge or Mortgage of Assets. Except as allowed under this
Agreement, pledge or mortgage any of its existing, or future acquired
assets to any other party, except liens that exist on the date hereof,
together with renewals, extensions, refinancings and modification
thereof.
c. Stock Transactions. Redeem any stock, subordinated debt,
warrants, or debt securities convertible into stock; provided Borrower
may redeem warrants in a one-time transaction having an aggregate cost
of no more than $7,500,000 and Borrower may redeem stock in a one-time
transaction having an aggregate cost of no more than $2,500,000.
d. Reorganization. Enter into any agreement to merge,
consolidate, or otherwise reorganize or recapitalize; provided,
however, this shall not apply to any transaction where Borrower and/or
a Co-Obligor is the surviving corporation.
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e. Disposition of Assets. Sell, lease, or otherwise transfer
all or substantially all of its assets in any transaction which is not
in the ordinary course of business; provided, this restriction shall
not apply to transfers among Borrower and/or any Co-Obligors.
f. Guaranties. Guarantee any obligations of any other
business or individual, except through the endorsement of items
tendered to Borrower and Co-Obligors as payment in the ordinary course
of business, where the aggregate of such guaranties exceeds
$4,000,000. This guaranty liability shall not be considered as debt
for purposes of Paragraph 30a. Any guaranty by Borrower of a debt of a
Co-Obligor shall not be counted toward the $4,000,000 so long as the
debt of the Co-Obligor is shown on the Borrower's consolidated
financial statements.
h. Creation of New Subsidiaries. Acquire an interest in any
subsidiary corporation unless, within 15 days after the acquisition of
such ownership interest, the new subsidiary executes the Line of Credit
Note and becomes a party to this Agreement.
i.Dividends. Co-Obligors shall not declare any dividends,
other than dividends payable to ShoLodge, Inc., without the prior
written consent of Lender.
30. Financial Covenants. Borrower and Co-Obligors shall maintain the
following financial requirements as determined by GAAP on a consolidated basis
(unless otherwise noted):
a. Tangible Net Worth. at all times maintain a minimum
Tangible Net Worth of not less than $74,000,000 computed quarterly.
b. Debt to Tangible-Net-Worth Ratio. From and after January
31, 1997, at all times maintain a ratio of total debt to Tangible Net
Worth of not more than 1.75 to 1.00 computed quarterly; provided,
however, that for purposes of computing this ratio, "revenue
participation bonds" (as those terms are used in Borrower's Financial
Statements) will be subtracted from total liabilities, and any
minority shareholder interest
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of a subsidiary of Borrower will be excluded from Borrower's total
liabilities.
c. Current Ratio. From and after January 31, 1997, maintain
at all times a ratio of Current Assets to Current Liabilities not less
than 1.0 to 1.0, computed quarterly.
d. Fixed-Charge Coverage Ratio. Maintain a Fixed-Charge
Coverage Ratio of not less than 1.25 to 1.0 computed quarterly based
on a trailing four quarters.
e. Definitions. For purposes of this Section 31 and
this Agreement, the following definitions shall apply:
(i) "Current Assets" will have the meaning given in
accordance with Generally-Accepted Accounting Principles.
(ii) "Current Liabilities" will have the meaning
given in accordance with Generally-Accepted Accounting
Principles.
(iii) "Fixed-Charge Coverage Ratio" will mean the
quotient obtained by dividing (a) the sum of net-after- tax
income, net interest, depreciation, amortization and net
rental expenses by (b) the sum of net interest, net rents,
the current maturities of long-term debt and capitalized
leases.
(iv) "Generally-Accepted Accounting Principles" will
mean generally-accepted accounting principles set forth in
opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the
Financial Accounting Standards Board, consistently applied
and maintained throughout the period indicated and consistent
with the prior financial practice of Borrowers and any
predecessors.
(v) "Tangible Net Worth" will mean the excess of
total assets (excluding intangible assets) over total
liabilities (exclusive of capital stock and surplus), all
determined in accordance with Generally-Accepted Accounting
Principles consistently applied.
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31. Environmental Matters
a. Definitions
(1) "Environmental Laws" means the Environmental
Protection Act, the Resource Conservation and Recovery Act of
1976, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Hazardous Materials
Transportation Act and any other federal, state or municipal
law, rule or regulation relating to air emissions, water
discharge, noise emissions, solid or liquid waste disposal,
hazardous or toxic waste or materials, or other environmental
or health matters.
(2) "Hazardous Materials" means those substances
included from time to time within the definition of hazardous
substances, hazardous materials, toxic substances, or solid
waste under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C.
ss. 9601 et seq.; the Resource Conversation and Recovery Act
of 1976, 42 U.S.C. ss. 1801 et seq., and in the regulations
promulgated pursuant to such acts and laws; and such other
substances that are or become regulated under any applicable
local, state or federal law or regulation addressing
environmental hazards.
b. Environmental Law Compliance. Borrower and Co-Obligors
warrant and covenant that the conduct of Borrower's and Co-Obligors'
business operations do not and will not violate, in any material
respect, any federal laws, rules, or ordinance for environmental
protection, regulations of the Environmental Protection Agency and any
applicable local or state law, rule, regulation, or rule of common law
and any judicial interpretation thereof relating primarily to the
environmental or Hazardous Materials and Borrower and Co-Obligors
will not use or permit any other party to use any Hazardous Materials
at any of Borrower's or Co-Obligors' places of business or at any
other property owned by Borrower and Co-Obligors except such materials
as are incidental to Borrower's and Co-Obligors' normal course of
business, maintenance and repairs and which are handled in material
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20
compliance with all applicable environmental laws. Borrower and
Co-Obligors agree to permit Lender, its agents, contractors, and
employees to enter and inspect any of Borrower's and Co-Obligors'
places of business or any other property of Borrower and Co-Obligors
at any reasonable times upon five (5) days prior notice for the purpose
of conducting an environmental investigation and audit (including
taking physical samples) to insure that Borrower and Co-Obligors are
complying with this covenant and Borrower and Co-Obligors shall
reimburse Lender on demand for the costs of any such environmental
investigation and audit. Borrowers and Co- Obligors shall provide
Lender, its agents, contractors, employees, and representatives with
access to and copies of any and all data and documents relating to or
dealing with any Hazardous Materials used, generated, manufactured,
stored or disposed of by Borrower's and Co-Obligors' business
operations within five (5) days of the request thereof.
c. Notification of Environmental Claims. Borrower and
Co-Obligors shall immediately advise Lender in writing of (i) any and
all material enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed, or
threatened pursuant to any applicable federal, state, or local laws,
ordinances or regulations relating to any Hazardous Materials
affecting Borrower's and Co-Obligors' business operations; and (ii)
all material claims made or threatened by any third party against
Borrower or any Co- Obligor relating to damages, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous
Materials. Borrower and Co-Obligors shall immediately notify Lender of
any material remedial action taken by Borrower or any Co-Obligor with
respect to Borrower's and Co-Obligors' business operations.
d. Indemnification. Borrower and Co-Obligors shall indemnify,
defend, and hold Lender and its successors and assigns harmless from
and against any and all claims, demands, suits, losses, damages,
assessments, fines, penalties, costs, or other expenses (including
reasonable attorneys' fees and court costs) arising from or in any way
related to actual or threatened damage to the environment, agency
costs of investigation, personal injury or death, or property damage,
due to a release or alleged release of Hazardous Materials,
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arising from Borrower's and Co-Obligors' business operations, any other
property owned by Borrower or any Co-Obligor or in the surface or
ground water arising from Borrower's or any Co-Obligors' business
operations, or gaseous emissions arising from Borrower's or any
Co-Obligors' business operations or any other condition existing from
Borrower's and Co-Obligors' business operations resulting from the use
or existence of Hazardous Materials, whether such claim proves to be
true or false. Borrower and Co-Obligors further agree that their
indemnity obligations shall include, but are not limited to, liability
for damages resulting from the personal injury or death of an employee
of the Borrower or any Co-Obligor, regardless of whether the Borrower
or any Co-Obligor has paid the employee under the workmen's
compensation laws of any state or other similar federal or state
legislation for the protection of employees. The term "property damage"
as used in this paragraph includes, but is not limited to, damage to
any real or personal property of the Borrower or any Co-Obligor, the
Lender, and of any third parties. The Borrower's and Co-Obligors'
obligations under this paragraph shall survive the repayment of the
Loan.
32. Default Defined. The occurrence of any one or more of the
following events shall constitute a Default under this Agreement:
a. Monetary Default. The failure of Borrower and Co-Obligors to
timely pay any amount due Lender under the Line of Credit or under any
other obligation to Lender if such failure continues for ten (10) days
after notice of nonpayment from Bank to Borrower and Co-Obligors.
b. Breach of Covenant. The failure of Borrower or any Co- Obligor to
comply with any of the terms and obligations of this Agreement (other
than those addressed in a, c, d, e, f or g hereof) for a period of 20
days; provided, however, that Borrower and Co-Obligors will not be
deemed in default hereunder if such failure is curable, but cannot be
cured within such 20-day period and Borrower or any Co-Obligor
commences to cure such failure within such 20-day period and
diligently pursues curing such failure and does in fact cure such
failure within a reasonable time, not to exceed 45 days (or such
longer period of time if such failure cannot
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reasonably be cured in 45 days and such failure to cure could not
materially and adversely affect Lender).
c. Breach of Warranty. Lender's discovery that any representation or
warranty in connection with this Agreement or the Line of Credit or
any other Loan Document was materially false when made.
d. Default Under Other Document. Subject to applicable cure periods,
the occurrence of a default under the terms of any document evidencing
or otherwise pertaining to the Line of Credit, including, without
limitation, the Loan Documents.
e. Voluntary Bankruptcy. The Borrower or any Co-Obligor shall commence
a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing.
f. Involuntary Bankruptcy. An involuntary case or other proceeding
shall be commenced against Borrower or any Co- Obligor seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of
ninety (90) days; or an order for relief shall be entered against the
Borrower and any Co-Obligor under the bankruptcy laws as now or
hereafter in effect.
g. Default Under Other Loans. Subject to any grace or cure periods,
the occurrence of a default under the terms of any
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document or agreement evidencing, securing or otherwise pertaining to
the extension of credit by any other party to Borrower or any
Co-Obligor, the default, which if not cured, would permit the
acceleration of the debt.
33. Remedies Upon Default. Upon a Default under Section 33, Lender
may exercise any or all of the following remedies:
a. Remedies. Lender may exercise any right that it may
have at law or equity, including an action to collect the Line
of Credit Loan. All obligations of Bank to advance or
readvance under the Line of Credit will terminate.
b. Application of Proceeds. All amounts received by Lender
for Borrower's or Co-Obligors' account by exercise of its remedies
hereunder shall be applied as follows: First, to the payment of all
reasonable expenses incurred by Lender in exercising its rights
hereunder, including reasonable attorney's fees, and any other
expenses due Lender from Borrower and Co-Obligors; Second, to the
payment of all interest included in the Line of Credit, in such order
as Lender may elect; Third, to the payment of all principal included
in the Line of Credit, in such order as Lender may elect; and Fourth,
surplus to Borrower, the Co-Obligors or other party entitled thereto.
34. Resolution of Disputes.
a. Arbitration. Any controversy or claim between or
among the parties to the Loan Documents or any related
agreements or instruments, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in
accordance with the Federal Arbitration Act (or if not applicable, the
applicable state law), the Rules of Practice and Procedure for the
arbitration of commercial disputes of Judicial Arbitration and
Mediation Services, Inc. (J.A.M.S.), and the "special rules" set forth
below. In the event of any inconsistency, the special rules shall
control. Judgment upon any arbitration award may be entered in any
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court having jurisdiction. Any party to the Loan Documents may bring
an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this agreement
applies in any court having jurisdiction over such action.
b. Special Rules. The arbitration shall be conducted
in Nashville, Tennessee and administered by J.A.M.S. who will
appoint an arbitrator; if J.A.M.S. is unable or legally
precluded from administering the arbitration, then the
American Arbitration Association will serve. All arbitration
hearings will be commenced within 90 days of the demand for
arbitration; further, the arbitrator shall only, upon a
showing of cause, be permitted to extend the commencement of
such hearing for up to an additional 60 days.
c. Reservations of Rights. Nothing in foregoing arbitration
shall be deemed to (i) limit the applicability of any otherwise
applicable statutes of limitation or repose and any waivers contained
in the Loan Documents; or (ii) be a waiver by Lender of the protection
afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent
state law; or (iii) limit the rights of Lender under the Loan
Documents (a) to exercise self help remedies such as (but not limited
to) set-off, or (b) to obtain from a court provisional or ancillary
remedies such as (but not limited to) injunctive relief, or the
appointment of a receiver. Lender may exercise such self help rights,
or obtain such provisional or ancillary remedies before, during or
after the pendency of any arbitration proceeding brought pursuant to
the Loan Documents.
35. Not Partners; No Third Party Beneficiaries. Nothing contained
herein or in any related document shall be deemed to render Lender a partner of
Borrower and Co-Obligors for any purpose. This Agreement has been executed for
the sole benefit of Lender, Borrower and Co-Obligors and no third party is
authorized to rely upon Lender's rights hereunder or to rely upon an assumption
that Lender has or will exercise its rights under this Agreement or under any
document referred to herein.
36. Regulation U. Borrower and each Co-Obligor warrants that
none of the proceeds of the loan evidenced by the Note will be used
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to purchase or carry "margin stock," as defined in Regulation U issued by the
Federal Reserve Board.
37. Business Days. If any payment date under the Line of Credit
fails on a day that is not a business day of Lender, or if the last day of any
notice period falls on such a day, the payment shall be due and the notice
period shall end on the next succeeding Lender business day.
38. Notices. Any communications concerning this Agreement or the
credit described herein shall be addressed as follows:
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As to Borrower and Co-Obligors:
ShoLodge, Inc.
Attention: Xxxx Xxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
With a Copy to:
BOULT, CUMMINGS, XXXXXXX & XXXXX, PLC
Attention: Xxxxxxx X. Xxxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
As to Lender:
NationsBank of Tennessee, N.A.
Attention: Xxx Xxxx, Vice President
Xxx XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
With a copy to:
Xxxx & Xxxxxxx
Attn: Xxxxx X. Xxxxxx
2000 First Union Tower
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Communications to be given to a party shall be effective when actually or
constructively received by such party or three (3) days after when set forth in
writing and mailed or delivered to such party's address stated above. Any party
may change its address for receipt of notices by submitting the change in
writing to the other party.
39. Participations. Prior to a Default, Lender agrees that it will not
assign or participate an interest in the Line of Credit Note and this Agreement
without the prior approval of Borrower. Thereafter, Lender may, from time to
time, in its sole discretion, and without notice to Borrower and Co-Obligors,
sell participations in any credit subject hereto to such other investors or
financial institutions as it may elect. Such participants will have no
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direct relationship with Borrower and Co-Obligors and will have no right with
respect to waivers or amendments or default declarations. Lender may from time
to time disclose to any participant or prospective participant such information
as Lender may have regarding the financial condition, operations, and prospects
of Borrower and Co-Obligors, but Lender shall take reasonable precautions to
require such participant or prospective participant to keep such information
confidential.
40. Incorporation of Exhibits. All Exhibits referred to in this
Agreement are incorporated herein by this reference.
41. Indulgence Not Waiver. Lender's indulgence in the existence of a
default hereunder or any other departure from the terms of this Agreement shall
not prejudice Lender's rights to declare a default or otherwise demand strict
compliance with this Agreement.
42. Cumulative Remedies. The remedies provided Lender in this
Agreement are not exclusive of any other remedies that may be available to
Lender under any other document or at law or equity.
43. Amendment and Waiver in Writing. No provision of this Agreement
can be amended or waived, except by a statement in writing signed by the party
against which enforcement of the amendment or waiver is sought.
44. Assignment. This Agreement shall be binding upon and inure to the
benefit of the respective heirs, successors and assigns of Borrower and
Co-Obligors and Lender, except that Borrower and Co-Obligors shall not assign
any rights or delegate any obligations arising hereunder without the prior
written consent of Lender. Any attempted assignment or delegation by Borrower
and Co-Obligors without the required prior consent shall be void.
45. Entire Agreement. This Agreement and the other written agreements
between Borrower, Co-Obligors and Lender represent the entire agreement between
the parties concerning the subject matter hereof, and all oral discussions and
prior agreements are merged herein.
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46. Severability. Should any provision of this Agreement be invalid or
unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
47. Time of Essence. Time is of the essence of this Agreement, and
all dates and time periods specified herein shall be strictly observed, except
that Lender may permit specific deviations therefrom by its written consent.
48. Applicable Law. The validity, construction and enforcement of this
Agreement and all other documents executed with respect to the Line of Credit
shall be determined according to the laws of Tennessee applicable to contracts
executed and performed entirely within that state, in which state this
Agreement has been executed and delivered.
49. Gender and Number. Words used herein indicating gender or number
shall be read as context may require.
50. Captions Not Controlling. Captions and headings have been
included in this Agreement for the convenience of the parties, and shall not be
construed as affecting the content of the respective paragraphs.
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A
THOROUGH UNDERSTANDING OF THE TERMS
OF THIS AGREEMENT AND AGREE TO BE
BOUND THEREBY:
NATIONSBANK OF TENNESSEE, N.A.
By: /s/ Xxxx X. Xxxxxxxxxxx
----------------------------------
Title: Banking Officer
------------------------------
SHOLODGE, INC.
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By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
SHONEY'S INN OF LEBANON, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
SHONEY'S INN, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Its: President
--------------------------------
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NASHVILLE AIR ASSOCIATES, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
XXXXX AND ASSOCIATES, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
SUNSHINE INNS, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
LAFLA INN, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
SOUTHEAST TEXAS INNS, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
DELAWARE INNS, INC.
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By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
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ALABAMA LODGING CORPORATION
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
FRONT RANGE SUITES, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
MIDWEST INNS, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
FAR WEST INNS, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
CAROLINA INNS, INC.
By: /s/ Xxxx Xxxxx
----------------------------------
Title: President
------------------------------
SHONEY'S INN OF BATON ROUGE, A
A TENNESSEE GENERAL PARTNERSHIP
By: Two Seventeen, Inc.,
General Partner
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By: /s/ Xxxx Xxxxx
-----------------------------
Its: President
-----------------------------
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By: Inn Partners, Inc.,
General Partner
By: /s/ Xxxx Xxxxx
-----------------------------
Its: President
-----------------------------
34
35
LINE OF CREDIT NOTE
$10,000,000.00 Nashville, Tennessee November 6, 1996
FOR VALUE RECEIVED, SHOLODGE, INC., a Tennessee corporation, SHONEY'S
INN OF LEBANON, INC., a Tennessee corporation, SHONEY'S INN, INC., a Tennessee
corporation, NASHVILLE AIR ASSOCIATES, INC., a Tennessee corporation, XXXXX AND
ASSOCIATES, INC., a Tennessee corporation, SUNSHINE INNS, INC., a Tennessee
corporation, LAFLA INN, INC., a Tennessee corporation, SOUTHEAST TEXAS INNS,
INC., a Tennessee corporation, DELAWARE INNS, INC., a Tennessee corporation,
ALABAMA LODGING CORPORATION, a Tennessee corporation, FRONT RANGE SUITES, INC.,
a Tennessee corporation, MIDWEST INNS, INC., a Tennessee corporation, FAR WEST
INNS, INC., a Tennessee corporation, CAROLINA INNS, INC., a Tennessee
corporation, and SHONEY'S INN OF BATON ROUGE, a Tennessee general partnership
(collectively the "Maker") jointly and severally promise to pay to the order of
NATIONSBANK OF TENNESSEE, N.A. ("Payee" or "NationsBank"), the sum of Ten
Million and No/100 Dollars ($10,000,000.00), or as much thereof as may be
outstanding from time to time, together with interest thereon as set forth
below.
Advances under this Note shall be governed by that certain Loan
Agreement dated November 6, 1996 ("Loan Agreement"). Subject to the
provisions of the Loan Agreement, Maker may borrow, repay and reborrow and
there is no limit on the number of advances against this Note as long as the
total unpaid principal balance at any time outstanding does not exceed Ten
Million and No/100 Dollars ($10,000,000.00).
Interest shall accrue at either (i) the NationsBank Prime Rate, as it
may change from time to time; or (ii) upon Maker's written election, for any
given period of 30, 60, or 90 days (a "LIBOR Period") the LIBOR Rate plus 190
basis points.
Interest in arrears shall be due and payable on the first (1st) day of
each quarter beginning on December 1, 1996, except in the case of a LIBOR Rate
Borrowing, interest shall be payable at the earlier of each quarter as set
forth above or at the end of the LIBOR Period.
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All remaining principal and interest shall become due on January 31,
1997.
Should Maker elect in writing to use the LIBOR Rate option for a LIBOR
Period, the following restrictions will apply. No more than three (3) LIBOR
Rate Borrowings may be outstanding at any time. The borrowings will be in
minimum amounts of One Million and 00/100 Dollars ($1,000,000.00) each or
greater amounts in Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
increments.
As used herein, the term "NationsBank Prime Rate" shall mean the
fluctuating rate of interest established by NationsBank from time to time as
its "Prime Rate", whether or not such rate shall be otherwise published. Such
Prime Rate is established by NationsBank as an index or base rate and may or
may not at any time be the best or lowest rate charged by NationsBank on any
loan. If at any time or from time to time the Prime Rate increases or
decreases, then the rate of interest hereunder shall be correspondingly
increased or decreased effective on the day on which any such increase or
decrease of the Prime Rate changes, unless otherwise herein provided. In the
event that NationsBank, during the term hereof, shall abolish or abandon the
practice of establishing a Prime Rate, or should the same become
unascertainable, NationsBank shall designate a comparable reference rate which
shall be deemed to be the Prime Rate for purposes hereof.
For purposes hereof, the "LIBOR Rate" shall mean the rate per annum
announced by NationsBank as its LIBOR Rate for a period equal to the length of
such LIBOR Period and in an amount comparable to the then aggregate unpaid
principal balance hereunder (or will be outstanding by the commencement of the
LIBOR Period requested by Maker) as adjusted to reflect NationsBank's reserve
requirements, all as calculated and announced from time to time by Payee, whose
announcement shall be binding absent manifest error.
Interest hereunder shall be calculated based upon a 360 day year in
the case of LIBOR Rate loans and a 365 day year in the case of Prime Rate loans
and actual days elapsed. The interest rate required hereby shall not exceed the
maximum rate permissible under applicable law, and any amounts paid in excess
of such rate shall be applied to reduce the principal amount hereof or shall be
refunded to Maker, at the option of the holder of this Note.
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37
All amounts due under this Note are payable at par in lawful money of
the United States of America, at the principal place of business of Payee in
Nashville, Tennessee, or at such other address as the Payee or other holder
hereof (herein "Holder") may direct.
Any payment not made within fifteen (15) days of its due date will be
subject to assessment of a late charge equal to five percent (5%) of such
payment. Holder's right to impose a late charge does not evidence a grace
period for the making of payments hereunder.
The occurrence of a Default under the Loan Agreement shall constitute
an event of default under this Note.
Upon the occurrence of an event of default, as defined above, Holder
may, at its option and without notice, terminate any obligation to advance
funds under this Note, declare all principal and interest provided for under
this Note, and any other obligations of Maker to Holder, to be presently due
and payable, and Holder may enforce any remedies available to Holder under any
documents securing or evidencing debts of Maker to Holder. Holder may waive any
default before or after it occurs and may restore this Note in full effect
without impairing the right to declare it due for a subsequent default, this
right being a continuing one. Upon default, at Holder's election, the remaining
unpaid principal balance of the indebtedness evidenced hereby and all expenses
due Holder shall bear interest at the Prime Rate in effect immediately before
the default plus four percent (4%).
All amounts received for payment of this Note shall be first applied
to any expenses due Holder under this Note or under any other documents
evidencing obligations of Maker to Holder relating to the indebtedness
evidenced by this Note, then to accrued interest, and finally to the reduction
of principal. Prepayment of principal or accrued interest may be made, in whole
or in part, at any time without penalty.
Maker and all sureties, guarantors, endorsers and other parties to
this instrument hereby consent to any and all renewals, waivers, modifications,
or extensions of time (of any duration) that may be granted by Holder with
respect to this Note and severally waive demand, presentment, protest, notice
of dishonor, and all other notices that might otherwise be required by law. All
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38
parties hereto waive the defense of impairment of collateral and all other
defenses of suretyship.
Maker's performance under this Note is unsecured.
Maker and all sureties, guarantors, endorsers and other parties hereto
agree to pay reasonable attorneys' fees and all court and other costs that
Holder may incur in the course of efforts to collect the debt evidenced hereby.
The validity and construction of this Note shall be determined
according to the laws of Tennessee applicable to contracts executed and
performed within that state. If any provision of this Note should for any
reason be invalid or unenforceable, the remaining provisions hereof shall
remain in full effect.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker and attached to this Note.
Any controversy or claim between or among the parties to this Note or
any related loan or collateral agreements or instruments (collectively, "Loan
Documents"), including any claim based on or arising from an alleged tort,
shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law), the Rules of
Practice and Procedure for the arbitration of commercial disputes of Judicial
Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "special rules"
set forth below. In the event of any inconsistency, the special rules shall
control. Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to the Loan Documents may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this agreement applies in any court having jurisdiction over
such action.
The following "Special Rules" shall apply. The arbitration
shall be conducted in Nashville, Tennessee and administered by J.A.M.S. who
will appoint an arbitrator; if J.A.M.S. is unable or legally precluded from
administering the arbitration, then the American Arbitration Association will
serve. All arbitration hearings will be commenced within 90 days of the demand
for arbitration; further, the arbitrator shall only, upon a
4
39
showing of cause, be permitted to extend the commencement of such hearing for
up to an additional 60 days.
Nothing in foregoing arbitration shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitation or repose and
any waivers contained in the Loan Documents; or (ii) be a waiver by NationsBank
of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially
equivalent state law; or (iii) limit the rights of NationsBank under the Loan
Documents (a) to exercise self help remedies such as (but not limited to)
set-off, or (b) to obtain from a court provisional or ancillary remedies such
as (but not limited to) injunctive relief, or the appointment of a receiver.
NationsBank may exercise such self help rights, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to the Loan Documents. Neither this exercise or
self help remedies nor the institution or maintenance of an action for
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of
the controversy or claim occasioning resort to such remedies.
Words used herein indicating gender or number shall be read as context
may require.
SHOLODGE, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
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40
SHONEY'S INN OF LEBANON, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
SHONEY'S INN, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
NASHVILLE AIR ASSOCIATES, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
XXXXX AND ASSOCIATES, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
SUNSHINE INNS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
LAFLA INN, INC.
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41
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
7
00
XXXXXXXXX XXXXX INNS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
DELAWARE INNS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
ALABAMA LODGING CORPORATION
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
FRONT RANGE SUITES, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
MIDWEST INNS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
FAR WEST INNS, INC.
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43
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
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44
CAROLINA INNS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Title: President
----------------------------------
SHONEY'S INN OF BATON ROUGE, A
A TENNESSEE GENERAL PARTNERSHIP
By: Two Seventeen, Inc.,
General Partner
By: /s/ Xxxx Xxxxx
----------------------------
Its: President
----------------------------
By: Inn Partners, Inc.
General Partner
By: /s/ Xxxx Xxxxx
----------------------------
Its: President
----------------------------
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