EXHIBIT 10.12
CONFIDENTIAL
------------
June 18, 1998
CapStar Hotel Company
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Mr. Xxxx Xxxxx
American General Hospitality Corporation
0000 XxxXxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxx
Ladies and Gentlemen:
We refer to the commitment letter (the "Commitment Letter") dated May 21, 1998
between Societe Generale, Southwest Agency ("SocGen"), Bankers Trust Company
("BTC") and Xxxxxx Commercial Paper Inc. ("Xxxxxx") (collectively, the
"Facilitators"), CapStar Hotel Company and American General Hospitality
Corporation (collectively the "Companies") pertaining to the REIT Facility and
the Op-Co Facility (collectively, the "Facility") described in the Commitment
Letter, as more fully set forth in that certain Summary of Terms and Conditions
(the "Term Sheet") attached to the Commitment Letter. All terms defined in the
Commitment Letter and the Term Sheet shall have the same meanings when used in
this letter (this "Commitment Letter Amendment").
The parties hereto agree to amend the Commitment Letter as follows:
1. Pages 1-6 of the Term Sheet are deleted in their entirety and replaced
with the pages attached hereto as Exhibit A.
Except as expressly provided in this Commitment Letter Amendment, all terms and
provisions of the Commitment Letter, including the Term Sheet, remain in full
force and effect.
Please indicate your acceptance of this Commitment Letter Amendment by signing
and returning this Commitment Letter Amendment, whereupon this Commitment Letter
Amendment will constitute an effective amendment to the Commitment Letter.
We look forward to working with you toward the successful completion of this
financing.
CapStar Hotel Company
American General Hospitality Corporation
June 18, 1998
Page 2
Signature Page of Commitment Letter Amendment
Very truly yours,
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Xxxxxx X. Day
---------------------------------
Xxxxxx X. Day
Director
BANKERS TRUST COMPANY
By: /s/ A.B.V. Xxxxxxx
---------------------------------
Name:
----------------------------
Title: Managing Director
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XXXXXX COMMERCIAL PAPER INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name:
----------------------------
Title: Authorized Signatory
---------------------------
CapStar Hotel Company
American General Hospitality Corporation
June 18, 1998
Page 3
Signature Page of Commitment Letter Amendment
Accepted and Agreed to:
CAPSTAR HOTEL COMPANY
By: /s/ Xxxx Xxxxx
----------------------------
Name:
--------------------------
Title: Chief Financial Officer
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AMERICAN GENERAL HOSPITALITY CORPORATION
By: /s/ Xxxxxxx Xxxx
---------------------------
Name:
---------------------------
Title: Executive Vice President
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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
$1.0 BILLION SENIOR SECURED CREDIT FACILITIES
SUMMARY OF TERMS & CONDITIONS
Borrower: MeriStar Hospitality Operating Partnership,
L.P. (the "Borrower" or "MeriStar OP").
Guarantors: MeriStar Hospitality Corporation ("MeriStar" or
the "Company"), the successor company created by
the merger (the "Merger") of CapStar Hotel
Company and American General Hospitality
Corporation, and such affiliates of the Borrower
as may be designated by the Arrangers, shall be
Guarantors. Borrower will not be required to
guaranty OpCo's (as hereinafter defined) debt, or
vice-versa.
Lenders: A syndicate of lending institutions (the
"Lenders") with Societe Generale, Southwest
Agency ("SG"), BT Alex. Xxxxx Incorporated and
Xxxxxx Brothers, Inc. as Arrangers.
Facility Amounts: Total of $1.0 billion in Senior Secured Credit
Facilities (the "Credit Facilities") comprised
of:
(a) a $500 million revolving credit facility (the
"Revolving Credit Facility"), with a $100 million
sub-limit for the issuance of Letters of Credit
("L/C's");
(b) a $300 million term loan facility (the "Term
Loan A Facility"); and
(c) a $200 million term loan facility (the "Term
Loan B Facility"). The Lenders will have risk
participations in any L/C's in accordance with
their pro rata portions of the Revolving Credit
Facility. The Term Loan Facilities will be fully
funded at closing.
Purpose: To refinance existing indebtedness in conjunction
with the Merger, fund investments in existing and
additional acquisition hotel properties, and for
general working capital purposes.
Maturities/Term: Revolving Credit Facility: Three years from
closing, with two, one-year extension options
subject to payment of a .125% extension fee in
conjunction with the election of each extension.
Term Loan A Facility: Five years from closing.
Term Loan B Facility: Five & 1/2 years from
closing.
Mandatory Prepayments and
Commitment Reductions: At any time that the Leverage Ratio (as defined
below and calculated on a pro forma basis before
and after giving effect to the issuance thereof)
is greater than 4.5x, the following amounts shall
be applied to prepay first the Revolving Credit
Facility and then the Term Loan A Facility and
then the Term Loan B Facility (once Term Loan A
Facility is fully repaid):
a) 100% of the net proceeds of any incurrence of
indebtedness after the closing date by the
Company or any of its subsidiaries or affiliates,
subject to certain customary exceptions to be
agreed upon; and
b) 100% of the net proceeds of any sale or other
disposition (including as a result of casualty or
condemnation) by the Company or any of its
subsidiaries or affiliates of any assets, except
for (i) the sale or other disposition of up to
$250,000,000 of the Company's assets so long as
the net proceeds therefrom are reinvested in
Hospitality/Leisure-Related Businesses (as
defined below) within 12 months and (ii) certain
other customary exceptions (including capacity
for reinvestment) to be agreed upon. With respect
to the Term Loan Facilities, mandatory
prepayments may not be re-borrowed.
Voluntary Prepayments and
Commitment Reductions: Credit Facilities loans may be prepaid and
commitments may be reduced by the Borrower in
minimum amounts to be agreed upon. Voluntary
prepayments of the Term Loan Facilities shall be
applied pro-rata to Term Loan A Facility and Term
Loan B Facility and may not be re-borrowed.
Security: The Credit Facilities will be secured by a
perfected first priority security interest in all
capital stock, partnership interests and limited
liability company interests owned by the Borrower
and each Guarantor except that of subsidiaries
liable for third-party debt until such time as
the Company achieves an investment grade rating
from both Standard & Poor's ("S&P") and Xxxxx'x.
Amortization: Revolving Credit Facility: None.
Term Loan A Facility: None during years one
through three and 10% per annum (in equal
quarterly installments) during years four and
five.
Term Loan B Facility: 1% per annum.
Interest Rate & Unused
Commitment Fee: The monthly per annum interest rates applicable
to the Credit Facilities and quarterly Unused
Commitment Fees applicable to the Revolving
Credit Facility (all payable in arrears) will be
determined based on the quarterly recalculation
of the Leverage Ratio (defined below) and set for
the quarter following each such quarterly test as
described below:
REVOLVER & TERM LOAN A FACILITY TERM LOAN B FACILITY
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ABR SPREAD (BPS)* LIBOR SPREAD (BPS)* UNUSED COMMT. FEE ABR LIBOR
LEVEL LEVERAGE RATIO (BPS) SPREAD SPREAD
(BPS)** (BPS)**
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V 3.0x 0 125.0 20 25 175
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VI 3.0x 3.5x 0 132.5 20 25 175
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VII 3.5x 4.0x 0 140.0 20 25 175
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VIII 4.0x 4.5x 12.5 150.0 25 25 175
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IX 4.5x 5.0x 20.0 165.0 25 50 200
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X 5.0 30.0 187.5 25 50 200
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* Initial pricing will be Level IX for the first 120 days. Pricing thereafter
will adjust within five days of delivery of financial reports.
** Initial pricing will be Level IX, through December 31, 1998. Pricing
thereafter will adjust within five days of delivery of financial reports.
The Leverage Ratio shall mean the ratio at the end of any trailing four quarter
period of (x) Total Liabilities (as hereinafter defined) to (y) EBITDA (as
hereinafter defined), adjusted for acquisitions and dispositions for the
relevant test period. Should the Company's Leverage Ratio be below 4.5x and its
senior unsecured debt ratings with either Standard & Poor's ("S&P") or Xxxxx'x
correspond to any of the ratings described below, the following interest rate
options that correspond to such rating shall apply in lieu of the interest rate
options described above:
REVOLVER & TERM A FACILITY TERM LOAN B FACILITY
--------------------------------------------------------------------------------------------------------------------------------
Level S&P RATING Xxxxx'x ABR SPREAD LIBOR SPREAD UNUSED COMM. ABR SPREAD LIBOR SPREAD
Rating (BPS) (BPS) FEE (BPS) (BPS) (BPS)
--------------------------------------------------------------------------------------------------------------------------------
I A- or higher A3 or higher 0.0 100.0 12.5 25 175
--------------------------------------------------------------------------------------------------------------------------------
II BBB+ Baa1 0.0 112.5 15.0 25 175
--------------------------------------------------------------------------------------------------------------------------------
III BBB Baa2 0.0 117.0 15.0 25 175
--------------------------------------------------------------------------------------------------------------------------------
IV BBB- Baa3 0.0 122.5 20.0 25 175
--------------------------------------------------------------------------------------------------------------------------------
The interest rate and Unused Commitment Fee will be based on the actual ratings
or written preliminary or "shadow" ratings of S&P and Xxxxx'x and will be
adjusted from time to time to reflect any change in the ratings. If the ratings
are not equivalent, the higher rating will apply. If the ratings are two or more
levels apart, the interest rate and Unused Commitment Fee will be based on the
rating which is one level below the higher rating. ABR will be the higher of (i)
the Prime commercial lending rate (the "Prime Rate") as publicly announced by SG
to be in effect from time to time and (ii) the Federal Funds Rate (as published
by the Federal Reserve Bank of New York) plus 0.50%. Interest on LIBOR
borrowings will be calculated on the basis of the actual number of days elapsed
over a 360-day year. Interest on ABR borrowings will be calculated on the basis
of the actual number of days elapsed over a 365-day year.
LIBOR Options: One, two, three, or six months with maturities
not to extend beyond the Credit Facilities'
maturity date.
Letter of Credit Fees: An L/C fee in an amount equal to the then
current LIBOR Spread with respect to the
Revolving Credit Facility, payable quarterly in
arrears which will be paid to the Lenders in
accordance with their pro-rata portion of the
L/C. L/C Fees shall be based on a 360-day year.
Letter of Credit Facing Fee: 0.0625% per annum, payable quarterly in arrears
for the account of the L/C issuer, on the
average daily undrawn amount of issued L/C's.
Drawings Under Letters of
Credit: Any drawing under issued L/C's shall be deemed
to constitute an advance under the Revolving
Credit Facility and shall be subject to all
terms thereof.
Environmental Indemnification:
Advances: Borrower and Guarantors will provide a joint and
several indemnification agreement. Advances
under the Credit Facilities are permitted
provided that:
(a) No defaults exist under the Credit
Facilities as evidenced by a compliance
certificate;
(b) All affirmative and negative covenants and
representations and warranties shall be complied
with both before and after the making of each
advance under the Credit Facilities; and
(c) The Borrower is limited to eight LIBOR
tranches, and advances are limited to four times
per month, with an exception for advances made
for acquisition purposes.
Swing Line:
Financial Covenants: To be provided by SG under mutually acceptable
terms and conditions. It is understood that the
Borrower and the Guarantors own, or may acquire,
interests in certain joint venture properties.
Accordingly, unless specified otherwise, the
various definitions referring to EBITDA and
Indebtedness used in the following covenants are
intended to include such entities' pro rata
interests in such joint ventures; provided that
if the interest owned by the Borrower or any
Guarantor in such joint venture is less than 20%
of the total equity ownership, such joint
venture shall be excluded and the pro rata
portion of EBITDA shall be included only to the
extent actually received by the Borrower or such
Guarantor. Financial covenants and other
covenants shall be calculated based on the
combined audited annual financial statements
(and Company prepared quarterly financial
statements) of the Company, the Borrower, the
other Guarantors, and their respective
subsidiaries, adjusted as described herein to
reflect such entities' pro rata interests in
joint ventures. Compliance with covenants shall
be certified by the Borrower and calculated no
less frequently than quarterly.
Company covenants shall include but not be
limited to the following:
(A) MINIMUM TANGIBLE NET WORTH
Tangible Net Worth, as defined below, shall at
all times equal or exceed 75% of the Company's
Net Worth at closing ("Minimum Net Worth").
Minimum Net Worth shall be adjusted upwards by
75% of the net cash proceeds or value derived
from the subsequent issuance of equity
securities, or 75% of the value of any operating
partnership units issued to acquire properties.
Tangible Net Worth is defined as the tangible
net worth of the Company as calculated on a GAAP
basis plus Minority Interest. The value of
unvalued MeriStar OP units will be included as
Tangible Net Worth.
(B) LIMITATION ON TOTAL LIABILITIES (LEVERAGE
RATIO) At no time shall Total Liabilities to
EBITDA exceed 5.5x initially, with a step-down
to 5.0x after 12 months from closing and a
further step-down to 4.5x after 24 months from
closing. Total Liabilities shall be defined as
recourse and non-recourse mortgage debt, letters
of credit, unsecured debt, capitalized lease
obligations, guarantees on indebtedness,
subordinated debt, interest rate hedge
obligations, and unfunded direct or contingent
obligations of the Company and its subsidiaries.
Total Liabilities shall include, without
duplication, (i) 100% of consolidated recourse
liability of the Company under (a) guarantees of
indebtedness, or (b) loans where the Company or
any of its subsidiaries is liable for debt as
general partner, and (ii) the Company's share of
non-recourse debt in unconsolidated affiliates.
Total Liabilities shall exclude ordinary trade
payables, accruals, ground leases, non-capital
commitments (i.e. operating leases), and
minority interests. EBITDA is defined as net
income, plus (a) the sum of (i) depreciation
expense, (ii) amortization expense and other
non-cash charges, (iii) interest expense, (iv)
income tax expense and (v) losses on sales or
other dispositions, less (b) gains on sales and
other dispositions to the extent included in the
determination of such net income. EBITDA and
Total Liabilities shall be adjusted immediately
concurrent with acquisitions and dispositions.
The initial borrowing calculation to be based on
June 30, 1998 pro forma trailing 12 month
EBITDA. For a period of up to 120 days after
closing, the Company's convertible debt will be
considered as equity, subject to a balance sheet
adjustment for the incurrence of additional debt
should it be required in conjunction with the
conversion. Thereafter, the convertible debt
will be considered as debt until such time as
the convertible debt is converted or exchanged.
(C) LIMITATION ON SECURED INDEBTEDNESS
Ratio of Total Outstanding Secured Indebtedness
to EBITDA not to exceed 2.75x initially with a
step-down to 2.5x after 12 months from closing.
Furthermore, EBITDA of properties
collateralizing Outstanding Secured Indebtedness
may not account for more than 40% of the
Company's EBITDA initially, with a step-down to
30% after 12 months from closing. Total
Outstanding Secured Indebtedness is defined as
total consolidated debt of the Company and its
subsidiaries (on a combined basis) outstanding
as of the test date (other than debt outstanding
under the Credit Facilities) which is secured or
collateralized by any asset of the Company, the
Borrower or any other Guarantor.
(D) LIMITATION ON RECOURSE SECURED INDEBTEDNESS
Those properties collateralizing outstanding
Recourse Secured Indebtedness may not account
for more than 20% of the Company's EBITDA.
Recourse Secured Indebtedness is defined as
Total Outstanding Secured Indebtedness, all or a
portion of which the Company, the Borrower or
any other Guarantor guarantees or for which
recourse can be made against the Company, the
Borrower or such Guarantor, other than for
customary carve-outs in non-recourse financings.
(E) ASSET FINANCING RESTRICTIONS
Individual assets may not be separately financed
if (i) such financing would result in a
violation of any Credit Facilities' covenants,
or (ii) the loan-to-value ratio for such
financing exceeds 70% on a property or aggregate
pool basis with respect to non-recourse
financings, and the loan-to-value ratio for such
financing exceeds no more than 65% with respect
to recourse financings. Furthermore, the
Borrower's subsidiaries may incur tax-
advantaged, non-recourse mortgage financing in
foreign countries in an aggregate amount up to
$100 million provided that the loan-to-value
ratio does not exceed 65%.
(F) MINIMUM INTEREST COVERAGE RATIO
Ratio of EBITDA to Total Interest Expense not to
be less than 2.20x (tested using trailing four
quarters' results) until June 30, 1999 at which
time the ratio shall be increased to 2.50x.
Total Interest Expense is defined as interest
expense on Total Liabilities (accrued, paid and
capitalized during the relevant period).
(G) MINIMUM FIXED CHARGE COVERAGE RATIO
Ratio of Adjusted EBITDA to Fixed Charges not to
be less than 1.85x (tested using trailing four
quarters' results) until June 30, 1999 at which
time the ratio shall be increased to 2.00x.
Fixed Charges is defined as the sum of Total
Interest Expense, plus scheduled principal
amortization on Total Liabilities (excluding
balloon payments due at maturity), plus
preferred stock dividends.
Adjusted EBITDA is defined as EBITDA less a 4%
FF&E reserve based on gross hotel operating
revenues.
(H) DISTRIBUTIONS
Distributions shall not exceed the lesser of 90%
of funds from operations ("FFO") or 100% of Free
Cash Flow (FFO less a capital expenditure
reserve equal to 4% of gross room revenues),
calculated quarterly based on the immediately
preceding completed four quarters, or an amount
required to maintain the general partner's
status as a real estate investment trust under
the provisions of the Internal Revenue Code. FFO
shall be defined as the Company's net income (or
loss) calculated in accordance with GAAP,
excluding gains (or losses) from debt
restructuring and sales of property, plus
depreciation and amortization and after
adjustments for unconsolidated partnerships and
joint ventures.
(I) PERMITTED INVESTMENTS
The Company shall at all times continue to
operate in Hospitality/Leisure-Related
Businesses defined as full service, extended-
stay and limited service hotels, subject to the
limitations outlined below. Unless related to a
hotel property, investments in golf course
properties will be prohibited. In addition,
investments in gaming properties will be
prohibited. Any other business activities shall
be strictly incidental thereto and shall be
further limited as follows:
. No more than 15% of the Company's hotel
properties will be comprised of non-
franchised hotels;
. Properties under ground leases may not
comprise more than 20% of the Company's total
assets or 20% of the Company's total room
count;
. Acquired hotels must be located in the United
States; provided that no more than 15% of the
Company's hotels may be located in approved
foreign countries (to be determined);
Furthermore, foreign owned hotels may be
separately financed so long as the loan-to-
cost ratio does not exceed 65%; and
. No more than 20% of the Company's hotels may
be limited service or extended stay. In
addition, unimproved land holdings (excluding
land that is either under development or
planned for commencement of development
within twelve months from the date it was
acquired), stock holdings, mortgages,
investments in unconsolidated partnerships
and joint ventures, and non-hotel assets will
be limited to the levels described below.
This paragraph shall not limit the Company's
investments in cash and cash equivalents,
investments in United Stated Treasury or
Agency obligations, and other similar
investments. Land Holdings: Not more than
$100,000,000 (at any one time) in
the aggregate based on cost.
Stock Holdings: None, except as received in settlement of
liabilities created in the ordinary course of
business plus investments not to exceed
$100,000,000 in total.
Mortgages: None, other than loans encumbering properties
previously owned or to be acquired, provided
that the aggregate amount of such loans shall
not exceed $200,000,000.
Partnership/JV's: Not to exceed $250,000,000 in total.
Development and Expansion of
Existing
Properties: Not to exceed $200,000,000 in total at any
one time.
Lessee: To be acceptable to the Administrative Agent.
Single Property Investments: No investment in any single property to
exceed $75 million unless approved by the
Lenders. Other covenants and defaults which
would be customary for a transaction of this
nature and size.
Other Covenants: (a) Loans to MeriStar H & R Operating
Partnership, L.P. ("OpCo") shall not exceed
the lesser of 5.5 times OpCo EBITDA or $75
million. OpCo's interest rate will be at
least equal to the Borrower's underlying
interest rate. The Company's interest income
shall be included in the Company's EBITDA.
(b) Limitations on mergers, consolidations,
sales of assets and acquisitions.
(c) Insurance coverages at a level and
provided by a carrier satisfactory to the
Administrative Agent.
(d) No property owned by the Company, the
Borrower, or any of its affiliates may be
leased to any entity other than OpCo, Twin
Towers Leasing, L.P., Prime Hospitality Corp.
(or one of its affiliates) or a third-party
lessee acceptable to the Administrative
Agent.
Financial Reporting: The Borrower shall be obligated to provide to
the Lenders:
(a) Delivery of the Company's annual audited
financial statements (within 95 days of
fiscal year end) and reports including an
officer's certificate to demonstrate
compliance with the covenants of the Credit
Facilities and the covenants of the Company's
public debt issue(s), if any.
(b) Delivery of quarterly financial
statements (within 50 days of fiscal quarter
end with the exception of fiscal year end).
Quarterly statements may be internally
prepared but not required to be audited or
reviewed by a third-party accounting firm.
Along with the quarterly and annual financial
statements, the Borrower shall provide a
summary report on its properties that details
EBITDA for the trailing four quarters by
quarter and in sum total.
(c) Prior to the commencement of a fiscal
year, the Company shall provide a projected
operating budget for the next fiscal year.
Concurrent with the delivery of the quarterly
financial statements and the annual financial
statements, the Borrower shall notify the
Lenders of any material changes (excluding
changes resulting from the acquisition of new
hotels) that have been made to the operating
budget of the then current fiscal year.
(d) Copies of any filing with the Securities
and Exchange Commission within 10 business
days of such filing.
(e) Copies of any written information
provided to shareholders.
(f) Such other information as the Arranger
shall reasonably require.
Management Restrictions: Either (i) Xxxx X. Xxxxxxxx or (ii) Xxxxxx X.
Xxxxx shall be required at all times to be
the chairman and chief executive officer of
the Company.
Representations and
Warranties: Usual and customary for this type of
financing, including but not limited to the
following:
(a) Valid existence and qualification,
including REIT qualification and tax status;
(b) Governmental authorization;
(c) No contravention of laws or contracts;
(d) Financial information is true and
correct;
(e) No material environmental matters;
(f) Compliance with laws and regulations,
including zoning, fire safety and building
requirements, ERISA, ADA, environmental and
REIT laws;
(g) Maintenance of required licenses and
permits with respect to the properties;
(h) No material litigation, casualty or
condemnation proceedings pending;
(i) Payment of taxes when due;
(j) Full disclosure; good title; no other
liens;
(k) Properties are in good condition and
repair; no deferred maintenance which is not
being timely addressed;
(l) No defaults or Event of Default (defined
herein) under the Credit Facilities or
franchise agreements; and
(m) The Merger has been consummated in
compliance with all laws.
Events of Default: Usual and customary for credit facilities of
this size, type and purpose, including,
without limitation:
(a) Non-payment when due of any payment of
principal in respect of any of the loans;
(b) Non-payment within five days of the due
date of any interest payable under the Credit
Facilities' documents provided that such late
payment within five days shall not occur more
than twice per year;
(c) Default in the performance or observance
of any covenants for more than 30 days after
notice;
(d) If the Company shall not qualify for tax
treatment under Sections 856-860, inclusive,
of the Internal Revenue Code;
(e) Restrictions on mergers, acquisitions,
distributions, joint ventures, etc.;
(f) Restrictions on change of control at the
Company and OpCo; and
(g) Cross defaults on recourse and non-
recourse indebtedness of not more than
$5,000,000 and $20,000,000, respectively, as
to the acceleration of any maturity date, and
$5,000,000 and $20,000,000 respectively.
Other Conditions: a) Within 90 days from closing, interest rate
protection will be required on at least 30% of
the Company's total outstanding indebtedness;
b) The Merger has been consummated in
compliance with all laws and acceptable to the
Lenders; and
c) Obtaining the necessary bank votes to amend
and restate the existing credit facility.
Governing Law: The laws of the State of Texas for the credit
agreement and other documents; for collateral
documents local law will apply.
Waiver of Jury Trial and Required.
Consent to Texas
Jurisdiction: