As filed with the Securities and Exchange Commission on November 8, 2013.
Registration No. 333-191110
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Hilton Worldwide Holdings Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 7011 | 27-4384691 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
7930 Jones Branch Drive, Suite 1100
McLean, VA 22102
Telephone: (703) 883-1000
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)
Christopher J. Nassetta
President and Chief Executive Officer
Hilton Worldwide Holdings Inc.
7930 Jones Branch Drive, Suite 1100
McLean, VA 22102
Telephone: (703) 883-1000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Joshua Ford Bonnie Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, NY 10017 Telephone: (212) 455-2000 Facsimile: (212) 455-2502 |
Kristin A. Campbell Executive Vice President and General Counsel Hilton Worldwide Holdings Inc. 7930 Jones Branch Drive, Suite 1100 McLean, VA 22102 Telephone: (703) 883-1000 |
Kevin J. Jacobs Executive Vice President and Chief Financial Officer Hilton Worldwide Holdings Inc. 7930 Jones Branch Drive, Suite 1100 McLean, VA 22102 Telephone: (703) 883-1000 |
Michael P. Kaplan
John B. Meade Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 Telephone: (212) 450-4111 Facsimile: (212) 701-5111 |
Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the Registration Statement is declared effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||||
Non-accelerated filer | x | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated November 8, 2013.
Shares
Hilton Worldwide Holdings Inc.
Common Stock
This is an initial public offering of shares of common stock of Hilton Worldwide Holdings Inc.
Hilton Worldwide Holdings Inc. is offering of the shares to be sold in the offering. The selling stockholder identified in this prospectus is offering an additional shares.
Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . We intend to apply to list our shares of common stock on under the symbol .
No private equity or real estate opportunity fund or co-investment vehicle sponsored or managed by The Blackstone Group L.P. is selling shares in this offering or receiving cash in lieu of selling shares. After the completion of this offering, affiliates of The Blackstone Group L.P. will continue to own a majority of the voting power of shares eligible to vote in the election of our directors. As a result, we will be a controlled company. See ManagementControlled Company Exception.
See Risk Factors beginning on page 15 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share | Total | |||||||
Initial public offering price |
$ | $ | ||||||
Underwriting discounts and commissions |
$ | $ | ||||||
Proceeds, before expenses, to us (1) |
$ | $ | ||||||
Proceeds, before expenses, to the selling stockholder |
$ | $ |
(1) | See Underwriting. |
To the extent that the underwriters sell more than shares of our common stock, the underwriters have the option to purchase up to an additional shares of our common stock from the selling stockholder at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares against payment in New York, New York on or about , .
Deutsche Bank Securities | Goldman, Sachs & Co. | BofA Merrill Lynch | Morgan Stanley |
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F-1 |
Neither we, the selling stockholder nor the underwriters have authorized anyone to provide you with information different from that contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. Neither we, the selling stockholder nor the underwriters take any responsibility for, or can provide any assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. We, the selling stockholder and the underwriters are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.
Unless indicated otherwise, the information included in this prospectus (1) assumes that the shares of common stock to be sold in this offering are sold at $ per share of common stock, which is the midpoint of the price range indicated on the front cover of this prospectus, and (2) reflects the stock split that we intend to effectuate prior to this offering, whereby each issued and outstanding share of our common stock will be converted into shares.
Except where the context requires otherwise, references in this prospectus to Hilton, Hilton Worldwide, the Company, we, us, and our refer to Hilton Worldwide Holdings Inc., together with its consolidated subsidiaries. We refer to the estimated over 311,000 individuals working at our owned, leased, managed, franchised, timeshare and corporate locations worldwide as of September 30, 2013 as our team members. Of these team members, approximately 151,000 were directly employed or supervised by us and the remaining team members were employed or supervised by third-parties. Except where the context requires otherwise, references to our properties, hotels and rooms refer to the hotels, resorts and timeshare properties managed, franchised, owned or leased by us. Of these hotels or resorts and rooms, a portion are directly owned or leased by us or joint ventures in which we have an interest and the remaining hotels or resorts and rooms were owned by our third-party owners.
Investment funds associated with or designated by The Blackstone Group L.P., our current majority owners, are referred to herein as Blackstone or our Sponsor and Blackstone, together with the other owners of Hilton Worldwide Holdings Inc. prior to this offering, are collectively referred to as our existing owners.
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Reference to ADR or Average Daily Rate means hotel room revenue divided by total number of rooms sold in a given period and RevPAR or Revenue per Available Room represents hotel room revenue divided by room nights available to guests for a given period. References to RevPAR index measure a hotels relative share of its segments Revenue per Available Room. For example, if a subject hotels RevPAR is $50 and the RevPAR of its competitive set is $50, the subject hotel would have no RevPAR index premium. If the subject hotels RevPAR totaled $60, its RevPAR index premium would be 20%, which indicates that the subject hotel has outperformed other hotels in its competitive set. References to global RevPAR index premium means the average RevPAR index premium of our comparable hotels (as defined in Managements Discussion and Analysis of Financial Condition and Results of OperationsKey Business and Financial Metrics used by ManagementComparable Hotels on page 65, but excluding hotels that do not receive competitive set information from Smith Travel Research, or STR, or do not participate with STR). The owner or manager of each Hilton comparable hotel exercises its discretion in identifying the competitive set of properties for such hotel, considering factors such as physical proximity, competition for similar customers, product features, services and amenities, quality and average daily rate, as well as STR rules regarding competitive set makeup. Accordingly, while the hotel brands included in the competitive set for any given Hilton comparable hotel depend heavily on market-specific conditions, the competitive sets for Hilton comparable hotels frequently include properties branded with the competing brands identified for the relevant Hilton comparable hotel listed under Selected Competitors on page 114. STR provides us with the relevant data for competitive sets that we submit for each of our comparable hotels, which we utilize to compute the RevPAR index for our comparable hotels.
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This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in shares of our common stock. You should read this entire prospectus carefully, including the section entitled Risk Factors and the financial statements and the related notes included elsewhere in this prospectus, before you decide to invest in shares of our common stock.
Hilton Worldwide
Hilton Worldwide is one of the largest and fastest growing hospitality companies in the world, with 4,080 hotels, resorts and timeshare properties comprising 671,926 rooms in 90 countries and territories. In the nearly 100 years since our founding, we have defined the hospitality industry and established a portfolio of 10 world-class brands. Our flagship full-service Hilton Hotels & Resorts brand is the most recognized hotel brand in the world. Our premier brand portfolio also includes our luxury hotel brands, Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts, our full-service hotel brands, DoubleTree by Hilton and Embassy Suites Hotels, our focused-service hotel brands, Hilton Garden Inn, Hampton Inn, Homewood Suites by Hilton and Home2 Suites by Hilton and our timeshare brand, Hilton Grand Vacations. We own or lease interests in 156 hotels, many of which are located in global gateway cities, including iconic properties such as The Waldorf Astoria New York, the Hilton Hawaiian Village and the London Hilton on Park Lane. More than 311,000 team members proudly serve in our properties and corporate offices around the world, and we have approximately 39 million members in our award-winning customer loyalty program, Hilton HHonors.
We operate our business through three segments: (1) management and franchise; (2) ownership; and (3) timeshare. These complementary business segments enable us to capitalize on our strong brands, global market presence and significant operational scale. Through our management and franchise segment, which consists of 3,883 hotels with 603,271 rooms, we manage hotels, resorts and timeshare properties owned by third parties and we license our brands to franchisees. Our management and franchise segment generates high margins and long-term recurring cash flow, and has grown by 40% in terms of number of rooms since June 30, 2007, representing 98% of our overall room growth, with virtually no capital investment by us. Our ownership segment consists of 156 hotels with 62,251 rooms that we own or lease. Through our timeshare segment, which consists of 41 properties comprising 6,404 units, we market and sell timeshare intervals, operate timeshare resorts and a timeshare membership club and provide consumer financing.
In October 2007, we were acquired by affiliates of The Blackstone Group L.P. and assembled a new management team led by Christopher J. Nassetta, our President and Chief Executive Officer. Under our new leadership, we have transformed our business, creating a globally aligned organization and establishing a performance-driven culture. As part of our transformation, we focused on both top- and bottom-line operating performance, strengthening and expanding our brands and commercial services platform, and enhancing our growth rate, particularly in markets outside the U.S. where our brands historically had been underrepresented.
As a result of the transformation of our business, despite the sharp downturn in our industry, between June 30, 2007 and September 30, 2013, we have:
| increased the number of open rooms in our system by 36%, or 176,248 rooms, which represents the highest growth rate of any major lodging company; |
| grown the number of rooms in our development pipeline by 60% to an industry-leading 185,699 rooms, over 99% of which are within our higher-margin, capital light management and franchise segment; |
| increased our total number of rooms under construction by 133%, to an industry-leading 97,520 rooms, over 99% of which are within our management and franchise segment; |
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| increased the geographic diversity of our pipeline, with rooms in the development pipeline outside the U.S. increasing from less than 20% to more than 60%, and rooms under construction outside the U.S. increasing from less than 15% to nearly 80%; |
| significantly enhanced our presence in key segments, brands and geographies, including significant growth in the luxury segment, in our DoubleTree by Hilton and Home2 Suites by Hilton brands and in the number of hotels in Europe and Greater China; |
| increased our management and franchise segments Adjusted EBITDA by 25% from the year ended December 31, 2007 to the year ended December 31, 2012 and grown the proportion of our aggregate segment Adjusted EBITDA contributed by our management and franchise segment from 47% to 53%; |
| increased the average global revenue per available room, or RevPAR, premium for all brands globally by approximately two percentage points to 15% on a trailing twelve month basis; |
| expanded membership in our Hilton HHonors program by 88% since December 31, 2007; |
| significantly outperformed our competitors in the timeshare segment, with annual interval sales increasing over 40% since the year ended December 31, 2007 and segment Adjusted EBITDA as a percentage of timeshare revenue increasing 435 basis points since the year ended December 31, 2010, while beginning a transformation of the business to a more capital-efficient model; for the twelve months ended September 30, 2013, 50% of our sales of timeshare intervals were developed by third parties versus 0% for the year ended December 31, 2009; and |
| significantly improved profitability, increasing our Adjusted EBITDA by an annual average of 12% from the year ended December 31, 2010 through the year ended December 31, 2012, and for the nine months ended September 30, 2013, increasing our Adjusted EBITDA by 12% compared to the nine months ended September 30, 2012. Net income attributable to Hilton stockholder increased by 68% on average from the year ended December 31, 2010 through the year ended December 31, 2012, and for the nine months ended September 30, 2013, net income attributable to Hilton stockholder increased 34% as compared to the nine months ended September 30, 2012. |
See Summary Historical Financial Data for the definition of Adjusted EBITDA and a reconciliation of net income attributable to Hilton stockholder to Adjusted EBITDA.
We believe this transformation positions us to continue to increase our share of the expanding global lodging industry, which continues to exhibit strong fundamentals and significant long-term growth prospects supported by increasing global travel and tourism. Our business has grown during times of economic expansion, as well as during global economic downturns. For example, during the period between January 1, 2000 and September 30, 2013, we increased the total number of hotel rooms in our system every year, achieving total growth of 122% and a compound annual growth rate, or CAGR, of 6%. Our industry leading percentage of global rooms under construction of 18.5% significantly exceeds our industry leading percentage of the existing global hotel supply of 4.6%, according to data provided by Smith Travel Research, Inc., or STR. We expect that our #1 share of worldwide rooms under construction will allow us to continue to expand our share of worldwide rooms supply and build on our leading market position.
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The transformation of our business since 2007 has enabled us to increase the number of hotels and timeshare units in our system at a more rapid rate than any other major lodging company. The following table illustrates our global room supply by business segment.
Our Competitive Strengths
We believe the following competitive strengths provide the foundation for our position as a leading global hospitality company.
| World-Class Hospitality Brands. Our globally recognized, world-class brands have defined the hospitality industry. Our flagship Hilton Hotels & Resorts brand often serves as an introduction to our wider range of brands that are designed to accommodate any customers needs anywhere in the world. Our brands have achieved an average global RevPAR index premium of 15% for the twelve months ended September 30, 2013, based on STR data. This means that our brands achieve on average 15% more revenue per room than competitive properties in similar markets. The demonstrated strength of our brands makes us a preferred partner for hotel owners, who have invested tens of billions of dollars since December 31, 2007 in the development and improvement of our branded hotels. |
| Leading Global Presence and Scale. We are one of the largest hospitality companies in the world with 4,080 properties and 671,926 rooms in 90 countries and territories. We have hotels in key gateway cities such as New York, London, Dubai, Johannesburg, Tokyo, Shanghai and Sydney and 351 hotels located at or near airports around the world. Our global presence allows us to serve our loyal customers throughout the world and to introduce our award-winning brands to customers in new markets. These world-class brands facilitate system growth by providing hotel owners with a variety of options to address each markets specific needs. In addition, the diversity of our operations reduces our exposure to business cycles, individual market disruptions and other risks. Our robust commercial services platform allows us to take advantage of our scale to more effectively deliver products and services that drive customer preference and enhance commercial performance on a global basis. |
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Large and Growing Loyal Customer Base. Serving our customers is our first priority. By continually adapting to customer preferences and providing our customers with superior experiences, we have improved our overall customer satisfaction ratings four of the last five years. We earned 32 first place awards in the J.D. Power North America Guest Satisfaction rankings since 1999, more than any multi- |
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brand lodging company. Our hotels accommodated more than 127 million customer visits during the twelve months ended September 30, 2013, with members of our Hilton HHonors loyalty program contributing approximately 50% of the nearly 172 million resulting room nights. Hilton HHonors unites all our brands, encourages customer loyalty and allows us to provide tailored promotions, messaging and customer experiences. We have grown the membership in our Hilton HHonors program by approximately 88% from approximately 21 million as of December 31, 2007 to nearly 39 million as of September 30, 2013. |
| Significant Embedded Growth. All of our segments are expected to grow through improvement in same-store performance driven by strong anticipated industry fundamentals. PKF Hospitality Research, LLC, or PKF-HR, predicts that lodging industry RevPAR in the U.S., where 78% of our system rooms are located, will grow 7.2% in 2014 and 8.1% in 2015. Our management and franchise segment also is expected to grow through new room additions, as upon completion, our industry-leading development pipeline would result in a 28% increase in our room count with minimal capital investment from us. In addition, our franchise revenues should grow over time as franchise agreements renew at our published license rates, which are higher than our current effective rates. For the twelve months ended September 30, 2013, our weighted average effective license rate across our brands was 4.5% of room revenue, an increase of 13% since 2007, and our weighted average published license rate was 5.4% as of September 30, 2013. We also expect our incentive management fees, which are linked to hotel profitability measures, to increase as a result of the expected improvements in industry fundamentals. In our ownership segment, we believe we will benefit from strong growth in bottom-line earnings as industry fundamentals continue to improve as a result of this segments operating leverage, and our large hotels with significant meeting space should benefit from recent improvements in group demand, which we expect will exhibit strong growth as the current stage of the lodging cycle advances. Finally, our timeshare business has over five years of projected interval supply at our current sales pace in the form of existing owned inventory and executed capital light projects, which should enable us to continue to grow our earnings from the segment with lower levels of capital investment from us. |
| Strong Cash Flow Generation . We generate significant cash flow from operating activities with an increasing percentage from our growing capital light management and franchise and timeshare segments. During the five-year period ended December 31, 2012, we generated an aggregate of $3.6 billion in cash flow from operating activities. We increased our cash flow from operating activities from $219 million for the year ended December 31, 2008 to $1.1 billion for the year ended December 31, 2012. We believe that our focus on cash flow generation, the relatively low investment required to grow our management and franchise and timeshare segments, and our disciplined approach to capital allocation position us to maximize opportunities for profitability and growth while continuing to reduce our indebtedness over time. |
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Iconic Hotels with Significant Underlying Real Estate Value. Our diverse global portfolio of owned and leased hotels includes a number of iconic properties in major gateway cities such as New York City, London, San Francisco, Chicago, São Paolo, Sydney and Tokyo. The portfolio also includes iconic hotels with significant embedded asset value, including: The Waldorf Astoria New York, a landmark luxury hotel with 1,413 rooms encompassing an entire city block in the heart of midtown Manhattan near Grand Central Terminal; the Hilton Hawaiian Village, a full-service beach resort with 2,860 rooms that sits on approximately 22 oceanfront acres along Waikiki Beach on the island of Oahu; and the London Hilton on Park Lane, a 453-room hotel overlooking Hyde Park in the exclusive Mayfair district of London. Our ten owned hotels with the highest Adjusted EBITDA contributed 54% of our ownership segments Adjusted EBITDA during the year ended December 31, 2012, which highlights the quality of our key flagship properties. In addition, we believe the iconic nature of many of these properties creates significant value for our entire system of properties by reinforcing the world-class nature of our brands. We continually focus on increasing the value and enhancing the |
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market position of our owned and leased hotels and have invested $1.8 billion in these properties between December 31, 2007 and September 30, 2013. Over time, we believe we can unlock significant incremental value through opportunistically exiting assets or executing on adaptive reuse plans for all or a portion of certain hotels as retail, residential or timeshare uses. |
| Market-Leading and Innovative Timeshare Platform. Our timeshare business complements our other segments and provides an alternative hospitality product that serves an attractive customer base. Our timeshare customers are among our most loyal hotel customers, with estimated spend in our hotel system increasing approximately 40% after the purchase of their timeshare interests. Historically, we have concentrated our timeshare efforts in four key markets: Florida, Hawaii, New York City and Las Vegas, which has helped us to increase annual sales of timeshare intervals by more than 40% since 2007 while yielding strong profit margins during a time when our competitors generally experienced declines in both sales and profit margins. As a result of this strong operating performance and the returns we were able to drive on our own timeshare developments, in 2010 we began a transformation of our timeshare business to a capital light model in which third-party timeshare owners and developers provide capital for development while we act as sales and marketing agent and property manager. Through these transactions, we receive a sales and marketing commission and branding fees on sales of timeshare intervals, recurring fees to operate the homeowners associations and revenues from resort operations. We also earn recurring fees in connection with the points-based membership programs we operate that provide for exclusive exchange, leisure travel and reservation services, and through fees related to the servicing of consumer loans. We have increased the sales of intervals developed by third parties from zero in 2009 to 50% for the twelve months ended September 30, 2013, which has dramatically reduced the capital requirements of our timeshare segment while continuing to drive strong earnings and cash flows. For the year ended December 31, 2012 and the nine months ended September 30, 2013, we incurred $56 million and $70 million, respectively, of capital expenditures for timeshare inventory, compared to an average of $405 million annually during 2007 and 2008. |
| Performance-Driven Culture. We are an organization of people serving people, thus it is imperative that we attract and retain best-in-class talent to serve our various stakeholders. We have a performance-driven culture that begins with an intense alignment around our mission, vision, values and key strategic priorities. Our President and Chief Executive Officer, Christopher J. Nassetta, has nearly 30 years of experience in the hotel industry, previously serving as President and Chief Executive Officer of Host Hotels & Resorts, Inc., where he was named Institutional Investor s 2007 REIT CEO of the Year. He and the balance of our executive management team have been instrumental in transforming our organization and installing a culture that develops leaders at all levels of the organization who are focused on delivering exceptional service to our customers every day. We rely on our over 311,000 team members to execute our strategy and continue to enhance our products and services to ensure that we remain at the forefront of performance and innovation in the lodging industry. |
Our Business and Growth Strategy
The following are key elements of our strategy to become the preeminent global hospitality companythe first choice of guests, team members and owners alike:
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Expand our Global Footprint . We intend to build on our leading position in the U.S. and expand our global footprint. In February 2006, we reacquired Hilton International Co., which had operated as a separate company since 1964, and in so doing, reacquired the international Hilton branding rights. Reuniting Hiltons U.S. and international operations has provided us with the platform to grow our business and brands globally. As a result of the reacquisition and focus on global expansion, we currently rank number one or number two in every major region of the world by rooms under construction, based on STR data. We aim to increase the relative contribution of our international operations, which accounted for only 27% of our revenues during the year ended December 31, 2012. |
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Of our new rooms under construction, 78% are located outside of the U.S. We plan to continue to expand our global footprint by introducing the right brands with the right product positioning in targeted markets and allocating business development resources effectively to drive new unit growth in every region of the world. |
| Grow our Fee-Based Businesses. We intend to grow our higher margin, fee-based businesses. We expect to increase the contribution of our management and franchise segment, which already accounts for more than half of our aggregate segment Adjusted EBITDA, through new third-party hotel development and the conversion of existing hotels to our brands. The number of rooms in our management and franchise segment grew by 40% from June 30, 2007 to September 30, 2013 and substantially all of our current development pipeline of 185,699 rooms consists of hotels in this segment. Upon completion, this pipeline of new, third-party owned hotels would result in a 31% increase in our management and franchise room count with minimal capital investment from us. In addition, we aim to increase the average effective franchise fees we receive over time by renewing and entering into new franchise agreements at our current published franchise fee rates. |
| Continue to Increase the Capital Efficiency of our Timeshare Business. Traditionally, timeshare operators have funded 100% of the investment necessary to acquire land and construct timeshare properties. In 2010, we began sourcing timeshare intervals through sales and marketing agreements with third-party developers. These agreements enable us to generate fees from the sales and marketing of the timeshare intervals and club memberships and from the management of the timeshare properties without requiring us to fund acquisition and construction costs. Our supply of third-party developed timeshare intervals has increased to 65,000 as of September 2013, compared to no supply in 2009, and the percentage of sales of timeshare intervals developed by third parties has already increased to 50% for the twelve months ended September 30, 2013. We will continue to seek opportunities to grow our timeshare business through this capital light model. |
| Optimize the Performance of our Owned and Leased Hotels. In addition to utilizing our commercial services platform to enhance the revenue performance of our owned and leased assets, we have focused on maximizing the cost efficiency of the portfolio by implementing labor management practices and systems and reducing fixed costs to drive profitability. Through our disciplined approach to asset management, we have developed and executed on strategic plans for each of our hotels and have invested $1.8 billion in our portfolio since December 31, 2007 to enhance the market position of each property. We expect to continue to enhance the performance of our hotels by improving operating efficiencies, and believe there is an opportunity to drive further improvements in operating margins and Adjusted EBITDA. The Adjusted EBITDA of our owned and leased portfolio for 2012 was still below 2008 levels. Further, at certain of our hotels, we are developing plans for the adaptive reuse of all or a portion of the property to residential, retail or timeshare uses. Finally, we expect to create value over time by opportunistically selling assets and restructuring or exiting leases. |
| Strengthen our Brands and Commercial Services Platform. We intend to enhance our world-class brands through superior brand management by continuing to develop products and services that drive increased RevPAR premiums. We will continue to refine our luxury brands to deliver modern products and service standards that are relevant to todays luxury traveler. We will continue to position our full-service operating model and product standards to meet evolving customer needs and drive financial results that support incremental owner investment in our hotels. In our focused-service brands, we will continue to position for growth in the U.S., and tailor our products as appropriate to meet the needs of customers and developers outside the U.S. We will continue to innovate and enhance our commercial services platform to ensure we have the most formidable sales, pricing, marketing and distribution platform in the industry to drive premium commercial performance to our entire system of hotels. We also will continue to invest in our Hilton HHonors customer loyalty program to ensure it remains relevant to our customers and drives customer loyalty and value to our hotel owners. |
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Our Industry
We believe that the fundamentals of the global hotel industry, as projected by analysts, particularly in the U.S., where 78% of our system-wide rooms are located, will yield strong industry performance and support the growth of our business in coming years. According to STR data, U.S. lodging demand, as measured by number of booked hotel rooms, has improved with the economic recovery in recent years, experiencing a CAGR of 4.9% over the last three years, significantly exceeding the 25-year CAGR of 1.8%. In contrast, over the last three years, U.S. lodging industry supply has grown at a CAGR of 0.9%, well below the 25-year CAGR of 2.0%. We believe this positive imbalance between demand growth and supply growth has contributed to a RevPAR CAGR of 6.8% over the last three years, well above the 25-year CAGR of 2.7%. According to PKF-HR, total U.S. lodging industry RevPAR is expected to increase 7.2% in 2014 and 8.1% in 2015. According to STR data, global lodging demand, as measured by number of booked hotel rooms, has grown at a CAGR of 5.3% over the last three years and hotel supply growth increased at a CAGR of 1.6%. We believe these attractive supply/demand fundamentals provide the potential for continued global RevPAR growth in the coming years.
In addition, we believe that broader positive global macroeconomic and travel and tourism trends will continue to drive longer-term growth in the lodging sector. In particular, we believe that a growing middle class (which the Organization for Economic Co-operation and Development, or OECD, expects will grow from approximately two to five billion people by 2030) with the desire and resources to travel both within their home regions and elsewhere will support growth in global tourism (which the United Nations World Tourism Organization projects will grow on average between 3% and 4% annually through 2030) and will be an important factor in driving the growth of the global lodging industry. We believe that these trends will provide a strong basis for our growth over the long term.
Our Sponsor
Blackstone (NYSE: BX) is one of the worlds leading investment and advisory firms. Blackstones alternative asset management businesses include the management of corporate private equity funds, real estate funds, hedge fund solutions, credit-oriented funds and closed-end mutual funds. Blackstone also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Through its different businesses, Blackstone had total assets under management of approximately $248 billion as of September 30, 2013. Blackstones global real estate group is the largest private equity real estate manager in the world with $69 billion of investor capital under management as of September 30, 2013.
Refinancing Transactions
On October 25, 2013, we repaid in full all $13.4 billion in borrowings outstanding on such date under our legacy senior mortgage loans and secured mezzanine loans using the proceeds from our recent offering of $1.5 billion of 5.625% senior notes due 2021, which were released from escrow on such date, borrowings under our new senior secured credit facilities, which consists of a $7.6 billion term loan facility (of which we voluntarily repaid $0.1 billion in November 2013) and an undrawn $1.0 billion revolving credit facility, a $3.5 billion commercial mortgage-backed securities loan and a $0.525 billion mortgage loan secured by our Waldorf Astoria New York property, together with additional borrowings under our non-recourse timeshare financing receivables credit facility, or Timeshare Facility, and cash on hand. For more information, see Description of Certain Indebtedness.
In addition, on October 25, 2013, Hilton Worldwide, Inc., our wholly owned subsidiary, issued a notice of redemption to holders of all of the outstanding $96 million aggregate principal amount of its 8% quarterly interest bonds due 2031 on November 25, 2013. The bonds will be redeemed at a redemption price equal to 100% of the principal amount thereof and accrued and unpaid interest thereof, if any, to, but not including November 25, 2013.
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Investment Risks
An investment in shares of our common stock involves substantial risks and uncertainties that may adversely affect our business, financial condition and results of operations and cash flows. Some of the more significant challenges and risks relating to an investment in our company include those associated with:
| We are subject to the business, financial, and operating risks inherent to the hospitality industry, any of which could reduce our revenues and limit opportunities for growth. |
| Macroeconomic and other factors beyond our control can adversely affect and reduce demand for our products and services. |
| Contraction in the global economy or low levels of economic growth could adversely affect our revenues and profitability as well as limit or slow our future growth. |
| The hospitality industry is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our results of operations and financial condition. |
| Because we operate in a highly competitive industry, our revenues or profits could be harmed if we are unable to compete effectively. |
| Any deterioration in the quality or reputation of our brands could have an adverse impact on our reputation, business, financial condition or results of operations. |
| If we are unable to maintain good relationships with third-party hotel owners and renew or enter into new management and franchise agreements, we may be unable to expand our presence and our business, financial condition and results of operations may suffer. |
| We are exposed to the risks resulting from significant investments in owned and leased real estate, which could increase our costs, reduce our profits and limit our ability to respond to market conditions. |
| Our efforts to develop, redevelop or renovate our owned and leased properties could be delayed or become more expensive, which could reduce revenues or impair our ability to compete effectively. |
| We share control in joint venture projects, which limits our ability to manage third-party risks associated with these projects. |
| The timeshare business is subject to extensive regulation and failure to comply with such regulation may have an adverse impact on our business. |
| A decline in timeshare interval inventory or our failure to enter into and maintain timeshare management agreements may have an adverse effect on our business or results of operations. |
| Some of our existing development pipeline may not be developed into new hotels, which could materially adversely affect our growth prospects. |
| Failures in, material damage to, or interruptions in our information technology systems, software or websites and difficulties in updating our existing software or developing or implementing new software could have a material adverse effect on our business or results of operations. |
| We may be exposed to risks and costs associated with protecting the integrity and security of our guests personal information. |
| Failure to comply with marketing and advertising laws, including with regard to direct marketing, could result in fines or place restrictions on our business. |
| Because we derive a portion of our revenues from operations outside the United States, the risks of doing business internationally could lower our revenues, increase our costs, reduce our profits or disrupt our business. |
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| The loss of senior executives or key field personnel, such as general managers, could significantly harm our business. |
| Any failure to protect our trademarks and other intellectual property could reduce the value of the Hilton brands and harm our business. |
| Our substantial indebtedness and other contractual obligations could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and pay our debts and could divert our cash flow from operations for debt payments. |
| Affiliates of our Sponsor control us and their interests may conflict with ours or yours in the future. |
Please see Risk Factors for a discussion of these and other factors you should consider before making an investment in shares of our common stock.
Hilton Worldwide Holdings Inc. was incorporated in Delaware in March 2010. In 1919, our founder Conrad Hilton purchased his first hotel in Cisco, Texas. Through our predecessors, we commenced operations in 1946 when our subsidiary Hilton Hotels Corporation, later renamed Hilton Worldwide, Inc., was incorporated in Delaware. Our principal executive offices are located at 7930 Jones Branch Drive, Suite 1100, McLean, Virginia 22102 and our telephone number is (703) 883-1000.
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The Offering
Common stock offered by us |
shares. |
Common stock offered by the selling stockholder |
shares. |
Option to purchase additional shares |
The underwriters have an option to purchase up to additional shares of our common stock from the selling stockholder. The underwriters can exercise this option at any time within 30 days from the date of this prospectus. |
Common stock outstanding after giving
|
shares. |
Use of proceeds |
We estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and offering expenses, will be approximately $ , based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus. |
We intend to use the net proceeds received by us from this offering to repay approximately $ million of term loan borrowings outstanding under our new senior secured credit facilities. To the extent we raise more proceeds in this offering than currently estimated, we will repay additional term loan borrowings or use such proceeds for other general corporate purposes. To the extent we raise less proceeds in this offering than currently estimated, we will reduce the amount of term loan borrowings that will be repaid. See Use of Proceeds. |
Except in relation to the payment to be made to us by the selling stockholder that is described in Principal and Selling Stockholders, we will not receive any proceeds from the sale of shares of common stock offered by the selling stockholder, including from any exercise by the underwriters of their option to purchase additional shares. |
Dividend policy |
We have no current plans to pay dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. |
Risk factors |
See Risk Factors for a discussion of risks you should carefully consider before deciding to invest in our common stock. |
Proposed trading symbol |
. |
In this prospectus, unless otherwise indicated, the number of shares of common stock outstanding and the information based thereon does not reflect shares of common stock that may be granted under our Omnibus Incentive Plan. See ManagementOmnibus Incentive Plan.
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Summary Historical Financial Data
We derived the summary statement of operations data and the summary statement of cash flows data for the years ended December 31, 2012, 2011 and 2010 and the summary balance sheet data as of December 31, 2012 and 2011 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the summary balance sheet data as of September 30, 2012 and December 31, 2010 from our unaudited consolidated financial statements that are not included in this prospectus. We derived the summary statement of operations data and the summary statement of cash flows data for the nine months ended September 30, 2013 and 2012 and the summary balance sheet data as of September 30, 2013 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements and, in our opinion, have included all adjustments, which include only normal recurring adjustments, necessary to present fairly in all material respects our financial position and results of operations. The results for any interim period are not necessarily indicative of the results that may be expected for the full year. Additionally, our historical results are not necessarily indicative of the results expected for any future period.
The unaudited summary pro forma financial information has been prepared to reflect the issuance of shares of our common stock in this offering at an assumed initial public offering price of $ , which is the midpoint of the range set forth on the cover of this prospectus and the other transactions described under Unaudited Pro Forma Condensed Consolidated Financial Information. The following unaudited summary pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the relevant transactions had been consummated on the date indicated, nor is it indicative of future operating results.
You should read the summary historical financial data below, together with the consolidated financial statements and related notes thereto appearing elsewhere in this prospectus, as well as Unaudited Pro Forma Condensed Consolidated Financial Information, Selected Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations, Description of Certain Indebtedness, and the other financial information included elsewhere in this prospectus.
Pro Forma
Nine Months Ended September 30, 2013 |
Pro Forma
Year Ended December 31, 2012 |
Nine Months
Ended September 30, |
Year Ended December 31, | |||||||||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||
(dollars in millions, except Hotel RevPAR and ADR) |
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Summary Statement of Operations Data: |
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Revenues |
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Owned and leased hotels |
$ | $ | $ | 2,982 | $ | 2,931 | $ | 3,979 | $ | 3,898 | $ | 3,667 | ||||||||||||||||
Management and franchise fees and other |
868 | 807 | 1,088 | 1,014 | 901 | |||||||||||||||||||||||
Timeshare |
809 | 822 | 1,085 | 944 | 863 | |||||||||||||||||||||||
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4,659 | 4,560 | 6,152 | 5,856 | 5,431 | ||||||||||||||||||||||||
Other revenues from managed and franchised properties |
2,433 | 2,378 | 3,124 | 2,927 | 2,637 | |||||||||||||||||||||||
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Total revenues |
7,092 | 6,938 | 9,276 | 8,783 | 8,068 | |||||||||||||||||||||||
Expenses |
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Owned and leased hotels |
2,327 | 2,401 | 3,230 | 3,213 | 3,009 | |||||||||||||||||||||||
Timeshare |
545 | 568 | 758 | 668 | 634 |
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Pro Forma
Nine Months Ended September 30, 2013 |
Pro Forma
Year Ended December 31, 2012 |
Nine Months
Ended September 30, |
Year Ended December 31, | |||||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | ||||||||||||||||||||
(dollars in millions, except Hotel RevPAR and ADR) |
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Depreciation and amortization |
455 | 394 | 550 | 564 | 574 | |||||||||||||||||||
Impairment losses |
| 33 | 54 | 20 | 24 | |||||||||||||||||||
General, administrative and other |
319 | 327 | 460 | 416 | 637 | |||||||||||||||||||
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3,646 | 3,723 | 5,052 | 4,881 | 4,878 | ||||||||||||||||||||
Other expenses from managed and franchised properties |
2,433 | 2,378 | 3,124 | 2,927 | 2,637 | |||||||||||||||||||
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Total expenses |
6,079 | 6,101 | 8,176 | 7,808 | 7,515 | |||||||||||||||||||
Operating income |
1,013 | 837 | 1,100 | 975 | 553 | |||||||||||||||||||
Net income attributable to Hilton stockholder |
389 | 291 | 352 | 253 | 128 |
Pro Forma
as of September 30, 2013 |
As of and for the
Nine Months Ended September 30, |
As of and for the
Year Ended December 31, |
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2013 | 2012 | 2012 | 2011 | 2010 | ||||||||||||||||||||
(dollars in millions, except Hotel RevPAR and ADR) |
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Summary Balance Sheet Data: |
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Cash and cash equivalents |
$ | $ | 724 | $ | 883 | $ | 755 | $ | 781 | $ | 796 | |||||||||||||
Restricted cash and cash equivalents |
502 | 700 | 550 | 658 | 619 | |||||||||||||||||||
Total assets |
26,729 | 27,517 | 27,066 | 27,312 | 27,750 | |||||||||||||||||||
Long-term debt (1) |
14,279 | 16,064 | 15,575 | 16,311 | 16,995 | |||||||||||||||||||
Non-recourse timeshare debt (1) (2) |
388 | | | | | |||||||||||||||||||
Non-recourse debt and capital lease obligations of consolidated variable interest entities (1) |
318 | 471 | 420 | 481 | 541 | |||||||||||||||||||
Total equity |
2,553 | 1,981 | 2,155 | 1,702 | 1,544 | |||||||||||||||||||
Summary Statement of Cash Flows Data: |
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Capital expenditures for property and equipment |
$ | 167 | $ | 336 | $ | 433 | $ | 389 | $ | 148 | ||||||||||||||
Cash flow from operating activities |
1,024 | 750 | 1,110 | 1,167 | 833 | |||||||||||||||||||
Cash flow from investing activities |
(252) | (413) | (558) | (463) | (68) | |||||||||||||||||||
Cash flow from financing activities |
(789) | (236) | (576) | (714) | (703) | |||||||||||||||||||
Operational and Other Data: |
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Number of hotels and timeshare properties |
4,080 | 3,924 | 3,966 | 3,843 | 3,709 | |||||||||||||||||||
Number of rooms and units |
671,926 | 645,654 | 652,957 | 633,238 | 609,634 | |||||||||||||||||||
Hotel RevPAR (3) |
$ | 100.19 | $ | 95.07 | $ | 93.38 | $ | 90.70 | $ | 86.16 | ||||||||||||||
Hotel occupancy (3) |
73.5% | 72.4% | 71.1% | 69.7% | 68.4% | |||||||||||||||||||
Hotel ADR (3) |
$ | 136.24 | $ | 131.30 | $ | 131.35 | $ | 130.15 | $ | 126.06 | ||||||||||||||
Adjusted EBITDA: |
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Management and franchise (4) |
$ | 938 | $ | 877 | $ | 1,180 | $ | 1,095 | $ | 968 | ||||||||||||||
Ownership |
672 | 566 | 793 | 725 | 688 | |||||||||||||||||||
Timeshare (4) |
205 | 198 | 252 | 207 | 171 | |||||||||||||||||||
Corporate and other |
(208) | (207) | (269) | (274) | (263) | |||||||||||||||||||
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Adjusted EBITDA (5) |
$ | 1,607 | $ | 1,434 | $ | 1,956 | $ | 1,753 | $ | 1,564 | ||||||||||||||
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(1) | Includes current maturities. |
(2) | Includes Timeshare Facility and our 2.28% notes backed by timeshare financing receivables, or Securitized Timeshare Debt. |
(3) | Operating statistics are for comparable hotels as of each period end. See the definition of comparable hotels in Managements Discussion and Analysis of Financial Condition and Results of OperationsKey Business and Financial Metrics Used by ManagementComparable Hotels. |
(4) | Includes pro forma timeshare license fee for year ended December 31, 2010. Timeshare license fee agreement of 5% of certain timeshare revenues charged by our management and franchise segment to our timeshare segment was effective January 1, 2011. |
(5) | EBITDA is defined by us as net income attributable to Hilton stockholder plus interest expense, income tax expense and depreciation and amortization. We evaluate our operating performance using a metric we refer to as Adjusted EBITDA which is defined as net income attributable to Hilton stockholder before interest expense, income tax expense (benefit), depreciation and amortization, as further adjusted to exclude gains, losses and expenses in connection with (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment charges; (v) furniture, fixtures and equipment, or FF&E replacement reserves required under certain lease arrangements; (vi) reorganization costs; (vii) share-based and certain other compensation expenses; (viii) severance, relocation and other expenses; and (ix) other items. |
EBITDA and Adjusted EBITDA are not recognized terms under generally accepted accounting principles in the United States, or U.S. GAAP, and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider such measures either in isolation or as a substitute for profit (loss), cash flow or other methods of analyzing our results as reported under U.S. GAAP. Some of these limitations are:
| EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; |
| EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness; |
| EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; |
| EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; |
| EBITDA and Adjusted EBITDA do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations; |
| although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and |
| other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures. |
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Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income attributable to Hilton stockholder, which we believe is the most closely comparable U.S. GAAP financial measure:
Nine Months
Ended September 30, |
Year Ended December 31, | |||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | ||||||||||||||||
(in millions) |
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Net income attributable to Hilton stockholder |
$ | 389 | $ | 291 | $ | 352 | $ | 253 | $ | 128 | ||||||||||
Interest expense |
401 | 423 | 569 | 643 | 946 | |||||||||||||||
Interest expense included in equity in earnings (losses) from unconsolidated affiliates |
10 | 8 | 13 | 12 | 16 | |||||||||||||||
Income tax expense (benefit) |
192 | 166 | 214 | (59) | 308 | |||||||||||||||
Depreciation and amortization |
455 | 394 | 550 | 564 | 574 | |||||||||||||||
Depreciation and amortization included in equity in earnings (losses) from unconsolidated affiliates |
23 | 28 | 34 | 48 | 48 | |||||||||||||||
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EBITDA |
1,470 | 1,310 | 1,732 | 1,461 | 2,020 | |||||||||||||||
Net income (loss) attributable to noncontrolling interest |
9 | 4 | 7 | 2 | (17) | |||||||||||||||
Loss (gain) on foreign currency transactions |
43 | (27) | (23) | 21 | (18) | |||||||||||||||
Gain on debt restructuring (a) |
| | | | (789) | |||||||||||||||
FF&E replacement reserve (b) |
29 | 52 | 68 | 57 | 48 | |||||||||||||||
Share-based compensation expense |
5 | 20 | 50 | 19 | 56 | |||||||||||||||
Impairment losses |
| 33 | 54 | 20 | 24 | |||||||||||||||
Impairment loss included in equity in earnings (losses) from unconsolidated affiliates |
| 4 | 19 | 141 | 6 | |||||||||||||||
Other gain, net (c) |
(5) | (8) | (15) | (19) | (8) | |||||||||||||||
Other adjustment items (d) |
56 | 46 | 64 | 51 | 242 | |||||||||||||||
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Adjusted EBITDA |
$ | 1,607 | $ | 1,434 | $ | 1,956 | $ | 1,753 | $ | 1,564 | ||||||||||
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(a) | Represents the gain recognized in our consolidated statement of operations as a result of the debt restructuring in April 2010. |
(b) | Represents FF&E replacement reserves established for the benefit of lessors for requisition of capital assets under certain lease agreements. |
(c) | Other gain, net includes gains and losses on the dispositions of certain property and equipment and investments in affiliates, as well as a gain related to the restructuring of a capital lease in 2011 and a gain related to the discounted repayment of senior unsecured debt in 2010. |
(d) | Represents adjustments for certain legal expenses, severance, and certain guarantee payments. Includes $150 million of legal settlement expense, including a cash payment of $75 million, for the year ended December 31, 2010. |
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Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and the other information contained in this prospectus, including our consolidated financial statements and the related notes, before you decide whether to purchase our common stock.
Risks Relating to Our Business and Industry
We are subject to the business, financial and operating risks inherent to the hospitality industry, any of which could reduce our revenues and limit opportunities for growth.
Our business is subject to a number of business, financial and operating risks inherent to the hospitality industry, including:
| significant competition from multiple hospitality providers in all parts of the world; |
| changes in operating costs, including energy, food, compensation, benefits and insurance; |
| increases in costs due to inflation that may not be fully offset by price and fee increases in our business; |
| changes in tax and governmental regulations that influence or set wages, prices, interest rates or construction and maintenance procedures and costs; |
| the costs and administrative burdens associated with complying with applicable laws and regulations; |
| the costs or desirability of complying with local practices and customs; |
| significant increases in cost for health care coverage for employees and potential government regulation with respect to health care coverage; |
| shortages of labor or labor disruptions; |
| the availability and cost of capital necessary for us and third-party hotel owners to fund investments, capital expenditures and service debt obligations; |
| delays in or cancellations of planned or future development or refurbishment projects, which in the case of our managed and franchised hotels and timeshare properties controlled by homeowner associations are generally not within our control; |
| the quality of services provided by franchisees; |
| the financial condition of third-party property owners, developers and joint venture partners; |
| relationships with third-party property owners, developers and joint venture partners, including the risk that owners may terminate our management, franchise or joint venture agreements; |
| changes in desirability of geographic regions of the hotels or timeshare resorts in our business, geographic concentration of our operations and customers, and shortages of desirable locations for development; |
| changes in the supply and demand for hotel services (including rooms, food and beverage, and other products and services) and vacation ownership services and products; |
| the ability of third-party internet and other travel intermediaries to attract and retain customers; and |
| decreases that may result in the frequency of business travel as a result of alternatives to in person meetings, including virtual meetings hosted on-line or over private teleconferencing networks. |
Any of these factors could increase our costs or limit or reduce the prices we are able to charge for hospitality services and timeshare products, or otherwise affect our ability to maintain existing properties or develop new properties. As a result, any of these factors can reduce our revenues and limit opportunities for growth.
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Macroeconomic and other factors beyond our control can adversely affect and reduce demand for our products and services.
Macroeconomic and other factors beyond our control can reduce demand for hospitality products and services, including demand for rooms at properties that we manage, franchise, own, lease or develop, as well as demand for timeshare properties. These factors include, but are not limited to:
| changes in general economic conditions, including low consumer confidence, unemployment levels, depressed real estate prices resulting from the severity and duration of any downturn in the U.S. or global economy; |
| war, political conditions or civil unrest, terrorist activities or threats and heightened travel security measures instituted in response to these events; |
| decreased corporate or government travel-related budgets and spending, as well as cancellations, deferrals or renegotiations of group business such as industry conventions; |
| statements, actions, or interventions by governmental officials related to travel and corporate travel-related activities and the resulting negative public perception of such travel and activities; |
| the financial and general business condition of the airline, automotive and other transportation-related industries and its impact on travel, including decreased airline capacity and routes; |
| conditions which negatively shape public perception of travel, including travel-related accidents and outbreaks of pandemic or contagious diseases, such as avian flu, severe acute respiratory syndrome (SARS) and H1N1 (swine flu); |
| climate change or availability of natural resources; |
| natural or man-made disasters, such as earthquakes, tsunamis, tornadoes, hurricanes, typhoons, floods, volcanic eruptions, oil spills and nuclear incidents; |
| changes in the desirability of particular locations or travel patterns of customers; |
| cyclical over-building in the hotel and timeshare industries; and |
| organized labor activities, which could cause a diversion of business from hotels involved in labor negotiations and loss of business for our hotels generally as a result of certain labor tactics. |
Any one or more of these factors could limit or reduce overall demand for our products and services or could negatively impact our revenue sources, which could adversely affect our business, financial condition and results of operations.
Contraction in the global economy or low levels of economic growth could adversely affect our revenues and profitability as well as limit or slow our future growth.
Consumer demand for our services is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Decreased global or regional demand for hospitality products and services can be especially pronounced during periods of economic contraction or low levels of economic growth, and the recovery period in our industry may lag overall economic improvement. Declines in demand for our products and services due to general economic conditions could negatively impact our business by decreasing the revenues and profitability of our owned properties, limiting the amount of fee revenues we are able to generate from our managed and franchised properties, and reducing overall demand for timeshare intervals. In addition, many of the expenses associated with our business, including personnel costs, interest, rent, property taxes, insurance and utilities, are relatively fixed. During a period of overall economic weakness, if we are unable to meaningfully decrease these costs as demand for our hotels and timeshare properties decreases, our business operations and financial performance may be adversely affected.
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The hospitality industry is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our results of operations and financial condition.
The hospitality industry is seasonal in nature. The periods during which our lodging properties experience higher revenues vary from property to property, depending principally upon location and the customer base served. We generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent quarters with the fourth quarter being the highest. In addition, the hospitality industry is cyclical and demand generally follows, on a lagged basis, the general economy. The seasonality and cyclicality of our industry may contribute to fluctuations in our results of operations and financial condition.
Because we operate in a highly competitive industry, our revenues or profits could be harmed if we are unable to compete effectively.
The segments of the hospitality industry in which we operate are subject to intense competition. Our principal competitors are other operators of luxury, full-service and focused-service and timeshare properties, including other major hospitality chains with well-established and recognized brands. We also compete against smaller hotel chains, independent and local hotel owners and operators and independent timeshare operators. If we are unable to compete successfully, our revenues or profits may decline.
Competition for hotel guests
We face competition for individual guests, group reservations and conference business. We compete for these customers based primarily on brand name recognition and reputation, as well as location, room rates, property size and availability of rooms and conference space, quality of the accommodations, customer satisfaction, amenities and the ability to earn and redeem loyalty program points. Our competitors may have greater financial and marketing resources and more efficient technology platforms, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect our ability to compete for guests effectively.
Competition for management and franchise agreements
We compete to enter into management and franchise agreements. Our ability to compete effectively is based primarily on the value and quality of our management services, brand name recognition and reputation, our ability and willingness to invest capital, availability of suitable properties in certain geographic areas, and the overall economic terms of our agreements and the economic advantages to the property owner of retaining our management services and using our brands. If the properties that we manage or franchise perform less successfully than those of our competitors, if we are unable to offer terms as favorable as those offered by our competitors, or if the availability of suitable properties is limited, our ability to compete effectively for new management or franchise agreements could be reduced.
Competition for sales of timeshare properties
We compete with other timeshare operators for sales of timeshare intervals based principally on location, quality of accommodations, price, financing terms, quality of service, terms of property use, opportunity for timeshare owners to exchange into time at other timeshare properties or other travel rewards as well as brand name recognition and reputation. Our ability to attract and retain purchasers of timeshare intervals depends on our success in distinguishing the quality and value of our timeshare offerings from those offered by others. If we are unable to do so, our ability to compete effectively for sales of timeshare intervals could be adversely affected.
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Any deterioration in the quality or reputation of our brands could have an adverse impact on our reputation, business, financial condition or results of operations.
Our brands and our reputation are among our most important assets. Our ability to attract and retain guests depends, in part, on the public recognition of our brands and their associated reputation. In addition, the success of our hotel owners businesses and their ability to make payments to us may indirectly depend on the strength and reputation of our brands. Such dependence makes our business susceptible to risks regarding brand obsolescence and to reputational damage. If our brands become obsolete or are viewed as unfashionable or lacking in consistency and quality, we may be unable to attract guests to our hotels, and further we may be unable to attract or retain our hotel owners.
In addition, there are many factors which can negatively affect the reputation of any individual brand, or the overall brand of our company. Changes in ownership or management practices, the occurrence of accidents or injuries, natural disasters, crime, individual guest notoriety, or similar events can have a substantial negative impact on our reputation, create adverse publicity and cause a loss of consumer confidence in our business. Because of the global nature of our brands and the broad expanse of our business and hotel locations, events occurring in one location could have a resulting negative impact on the reputation and operations of otherwise successful individual locations. In addition, the considerable expansion in the use of social media over recent years has compounded the potential scope of the negative publicity that could be generated by such incidents. We could also face legal claims related to these events, along with adverse publicity resulting from such litigation. If the perceived quality of our brands declines, or if our reputation is damaged, our business, financial condition or results of operations could be adversely affected.
If we are unable to maintain good relationships with third-party hotel owners and renew or enter into new management and franchise agreements, we may be unable to expand our presence and our business, financial condition and results of operations may suffer.
Our management and franchising business depends on our ability to establish and maintain long-term, positive relationships with third-party property owners and on our ability to renew existing, and enter into new, management and franchise agreements. The management and franchise contracts we enter into with third-party owners are typically long-term arrangements, but may allow the hotel owner to terminate the agreement under certain circumstances, including in certain cases, the failure to meet certain financial or performance criteria. Our ability to meet these financial and performance criteria is subject to, among other things, risks common to the overall hotel industry, including factors outside of our control. In addition, any negative management and franchise pricing trends could adversely affect our ability to negotiate with hotel owners. If we fail to maintain and renew existing management and franchise agreements, and enter into new agreements on favorable terms, we may be unable to expand our presence and our business, financial condition and results of operations may suffer.
Our management and franchise business is subject to real estate investment risks for third-party owners which could adversely affect our operational results and our prospects for growth.
The ability to grow our management and franchise business is subject to the range of risks associated with real estate investments. Our ability to sustain continued growth through management and franchise agreements for new hotels and the conversion of existing facilities to managed or franchised branded hotels is affected, and may potentially be limited, by a variety of factors influencing real estate development generally. These include site availability, the availability of financing, planning, zoning and other local approvals. Other limitations that may be imposed by market factors include projected room occupancy, changes in growth in demand compared to projected supply, geographic area restrictions in management and franchise agreements, costs of construction and anticipated room rate structure. Any inability by us or our third-party owners to manage these factors effectively could adversely affect our operational results and our prospects for growth.
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If our third-party property owners are unable to repay or refinance loans secured by the mortgaged properties, or to obtain financing adequate to fund current operations or growth plans, our revenues, profits and capital resources could be reduced and our business could be harmed.
Many of the properties owned by our third-party property owners are pledged as collateral for mortgage loans entered into when such properties were purchased or refinanced by them. If our third-party property owners are unable to repay or refinance maturing indebtedness on favorable terms or at all, their lenders could declare a default, accelerate the related debt and repossess the property. Any such repossessions could result in the termination of our management and franchise agreements or eliminate revenues and cash flows from such property, which could negatively affect our business and results of operations. In addition, the owners of managed and franchised hotels depend on financing to buy, develop and improve hotels and in some cases, fund operations during down cycles. Our hotel owners inability to obtain adequate funding could materially adversely impact the maintenance and improvement plans with respect to existing hotels, as well as result in the delay or stoppage of the development of our existing pipeline.
If third-party property owners fail to make investments necessary to maintain or improve their properties, guest preference for Hilton brands and reputation and performance results could suffer.
Substantially all of our management and franchise agreements require third-party property owners to comply with standards that are essential to maintaining the quality and reputation of our branded hotel properties. This includes requirements related to the physical condition, safety standards and appearance of the properties as well as the service levels provided by employees. These standards may evolve with customer preference, or we may introduce new requirements and team members over time. If our property owners fail to make investments necessary to maintain or improve the properties in accordance with such standards, guest preference for our brands could diminish, and this could result in an adverse impact on our results of operations. In addition, if third-party property owners fail to observe standards and meet their contractual requirements, we may elect to exercise our termination rights, which would eliminate revenues from these properties and cause us to incur expenses related to terminating these relationships. We may be unable to find suitable or offsetting replacements for any terminated relationships.
Contractual and other disagreements with third-party property owners could make us liable to them or result in litigation costs or other expenses.
Our management and franchise agreements require us and our hotel owners to comply with operational and performance conditions that are subject to interpretation and could result in disagreements. At any given time, we may be in disputes with one or more of our hotel owners. Any such dispute could be very expensive for us, even if the outcome is ultimately in our favor. We cannot predict the outcome of any arbitration or litigation, the effect of any negative judgment against us or the amount of any settlement that we may enter into with any third-party. An adverse result in any of these proceedings could materially adversely affect our results of operations. Furthermore, specific to our industry, some courts have applied principles of agency law and related fiduciary standards to managers of third-party hotel properties, which means that property owners may assert the right to terminate agreements even where the agreements do not expressly provide for termination. In the event of any such termination, our fees from such properties would be eliminated, and accordingly may negatively impact our results of operations.
We are exposed to the risks resulting from significant investments in owned and leased real estate, which could increase our costs, reduce our profits and limit our ability to respond to market conditions.
We own or lease a substantial amount of real property as one of our three business segments. Real estate ownership and leasing is subject to various risks which may or may not be applicable to managed or franchised properties, including:
| governmental regulations relating to real estate ownership or operations, including tax, environmental, zoning, and eminent domain laws; |
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| changes in market conditions or the area in which real estate is located losing value; |
| differences in potential civil liability between owners and operators for accidents or other occurrences on owned or leased properties; |
| the ongoing need for owner-funded capital improvements and expenditures to maintain or upgrade properties; |
| periodic total or partial closures due to renovations and facility improvements; |
| risks associated with mortgage debt, including the possibility of default, fluctuating interest rate levels and uncertainties in the availability of replacement financing; |
| fluctuations in real estate values or potential impairments in the value of our assets; and |
| the relative illiquidity of real estate compared to some other assets. |
The negative impact on profitability and cash flow from declines in revenues is more pronounced in owned properties because we, as the owner, bear the risk of their high fixed-cost structure. Further, during times of economic distress, declining demand and declining earnings often result in declining asset values and we may not be able to sell properties on favorable terms or at all. Accordingly, we may not be able to adjust our owned property portfolio promptly in response to changes in economic or other conditions.
Our efforts to develop, redevelop or renovate our owned and leased properties could be delayed or become more expensive, which could reduce revenues or impair our ability to compete effectively.
Certain of our owned and leased properties were constructed more than a century ago. The condition of aging properties could negatively impact our ability to attract guests or result in higher operating and capital costs, either of which could reduce revenues or profits from these properties. While we have budgeted for replacements and repairs to furniture, fixtures and hotel equipment at our properties there can be no assurance that these replacements and repairs will occur, or even if completed, will result in improved performance. In addition, these efforts are subject to a number of risks, including:
| construction delays or cost overruns (including labor and materials) that may increase project costs; |
| obtaining zoning, occupancy, and other required permits or authorizations; |
| changes in economic conditions that may result in weakened or lack of demand or negative project returns; |
| governmental restrictions on the size or kind of development; |
| volatility in the debt and capital markets that may limit our ability to raise capital for projects or improvements; |
| lack of availability of rooms or meeting spaces for revenue-generating activities during construction, modernization or renovation projects; |
| force majeure events, including earthquakes, tornadoes, hurricanes, floods or tsunamis; and |
| design defects that could increase costs. |
If our properties are not updated to meet guest preferences, if properties under development or renovation are delayed in opening as scheduled, or if renovation investments adversely affect or fail to improve performance, our operations and financial results could be negatively impacted.
Our properties may not be permitted to be rebuilt if destroyed.
Certain of our properties may qualify as legally permissible nonconforming uses and improvements, including certain of our iconic and most profitable properties. If a substantial portion of any such properties were
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to be destroyed by fire or other casualty, we might not be permitted to rebuild that property as it now exists, regardless of the availability of insurance proceeds. Any loss of this nature, whether insured or not, could materially adversely affect our results of operations and prospects.
We share control in joint venture projects, which limits our ability to manage third-party risks associated with these projects.
Joint venturers often have shared control over the operation of our joint venture assets. In most cases, we are minority participants and do not control the decisions of the ventures. Therefore, joint venture investments may involve risks such as the possibility that a co-venturer in an investment might become bankrupt, be unable to meet its capital contribution obligations, have economic or business interests or goals that are inconsistent with our business interests or goals, or take actions that are contrary to our instructions or to applicable laws and regulations. In addition, we may be unable to take action without the approval of our joint venture partners, or our joint venture partners could take actions binding on the joint venture without our consent. Consequently, actions by a co-venturer or other third-party could expose us to claims for damages, financial penalties and reputational harm, any of which could have an adverse effect on our business and operations. In addition, we may agree to guarantee indebtedness incurred by a joint venture or co-venturer or provide standard indemnifications to lenders for loss liability or damage occurring as a result of our actions or actions of the joint venture or other co-venturers. Such a guarantee or indemnity may be on a joint and several basis with a co-venturer, in which case we may be liable in the event such co-venturer defaults on its guarantee obligation. The non-performance of such obligations may cause losses to us in excess of the capital we initially may have invested or committed under such obligations.
Preparing our financial statements requires us to have access to information regarding the results of operations, financial position and cash flows of our joint ventures. Any deficiencies in our joint ventures internal controls over financial reporting may affect our ability to report our financial results accurately or prevent or detect fraud. Such deficiencies also could result in restatements of, or other adjustments to, our previously reported or announced operating results, which could diminish investor confidence and reduce the market price for our shares. Additionally, if our joint ventures are unable to provide this information for any meaningful period or fail to meet expected deadlines, we may be unable to satisfy our financial reporting obligations or timely file our periodic reports.
Although our joint ventures may generate positive cash flow, in some cases they may be unable to distribute that cash to the joint venture partners. Additionally, in some cases our joint venture partners control distributions and may choose to leave capital in the joint venture rather than distribute it. Because our ability to generate liquidity from our joint ventures depends in part on their ability to distribute capital to us, our failure to receive distributions from our joint venture partners could reduce our return on these investments.
The timeshare business is subject to extensive regulation and failure to comply with such regulation may have an adverse impact on our business.
We develop, manage, market and sell timeshare intervals. Certain of these activities are subject to extensive state regulation in both the state in which the timeshare property is located and the states in which the timeshare property is marketed and sold. Federal regulation of certain marketing practices also applies. In addition, we provide financing to some purchasers of timeshare intervals and we also service the resulting loans. This practice subjects us to various federal and state regulations, including those which require disclosure to borrowers regarding the terms of their loans as well as settlement, servicing and collection of loans. If we fail to comply with applicable federal, state, and local laws in connection with our timeshare business, we may not be able to offer timeshare intervals or associated financing in certain areas, and as a result, the timeshare business could suffer a decline in revenues.
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A decline in timeshare interval inventory or our failure to enter into and maintain timeshare management agreements may have an adverse effect on our business or results of operations.
In addition to timeshare interval inventory from our owned timeshare properties, we source inventory through sales and marketing agreements with third-party developers. If we fail to develop timeshare properties or are unsuccessful in entering into new agreements with third-party developers, we may experience a decline in timeshare interval inventory available to be sold by us, which could result in a decrease in our revenues. In addition, a decline in timeshare interval inventory could result in both a decrease of financing revenues that are generated from purchasers of timeshare intervals and fee revenues that are generated by providing management services to the timeshare properties.
If purchasers default on the loans that we provide to finance their purchases of timeshare intervals, the revenues and profits that we derive from the timeshare business could be reduced.
Providing secured financing to some purchasers of timeshare intervals subjects us to the risk of purchaser default. As of September 30, 2013, we had approximately $994 million of timeshare financing receivables outstanding. If a purchaser defaults under the financing that we provide, we could be forced to write off the loan and reclaim ownership of the timeshare interval through foreclosure or deed in lieu of foreclosure. If the timeshare interval has declined in value, we may incur impairment losses that reduce our profits. In addition, we may be unable to resell the property in a timely manner or at the same price, or at all. Also, if a purchaser of a timeshare interval defaults on the related loan during the early part of the amortization period, we may not have recovered the marketing, selling and general and administrative costs associated with the sale of that timeshare interval. If we are unable to recover any of the principal amount of the loan from a defaulting purchaser, or if the allowances for losses from such defaults are inadequate, the revenues and profits that we derive from the timeshare business could be reduced.
Some of our existing development pipeline may not be developed into new hotels, which could materially adversely affect our growth prospects.
As of September 30, 2013, we had a total of 1,069 hotels in our development pipeline, which we define as hotels under construction or approved for development under one of our brands. The commitments of owners and developers with whom we have agreements are subject to numerous conditions, and the eventual development and construction of our pipeline not currently under construction is subject to numerous risks, including, in certain cases, obtaining governmental and regulatory approvals and adequate financing. As a result, we cannot assure you that our entire development pipeline will develop into new hotels.
New brands or services that we launch in the future may not be as successful as we anticipate, which could have a material adverse effect on our business, financial condition or results of operations.
We opened our first Home2 Suites by Hilton hotel in 2011 and we launched our eforea spa concept in 2010. We may launch additional branded hotel products and services in the future. We cannot assure you that any new hotel products we launch will be accepted by hotel owners, franchisees or customers, that we will recover the costs we incurred in developing the brands, or that the brands, products or services will be successful. If new branded hotel products and services are not as successful as we anticipate, it could have a material adverse effect on our business, financial condition or results of operations.
We may seek to expand through acquisitions of and investments in other businesses and properties, or through alliances, and we may also seek to divest some of our properties and other assets. These acquisition and disposition activities may be unsuccessful or divert managements attention.
We may consider strategic and complementary acquisitions of and investments in other hotel or hospitality brands, businesses, properties or other assets. Furthermore, we may pursue these opportunities in alliance with existing or prospective owners of managed or franchised properties. In many cases, we will be competing for
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these opportunities with third parties that may have substantially greater financial resources than us. Acquisitions or investments in brands, businesses, properties or assets as well as these alliances are subject to risks that could affect our business, including risks related to:
| issuing shares of stock that could dilute the interests of our existing stockholders; |
| spending cash and incurring debt; |
| assuming contingent liabilities; or |
| creating additional expenses. |
We cannot assure you that we will be able to identify opportunities or complete transactions on commercially reasonable terms or at all or that we will actually realize any anticipated benefits from such acquisitions, investments or alliances. Similarly, we cannot assure you that we will be able to obtain financing for acquisitions or investments on attractive terms or at all or that the ability to obtain financing will not be restricted by the terms of our indebtedness. In addition, the success of any acquisitions or investments also will depend, in part, on our ability to integrate the acquisition or investment with our existing operations.
We may also divest certain properties or assets, and any such divestments may yield lower than expected returns. In some circumstances, sales of properties or other assets may result in losses. Upon a sale of properties or assets, we may become subject to contractual indemnity obligations, incur material tax liabilities or, as a result of required debt repayment, face a shortage of liquidity. Finally, any acquisitions, investments or dispositions could demand significant attention from management that would otherwise be available for business operations, which could harm our business.
Failure to keep pace with developments in technology could adversely affect our operations or competitive position.
The hospitality industry demands the use of sophisticated technology and systems for property management, brand assurance and compliance, procurement, reservation systems, operation of our customer loyalty programs, distribution of hotel resources to current and future customers, and guest amenities. These technologies may require refinements and upgrades. The development and maintenance of these technologies may require significant investment by us. We cannot assure you that as various systems and technologies become outdated or new technology is required, we will be able to replace or introduce them as quickly as needed or in a cost-effective and timely manner. We also cannot assure you that we will achieve the benefits we may have been anticipating from any new technology or system.
Failures in, material damage to, or interruptions in our information technology systems, software or websites, including as a result of cyber-attacks, and difficulties in updating our existing software or developing or implementing new software could have a material adverse effect on our business or results of operations.
We depend heavily upon our information technology systems in the conduct of our business. We own and license or otherwise contract for sophisticated technology and systems for property management, procurement, reservations and the operation of the Hilton HHonors customer loyalty program. Such systems are subject to, among other things, damage or interruption from power outages, computer and telecommunications failures, computer viruses, and natural and man-made disasters. In particular, from time to time we and third parties who serve us experience cyber-attacks, attempted breaches of our or their information technology systems and networks or similar events, which could result in a loss of sensitive business or customer information, systems interruption or the disruption of our operations. For example, in 2011 we were notified by Epsilon, our database marketing vendor, that we were among a group of companies served by Epsilon that were affected by a data breach that resulted in an unauthorized third party gaining access to Epsilons files that included names and e-mails of certain of our customers. In addition, substantially all of our data center operations are currently located in a single facility, and any loss or damage to the facility could result in operational disruption and data loss.
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Damage or interruption to our information systems may require a significant investment to update, remediate or replace with alternate systems, and we may suffer interruptions in our operations as a result. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our systems, including those that may result from our failure to adequately develop, implement and maintain a robust disaster recovery plan and backup systems could severely affect our ability to conduct normal business operations and, as a result, have a material adverse effect on our business operations and financial performance.
We rely on third parties for the performance of a significant portion of our information technology functions worldwide and the provision of information technology and business process services. In particular, our reservation system relies on data communications networks operated by unaffiliated third parties. The success of our business depends in part on maintaining our relationships with these third parties and their continuing ability to perform these functions and services in a timely and satisfactory manner. If we experience a loss or disruption in the provision of any of these functions or services, or they are not performed in a satisfactory manner, we may have difficulty in finding alternate providers on terms favorable to us, in a timely manner or at all, and our business could be adversely affected.
We rely on certain software vendors to maintain and periodically upgrade many of these systems so that they can continue to support our business. The software programs supporting many of our systems were licensed to us by independent software developers. The inability of these developers or us to continue to maintain and upgrade these information systems and software programs would disrupt or reduce the efficiency of our operations if we were unable to convert to alternate systems in an efficient and timely manner.
We are vulnerable to various risks and uncertainties associated with our websites and mobile applications, including changes in required technology interfaces, website and mobile application downtime and other technical failures, costs and issues as we upgrade our website software and mobile applications. Additional risks include computer viruses, changes in applicable federal and state regulation, security breaches, legal claims related to our website operations and e-commerce fulfillment and other consumer privacy concerns. Our failure to successfully respond to these risks and uncertainties could reduce website and mobile application sales and have a material adverse effect on our business or results of operations.
We may be exposed to risks and costs associated with protecting the integrity and security of our guests personal information.
We are subject to various risks associated with the collection, handling, storage and transmission of sensitive information, including risks related to compliance with U.S. and foreign data collection and privacy laws and other contractual obligations, as well as the risk that our systems collecting such information could be compromised. In the course of doing business, we collect large volumes of internal and customer data, including credit card numbers and other personally identifiable information for various business purposes, including managing our workforce, providing requested products and services, and maintaining guest preferences to enhance customer service and for marketing and promotion purposes. Our various information technology systems enter, process, summarize and report such data. If we fail to maintain compliance with the various U.S. and foreign data collection and privacy laws or with credit card industry standards or other applicable data security standards, we could be exposed to fines, penalties, restrictions, litigation or other expenses, and our business could be adversely impacted.
In addition, even if we are fully compliant with legal standards and contractual requirements, we still may not be able to prevent security breaches involving sensitive data. The sophistication of efforts by hackers to gain unauthorized access to information systems has increased in recent years. Any breach, theft, loss, or fraudulent use of customer, employee or company data could cause consumers to lose confidence in the security of our
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websites, mobile applications and other information technology systems and choose not to purchase from us. Any such security breach could expose us to risks of data loss, business disruption, litigation and other liability, any of which could adversely affect our business.
In addition, states and the federal government have recently enacted additional laws and regulations to protect consumers against identity theft. These laws and similar laws in other jurisdictions have increased the costs of doing business and, if we fail to implement appropriate safeguards or we fail to detect and provide prompt notice of unauthorized access as required by some of these laws, we could be subject to potential claims for damages and other remedies. If we were required to pay any significant amounts in satisfaction of claims under these laws, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully with any such law, our business, operating results and financial condition could be adversely affected.
Failure to comply with marketing and advertising laws, including with regard to direct marketing, could result in fines or place restrictions on our business.
We rely on a variety of direct marketing techniques, including telemarketing, email marketing and postal mailings, and we are subject to various laws and regulations in the U.S. and internationally which govern marketing and advertising practices. Any further restrictions in laws, such as the Telephone Consumer Protection Act of 1991, the Telemarketing Sales Rule, CAN-SPAM Act of 2003, and various U.S. state laws, new laws, or international data protection laws, such as the EU member states implementation of proposed privacy regulation, that govern these activities could adversely affect current or planned marketing activities and cause us to change our marketing strategy. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact our ability to maintain relationships with our customers and acquire new customers. We also obtain access to names of potential customers from travel service providers or other companies and we market to some individuals on these lists directly or through other companies marketing materials. If access to these lists was prohibited or otherwise restricted, our ability to develop new customers and introduce them to products could be impaired.
The growth of internet reservation channels could adversely affect our business and profitability.
A significant percentage of hotel rooms for individual guests is booked through internet travel intermediaries. We contract with such intermediaries and pay them various commissions and transaction fees for sales of our rooms through their systems. If such bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant concessions from us or our franchisees. Although we have established agreements with many of these intermediaries that limit transaction fees for hotels, there can be no assurance that we will be able to renegotiate these agreements upon their expiration with terms as favorable as the provisions that existed before the expiration, replacement or renegotiation. Moreover, hospitality intermediaries generally employ aggressive marketing strategies, including expending significant resources for online and television advertising campaigns to drive consumers to their websites. As a result, consumers may develop brand loyalties to the intermediaries offered brands, websites and reservations systems rather than to the Hilton brands and systems. If this happens, our business and profitability may be significantly impacted as shifting customer loyalties divert bookings away from our websites.
In addition, in general, internet travel intermediaries have traditionally competed to attract individual consumers or transient business rather than group and convention business. However, hospitality intermediaries have recently grown their business to include marketing to large group and convention business. If that growth continues, it could both divert group and convention business away from our hotels, and it could also increase our cost of sales for group and convention business.
Recent class action litigation against several online travel intermediaries and lodging companies, including Hilton, challenges the legality under certain antitrust laws of certain provisions in contracts and alleged practices with third-party intermediaries. While we are vigorously defending the litigation, and believe the contract
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provisions are lawful, the courts will ultimately determine this issue. Our fees and expenses associated with this litigation, even if we ultimately prevail, could be material. Any adverse outcome could require us to alter our business arrangements with these intermediaries, and consequently could have a negative impact on our financial condition and results of operations.
Our reservation system is an important component of our business operations and a disruption to its functioning could have an adverse effect on our performance and results.
We manage a global reservation system that communicates reservations to our branded hotels when made by individuals directly, either online or by telephone to our call centers, or through intermediaries like travel agents, internet travel web sites and other distribution channels. The cost, speed, efficacy and efficiency of the reservation system are important aspects of our business and is an important consideration of hotel owners in choosing to affiliate with our brands. Any failure to maintain or upgrade, and any other disruption to our reservation system may adversely affect our business.
The cessation, reduction or taxation of program benefits of our Hilton HHonors loyalty program could adversely affect the Hilton brands and guest loyalty.
We manage the Hilton HHonors guest loyalty and rewards program for the Hilton brands. Program members accumulate points based on eligible stays and hotel charges and redeem the points for a range of benefits including free rooms and other items of value. The program is an important aspect of our business and of the affiliation value for hotel owners under management and franchise agreements. System hotels (including, without limitation, third-party hotels under management and franchise arrangements) contribute a percentage of the guests charges to the program for each stay of a program member. In addition to the accumulation of points for future hotels stays at our brands, Hilton HHonors arranges with third-party service providers such as airlines and rail companies to exchange monetary value represented by points for program awards. Currently, the program benefits are not taxed as income to members. If the program awards and benefits are materially altered, curtailed or taxed such that a material number of HHonors members choose to no longer participate in the program, this could adversely affect our business.
Because we derive a portion of our revenues from operations outside the United States, the risks of doing business internationally could lower our revenues, increase our costs, reduce our profits or disrupt our business.
We currently manage, franchise, own or lease hotels and resorts in 90 countries around the world. Our operations outside the United States represented approximately 27% and 26% of our revenues for the year ended December 31, 2012 and the nine months ended September 30, 2013, respectively. We expect that revenues from our international operations will continue to account for an increasing portion of our total revenues. As a result, we are subject to the risks of doing business outside the United States, including:
| rapid changes in governmental, economic and political policy, political or civil unrest, acts of terrorism or the threat of international boycotts or U.S. anti-boycott legislation; |
| increases in anti-American sentiment and the identification of the licensed brands as an American brand; |
| recessionary trends or economic instability in international markets; |
| changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate; |
| the effect of disruptions caused by severe weather, natural disasters, outbreak of disease or other events that make travel to a particular region less attractive or more difficult; |
| the presence and acceptance of varying levels of business corruption in international markets and the impact of various anti-corruption and other laws; |
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| the imposition of restrictions on currency conversion or the transfer of funds or limitations on our ability to repatriate non-U.S. earnings in a tax efficient manner; |
| the ability to comply with or impact of complying with complex and changing laws, regulations and policies of foreign governments that may affect investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, increases in taxes paid and other changes in applicable tax laws; |
| uncertainties as to local laws and enforcement of contract and intellectual property rights; |
| forced nationalization of our properties by local, state or national governments; and |
| the difficulties involved in managing an organization doing business in many different countries. |
These factors may adversely affect the revenues from and the market value of our properties located in international markets. While these factors and the impact of these factors are difficult to predict, any one or more of them could lower our revenues, increase our costs, reduce our profits or disrupt our business operations.
Failure to comply with laws and regulations applicable to our international operations may increase costs, reduce profits, limit growth or subject us to broader liability.
Our business operations in countries outside the U.S. are subject to a number of laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act, or FCPA, as well as trade sanctions administered by the Office of Foreign Assets Control, or OFAC. The FCPA is intended to prohibit bribery of foreign officials and requires companies whose securities are listed in the U.S. to keep books and records that accurately and fairly reflect those companies transactions and to devise and maintain an adequate system of internal accounting controls. OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. We have policies in place designed to comply with applicable sanctions, rules and regulations. Given the nature of our business, it is possible that hotels we own or manage in the 90 countries and territories in which we operate may provide services to persons subject to sanctions. Where we have identified potential violations in the past, we have taken appropriate remedial action including filing voluntary disclosures to OFAC. In addition, some of our operations may be subject to the laws and regulations of non-U.S. jurisdictions, including the U.K.s Bribery Act 2010, which contains significant prohibitions on bribery and other corrupt business activities, and other local anti-corruption laws in the countries in which we conduct operations.
If we fail to comply with these laws and regulations, we could be exposed to claims for damages, financial penalties, reputational harm, and incarceration of employees or restrictions on our operation or ownership of hotels and other properties, including the termination of management, franchising, and ownership rights. In addition, in certain circumstances, the actions of parties affiliated with us (including our owners, joint venture partners, team members and agents) may expose us to liability under the FCPA, U.S. sanctions or other laws. These restrictions could increase costs of operations, reduce profits or cause us to forgo development opportunities that would otherwise support growth.
In August 2012, Congress enacted the Iran Threat Reduction and Syria Human Rights Act of 2012, or ITRSHRA, which expands the scope of U.S. sanctions against Iran and Syria. In particular, Section 219 of the ITRSHRA amended the Securities Exchange Act of 1934, as amended, or Exchange Act, to require companies subject to Securities and Exchange Commission, or SEC, reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain OFAC sanctions engaged in by the reporting company or any of its affiliates during the period covered by the relevant periodic report. In some cases, ITRSHRA requires companies to disclose these types of transactions even if they would otherwise be permissible under U.S. law. These companies are required to separately file with the SEC a notice that such activities have been disclosed in the relevant periodic report, and the SEC is required to post this notice of disclosure on its website and send the report to the U.S. President
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and certain U.S. Congressional committees. The U.S. President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation with respect to certain disclosed activities, to determine whether sanctions should be imposed.
Under ITRSHRA, we will be required to report if we or any of our affiliates knowingly engaged in certain specified activities during a period covered by one of our annual reports on Form 10-K or quarterly reports on Form 10-Q. We have engaged in, and may in the future engage in, activities that would require disclosure pursuant to Section 219 of ITRSHRA, including the activities discussed in the disclosures included on Exhibit 99.1 to the registration statement of which this prospectus forms a part, which disclosures are hereby incorporated by reference herein. In addition, because the SEC defines the term affiliate broadly, it includes any entity controlled by us as well as any person or entity that controls us or is under common control with us. Because we may be deemed to be a controlled affiliate of Blackstone, affiliates of Blackstone may also be considered our affiliates. Other affiliates of Blackstone have in the past and may in the future be required to make disclosures pursuant to ITRSHRA. Disclosure of such activities, even if such activities are permissible under applicable law, and any sanctions imposed on us or our affiliates as a result of these activities could harm our reputation and brands and have a negative impact on our results of operations.
The loss of senior executives or key field personnel, such as general managers, could significantly harm our business.
Our ability to maintain our competitive position depends somewhat on the efforts and abilities of our senior executives. Finding suitable replacements for senior executives could be difficult. Losing the services of one or more of these senior executives could adversely affect strategic relationships, including relationships with third-party property owners, joint venture partners and vendors, and limit our ability to execute our business strategies.
We also rely on the general managers at each of our managed, owned, leased and joint venture hotels to manage daily operations and oversee the efforts of team members. These general managers are trained professionals in the hospitality industry and have extensive experience in many markets worldwide. The failure to retain, train or successfully manage general managers for our managed, owned, leased and joint venture hotels could negatively affect our operations.
Collective bargaining activity could disrupt our operations, increase our labor costs or interfere with the ability of our management to focus on executing our business strategies.
A significant number of our employees (approximately 27%) and employees of our hotel owners are covered by collective bargaining agreements and similar agreements. If relationships with our employees or employees of our hotel owners or the unions that represent them become adverse, the properties we manage, franchise or own could experience labor disruptions such as strikes, lockouts, boycotts and public demonstrations. A number of our collective bargaining agreements, representing approximately 6% of our organized employees, have expired and are in the process of being renegotiated, and we may be required to negotiate additional collective bargaining agreements in the future if more employees become unionized. Labor disputes, which may be more likely when collective bargaining agreements are being negotiated, could harm our relationship with our employees or employees of our hotel owners, result in increased regulatory inquiries and enforcement by governmental authorities and deter guests. Further, adverse publicity related to a labor dispute could harm our reputation and reduce customer demand for our services. Labor regulation and the negotiation of new or existing collective bargaining agreements could lead to higher wage and benefit costs, changes in work rules that raise operating expenses, legal costs, and limitations on our ability or the ability of our third-party property owners to take cost saving measures during economic downturns. We do not have the ability to control the negotiations of collective bargaining agreements covering unionized labor employed by many third-party property owners. Increased unionization of our workforce, new labor legislation or changes in regulations could disrupt our operations, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies.
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Labor shortages could restrict our ability to operate our properties or grow our business or result in increased labor costs that could adversely affect our results of operations.
Our success depends in large part on our ability to attract, retain, train, manage, and engage employees. Our managed, owned, leased and joint venture hotels are staffed by approximately 151,000 team members around the world. If we are unable to attract, retain, train, manage, and engage skilled employees, our ability to manage and staff the managed, owned, leased and joint venture hotels could be impaired, which could reduce customer satisfaction. In addition, the inability of our franchisees to attract, retain, train, manage, and engage skilled employees for the franchised hotels could adversely affect the reputation of our brands. Staffing shortages in various parts of the world also could hinder our ability to grow and expand our businesses. Because payroll costs are a major component of the operating expenses at our hotels and our franchised hotels, a shortage of skilled labor could also require higher wages that would increase labor costs, which could adversely affect our results of operations.
Any failure to protect our trademarks and other intellectual property could reduce the value of the Hilton brands and harm our business.
The recognition and reputation of our brands are important to our success. We have over 4,000 trademark registrations in jurisdictions around the world for use in connection with our services. At any given time, we also have a number of pending applications to register trademarks and other intellectual property in the U.S. and other jurisdictions. However, we cannot assure you that those trademark or other intellectual property registrations will be granted or that the steps we take to use, control or protect our trademarks or other intellectual property in the U.S. and other jurisdictions will always be adequate to prevent third parties from copying or using the trademarks or other intellectual property without authorization. We may also fail to obtain and maintain trademark protection for all of our brands in all jurisdictions. For example, in certain jurisdictions, third parties have registered or otherwise have the right to use certain trademarks that are the same as or similar to our trademarks, which could prevent us from registering trademarks and opening hotels in that jurisdiction. Third parties may also challenge our rights to certain trademarks or oppose our trademark applications. Defending against any such proceedings may be costly, and if unsuccessful, could result in the loss of important intellectual property rights. Obtaining and maintaining trademark protection for multiple brands in multiple jurisdictions is also expensive, and we may therefore elect not to apply for or to maintain certain trademarks.
Our intellectual property is also vulnerable to unauthorized copying or use in some jurisdictions outside the U.S., where local law, or lax enforcement of law, may not provide adequate protection. If our trademarks or other intellectual property are improperly used, the value and reputation of the Hilton brands could be harmed. There are times where we may need to resort to litigation to enforce our intellectual property rights. Litigation of this type could be costly, force us to divert our resources, lead to counterclaims or other claims against us or otherwise harm our business or reputation. In addition, we license certain of our trademarks to third parties. For example, we grant our franchisees a right to use certain of our trademarks in connection with their operation of the applicable property. If a franchisee or other licensee fails to maintain the quality of the goods and services used in connection with the licensed trademarks, our rights to, and the value of, our trademarks could potentially be harmed. Failure to maintain, control and protect our trademarks and other intellectual property could likely adversely affect our ability to attract guests or third-party owners, and could adversely impact our results.
In addition, we license the right to use certain intellectual property from unaffiliated third parties. Such rights include the right to grant sublicenses to franchisees. If we are unable to use such intellectual property, our ability to generate revenue from such properties may be diminished.
Third-party claims that we infringe intellectual property rights of others could subject us to damages and other costs and expenses.
Third parties may make claims against us for infringing their patent, trademark, copyright or other intellectual property rights or for misappropriating their trade secrets. We have been and are currently party to a
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number of such claims and may receive additional claims in the future. Any such claims, even those without merit, could:
| be expensive and time consuming to defend, and result in significant damages; |
| force us to stop using the intellectual property that is being challenged or to stop providing products or services that use the challenged intellectual property; |
| force us to redesign or rebrand our products or services; |
| require us to enter into royalty, licensing, co-existence or other agreements to obtain the right to use a third partys intellectual property; |
| divert managements attention and resources; and |
| limit the use or the scope of our intellectual property or other rights. |
In addition, we may be required to indemnify third-party owners of the hotels that we manage for any losses they incur as a result of any infringement claims against them. All necessary royalty, licensing or other agreements may not be available to us on acceptable terms. Any adverse results associated with third-party intellectual property claims could negatively impact our business.
Exchange rate fluctuations and foreign exchange hedging arrangements could result in significant foreign currency gains and losses and impact our business results.
Conducting business in currencies other than the U.S. dollar subjects us to fluctuations in currency exchange rates that could have a negative impact on financial results. We earn revenues and incur expenses in foreign currencies as part of our operations outside of the U.S. As a result, fluctuations in currency exchange rates may significantly increase the amount of U.S. dollars required for foreign currency expenses or significantly decrease the U.S. dollars received from foreign currency revenues. We also have exposure to currency translation risk because, generally, the results of our business outside of the U.S. are reported in local currency and then translated to U.S. dollars for inclusion in our consolidated financial statements. As a result, changes between the foreign exchange rates and the U.S. dollar will affect the recorded amounts of our foreign assets, liabilities, revenues and expenses and could have a negative impact on financial results. Our exposure to foreign currency exchange rate fluctuations will grow if the relative contribution of our operations outside the U.S. increases.
To attempt to mitigate foreign currency exposure, we may enter into foreign exchange hedging agreements with financial institutions to reduce certain of our exposures to fluctuations in currency exchange rates. However, these hedging agreements may not eliminate foreign currency risk entirely and involve costs and risks of their own in the form of transaction costs, credit requirements and counterparty risk.
If the insurance that we or our owners carry does not sufficiently cover damage or other potential losses or liabilities to third parties involving properties that we manage, franchise or own, our profits could be reduced.
We operate in certain areas where the risk of natural disaster or other catastrophic losses vary, and the occasional incidence of such an event could cause substantial damage to us, our owners or the surrounding area. We carry, and we require our owners to carry, insurance from solvent insurance carriers that we believe is adequate for foreseeable first- and third-party losses and with terms and conditions that are reasonable and customary. Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we and our owners can obtain or which may otherwise restrict our or our owners ability to buy insurance coverage at reasonable rates. In the event of a substantial loss, the insurance coverage that we and/or our owners carry may not be sufficient to pay the full value of our financial obligations, our liabilities or the replacement cost of any lost investment or property. Because certain types of losses are uncertain, they can be uninsurable or prohibitively expensive. In addition, there are other risks that may fall outside the general coverage terms and limits of our policies.
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In some cases, these factors could result in certain losses being completely uninsured. As a result, we could lose some or all of the capital we have invested in a property, as well as the anticipated future revenues, profits, management fees or franchise fees from the property.
Terrorism insurance may not be available at all or at commercially reasonable rates.
Following the September 11, 2001 terrorist attacks in New York City and the Washington, D.C. area, Congress passed the Terrorism Risk Insurance Act of 2002, which established the Terrorism Insurance Program to provide insurance capacity for terrorist acts. On December 26, 2007, the Terrorism Insurance Program was extended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 through December 31, 2014, or TRIPRA. We carry, and we require our owners and our franchisees to carry, insurance from solvent insurance carriers to respond to both first-party and third-party liability losses related to terrorism. We purchase our first-party property damage and business interruption insurance from a stand-alone market in place of and to supplement insurance from government run pools. If TRIPRA is not extended or renewed upon its expiration in 2014, premiums for terrorism insurance coverage will likely increase and/or the terms of such insurance may be materially amended to increase stated exclusions or to otherwise effectively decrease the scope of coverage available, perhaps to the point where it is effectively unavailable.
Terrorist attacks and military conflicts may adversely affect the hospitality industry.
The terrorist attacks on the World Trade Center and the Pentagon on September 11, 2001 underscore the possibility that large public facilities or economically important assets could become the target of terrorist attacks in the future. In particular, properties that are well-known or are located in concentrated business sectors in major cities may be subject to the risk of terrorist attacks.
The occurrence or the possibility of terrorist attacks or military conflicts could:
| cause damage to one or more of our properties that may not be fully covered by insurance to the value of the damages; |
| cause all or portions of affected properties to be shut down for prolonged periods, resulting in a loss of income; |
| generally reduce travel to affected areas for tourism and business or adversely affect the willingness of customers to stay in or avail themselves of the services of the affected properties; |
| expose us to a risk of monetary claims arising out of death, injury or damage to property caused by any such attacks; and |
| result in higher costs for security and insurance premiums or diminish the availability of insurance coverage for losses related to terrorist attacks, particularly for properties in target areas, all of which could adversely affect our results. |
Certain of our buildings are also highly profitable properties to our business. In addition to the impacts noted above, the occurrence of a terrorist attack with respect to one of these properties could directly and materially adversely affect our results of operations. Furthermore, the loss of any of our well-known buildings could indirectly impact the value of our brands, which would in turn adversely impact our business prospects.
Changes in U.S. federal, state and local or foreign tax law, interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition or results of operations.
We are subject to taxation at the federal, state or provincial and local levels in the U.S. and various other countries and jurisdictions. Our future effective tax rate could be affected by changes in the composition of
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earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, or changes in determinations regarding the jurisdictions in which we are subject to tax. From time to time, the U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations.
We record tax expense based in part on our estimates of expected future tax rates, reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets, including net operating loss carryforwards.
We are subject to ongoing and periodic tax audits and disputes in various state, local and foreign jurisdictions. In particular, our consolidated U.S. federal income tax returns for the fiscal years ended December 31, 2006 and October 24, 2007 are under audit by the Internal Revenue Service, or IRS, and the IRS has proposed adjustments to increase our taxable income based on several assertions involving intercompany loans, our Hilton HHonors guest loyalty and reward program and our foreign-currency denominated loans issued by one of our subsidiaries. In total, the proposed adjustments sought by the IRS would result in U.S. federal tax owed of approximately $695 million, excluding interest and penalties and potential state income taxes. We disagree with the IRSs position on each of the assertions and intend to vigorously contest them. See Note 18: Income Taxes in our audited consolidated financial statements included elsewhere in this prospectus for additional information. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition or results of operations.
Changes to accounting rules or regulations may adversely affect our financial condition and results of operations.
New accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. A change in accounting rules or regulations may even affect our reporting of transactions completed before the change is effective, and future changes to accounting rules or regulations or the questioning of current accounting practices may adversely affect our financial condition and results of operations. For example, in 2013, the Financial Accounting Standards Board, or FASB, issued a revised exposure draft outlining proposed changes to current lease accounting in FASB Accounting Standards Codification Topic 840, Leases . The proposed accounting standards update, if ultimately adopted in its current form, could result in significant changes to current accounting, including the capitalization of leases on the balance sheet that currently are recorded off balance sheet as operating leases. While this change would not impact the cash flow related to our leased hotels and other leased assets, it could adversely impact our balance sheet and could therefore impact our ability to raise financing from banks or other sources.
Changes to estimates or projections used to assess the fair value of our assets, or operating results that are lower than our current estimates at certain locations, may cause us to incur impairment charges that could adversely affect our results of operations.
Our total assets include goodwill, intangible assets with an indefinite life, other intangible assets with finite useful lives, and substantial amounts of long-lived assets, principally property and equipment, including hotel properties. We evaluate our goodwill and trademarks for impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value is below the carrying value. We evaluate intangible assets with finite useful lives and long-lived assets for impairment when circumstances indicate that the carrying amount may not be recoverable. Our evaluation of impairment requires us to make certain estimates and assumptions including projections of future results. After performing our evaluation for impairment, including an analysis to determine the recoverability of long-lived assets, we will record an impairment loss when the carrying value of the underlying asset, asset group or reporting unit exceeds its fair value. If the estimates or assumptions used in our evaluation of impairment change, we may be required to
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record additional impairment losses on certain of these assets. If these impairment losses are significant, our results of operations would be adversely affected.
Governmental regulation may adversely affect the operation of our properties.
In many jurisdictions, the hotel industry is subject to extensive foreign or U.S. federal, state and local governmental regulations, including those relating to the service of alcoholic beverages, the preparation and sale of food and those relating to building and zoning requirements. We are also subject to licensing and regulation by foreign or U.S. state and local departments relating to health, sanitation, fire and safety standards, and to laws governing their relationships with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements. We or our third-party owners may be required to expend funds to meet foreign or U.S. federal, state and local regulations in connection with the continued operation or remodeling of certain of our properties. The failure to meet the requirements of applicable regulations and licensing requirements, or publicity resulting from actual or alleged failures, could have an adverse effect on our results of operations.
Foreign or U.S. environmental laws and regulations may cause us to incur substantial costs or subject us to potential liabilities.
We are subject to certain compliance costs and potential liabilities under various foreign and U.S. federal, state and local environmental, health and safety laws and regulations. These laws and regulations govern actions including air emissions, the use, storage and disposal of hazardous and toxic substances, and wastewater disposal. Our failure to comply with such laws, including any required permits or licenses, could result in substantial fines or possible revocation of our authority to conduct some of our operations. We could also be liable under such laws for the costs of investigation, removal or remediation of hazardous or toxic substances at our currently or formerly owned, leased or operated real property (including managed and franchised properties) or at third-party locations in connection with our waste disposal operations, regardless of whether or not we knew of, or caused, the presence or release of such substances. From time to time, we may be required to remediate such substances or remove, abate or manage asbestos, mold, radon gas, lead or other hazardous conditions at our properties. The presence or release of such toxic or hazardous substances could result in third-party claims for personal injury, property or natural resource damages, business interruption or other losses. Such claims and the need to investigate, remediate, or otherwise address hazardous, toxic or unsafe conditions could adversely affect our operations, the value of any affected real property, or our ability to sell, lease or assign our rights in any such property, or could otherwise harm our business or reputation. Environmental, health and safety requirements have also become increasingly stringent, and our costs may increase as a result. For example, Congress, the U.S. Environmental Protection Agency, or EPA, and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our properties or result in significant additional expense and operating restrictions on us. The potential for changes in the frequency, duration and severity of extreme weather events that may be a result of climate change could lead to significant property damage at our hotels and other assets, impact our ability to obtain insurance coverage in areas that are most vulnerable to such events, such as the coastal resort areas where we operate, and have a negative effect on revenues.
The cost of compliance with the Americans with Disabilities Act and similar legislation outside of the U.S. may be substantial.
We are subject to the Americans with Disabilities Act, or ADA, and similar legislation in certain jurisdictions outside of the U.S. Under the ADA all public accommodations are required to meet certain federal requirements related to access and use by disabled persons. These regulations apply to accommodations first occupied after January 26, 1993, and older structures that undergo material renovations. The regulations also mandate certain operational requirements that hotel operators must observe. The failure of a property to comply
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with the ADA could result in injunctive relief, fines, an award of damages to private litigants or mandated capital expenditures to remedy such noncompliance. Any imposition of injunctive relief, fines, damage awards or capital expenditures could adversely affect the ability of an owner or franchisee to make payments under the applicable management or franchise agreement or negatively impact the reputation of our brands. In November 2010, we entered into a settlement with the U.S. Department of Justice related to compliance with the ADA. Under the terms of the settlement, we must: ensure compliance with ADA regulations at our owned and joint venture properties built after January 26, 1993; require managed or franchised hotels that enter into a new management or franchise agreement, experience a change in ownership, or renew or extend a franchise agreement, to conduct a survey of its facilities and to certify that the hotel complies with the ADA; ensure that new hotels constructed in our system are compliant with ADA regulations; provide ADA training to our team members; improve the accessibility of our websites and reservations system for individuals with disabilities; appoint a national ADA compliance officer; and appoint an ADA contact on-site at each hotel. If we fail to comply with the requirements of the ADA and our related consent decree, we could be subject to fines, penalties, injunctive action, reputational harm, and other business impacts which could materially and negatively affect our performance and results of operations.
Casinos featured on certain of our properties are subject to gaming laws and noncompliance could result in the revocation of the gaming licenses.
Several of our properties feature casinos, most of which are operated by third-parties. Factors affecting the economic performance of a casino property include:
| location, including proximity to or easy access from major population centers; |
| appearance; |
| local, regional or national economic conditions, which may limit the amount of disposable income that potential patrons may have for gambling; |
| the existence or construction of competing casinos; |
| dependence on tourism; and |
| governmental regulation. |
Jurisdictions in which our properties containing casinos are located, including Nevada, New Jersey, Puerto Rico and Egypt have laws and regulations governing the conduct of casino gaming. These jurisdictions generally require that the operator of a casino must be found suitable and be registered. Once issued, a registration remains in force until revoked. The law defines the grounds for registration, as well as revocation or suspension of such registration. The loss of a gaming license for any reason would have a material adverse effect on the value of a casino property and could reduce fee income associated with such operations and consequently negatively impact our business results.
We are subject to risks from litigation filed by or against us.
Legal or governmental proceedings brought by or on behalf of franchisees, third-party owners of managed properties, employees or customers may adversely affect our financial results. In recent years, a number of hospitality companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal laws and regulations regarding workplace and employment matters, consumer protection claims and other commercial matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits have been and may be instituted against us from time to time, and we may incur substantial damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business. At any given time, we may be engaged in lawsuits involving third-party owners of our hotels. Similarly, we may from time to time institute legal proceedings on behalf of ourselves or others, the ultimate outcome of which could cause us to incur substantial damages and expenses, which could have a material adverse effect on our business.
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Risks Relating to Our Indebtedness
Our substantial indebtedness and other contractual obligations could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and pay our debts and could divert our cash flow from operations for debt payments.
We have a significant amount of indebtedness. As of September 30, 2013, after giving effect to the transactions described in Unaudited Pro Forma Condensed Consolidated Financial Information, our total indebtedness would have been approximately $ billion, including $ million of non-recourse debt, and our contractual debt maturities of our long-term debt and non-recourse debt for the three months ending December 31, 2013 and the years ending December 31, 2014, 2015 and 2016, respectively, would be $ million, $ million, $ million and $ million. Our substantial debt and other contractual obligations could have important consequences, including:
| requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and pursue future business opportunities; |
| increasing our vulnerability to adverse economic, industry or competitive developments; |
| exposing us to increased interest expense, as our degree of leverage may cause the interest rates of any future indebtedness (whether fixed or floating rate interest) to be higher than they would be otherwise; |
| exposing us to the risk of increased interest rates because certain of our indebtedness is at variable rates of interest; |
| making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants, could result in an event of default that accelerates our obligation to repay indebtedness; |
| restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; |
| limiting our ability to obtain additional financing for working capital, capital expenditures, product development, satisfaction of debt service requirements, acquisitions and general corporate or other purposes; and |
| limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who may be better positioned to take advantage of opportunities that our leverage prevents us from exploiting. |
We are a holding company and substantially all of our consolidated assets are owned by, and most of our business is conducted through, our subsidiaries. Revenues from these subsidiaries are our primary source of funds for debt payments and operating expenses. If our subsidiaries are restricted from making distributions to us, that may impair our ability to meet our debt service obligations or otherwise fund our operations. Moreover, there may be restrictions on payments by subsidiaries to their parent companies under applicable laws, including laws that require companies to maintain minimum amounts of capital and to make payments to stockholders only from profits. As a result, although a subsidiary of ours may have cash, we may not be able to obtain that cash to satisfy our obligation to service our outstanding debt or fund our operations.
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Certain of our debt agreements impose significant operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities.
The indenture that governs our senior notes, the credit agreement that will govern our new senior secured credit facilities and the agreements that will govern our new commercial mortgage-backed securities loan and the mortgage loan secured by our Waldorf Astoria New York property, will impose significant operating and financial restrictions on us. These restrictions will limit our ability and/or the ability of our subsidiaries to, among other things:
| incur or guarantee additional debt or issue disqualified stock or preferred stock; |
| pay dividends (including to us) and make other distributions on, or redeem or repurchase, capital stock; |
| make certain investments; |
| incur certain liens; |
| enter into transactions with affiliates; |
| merge or consolidate; |
| enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to the issuers; |
| designate restricted subsidiaries as unrestricted subsidiaries; and |
| transfer or sell assets. |
In addition, if, on the last day of any period of four consecutive quarters on or after the date to be specified in the new credit agreement, the aggregate principal amount of revolving credit loans, swing line loans and/or letters of credit (excluding up to $50 million of letters of credit and certain other letters of credit that have been cash collateralized or back-stopped) that are issued and/or outstanding is greater than 25% of the revolving credit facility, the new credit agreement will require us to maintain a consolidated first lien net leverage ratio not to exceed 7.9 to 1.0. Our subsidiaries mortgage-backed loans will also require them to maintain certain debt service coverage ratios and minimum net worth requirements.
As a result of these restrictions, we will be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
Our failure to comply with the restrictive covenants described above as well as other terms of our other indebtedness and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or are unable to refinance these borrowings, our results of operations and financial condition could be adversely affected.
Servicing our indebtedness will require a significant amount of cash. Our ability to generate sufficient cash depends on many factors, some of which are not within our control.
Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. To a certain extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations or raise additional debt or equity capital. We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt arrangements may restrict us from effecting any of these alternatives.
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Despite our current level of indebtedness, we may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to our financial condition described above.
We may be able to incur significant additional indebtedness in the future. Although the credit agreements and indentures that govern substantially all of our indebtedness contain restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent us from incurring obligations, such as trade payables, that do not constitute indebtedness as defined under our debt instruments. To the extent new debt is added to our current debt levels, the substantial leverage risks described in the preceding two risk factors would increase.
Risks Related to this Offering and Ownership of Our Common Stock
Affiliates of our Sponsor control us and their interests may conflict with ours or yours in the future.
Immediately following this offering, affiliates of our Sponsor will beneficially own approximately % of our common stock. Moreover, under our bylaws and the stockholders agreement with our Sponsor and its affiliates that will be in effect by the completion of this offering, for so long as our existing owners and their affiliates retain significant ownership of us, we will agree to nominate to our board individuals designated by our Sponsor, whom we refer to as the Sponsor Directors. Even when our Sponsor and its affiliates cease to own shares of our stock representing a majority of the total voting power, for so long as our Sponsor continues to own a significant percentage of our stock our Sponsor will still be able to significantly influence the composition of our board of directors and the approval of actions requiring stockholder approval. Accordingly, for such period of time, our Sponsor will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers. In particular, for so long as our Sponsor continues to own a significant percentage of our stock, our Sponsor will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of our company and ultimately might affect the market price of our common stock.
Our Sponsor and its affiliates engage in a broad spectrum of activities, including investments in real estate generally and in the hospitality industry in particular. In the ordinary course of their business activities, our Sponsor and its affiliates may engage in activities where their interests conflict with our interests or those of our stockholders. For example, our Sponsor owns interests in Extended Stay America, Inc. and La Quinta Hotels, and certain other investments in the hotel industry that compete directly or indirectly with us. In addition, affiliates of our Sponsor directly and indirectly own hotels that we manage or franchise, and they may in the future enter into other transactions with us, including hotel or timeshare development projects, that could result in their having interests that could conflict with ours. Our amended and restated certificate of incorporation will provide that none of our Sponsor, any of its affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Our Sponsor also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, Blackstone may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.
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Upon the listing of our shares on , we will be a controlled company within the meaning of rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
After completion of this offering, affiliates of our Sponsor will continue to control a majority of the combined voting power of all classes of our stock entitled to vote generally in the election of directors. As a result, we will be a controlled company within the meaning of the corporate governance standards of . Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements. For example, controlled companies, within one year of the date of the listing of their common stock:
| are not required to have a board that is composed of a majority of independent directors, as defined under the rules of such exchange; |
| are not required to have a compensation committee that is composed entirely of independent directors; and |
| are not required to have a nominating and corporate governance committee that is composed entirely of independent directors. |
Following this offering, we intend to utilize these exemptions. As a result, we do not expect a majority of the directors on our board will be independent upon closing this offering. In addition, although we will have a fully independent audit committee and have independent director representation on our compensation and nominating and corporate governance committees upon closing this offering, we do not expect that our compensation and nominating and corporate governance committees will consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of .
We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a public company, which could lower our profits or make it more difficult to run our business.
As a public company, we will incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, and related rules implemented by the SEC and . The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. In addition, beginning with our second annual report on
38
Form 10-K, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act. Our independent registered public accounting firm is required to express an opinion as to the effectiveness of our internal control over financial reporting beginning with our second annual report on Form 10-K. The process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation is time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
There may not be an active trading market for shares of our common stock, which may cause shares of our common stock to trade at a discount from the initial offering price and make it difficult to sell the shares of common stock you purchase.
Prior to this offering, there has not been a public trading market for shares of our common stock. It is possible that after this offering an active trading market will not develop or continue or, if developed, that any market will be sustained which would make it difficult for you to sell your shares of common stock at an attractive price or at all. The initial public offering price per share of common stock will be determined by agreement among us, the selling stockholder and the representatives of the underwriters, and may not be indicative of the price at which shares of our common stock will trade in the public market after this offering.
The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.
Even if a trading market develops, the market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results, additions or departures of key management personnel, failure to meet analysts earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industries we participate in or individual scandals, and in response the market price of shares of our common stock could decrease significantly. You may be unable to resell your shares of common stock at or above the initial public offering price.
In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a companys securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our managements attention and resources.
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Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
We have no current plans to pay any cash dividends. The declaration, amount and payment of any future dividends on shares of common stock will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends will be limited by our new senior secured credit facility and our new senior notes and first priority senior secured notes and may be limited by covenants of other indebtedness we or our subsidiaries incur in the future. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.
Investors in this offering will suffer immediate and substantial dilution.
The initial public offering price per share of common stock will be substantially higher than our pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per share of common stock that substantially exceeds the per share book value of our tangible assets after subtracting our liabilities. In addition, you will pay more for your shares of common stock than the amounts paid by our existing owners. Assuming an offering price of $ per share of common stock, which is the midpoint of the range on the front cover of this prospectus, you will incur immediate and substantial dilution in an amount of $ per share of common stock. See Dilution.
You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise.
After this offering we will have approximately million shares of common stock authorized but unissued. Our amended and restated certificate of incorporation to become effective immediately prior to the consummation of this offering authorizes us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. We have reserved shares for issuance under our Omnibus Incentive Plan, including . See ManagementOmnibus Incentive Plan. Any common stock that we issue, including under our Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase common stock in this offering.
If we or our existing investors sell additional shares of our common stock after this offering, the market price of our common stock could decline.
The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Upon completion of this offering we will have a total of shares of our common stock outstanding. Of the outstanding shares, the shares sold in this offering (or shares if the underwriters exercise their option to purchase additional shares) will be freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described in Shares Eligible for Future Sale.
The remaining outstanding shares of common stock held by our existing owners after this offering will be subject to certain restrictions on resale. We, our officers, directors and holders of certain of our
40
outstanding shares of common stock immediately prior to this offering, including our Sponsor, will sign lock-up agreements with the underwriters that will, subject to certain customary exceptions, restrict the sale of the shares of our common stock held by them for 180 days following the date of this prospectus, subject to extension in the case of an earnings release or material news or a material event relating to us. The representatives of the underwriters may, in their sole discretion and without notice, release all or any portion of the shares of common stock subject to lock-up agreements. See Underwriting for a description of these lock-up agreements.
Upon the expiration of the lock-up agreements described above, all of such shares, or shares if the underwriters exercise their over-allotment option in full, will be eligible for resale in a public market, subject, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144. We expect that our Sponsor will be considered an affiliate 180 days after this offering based on their expected share ownership (consisting of shares), as well as their board nomination rights. Certain other of our stockholders may also be considered affiliates at that time. However, commencing 180 days following this offering, the holders of these shares of common stock will have the right, subject to certain exceptions and conditions, to require us to register their shares of common stock under the Securities Act, and they will have the right to participate in future registrations of securities by us. Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See Shares Eligible for Future Sale.
Members of Hilton Global Holdings LLC who receive shares of our common stock from Hilton Global Holdings LLC, including Blackstone, will be prohibited from transferring such shares for six months beginning on the date of receipt of such shares. One third of the shares they receive (approximately shares) may be transferred between 6 and 12 months following the date of receipt and one third of the shares they may receive (approximately shares) may be transferred between 13 and 18 months after the date of receipt. The transfer restrictions applicable to such holders will lapse after 18 months after the date of receipt. See Principal and Selling Stockholders and Shares Eligible for Future SaleLock-up Arrangements.
We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our Omnibus Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover shares of our common stock.
As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.
Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
Our amended and restated certificate of incorporation and amended and restated bylaws to become effective immediately prior to the consummation of this offering will contain provisions that may make the merger or acquisition of our company more difficult without the approval of our board of directors. Among other things:
| although we do not have a stockholder rights plan, and would either submit any such plan to stockholders for ratification or cause such plan to expire within a year, these provisions would allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; |
41
| these provisions prohibit stockholder action by written consent from and after the date on which the parties to our stockholders agreement cease to beneficially own at least 40% of the total voting power of all then outstanding shares of our capital stock unless such action is recommended by all directors then in office; |
| these provisions provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 80% or more of all the outstanding shares of our capital stock entitled to vote; and |
| these provisions establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings. |
Further, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.
42
This prospectus contains forward-looking statements that reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as outlook, believes, expects, potential, continues, may, will, should, could, seeks, approximately, predicts, intends, plans, estimates, anticipates or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under Risk Factors. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts ® , DoubleTree by Hilton ® , Embassy Suites Hotels ® , Hilton Garden Inn ® , Hampton Inn ® , Homewood Suites by Hilton ® , Home2 Suites by Hilton ® , Hilton Grand Vacations ® , Hilton Grand Vacations Club ® , The Hilton Club ® , Hilton HHonors, eforea ® , OnQ ® , LightStay ® , the Hilton Hawaiian Village ® , Requests Upon Arrival and other trademarks, trade names, and service marks of Hilton and our brands appearing in this prospectus are the property of Hilton and our affiliates.
Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are without the ® and symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names. All trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.
Within this prospectus, we reference information and statistics regarding various industries and sectors. We have obtained this information and statistics from various independent third-party sources, including independent industry publications, reports by market research firms and other independent sources. STR and PKF-HR are the primary sources for third-party market data and industry statistics and forecasts, respectively, included in this prospectus. STR does not guarantee the performance of any company about which it collects and provides data. Nothing in the STR or PKF-HR data should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review of internal surveys and independent sources. We believe that these external sources and estimates are reliable, but have not independently verified them.
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We estimate that the net proceeds from our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $ million. A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds received by us from this offering to repay approximately $ million of term loan borrowings outstanding under our new senior secured credit facilities. As of November 8, 2013, we had $7.5 billion of term loan borrowings outstanding under our senior secured credit facilities which will mature on October 25, 2020. The currently outstanding term loan borrowings were used, together with other borrowings and cash on hand, to repay in full all $13.4 billion of our legacy senior mortgage loans and secured mezzanine loans. See SummaryRefinancing Transactions. The term loan borrowings bear interest, at our option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agents prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the term loans is 2.00%, in the case of base rate loans, and 3.00%, in the case of LIBOR rate loans, subject to one step-down of 0.25% upon the achievement of a first lien net leverage ratio of less than or equal to 3.85 to 1.00 and subject to an additional step-down of 0.25% following a qualifying initial public offering, subject to a base rate floor of 2.00%, and a LIBOR floor of 1.00%. See Description of Certain Indebtedness. To the extent we raise more proceeds in this offering than currently estimated, we will repay additional term loans borrowings or use such proceeds for other general corporate purposes. To the extent we raise less proceeds in this offering than currently estimated, we will reduce the amount of term loans borrowings that will be repaid. Affiliates of certain of the underwriters currently serve as lenders and/or agents under our term loan borrowings and would be entitled to receive their pro rata portion of the proceeds of this offering that are used to repay such term loan borrowings. See UnderwritingRelationships.
Except in relation to the payment to be made to us by the selling stockholder that is described in Principal and Selling Stockholders, we will not receive any proceeds from the sale of shares of our common stock by the selling stockholder, including from any exercise by the underwriters of their option to purchase additional shares.
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We have no current plans to pay dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. Because we are a holding company and have no direct operations, we will only be able to pay dividends from funds we receive from our subsidiaries.
We did not declare or pay any dividends on our common stock in 2012, 2011 or in the first nine months of 2013.
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The following table sets forth our consolidated cash and cash equivalents, restricted cash and cash equivalents and capitalization as of September 30, 2013 on:
| an actual basis; and |
| an as adjusted basis to reflect: |
| the sale by us of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and |
| the application of net proceeds from this offering as described under Use of Proceeds, as if this offering and the application of the net proceeds of this offering had occurred on September 30, 2013. |
The information below is illustrative only and our capitalization following this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. Cash and cash equivalents and restricted cash and cash equivalents are not components of our total capitalization. You should read this table together with the information contained in this prospectus, including Use of Proceeds, Managements Discussion and Analysis of Financial Condition and Results of Operations, Description of Certain Indebtedness and our historical financial statements and related notes included elsewhere in this prospectus.
As of September 30, 2013 | ||||||||
Actual | As Adjusted (1) | |||||||
(in millions, except share and per share data) |
||||||||
Cash and cash equivalents |
$ | 724 | $ | |||||
Restricted cash and cash equivalents (2) |
502 | |||||||
|
|
|
|
|||||
Total |
$ | 1,226 | $ | |||||
|
|
|
|
|||||
Total long-term debt and non-recourse debt: |
||||||||
Long-term debt, including current maturities |
$ | 14,279 | $ | |||||
Non-recourse timeshare debt, including current maturities (3) |
388 | |||||||
Non-recourse debt and capital lease obligations of consolidated variable interest entities, including current maturities |
318 | |||||||
|
|
|
|
|||||
Total debt |
14,985 | |||||||
Equity: |
||||||||
Common stock, par value $0.01 per share, 1,000 shares authorized and 100 shares issued and outstanding, actual; and shares authorized and shares issued and outstanding, as adjusted |
1 | |||||||
Additional paid-in capital |
8,452 | |||||||
Accumulated deficit |
(5,357) | |||||||
Accumulated other comprehensive loss |
(417) | |||||||
|
|
|
|
|||||
Total stockholders equity |
2,679 | |||||||
Noncontrolling interests |
(126) | |||||||
|
|
|
|
|||||
Total equity |
2,553 | |||||||
|
|
|
|
|||||
Total capitalization |
$ | 17,538 | $ | |||||
|
|
|
|
(1) | Each $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, total debt, additional paid-in capital and total stockholders deficit by approximately $ million, assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses that we must pay. |
(2) | The majority of our restricted cash and cash equivalents balances relates to cash collateral on our self-insurance programs and escrowed cash from our timeshare operations. |
(3) | Includes Timeshare Facility and Securitized Timeshare Debt. |
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If you invest in shares of our common stock in this offering, your investment will be immediately diluted to the extent of the difference between the initial public offering price per share of common stock and the net tangible book value per share of common stock after this offering. Dilution results from the fact that the per share offering price of the shares of common stock is substantially in excess of the net tangible book value per share attributable to the shares of common stock held by existing owners.
Our net tangible book value as of September 30, 2013 was approximately $ , or $ per share of common stock. We calculate net tangible book value per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities, and then dividing that amount by the total number of shares of common stock outstanding.
After giving effect to our sale of the shares in this offering at an assumed initial public offering price of $ per share, the midpoint range described on the cover of this prospectus, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us, our net tangible book value as of September 30, 2013 would have been $ , or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share of common stock to our existing owners and an immediate and substantial dilution in net tangible book value of $ per share of common stock to investors in this offering at the assumed initial public offering price.
The following table illustrates this dilution on a per share of common stock basis:
Assumed initial public offering price per share of common stock |
$ | |||||||
Net tangible book value per share of common stock as of September 30, 2013 |
$ | |||||||
Increase in net tangible book value per share of common stock attributable to investors in this offering |
$ | |||||||
|
|
|||||||
Net tangible book value per share of common stock after giving effect to this offering |
$ | |||||||
|
|
|||||||
Dilution per share of common stock to investors in this offering |
$ | |||||||
|
|
A $1.00 increase in the assumed initial public offering price of $ per share of our common stock would increase our net tangible book value after giving effect to this offering by $ million, or by $ per share of our common stock, assuming the number of shares offered by us remains the same and after deducting the underwriting discount and the estimated offering expenses payable by us. A $1.00 decrease in the assumed initial public offering price per share would result in equal changes in the opposite direction.
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The following table summarizes, as of September 30, 2013, the total number of shares of common stock purchased from us, the total cash consideration paid to us, and the average price per share paid by existing owners and by new investors. As the table shows, new investors purchasing shares in this offering will pay an average price per share substantially higher than our existing owners paid. The table below assumes an initial public offering price of $ per share, the midpoint of the range set forth on the cover of this prospectus, for shares purchased in this offering and excludes underwriting discounts and commissions and estimated offering expenses payable by us:
Shares of Common
Stock Purchased |
Total
Consideration |
Average
Price Per Share of Common Stock |
||||||||||||||||
Number |
Percent | Amount | Percent | |||||||||||||||
(Dollar amounts in millions,
except per share amounts) |
||||||||||||||||||
Existing owners |
% | $ | % | $ | ||||||||||||||
Investors in this offering |
% | $ | % | $ | ||||||||||||||
|
|
|
|
|
|
|
||||||||||||
Total |
100.0 | % | $ | 100.0 | % | $ | ||||||||||||
|
|
|
|
|
|
|
Each $1.00 increase in the assumed offering price of $ per share would increase total consideration paid by investors in this offering and total consideration paid by all stockholders by $ million, assuming the number of shares offered by us remains the same and after deducting the underwriting discount and the estimated offering expenses payable by us. A $1.00 decrease in the assumed initial public offering price per share would result in equal changes in the opposite direction.
The dilution information above is for illustration purposes only. Our net tangible book value following the consummation of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial information has been prepared to reflect (1) the issuance of shares of our common stock in this offering at an assumed initial public offering price of $ , which is the midpoint of the range set forth on the cover of this prospectus and (2) the Refinancing Transactions, additional borrowings under the Timeshare Facility, the Hilton HHonors point sales and the use of proceeds from the foregoing (collectively, the Financing Transactions), in our historical consolidated financial statements.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2013 is presented on a pro forma adjusted basis to give effect to this offering and the Financing Transactions. The following unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and the nine months ended September 30, 2013 are presented on a pro forma adjusted basis to give effect to this offering and the Financing Transactions as if they had been completed on January 1, 2012.
The pro forma adjustments are based on preliminary estimates, accounting judgments and currently available information and assumptions that management believes are reasonable. The notes to the unaudited pro forma statements provide a detailed discussion of how such adjustments were derived and presented in the unaudited pro forma financial information. The unaudited pro forma financial information should be read in conjunction with SummaryRefinancing Transactions, Capitalization, Use of Proceeds, Selected Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations, and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.
The unaudited pro forma financial information has been prepared for illustrative purposes only and is not necessarily indicative of our financial position or results of operations had the transactions actually occurred on the dates indicated, nor is such unaudited pro forma financial information necessarily indicative of the results to be expected for any future period. A number of factors may affect our results. See Risk Factors and Forward-Looking Statements.
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Hilton Worldwide Holdings Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2013
(in millions)
(1) | For details of the adjustments referenced, see Note 4: Pro Forma Adjustments. |
(2) | Pro forma adjustments to other liabilities include deferred revenue of $650 million related to our Hilton HHonors point sales. See Note 4: Pro Forma Adjustments adjustment (e) and Managements Discussion and Analysis of Financial Condition and Results of OperationsOverviewRecent Events for further discussion of this transaction. |
See notes to unaudited pro forma condensed consolidated financial statements.
50
Hilton Worldwide Holdings Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 2013
(in millions, except per share data)
Pro Forma Adjustments (1) | ||||||||||||||||
Historical |
Financing
Transactions |
Common
Stock Offering |
Pro Forma | |||||||||||||
Revenues |
||||||||||||||||
Owned and leased hotels |
$ | 2,982 | $ | $ | $ | |||||||||||
Management and franchise fees and other |
868 | |||||||||||||||
Timeshare |
809 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
4,659 | | | ||||||||||||||
Other revenues from managed and franchised properties |
2,433 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
7,092 | | | |||||||||||||
Expenses |
||||||||||||||||
Owned and leased hotels |
2,327 | |||||||||||||||
Timeshare |
545 | |||||||||||||||
Depreciation and amortization |
455 | |||||||||||||||
General, administrative, and other |
319 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
3,646 | | | ||||||||||||||
Other expenses from managed and franchised properties |
2,433 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses |
6,079 | | | |||||||||||||
Operating income |
1,013 | | | |||||||||||||
Interest income |
5 | |||||||||||||||
Interest expense |
(401) | (124) | (g) | (j) | ||||||||||||
Equity in earnings from unconsolidated affiliates |
11 | |||||||||||||||
Loss on foreign currency transactions |
(43) | |||||||||||||||
Other gain, net |
5 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
590 | (124) | | |||||||||||||
Income tax expense |
(192) | 48 | (h) | (j) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
398 | (76) | | |||||||||||||
Net income attributable to noncontrolling interests |
(9) | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Hilton stockholder |
$ | 389 | $ | (76) | $ | | $ | |||||||||
|
|
|
|
|
|
|
|
(1) | For details of the adjustments referenced, see Note 4: Pro Forma Adjustments. |
See notes to unaudited pro forma condensed consolidated financial statements.
51
Hilton Worldwide Holdings Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2012
(in millions)
Pro Forma
Adjustments (1) |
||||||||||||||||
Historical |
Financing
Transactions |
Common
Stock Offering |
Pro Forma | |||||||||||||
Revenues |
||||||||||||||||
Owned and leased hotels |
$ | 3,979 | $ | $ | $ | |||||||||||
Management and franchise fees and other |
1,088 | |||||||||||||||
Timeshare |
1,085 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
6,152 | | | ||||||||||||||
Other revenues from managed and franchised properties |
3,124 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
9,276 | | | |||||||||||||
Expenses |
||||||||||||||||
Owned and leased hotels |
3,230 | |||||||||||||||
Timeshare |
758 | |||||||||||||||
Depreciation and amortization |
550 | |||||||||||||||
Impairment losses |
54 | |||||||||||||||
General, administrative, and other |
460 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
5,052 | | | ||||||||||||||
Other expenses from managed and franchised properties |
3,124 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses |
8,176 | | | |||||||||||||
Operating income |
1,100 | | | |||||||||||||
Interest income |
15 | |||||||||||||||
Interest expense |
(569) | (158) | (g) | (j) | ||||||||||||
Equity in losses from unconsolidated affiliates |
(11) | |||||||||||||||
Gain on foreign currency transactions |
23 | |||||||||||||||
Other gain, net |
15 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
573 | (158) | | |||||||||||||
Income tax expense |
(214) | 61 | (h) | (j) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
359 | (97) | | |||||||||||||
Net income attributable to noncontrolling interests |
(7) | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Hilton stockholder |
$ | 352 | $ | (97) | $ | | $ | |||||||||
|
|
|
|
|
|
|
|
(1) | For details of the adjustments referenced, see Note 4: Pro Forma Adjustments. |
See notes to unaudited pro forma condensed consolidated financial statements.
52
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Note 1: Basis of Presentation
The unaudited pro forma financial information is based on our historical financial statements, which are included elsewhere in this prospectus, and has been prepared to reflect this offering and the Financing Transactions.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2013 is presented on a pro forma adjusted basis to give effect to this offering and the Financing Transactions. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and the nine months ended September 30, 2013 are presented on a pro forma adjusted basis to give effect to this offering and the Financing Transactions as if they had been completed on January 1, 2012.
The unaudited pro forma adjustments are based on preliminary estimates, accounting judgments and currently available information and assumptions that management believes are reasonable. These adjustments are included only to the extent they are directly attributable to this offering and the Financing Transactions and the appropriate information is known and factually supportable. We continue to evaluate the accounting impact of the Financing Transactions and believe that substantially all of the existing long-term debt (and related current maturities) to be repaid as a part of the Financing Transactions will be considered extinguished. Accordingly, the pro forma financial information reflects all of the repaid debt being accounted for as an extinguishment of debt. We believe that any portion of the repaid debt that may be required to be subject to modification of debt accounting guidance will not have a material effect on the pro forma financial information. Pro forma adjustments reflected in the unaudited pro forma condensed consolidated statements of operations are expected to have a continuing effect on us. As a result, the unaudited pro forma condensed consolidated statements of operations exclude gains and losses related to the Financing Transactions that will not have a continuing effect on us, although these items are reflected in the unaudited pro forma condensed consolidated balance sheet.
Note 2: Financing Transactions
Prior to consummating this offering, we closed or expect to close various debt refinancing and related transactions. These Financing Transactions, which are discussed in greater detail elsewhere in this prospectus, include the following:
| entry into a new $1 billion senior secured revolving credit facility (the Revolving Credit Facility), with no expected borrowings upon the completion of the Financing Transactions; |
| entry into a new $7.6 billion senior secured term loan facility (the Term Loan), of which $100 million was voluntarily prepaid in November 2013; |
| the issuance of $1.5 billion of our 5.625% senior notes due 2021; |
| entry into a new $3.5 billion commercial mortgage-backed securities loan (the CMBS Loan) secured by 23 of our U.S. owned real estate assets; |
| entry into a new $525 million mortgage loan (the Waldorf Astoria Loan) secured by our Waldorf Astoria New York property; |
| additional borrowings of $300 million under our Timeshare Facility; |
| entry into four interest rate swaps with a notional value of $1.45 billion, which swap floating three-month LIBOR on the Term Loan to a fixed rate of 1.87%; |
| sales of Hilton HHonors points for cash proceeds of $650 million, classified as deferred revenue at the date of receipt; and |
| the repayment of our senior mortgage loans and secured mezzanine loans and the redemption of our unsecured notes due 2031 with available cash and proceeds from the transactions described above. |
For more information regarding these transactions, see SummaryRefinancing Transactions, Use of Proceeds, Managements Discussion and Analysis of Financial Condition and Results of OperationsOverviewRecent Events and Description of Certain Indebtedness.
53
Note 3: The Common Stock Offering
We intend to use the net proceeds from this offering to repay certain of our then outstanding indebtedness.
Note 4: Pro Forma Adjustments
Adjustments included under the heading Pro Forma AdjustmentsFinancing Transactions represent the following:
a. | To adjust cash for the transactions discussed below, as follows: |
(in millions) | ||||
Cash paid to repay debt principal (1) (2) |
$ (14,066) | |||
Cash paid for interest on repaid debt (3) |
(39) | |||
Cash paid for debt issuance costs |
(265) | |||
Cash received from new debt issuances |
13,387 | |||
Cash received from Hilton HHonors point sales |
650 | |||
|
|
|||
Net adjustment to cash (4) |
$ (333) | |||
|
|
(1) | The long-term debt balance of our senior mortgage loans and secured mezzanine loans include $18 million and $27 million, respectively, of yield adjustments related to prior debt modifications. Thus, the principal balance of our debt to be repaid in cash is presented net of this amount. These yield adjustments, totaling $45 million, will be released concurrent with the repayment of the debt. This release is not considered to have a continuing effect on us and, therefore, it is not reflected in our unaudited pro forma condensed consolidated statements of operations. |
(2) | Includes the voluntary prepayment of $100 million on the Term Loan made in November 2013. |
(3) | Includes our accrued balance of $21 million and $18 million of additional interest we are required to pay, concurrent with the principal repayment of our senior mortgage loans and secured mezzanine loans. |
(4) | The above adjustments result in changes to cash and cash equivalents of $242 million and to restricted cash and cash equivalents of $91 million. |
b. | To adjust for the completion of the Financing Transactions and the repayment of our senior mortgage loans, secured mezzanine loans and unsecured notes due 2031, as follows: |
Long-term
Debt |
||||
(in millions) | ||||
Repayment of existing debt: |
||||
Senior mortgage loans |
$ | (7,010) | ||
Secured mezzanine loans |
(6,905) | |||
Unsecured notes due 2031 |
(96) | |||
|
|
|||
Total repayment of existing debt (1) |
(14,011) | |||
|
|
|||
Issuance of new debt: |
||||
Term Loan (2)(3) |
7,462 | |||
Senior Notes |
1,500 | |||
CMBS Loan |
3,500 | |||
Waldorf Astoria Loan |
525 | |||
|
|
|||
Total issuance of new debt |
12,987 | |||
|
|
|||
Net effect of refinancing on long-term debt, including current maturities |
$ | (1,024) | ||
|
|
(1) | Includes current maturities of long-term debt of $352 million. |
(2) | Long-term debt for the Term Loan is net of the original issue discount of $38 million and the $100 million voluntary prepayment made in November 2013. |
54
(3) | The Term Loan requires amortization payments of one percent of the principal balance per year; therefore, $76 million of this balance is reflected as current maturities of long-term debt on a pro forma basis. |
The Financing Transactions also reflect:
| the release of debt issuance costs of $16 million related to the existing debt payoff and the addition of debt issuance costs of $265 million related to the new debt issued. The net increase to the debt issuance costs, which are classified as other assets in our unaudited pro forma condensed consolidated balance sheet, was $249 million; |
| the payment of current accrued interest of $21 million related to the existing debt payoff, which was reflected in accounts payable, accrued expenses, and other in our unaudited pro forma condensed consolidated balance sheet. This release is not considered to have a continuing effect on us and, therefore, it is not reflected in our unaudited pro forma condensed consolidated statements of operations; and |
| the release of $204 million of interest, which was reflected in other liabilities in our unaudited pro forma condensed consolidated balance sheet, that related to our senior mortgage loans and secured mezzanine loans. The interest expense was recognized using the interest method and has exceeded the cash paid due to the fact that the terms of the senior mortgage loans and secured mezzanine loans require annual increases in the interest rate. Since we have assumed all extensions of the senior mortgage loans and secured mezzanine loans, which were at our option, our accrual of interest under the interest method contemplated these increases in interest expense over the fully extended life of the debt, resulting in an accrual of interest expected to be paid over the term of the debt based on increased cash payments of interest in subsequent periods. Upon consummation of the Financing Transactions, such payments will no longer be required and the accrual for these amounts will be reversed. Refer to adjustment (c) for the associated adjustment to deferred tax liabilities. This release is not considered to have a continuing effect on us and, therefore, it is not reflected in our unaudited pro forma condensed consolidated statements of operations. |
c. | To adjust for the tax effects of the gains and losses referenced in adjustment (f) and the Hilton HHonors point sales referenced in adjustment (e), using the statutory tax rate of 38.4% referenced in adjustment (h), as follows: |
(in millions) | ||||
Income taxes payable: |
||||
Unamortized portion of yield adjustments of debt principal |
$ | 17 | ||
Interest not accrued (1) |
(7) | |||
Unamortized debt issuance costs |
(29) | |||
Hilton HHonors point sales |
144 | |||
|
|
|||
Net adjustment to income taxes payable |
$ | 125 | ||
|
|
|||
Deferred tax liabilities: |
||||
Other liabilities - interest accrued under the interest method |
$ | 78 | ||
Unamortized debt issuance costs |
23 | |||
Hilton HHonors point sales |
(144) | |||
|
|
|||
Net adjustment to deferred tax liabilities |
$ | (43) | ||
|
|
(1) | Represents interest we are required to pay, concurrent with the principal repayment of our senior mortgage loans and secured mezzanine loans. |
55
d. | To adjust for additional borrowings of $300 million under our Timeshare Facility. |
e. | To adjust for proceeds of $650 million presented as deferred revenue as a result of the Hilton HHonors point sales. Refer to adjustment (c) for related tax adjustments. |
f. | To adjust accumulated deficit for amounts related to the senior mortgage loans and secured mezzanine loans that do not have a continuing effect on us, as follows: |
(in millions) | ||||
Unamortized portion of yield adjustments of debt principal, net of taxes of $17 million |
$ | 28 | ||
Other liabilities - interest accrued under the interest method, net of taxes of $78 million |
126 | |||
Interest not accrued, net of taxes of $(7) million (1) |
(11) | |||
Unamortized debt issuance costs, net of taxes of $(6) million |
(10) | |||
|
|
|||
Net adjustment to accumulated deficit |
$ | 133 | ||
|
|
(1) | Represents interest we are required to pay, concurrent with the principal repayment of our senior mortgage loans and secured mezzanine loans. |
g. | To adjust interest expense for the repayment of the existing indebtedness and additional borrowings discussed above, as follows: |
Nine Months Ended
September 30, 2013 |
Year Ended
December 31, 2012 |
|||||||
(in millions) | ||||||||
Repayment of existing debt: |
||||||||
Interest expense |
$ | (337) | $ | (461) | ||||
Amortization expense of debt issuance costs |
(7) | (9) | ||||||
|
|
|
|
|||||
(344) | (470) | |||||||
|
|
|
|
|||||
Issuance of new debt: |
||||||||
Interest expense (1)(2) (3) (4) |
431 | 579 | ||||||
Amortization expense of debt issuance costs and discounts (1) |
37 | 49 | ||||||
|
|
|
|
|||||
468 | 628 | |||||||
|
|
|
|
|||||
Net adjustment to interest expense |
$ | 124 | $ | 158 | ||||
|
|
|
|
(1) | Includes interest expense and amortization expense of the debt issuance costs of the Timeshare Facility as if the facility was in place on January 1, 2012. Also, includes interest expense and amortization expense related to the Securitized Timeshare Debt, which was issued in August 2013, as if it were issued on January 1, 2012. See Description of Certain Indebtedness for further discussion of the transaction. |
(2) | Includes commitment fees on the unused Revolving Credit Facility commitments. |
(3) | We applied the interest rates that were prevailing during the periods presented for our variable interest rate debt totaling approximately $8 billion, which excludes $1.45 billion of the Term Loan, for which a variable to fixed interest rate swap has been executed. |
(4) | A 0.125 percent change to interest rates on our variable rate debt would result in an increase in interest expense of approximately $7 million and $10 million for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively. |
h. | To adjust income tax expense for the changes in the expense items noted above in adjustment (g). The statutory tax rate of 38.4% is a blended U.S. federal and state income tax rate. |
56
Adjustments included under the heading Pro Forma AdjustmentsCommon Stock Offering represent the following:
i. | Certain members of our senior management team were offered the opportunity to participate in an executive compensation plan (the Promote plan). The Promote plan provides for the grant of a Tier I liability award, or an alternative cash payment in lieu thereof, and a Tier II equity award, representing Class B Units in BH Hotels Holdco, LLC (our Ultimate Parent). The awards vest based on service and performance conditions. For further discussion of the Promote plan, including the assumptions used in estimating fair value of the awards, refer to our audited consolidated financial statements included elsewhere within this prospectus. |
In connection with this offering, the Tier I liability awards that remain outstanding at the time of the offering will vest as of the pricing date of this offering and will be paid in cash no later than 30 days following the pricing of this offering. Additionally, the Tier II equity awards that remain outstanding at the time of the pricing of the offering will be exchanged for restricted stock in the Company of equivalent economic value that will vest as follows:
| 40% of each award will vest as of the pricing date with respect to this offering; |
| 40% of each award will vest on the first anniversary of the pricing date with respect to this offering, contingent upon continued employment through that date; and |
| 20% of each award will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, contingent upon continued employment through that date. |
Upon the pricing date with respect to this offering, we expect to record incremental compensation expense of $ million as a result of modifying the vesting conditions of the Tier I liability award, as well as the exchange of the Tier II awards for restricted shares. The adjustment is reflected in our unaudited pro forma condensed balance sheet as an addition to common stock and additional paid-in capital and a corresponding increase to accumulated deficit. Further, we do not anticipate that there will be a material effect on the amount of future compensation expense as a result of modifying the terms of the awards which solely vest upon achieving the service conditions. Accordingly, we have made no adjustment to our unaudited pro forma condensed consolidated statements of operations for any incremental compensation expense resulting from the modification of these awards. No compensation expense will be recognized for the 20% of restricted stock that will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, as this performance condition has been determined to be not probable of occurring for accounting purposes.
j. | We intend to use $ million of proceeds from this offering to repay our Term Loan. |
57
We derived the selected statement of operations data for the years ended December 31, 2012, 2011 and 2010 and the selected balance sheet data as of December 31, 2012 and 2011 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the selected balance sheet data as of December 31, 2010 from our unaudited consolidated financial statements that are not included in this prospectus. We derived the selected statement of operations data for the years ended December 31, 2009 and 2008 and the selected balance sheet data as of December 31, 2009 and 2008 from Hilton Worldwide, Inc.s audited consolidated financial statements, which are not included in this prospectus. We derived the selected statement of operations data for the nine months ended September 30, 2013 and 2012 and the selected consolidated balance sheet data as of September 30, 2013 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements and, in our opinion, have included all adjustments, which include only normal recurring adjustments, necessary to present fairly in all material respects our financial position and results of operations. The results for any interim period are not necessarily indicative of the results that may be expected for the full year. Additionally, our historical results are not necessarily indicative of the results expected for any future period.
You should read the selected consolidated financial data below together with the consolidated financial statements including the related notes thereto appearing elsewhere in this prospectus, as well as Managements Discussion and Analysis of Financial Condition and Results of Operations and Description of Certain Indebtedness, and the other financial information included elsewhere in this prospectus.
Nine Months Ended
September 30, |
Year Ended December 31, | |||||||||||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Statement of Operations Data: |
||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Owned and leased hotels |
$ | 2,982 | $ | 2,931 | $ | 3,979 | $ | 3,898 | $ | 3,667 | $ | 3,540 | $ | 4,301 | ||||||||||||||
Management and franchise fees and other |
868 | 807 | 1,088 | 1,014 | 901 | 807 | 901 | |||||||||||||||||||||
Timeshare |
809 | 822 | 1,085 | 944 | 863 | 832 | 920 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
4,659 | 4,560 | 6,152 | 5,856 | 5,431 | 5,179 | 6,122 | ||||||||||||||||||||||
Other revenues from managed and franchised properties |
2,433 | 2,378 | 3,124 | 2,927 | 2,637 | 2,397 | 2,753 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
7,092 | 6,938 | 9,276 | 8,783 | 8,068 | 7,576 | 8,875 | |||||||||||||||||||||
Expenses |
||||||||||||||||||||||||||||
Owned and leased hotels |
2,327 | 2,401 | 3,230 | 3,213 | 3,009 | 2,904 | 3,328 | |||||||||||||||||||||
Timeshare |
545 | 568 | 758 | 668 | 634 | 644 | 682 | |||||||||||||||||||||
Depreciation and amortization |
455 | 394 | 550 | 564 | 574 | 587 | 598 | |||||||||||||||||||||
Impairment losses |
| 33 | 54 | 20 | 24 | 475 | 5,611 | |||||||||||||||||||||
General, administrative and other |
319 | 327 | 460 | 416 | 637 | 423 | 416 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
3,646 | 3,723 | 5,052 | 4,881 | 4,878 | 5,033 | 10,635 | ||||||||||||||||||||||
Other expenses from managed and franchised properties |
2,433 | 2,378 | 3,124 | 2,927 | 2,637 | 2,394 | 2,746 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total expenses |
6,079 | 6,101 | 8,176 | 7,808 | 7,515 | 7,427 | 13,381 | |||||||||||||||||||||
Operating income (loss) |
1,013 | 837 | 1,100 | 975 | 553 | 149 | (4,506) | |||||||||||||||||||||
Net income (loss) attributable to Hilton stockholder |
389 | 291 | 352 | 253 | 128 | (532) | (5,663) |
58
September 30, | December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Selected Balance Sheet Data: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 724 | $ | 755 | $ | 781 | $ | 796 | $ | 738 | $ | 397 | ||||||||||||
Restricted cash and cash equivalents |
502 | 550 | 658 | 619 | 394 | 691 | ||||||||||||||||||
Total assets |
26,729 | 27,066 | 27,312 | 27,750 | 29,140 | 30,639 | ||||||||||||||||||
Long-term debt (1) |
14,279 | 15,575 | 16,311 | 16,995 | 21,125 | 21,157 | ||||||||||||||||||
Non-recourse timeshare debt (1) (2) |
388 | | | | | | ||||||||||||||||||
Non-recourse debt and capital lease obligations of consolidated variable interest entities (1) |
318 | 420 | 481 | 541 | 574 | 565 | ||||||||||||||||||
Total equity (deficit) |
2,553 | 2,155 | 1,702 | 1,544 | (1,470 | ) | (1,253 | ) |
(1) | Includes current maturities. |
(2) | Includes Timeshare Facility and Securitized Timeshare Debt. |
59
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with SummarySummary Historical Financial Data, Selected Financial Data and our consolidated financial statements and related notes that appear elsewhere in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in Risk Factors.
Overview
Our Business
Hilton Worldwide is one of the largest and fastest growing hospitality companies in the world, with 4,080 hotels, resorts and timeshare properties comprising 671,926 rooms in 90 countries and territories. In the nearly 100 years since our founding, we have defined the hospitality industry and established a portfolio of 10 world-class brands. Our flagship full-service Hilton Hotels & Resorts brand is the most recognized hotel brand in the world. Our premier brand portfolio also includes our luxury hotel brands, Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts, our full-service hotel brands, DoubleTree by Hilton and Embassy Suites Hotels, our focused-service hotel brands, Hilton Garden Inn, Hampton Inn, Homewood Suites by Hilton and Home2 Suites by Hilton, and our timeshare brand, Hilton Grand Vacations. We own or lease interests in 156 hotels, many of which are located in global gateway cities, including iconic properties such as The Waldorf Astoria New York, the Hilton Hawaiian Village, and the London Hilton on Park Lane. More than 311,000 team members proudly serve in our properties and corporate offices around the world, and we have approximately 39 million members in our award-winning customer loyalty program, Hilton HHonors.
Segments and Regions
Management analyzes our operations and business by both operating segments and geographic regions. Our operations consist of three reportable segments that are based on similar products or services: management and franchise, ownership, and timeshare. The management and franchise segment provides services, which include hotel management and licensing of our brands to franchisees, as well as property management at timeshare properties. This segment generates its revenue from management and franchise fees charged to hotel owners, including our owned and leased hotels, and to homeowners associations at timeshare properties. As a manager of hotels and timeshare resorts, we typically are responsible for supervising or operating the property in exchange for management fees, which, at hotels, are based on a percentage of the hotels gross revenue, operating profits, cash flows, or a combination thereof, and, at timeshare properties, are fixed amounts stated in the management agreements. As a franchisor of hotels, we charge franchise fees, which generally are based on a percentage of room revenue, and in some instances, may also include a percentage of food and beverage and other revenues in exchange for the use of one of our brand names and related commercial services, such as our reservation system, marketing, and information technology services. The ownership segment derives earnings from providing hotel room rentals, food and beverage sales, and other services at our owned and leased hotels. The timeshare segment consists of multi-unit vacation ownership properties. This segment generates revenue by marketing and selling timeshare interests owned by Hilton and third parties, providing consumer financing, and resort operations.
Geographically, management conducts business through three distinct geographic regions: the Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific. The Americas region includes North America, South America, and Central America, including all Caribbean nations. Although the U.S. is included in the Americas, it is often analyzed separately and apart from the Americas geographic region and, as such, it is presented separately within the analysis herein. The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Ireland in the west to Russia in the east, and the Middle East
60
and Africa (MEA), which represents the Middle East region and all African nations, including the Indian Ocean island nations. Europe and MEA are often analyzed separately by management and, as such, are presented separately within the analysis herein. The Asia Pacific region includes the eastern and southeastern nations of Asia, as well as India, Australia, New Zealand, and the Pacific island nations.
As of September 30, 2013, approximately 78 percent of our system-wide hotel rooms were located in the U.S. We expect that the percentage of our hotels outside the U.S. will continue to increase in future years as hotels in our pipeline open.
System Growth and Pipeline
In recent years, we have made significant progress on our strategic priorities including the expansion of our global footprint, particularly in our management and franchise business, and as of September 30, 2013, we had the largest rooms pipeline in the lodging industry according to data provided by STR. From June 30, 2007 through September 30, 2013, we added a net 1,182 managed and franchised hotels to our system and 172,748 rooms, of which 29.1 percent of the rooms were located outside the U.S.
To support our growth strategy, we also continue to expand our development pipeline. As of September 30, 2013, we had a total of 1,069 hotels in our development pipeline, representing 185,699 rooms under construction or approved for development throughout 71 countries. As of September 30, 2013, 97,520 rooms, representing 52.5 percent of our development pipeline, are under construction. Of the 185,699 rooms in the pipeline, 111,642 rooms, representing 60.1 percent of the pipeline, were located outside the U.S. Over 99% of the hotels in our pipeline and under construction as of September 30, 2013 are within our management and franchise segment. As of September 30, 2013, only one development project was within our ownership segment. We do not consider such project, or any development project relating to properties under our management and franchise segment, to be material to us.
Our management and franchise contracts are designed to expand our business with limited or no capital investment. The capital required to build and maintain hotels that we manage or franchise, is typically provided by the owner of the respective hotel with minimal or no capital required by us as the manager or franchisor. Additionally, prior to approving the addition of new hotels to our management and franchise development pipeline, we evaluate the economic viability of the hotel based on the geographic location, the credit quality of the third-party owner, and other factors. As a result, by increasing the number of management and franchise agreements with third-party owners we expect to achieve a higher overall return on invested capital.
Recent Events
In October 2013, we sold Hilton HHonors points to American Express Travel Related Services Company, Inc. (Amex), and Citibank, N.A. (Citi), for $400 million and $250 million, respectively, in cash. We used the net proceeds of the HHonors points sales to reduce outstanding indebtedness. Amex and Citi and their respective designees may use the points in connection with Hilton HHonors co-branded credit cards and for promotions, rewards and incentive programs or other certain activities as they may establish or engage in from time to time.
Principal Components and Factors Affecting our Results of Operations
Revenues
Principal Components
We primarily derive our revenues from the following sources:
| Owned and leased hotels. Represents revenues derived from hotel operations, including room rentals and food and beverage sales and other ancillary services. |
Revenues from room rentals, food and beverage sales, and other ancillary services are primarily derived from two categories of customers: transient and group. Transient guests are individual travelers
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who are traveling for business or leisure. Our group guests are traveling for group events that reserve rooms for meetings, conferences, or social functions sponsored by associations, corporate, social, military, educational, religious or other organizations. Group business usually includes a block of room accommodations as well as other ancillary services, such as catering and banquet services. A majority of our food and beverage sales and other ancillary services are provided to customers who are also occupying rooms at our hotel properties. As a result, key drivers of operations, such as occupancy, generally affect all components of our owned and leased hotel revenues consistently.
| Management and franchise fees and other. Represents revenues derived from fees earned from hotels and timeshare properties managed by us, franchise fees received in connection with the franchising of our brands, and other revenue generated by the incidental support of hotel operations for owned, leased, managed, and franchised properties, and other rental income. |
| Terms of our management agreements vary, but our fees generally consist of a base fee, which is generally a percentage of each hotels gross revenue, and in some cases an incentive fee, which is based on gross operating profits, cash flow or a combination thereof. Management fees from timeshare properties are generally a fixed amount as stated in the management agreement. Outside of the U.S., our fees are often more dependent on hotel profitability measures, either through a single management fee structure where the entire fee is based on a profitability measure, or because our two-tier fee structure is more heavily weighted toward the incentive fee than the base fee. Additionally, we receive one-time upfront fees upon execution of certain management contracts. In general, the hotel owner pays all operating and other expenses and reimburses our out-of-pocket expenses. The initial terms of our management agreements for full service hotels typically are 20 years. Extensions are negotiated and vary, but typically are more prevalent in full-service hotels. These extensions typically are either for five or ten years and can be exercised once or twice at our or the other partys option or by mutual agreement. Some of our management agreements provide early termination rights to hotel owners upon certain events, including the failure to meet certain financial or performance criteria. Performance test measures typically are based upon the hotels performance individually and/or in comparison to specified hotels. |
| Under our franchise agreements, franchisees pay us franchise fees which consist of an initial application and initiation fees for new hotels entering the system and monthly royalty fees, generally calculated as a percentage of room revenue. Royalty fees for our full-service brands may also include a percentage of gross food and beverage revenues and other revenues, where applicable. In addition to the franchise application and royalty fees, franchisees also generally pay a monthly program fee based on a percentage of the total gross room revenue that covers the cost of advertising and marketing programs; internet, technology and reservation system expenses; and quality assurance program costs. Our franchise agreements typically have initial terms of approximately 20 years for new construction and approximately 10 to 20 years for properties that are converted from other brands. At the expiration of the initial term, we may relicense the hotel to the franchisee, at our or the other partys option or by mutual agreement, for an additional term ranging from 10 to 15 years. We have the right to terminate a franchise agreement upon specified events of default, including nonpayment of fees or noncompliance with brand standards. If a franchise agreement is terminated by us because of a franchisees default, the franchisee is contractually required to pay us liquidated damages. |
| Timeshare. Represents revenues derived from the sale and financing of timeshare units and revenues from enrollments and other fees, rentals of timeshare units, food and beverage sales and other ancillary services at our timeshare properties and fees which we refer to as resort operations. Additionally, in recent years, we began a transformation of our timeshare business to a capital light model in which third-party timeshare owners and developers provide capital for development while we act as sales and marketing agent and property manager. Through these transactions, we receive a sales and marketing commission and branding fees on sales of timeshare intervals, recurring fees to operate the homeowners associations and revenues from resort operations. |
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| Other revenues from managed and franchised properties. These revenues represent the payroll and its related costs for hotels that we manage where the hotel employees are legally our responsibility, as well as certain other operating costs of the managed and franchised hotels operations, marketing expenses, and other expenses associated with our brands and shared services that are contractually either reimbursed to us by the hotel owners or paid from fees collected in advance from these hotels. The corresponding expenses are presented as other expenses from managed and franchised properties in our consolidated statements of operations resulting in no impact to operating income or net income. |
Factors Affecting our Revenues
The following factors affect the revenues we derive from our operations. For other factors affecting our revenues, see Risk FactorsRisks Relating to Our Business and Industry.
| Consumer demand and global economic conditions . Consumer demand for our products and services is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence and adverse political conditions can lower the revenues and profitability of our owned operations and the amount of management and franchise fee revenues we are able to generate from our managed and franchised properties. Also, declines in hotel profitability during an economic downturn directly impact the incentive portion of our management fees, which is based on hotel profit measures. Our timeshare segment is also linked to cycles in the general economy and consumer discretionary spending. As a result, changes in consumer demand and general business cycles can subject and have subjected our revenues to significant volatility. See Risk FactorsRisks Relating to Our Business and Industry. |
Our results of operations have steadily improved as the global economy continues to improve following the global recession in recent years. Our comparable system-wide RevPAR increased 20.9% from the year ended December 31, 2009 to the nine months ended September 30, 2013.
| Agreements with third-party owners and franchisees and relationships with developers . We depend on our long-term management and franchise agreements with third-party owners and franchisees for a significant portion of our management and franchise fee revenues. The success and sustainability of our management and franchise business depends on our ability to perform under our management and franchise agreements and maintain good relationships with third-party owners and franchisees. Our relationships with these third parties also generate new relationships with developers and opportunities for property development that can support our growth. We believe that we have good relationships with our third-party owners, franchisees and developers and are committed to the continued growth and development of these relationships. These relationships exist with a diverse group of owners, franchisees and developers and are not significantly concentrated with any particular third party. Additionally, in recent years we have entered into sales and marketing agreements to sell timeshare units on behalf of third-party developers. Our supply of third-party developed timeshare intervals was approximately 65,000, or 78% of our total supply, as of September 30, 2013. We expect sales and marketing agreements with third-party developers and resort operations to comprise a growing percentage of our timeshare revenue and revenues derived from the sale and financing of timeshare units developed by us to comprise a smaller percentage of our timeshare revenue in future periods, consistent with our strategy to focus our business on the management aspects and deploy less of our capital to asset construction. |
Expenses
Principal Components
We primarily incur the following expenses:
|
Owned and leased hotels. Owned and leased hotel expenses reflect the operating expenses of our consolidated owned and leased hotels, including room expense, food and beverage costs, other support |
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costs and property expenses. Room expense includes compensation costs for housekeeping, laundry and front desk staff and supply costs for guest room amenities and laundry. Food and beverage costs include costs for wait and kitchen staff and food and beverage products. Other support expenses consist of costs associated with property-level management, utilities, sales and marketing, operating hotel spas, telephones, parking and other guest recreation, entertainment and services. Property expenses include property taxes, repairs and maintenance, rent and insurance. |
| Timeshare . Timeshare expenses include the cost of inventory sold during the period, sales and marketing expenses, resort operations expenses, bad debt expense on financing of timeshare units, and other overhead expenses associated with our timeshare business. |
| Depreciation and amortization. These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our consolidated owned and leased hotels, as well as certain corporate assets. Amortization expense primarily consists of amortization of management agreement acquisition costs and franchise and brand intangibles, which are amortized over their estimated useful lives. |
| General, administrative, and other expenses. General, administrative, and other expenses consist primarily of compensation expense for our corporate staff and personnel supporting our business segments (including divisional offices that support our management and franchising segments), professional fees (including consulting, audit and legal fees), travel and entertainment expenses, bad debt expenses, contractual performance obligations and office administrative and related expenses. Expenses incurred by our supply management business, laundry facilities and other ancillary businesses are also included in general, administrative and other expenses. |
| Impairment losses. We hold goodwill, amortizing and non-amortizing intangible assets, long-lived assets and equity method investments. We evaluate these assets for impairment as further discussed in Critical Accounting Policies and Estimates. These evaluations have, in the past, resulted in impairment losses for certain of these assets based on the specific facts and circumstances surrounding those assets and our estimates of the fair value of those assets. Based on economic conditions or other factors at a property-specific or company-wide level, we may be required to take additional impairment losses to reflect further declines in our asset and/or investment values. |
| Other expenses from managed and franchised properties. These expenses represent the payroll and its related costs for hotels that we manage where the hotel employees are legally our responsibility, as well as certain other operating costs of the managed and franchised hotels operations, marketing expenses, and other expenses associated with our brands and shared services that are contractually either reimbursed to us by the hotel owners or paid from fees collected in advance from these hotels. The corresponding revenues are presented as other revenues from managed and franchised properties in our consolidated statements of operations resulting in no impact to operating income or net income. |
Factors Affecting our Costs and Expenses
The following are several principal factors that affect the costs and expenses we incur in the course of our operations. For other factors affecting our costs and expenses, see Risk FactorsRisks Relating to Our Business and Industry.
|
Fixed nature of expenses. Many of the expenses associated with managing, franchising, and owning hotels and timeshare resorts are relatively fixed. These expenses include personnel costs, rent, property taxes, insurance and utilities, as well as sales and marketing expenses for our timeshare segment. If we are unable to decrease these costs significantly or rapidly when demand for our hotels and other properties decreases, the resulting decline in our revenues can have an adverse effect on our net cash flow, margins and profits. This effect can be especially pronounced during periods of economic contraction or slow economic growth. Economic downturns generally affect the results of our ownership segment more significantly than the results of our management and franchise segment due |
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to the high fixed costs associated with operating an owned or leased hotel. The effectiveness of any cost-cutting efforts is limited by the fixed-cost nature of our business. As a result, we may not be able to offset further revenue reductions through cost cutting. Employees at some of our owned hotels are parties to collective bargaining agreements that may also limit our ability to make timely staffing or labor changes in response to declining revenues. In addition, any of our efforts to reduce costs, or to defer or cancel capital improvements, could adversely affect the economic value of our hotels and brands. We have taken steps to reduce our fixed costs to levels we feel are appropriate to maximize profitability and respond to market conditions without jeopardizing the overall customer experience or the value of our hotels or brands. Also, a significant portion of our costs to support our timeshare business relates to direct sales and marketing of these units. In periods of decreased demand for timeshare units, we may be unable to reduce our sales and marketing expenses quickly enough to prevent a deterioration of our profit margins on our timeshare business. |
| Changes in depreciation and amortization expense. Changes in depreciation expenses may be driven by renovations of existing hotels, acquisition or development of new hotels or the disposition of existing hotels through sale or closure. As we place new assets into service, we will be required to record additional depreciation expense on those assets. Additionally, we capitalize costs associated with certain software development projects, and as those projects are completed and placed into service, amortization expense will increase. |
Other Items
Effect of foreign currency exchange rate fluctuations
Significant portions of our operations are conducted in functional currencies other than our reporting currency, which is the U.S. dollar, and we have assets and liabilities denominated in a variety of foreign currencies. As a result, we are required to translate those results, assets and liabilities from the functional currency into U.S. dollars at market-based exchange rates for each reporting period. When comparing our results of operations between periods, there may be material portions of the changes in our revenues or expenses that are derived from fluctuations in exchange rates experienced between those periods.
Seasonality
The lodging industry is seasonal in nature. However, the periods during which our hotels experience higher or lower levels of demand vary from property to property and depend upon location, type of property, and competitive mix within the specific location. Based on historical results, we generally expect our revenue to be lower during the first calendar quarter of each year than during each of the three subsequent quarters, with the fourth quarter producing the strongest revenues of the year.
Key Business and Financial Metrics Used by Management
Comparable Hotels
We define our comparable hotels as those that: (i) were active and operating in our system for at least one full calendar year as of the end of the current period, and were open as of January 1st of the previous year; (ii) have not undergone a change in brand or ownership during the current or comparable periods reported; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects, or for which comparable results are not available.
| Of the 4,039 hotels in our system as of September 30, 2013, 3,571 have been classified as comparable hotels for the nine months ended September 30, 2013. Our non-comparable hotels include 16 properties, or less than one percent of the total hotels in our system, that have been removed from the comparable group during the last twelve months because they have sustained substantial property damage, business interruption, undergone large-scale capital projects or comparable results were not available. |
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| Of the 3,926, 3,806 and 3,671 hotels in our system as of December 31, 2012, 2011, and 2010, respectively, 3,484, 3,401, and 3,164 have been classified as comparable hotels for the years ended December 31, 2012, 2011, and 2010, respectively. |
Occupancy
Occupancy represents the total number of rooms sold divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of our hotels available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable Average Daily Rate (ADR) levels as demand for hotel rooms increases or decreases.
Average Daily Rate (ADR)
ADR represents hotel room revenue divided by total number of rooms sold in a given period. ADR measures average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.
Revenue per Available Room (RevPAR)
We calculate RevPAR by dividing hotel room revenue by room nights available to guests for the period. We consider RevPAR to be a meaningful indicator of our performance as it provides a metric correlated to two primary and key drivers of operations at our hotels: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.
References to RevPAR and ADR throughout this report are presented on a currency neutral (all periods using the same exchange rates) and comparable basis, unless otherwise noted.
Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA
EBITDA, presented herein, is a non-GAAP financial measure that reflects net income attributable to Hilton stockholder, excluding interest expense, a provision for income taxes, and depreciation and amortization. We consider EBITDA to be a useful measure of operating performance, due to the significance of our long-lived assets and level of indebtedness.
Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude gains, losses and expenses in connection with (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment charges; (v) furniture, fixtures and equipment, or FF&E, replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based and certain other compensation expenses; (viii) severance, relocation and other expenses; and (ix) other items.
EBITDA and Adjusted EBITDA are not recognized terms under generally accepted accounting principles in the United States, or U.S. GAAP, and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are
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among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered either in isolation or as a substitute for profit (loss), cash flow or other methods of analyzing our results as reported under U.S. GAAP. Some of these limitations are:
| EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; |
| EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness; |
| EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; |
| EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; |
| EBITDA and Adjusted EBITDA do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations; |
| although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and |
| other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures. |
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
Results of Operations
Our business has steadily improved in recent years, resulting in higher RevPAR on a year-over-year basis since 2010. We have experienced occupancy increases in all segments of our business and we have been able to increase rates in market segments where demand has outpaced supply. The following table presents hotel operating statistics for our system-wide comparable hotels:
Nine Months
Ended September 30, 2013 |
Variance
2013 vs. 2012 |
Year Ended
December 31, 2012 |
Variance
2012 vs. 2011 |
Year Ended
December 31, 2011 |
Variance
2011 vs. 2010 |
|||||||||||||||||||
Occupancy |
73.5 | % | 1.4 | % pts | 71.1 | % | 1.9 | % pts | 69.7 | % | 2.1 | % pts | ||||||||||||
ADR |
$ | 136.24 | 3.4 | % | $ | 131.35 | 2.9 | % | $ | 130.15 | 2.8 | % | ||||||||||||
RevPAR |
$ | 100.19 | 5.3 | % | $ | 93.38 | 5.7 | % | $ | 90.70 | 5.9 | % |
We anticipate that if worldwide gross domestic product continues to exhibit growth, we will continue to experience increases in demand for lodging accommodations. Because this continued increase in demand is not expected to be met with a corresponding significant increase in hotel room supply in the near term, particularly in the U.S., we expect to see continued improvement in our operational and financial metrics. While we expect operating results at existing properties to improve and our business to continue to grow based on our business strengths and strategies that have and will continue to maximize our performance, our ability to do so is dependent in part on increases in discretionary spending and continued stabilization and recovery in the global
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economic environment. We also anticipate growth in our management and franchise fee business, driven both by improvements in performance at our existing hotels and by increases in the number of hotels in our system based on our management and franchise property development pipeline. However, should hotel developers experience difficulty in securing on-going financing for hotel projects or a decline in demand for any other reason, our pipeline may be adversely affected, resulting in delays in the opening of new hotels or decreases in the number of future properties that we could potentially manage or franchise.
Nine Months Ended September 30, 2013 Compared with Nine Months Ended September 30, 2012
During the nine months ended September 30, 2013, we experienced system-wide improvement at our comparable hotels in occupancy, ADR and RevPAR, compared to the nine months ended September 30, 2012. Despite challenges in specific markets, we were able to increase rates in markets where demand outpaced supply resulting in a 3.4 percent increase in system-wide ADR. System-wide occupancy increased 1.4 percentage points and the combination of improved occupancy and ADR drove a system-wide RevPAR increase of 5.3 percent.
Our Asia Pacific region had a RevPAR increase of 6.3 percent due to an increase in occupancy of 5.0 percentage points. In the Americas region, which includes the U.S., RevPAR increased 5.4 percent due to an increase in ADR of 3.7 percent.
Our hotels in the MEA region experienced a RevPAR increase of 10.2 percent, due to an increase in ADR of 14.9 percent. The majority of this improvement occurred during the first half of 2013. Our European hotels experienced a RevPAR increase of 3.7 percent due to increased occupancy of 2.9 percentage points. There continues to be political unrest and macroeconomic uncertainty in certain portions of the EMEA region that may have an effect on our hotel revenues.
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Our overall operating performance during the nine months ended September 30, 2013 improved when compared to the nine months ended September 30, 2012, driven by improvements in both system-wide occupancy and ADR. Our results for the periods are as follows:
Nine Months Ended
September 30, |
Increase / (Decrease) | |||||||||||||||
2013 | 2012 | $ change | % change | |||||||||||||
(in millions) | ||||||||||||||||
Revenues |
||||||||||||||||
Owned and leased hotels |
$ | 2,982 | $ | 2,931 | $ | 51 | 1.7 | |||||||||
Management and franchise fees and other |
868 | 807 | 61 | 7.6 | ||||||||||||
Timeshare |
809 | 822 | (13) | (1.6 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
4,659 | 4,560 | 99 | 2.2 | |||||||||||||
Other revenues from managed and franchised properties |
2,433 | 2,378 | 55 | 2.3 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total revenues |
7,092 | 6,938 | 154 | 2.2 | ||||||||||||
Expenses |
||||||||||||||||
Owned and leased hotels |
2,327 | 2,401 | (74) | (3.1 | ) | |||||||||||
Timeshare |
545 | 568 | (23) | (4.0 | ) | |||||||||||
Depreciation and amortization |
455 | 394 | 61 | 15.5 | ||||||||||||
Impairment losses |
| 33 | (33) | NM | (1) | |||||||||||
General, administrative, and other |
319 | 327 | (8) | (2.4 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
3,646 | 3,723 | (77) | (2.1 | ) | ||||||||||||
Other expenses from managed and franchised properties |
2,433 | 2,378 | 55 | 2.3 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total expenses |
6,079 | 6,101 | (22) | (0.4 | ) | |||||||||||
Operating income |
1,013 | 837 | 176 | 21.0 | ||||||||||||
Interest income |
5 | 11 | (6) | (54.5 | ) | |||||||||||
Interest expense |
(401) | (423) | 22 | (5.2 | ) | |||||||||||
Equity in earnings from unconsolidated affiliates |
11 | 1 | 10 | NM | (1) | |||||||||||
Gain (loss) on foreign currency transactions |
(43) | 27 | (70) | NM | (1) | |||||||||||
Other gain, net |
5 | 8 | (3) | (37.5 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Income before income taxes |
590 | 461 | 129 | 28.0 | ||||||||||||
Income tax expense |
(192) | (166) | (26) | 15.7 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Net income |
398 | 295 | 103 | 34.9 | ||||||||||||
Net income attributable to noncontrolling interests |
(9) | (4) | (5) | NM | (1) | |||||||||||
|
|
|
|
|
|
|||||||||||
Net income attributable to Hilton stockholder |
$ | 389 | $ | 291 | $ | 98 | 33.7 | |||||||||
|
|
|
|
|
|
(1) | Fluctuation in terms of percentage change is not meaningful. |
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Nine Months
Ended September 30, 2013 |
Variance
2013 vs. 2012 |
|||||||
Comparable Hotel Statistics |
||||||||
Owned and leased hotels |
||||||||
Occupancy |
76.6 | % | 0.9 | % pts | ||||
ADR |
$ | 188.01 | 3.2 | % | ||||
RevPAR |
$ | 144.06 | 4.5 | % | ||||
Managed and franchised hotels |
||||||||
Occupancy |
73.3 | % | 1.4 | % pts | ||||
ADR |
$ | 130.75 | 3.4 | % | ||||
RevPAR |
$ | 95.78 | 5.4 | % | ||||
System-wide |
||||||||
Occupancy |
73.5 | % | 1.4 | % pts | ||||
ADR |
$ | 136.24 | 3.4 | % | ||||
RevPAR |
$ | 100.19 | 5.3 | % |
Revenues
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 2,982 | $ | 2,931 | 1.7 | |||||||
Management and franchise fees and other |
868 | 807 | 7.6 | |||||||||
Timeshare |
809 | 822 | (1.6 | ) | ||||||||
|
|
|
|
|||||||||
$ | 4,659 | $ | 4,560 | 2.2 | ||||||||
|
|
|
|
Revenues as presented in this section excludes other revenues from managed and franchised properties of $2,433 million and $2,378 million during the nine months ended September 30, 2013 and 2012, respectively.
Owned and leased hotels
The overall improved performance at our owned and leased hotels primarily was a result of improvement in RevPAR of 4.5 percent, respectively, at our comparable owned and leased hotels.
As of September 30, 2013, we had 35 consolidated owned and leased hotels located in the U.S., comprising 24,050 rooms. Revenues at our U.S. owned and leased hotels totaled $1,520 million and $1,411 million for the nine months ended September 30, 2013 and 2012, respectively. The increase of $109 million, or 7.7 percent, was primarily driven by an increase in RevPAR at our U.S. comparable owned and leased hotels of 7.0 percent, which was due to increases in ADR and occupancy of 4.9 percent and 1.6 percentage points, respectively. The increase in our U.S. owned and leased hotel revenue was primarily driven by group business, as room revenue from group travel at our U.S. comparable owned and leased hotels increased 7.7 percent, due to a combination of increases in group ADR of 3.9 percent and group occupied rooms of 3.7 percent. Room revenue from transient guests at our U.S. comparable owned and leased hotels also increased 3.4 percent, primarily due to an increase in transient ADR of 3.3 percent.
As of September 30, 2013, we had 89 consolidated owned and leased hotels located outside of the U.S., comprising 25,775 rooms. Revenues from our international (non-U.S.) owned and leased hotels totaled $1,462 million and $1,520 million for the nine months ended September 30, 2013 and 2012, respectively. The decrease of $58 million, or 3.8 percent, was primarily due to a combination of an unfavorable movement in foreign currency rates and the sales and lease terminations of hotels after September 30, 2012, which contributed to $49 million and $27 million of the decrease, respectively. These decreases were partially offset by the increase in RevPAR at our international comparable owned and leased hotels of 1.6 percent, which was primarily due to an increase in ADR of 1.2 percent.
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Management and franchise fees and other
Management and franchise fee revenue for the nine months ended September 30, 2013 and 2012 totaled $827 million and $768 million, respectively. The increase of $59 million, or 7.7 percent, in our management and franchise fee business reflects increases in RevPAR of 6.2 percent and 5.2 percent at our comparable managed and franchised properties, respectively. The increases in RevPAR for managed and franchised hotels were driven by both increased occupancy and ADR.
The addition of new hotels to our managed and franchised system also contributed to the growth in revenue. From September 30, 2012 to September 30, 2013 we added 47 managed properties on a net basis, contributing an additional 9,447 rooms to our system, as well as 112 franchised properties on a net basis, providing an additional 16,813 rooms to our system. As new hotels are established in our system, we expect the fees received from such hotels to increase as they are part of our system for full periods.
Other revenues for the nine months ended September 30, 2013 and 2012 were relatively unchanged at $41 million and $39 million, respectively.
Timeshare
The decrease in timeshare revenue was due to a decrease of approximately $90 million in real estate sales, due to lower sales volumes from our developed properties, which we expect to continue as we further develop our capital light timeshare business. This decrease was partially offset by an increase of $56 million in sales commissions and fees earned on projects developed by third parties, primarily due to two properties comprising 1,033 units commencing sales during or after the nine months ended September 30, 2012. There was also an increase of approximately $17 million of financing revenues and other revenues generated primarily from our resort operations.
Operating Expenses
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 2,327 | $ | 2,401 | (3.1 | ) | ||||||
Timeshare |
545 | 568 | (4.0 | ) |
Fluctuations in operating expenses at our owned and leased hotels can be related to various factors, including changes in occupancy levels, labor costs, utilities, taxes and insurance costs. The change in the number of occupied room nights directly affects certain variable expenses, which include payroll, supplies and other operating expenses.
U.S. owned and leased hotel expenses totaled $1,046 million and $1,021 million for the nine months ended September 30, 2013 and 2012, respectively. The increase of $25 million, or 2.4 percent, was due to increased occupancy levels, which resulted in an increase in variable operating expenses, including labor and utility costs.
International owned and leased hotel expenses decreased $99 million, or 7.2 percent, to $1,281 million from $1,380 million. Foreign currency movements contributed $38 million of the decrease, as international owned and leased hotel expenses, on a currency neutral basis, decreased $61 million. The decrease in currency neutral expenses was primarily due to expenses incurred in the prior year at properties which we no longer own or lease subsequent to September 30, 2012, as well as cost mitigation strategies and operational efficiencies employed at all of our owned and leased properties. Occupancy at our comparable international owned and leased hotels was relatively consistent period over period.
71
Timeshare expense decreased $23 million for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012. The decrease was primarily due to lower sales volume at our developed properties resulting in lower cost of sales, offset by an increase in sales and marketing expenses of $20 million most significantly related to the shift towards our capital light timeshare business. This is consistent with the slight decrease in timeshare revenue during the same periods.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Depreciation and amortization |
$ | 455 | $ | 394 | 15.5 |
Depreciation expense increased $28 million primarily due to $264 million in capital expenditures for property and equipment between September 30, 2012 and September 30, 2013, resulting in additional depreciation expense on certain owned and leased assets in 2013. Amortization expense increased $33 million primarily due to capitalized software costs that were placed into service during the fourth quarter of 2012.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Impairment losses |
$ | | $ | 33 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
During the first nine months of 2012, certain specific markets and properties faced operating and competitive challenges. Such challenges caused a decline in market value of certain corporate buildings and in the expected future results of certain owned and leased properties, which caused us to evaluate the carrying values of these affected properties for impairment. As a result of this evaluation, we recognized impairment losses for the nine months ended September 30, 2012 of $33 million.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
General, administrative, and other |
$ | 319 | $ | 327 | (2.4 | ) |
General and administrative expenses consist of our corporate operations, compensation and related expenses, including share-based compensation, and other operating costs.
General and administrative expenses were $282 million and $288 million for the nine months ended September 30, 2013 and 2012, respectively. The decrease of $6 million was primarily a result of legal and other operating costs incurred during the nine months ended September 30, 2012 that were not incurred during the nine months ended September 30, 2013. The decrease also included a decrease in share-based compensation expense, predominately due to the acceleration of certain payments under our share-based compensation plan during the first quarter of 2012, which resulted in an additional $9 million of expense in that period. The decrease was partially offset by an increase in employee severance costs of $18 million. Additionally, there was an acceleration of prior service credit of $13 million on our pension plan in the United Kingdom during the first quarter of 2012, which resulted in a reduction to general and administrative expenses during the nine months ended September 30, 2012.
Other expenses were relatively unchanged at $37 million and $39 million for the nine months ended September 30, 2013 and 2012, respectively.
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Non-operating Income and Expenses
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Interest expense |
$ | 401 | $ | 423 | (5.2 | ) |
Interest expense decreased $22 million as a result of reductions in our debt balances. We repaid $389 million of our unsecured notes during the fourth quarter of 2012, and we made unscheduled, voluntary debt payments of $1 billion during the nine months ended September 30, 2013.
The weighted average effective interest rate on our outstanding debt was approximately 3.2 percent for the nine months ended September 30, 2013, compared to 3.1 percent for the nine months ended September 30, 2012.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Equity in earnings from unconsolidated affiliates |
$ | 11 | $ | 1 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
The $10 million increase in equity in earnings from unconsolidated affiliates was primarily due to improved performance of our unconsolidated affiliates, as well as the sale of our interest in an unconsolidated affiliate in June 2012 that generated a loss of $2 million during the nine months ended September 30, 2012. In addition, during the nine months ended September 30, 2012, we recognized $4 million of impairment losses on our equity investments, while there were no impairment losses on our equity method investments during the nine months ended September 30, 2013.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Gain (loss) on foreign currency transactions |
$ | (43 | ) | $ | 27 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
The net gain (loss) on foreign currency transactions primarily relates to changes in foreign currency rates relating to short-term cross-currency intercompany loans.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Other gain, net |
$ | 5 | $ | 8 | (37.5 | ) |
The other gain, net for the nine months ended September 30, 2013 was primarily related to a capital lease restructuring by one of our consolidated variable interest entities (VIEs) during the period. The revised terms reduced the future minimum lease payments, resulting in a reduction of the capital lease obligation and a residual amount, which was recorded in other gain, net.
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The other gain, net for the nine months ended September 30, 2012 was primarily related to the pre-tax gain of $5 million resulting from the sale of our interest in an investment in affiliate accounted for under the equity method.
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Income tax expense |
$ | (192 | ) | $ | (166 | ) | 15.7 |
The effective income tax rate is determined by the level and composition of pre-tax income which is subject to federal, foreign, state, and local income taxes. The lower effective tax rate, as compared to our statutory tax rate, for the nine months ended September 30, 2013, was largely affected by a net decrease of $35 million in unrecognized tax benefits.
Segment Results
We evaluate our business segment operating performance using segment Adjusted EBITDA, as described in Note 15: Business Segments in our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Refer to those financial statements for a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income attributable to Hilton stockholder. For a discussion of our definition of EBITDA and Adjusted EBITDA, how management uses it to manage our business and material limitations on its usefulness, refer to Key Business and Financial Metrics Used by Management. The following table sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amounts, for the nine months ended September 30, 2013 and 2012:
Nine Months Ended
September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Revenues: |
||||||||||||
Ownership (1) |
$ | 3,003 | $ | 2,951 | 1.8 | |||||||
Management and franchise (2) |
938 | 877 | 7.0 | |||||||||
Timeshare |
809 | 822 | (1.6 | ) | ||||||||
|
|
|
|
|||||||||
Segment revenues |
4,750 | 4,650 | 2.2 | |||||||||
Other revenues from managed and franchised properties |
2,433 | 2,378 | 2.3 | |||||||||
Other revenues (3) |
48 | 46 | 4.3 | |||||||||
Intersegment fees elimination (1)(2)(3) |
(139) | (136) | 2.2 | |||||||||
|
|
|
|
|||||||||
Total revenues |
$ | 7,092 | $ | 6,938 | 2.2 | |||||||
|
|
|
|
|||||||||
Adjusted EBITDA |
||||||||||||
Ownership (1)(4) |
$ | 672 | $ | 566 | 18.7 | |||||||
Management and franchise (2) |
938 | 877 | 7.0 | |||||||||
Timeshare |
205 | 198 | 3.5 | |||||||||
Corporate and other (3) |
(208) | (207) | 0.5 | |||||||||
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 1,607 | $ | 1,434 | 12.1 | |||||||
|
|
|
|
(1) | Includes charges to our timeshare segment by our ownership segment for rental fees and fees for other amenities, which are eliminated in our condensed consolidated financial statements. These charges totaled $19 million and $17 million for the nine months ended September 30, 2013 and 2012, respectively. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to the ownership segment and a cost to the timeshare segment. |
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(2) | Includes management, royalty, and intellectual property fees of $71 million and $70 million for the nine months ended September 30, 2013 and 2012, respectively. These fees are charged to consolidated owned and leased properties and are eliminated in our condensed consolidated financial statements. Also, includes a licensing fee of $40 million and $39 million for the nine months ended September 30, 2013 and 2012, respectively, which is charged to our timeshare segment by our management and franchise segment and is eliminated in our condensed consolidated financial statements. |
(3) | Includes charges to consolidated owned and leased properties for laundry services of $7 million for the nine months ended September 30, 2013 and 2012, respectively. These charges are earned by our Other category and therefore are eliminated in our condensed consolidated financial statements. |
(4) | Includes Adjusted EBITDA from unconsolidated affiliates. |
Ownership
Ownership segment revenues increased $52 million primarily due to an improvement in RevPAR of 4.5 percent at our comparable owned and leased hotels. Refer to RevenuesOwned and leased hotels within this section for further discussion on the increase in revenues from our comparable owned and leased hotels. Our ownership segments Adjusted EBITDA increased $106 million primarily as a result of the increase in ownership segment revenues of $52 million and the decrease in segment operating expenses of $50 million. Refer to Operating ExpensesOwned and leased hotels within this section for further discussion on the decrease in operating expenses.
Management and franchise
Management and franchise segment revenues increased $61 million primarily as a result of increases in RevPAR of 6.2 percent and 5.2 percent at our comparable managed and franchised properties, respectively, and the net addition of hotels added to our managed and franchised system. Refer to RevenuesManagement and franchise fees and other within this section for further discussion on the increase in revenues from our comparable managed and franchised properties. Our management and franchise segments Adjusted EBITDA increased as a result of the increase in management and franchise segment revenues.
Timeshare
Refer to RevenuesTimeshare within this section for a discussion of the decrease in revenues from our timeshare segment. Our timeshare segments Adjusted EBITDA increased $7 million as a result of the $23 million decrease in timeshare operating expense, offset by the $13 million decrease in timeshare revenue. Refer to Operating ExpensesTimeshare within this section for a discussion of the decrease in operating expenses from our timeshare segment.
Year Ended December 31, 2012 Compared with Year Ended December 31, 2011
For 2012, the growth in hotel room demand continued from 2011 and 2010, as we experienced system-wide improvement in occupancy, ADR, and RevPAR, compared to the year ended December 31, 2011. Despite challenges in specific markets, we were able to increase rates in markets where demand outpaced supply resulting in a 2.9 percent increase in system-wide ADR in the year ended December 31, 2012, compared to the year ended December 31, 2011. System-wide occupancy increased 1.9 percentage points in the year ended December 31, 2012, compared to the year ended December 31, 2011; and, the combination of improved occupancy and ADR drove a system-wide RevPAR increase of 5.7 percent in the year ended December 31, 2012, compared to the year ended December 31, 2011.
The system-wide increase in occupancy was led by our Asia Pacific region, which had an increase of 4.8 percentage points, and was lagged by our European hotels, which had a growth in occupancy of 1.3 percentage points. Our European hotels experienced a 2.5 percent increase in RevPAR in the year ended December 31, 2012, compared to the year ended December 31, 2011, partially attributable to the 2012 Summer Olympics held in
75
London. While political unrest in portions of the Middle East continued throughout 2012, the Middle East and Africa experienced a 2.8 percent increase in RevPAR in the year ended December 31, 2012, compared to the year ended December 31, 2011.
As of December 31, 2012, we had ten hotels in Japan, five of which were included in our ownership segment. Additionally, Hilton Grand Vacations had eight sales centers and offices in Japan. None of our hotels or offices in Japan were damaged in the March 2011 earthquake and tsunami. Our Japanese operations stabilized during the third quarter of 2011 and, from that time on, our Japanese hotels have experienced continued improvement in RevPAR, which increased 14.9 percent in the year ended December 31, 2012, compared to the year ended December 31, 2011 and supported the increase in RevPAR of 8.7 percent in our Asia Pacific region between periods. The Asia Pacific region experienced the largest increase in RevPAR of all our regions from 2011.
Year Ended
December 31, |
Increase / (Decrease) | |||||||||||||||
2012 | 2011 | $ change | % change | |||||||||||||
(in millions) | ||||||||||||||||
Revenues |
||||||||||||||||
Owned and leased hotels |
$ | 3,979 | $ | 3,898 | $ | 81 | 2.1 | |||||||||
Management and franchise fees and other |
1,088 | 1,014 | 74 | 7.3 | ||||||||||||
Timeshare |
1,085 | 944 | 141 | 14.9 | ||||||||||||
|
|
|
|
|
|
|||||||||||
6,152 | 5,856 | 296 | 5.1 | |||||||||||||
Other revenues from managed and franchised properties |
3,124 | 2,927 | 197 | 6.7 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total revenues |
9,276 | 8,783 | 493 | 5.6 | ||||||||||||
Expenses |
||||||||||||||||
Owned and leased hotels |
3,230 | 3,213 | 17 | 0.5 | ||||||||||||
Timeshare |
758 | 668 | 90 | 13.5 | ||||||||||||
Depreciation and amortization |
550 | 564 | (14) | (2.5 | ) | |||||||||||
Impairment losses |
54 | 20 | 34 | NM | (1) | |||||||||||
General, administrative, and other |
460 | 416 | 44 | 10.6 | ||||||||||||
|
|
|
|
|
|
|||||||||||
5,052 | 4,881 | 171 | 3.5 | |||||||||||||
Other expenses from managed and franchised properties |
3,124 | 2,927 | 197 | 6.7 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total expenses |
8,176 | 7,808 | 368 | 4.7 | ||||||||||||
Operating income |
1,100 | 975 | 125 | 12.8 | ||||||||||||
Interest income |
15 | 11 | 4 | 36.4 | ||||||||||||
Interest expense |
(569) | (643) | 74 | (11.5 | ) | |||||||||||
Equity in losses from unconsolidated affiliates |
(11) | (145) | 134 | (92.4 | ) | |||||||||||
Gain (loss) on foreign currency transactions |
23 | (21) | 44 | NM | (1) | |||||||||||
Other gain, net |
15 | 19 | (4) | (21.1 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Income before income taxes |
573 | 196 | 377 | NM | (1) | |||||||||||
Income tax benefit (expense) |
(214) | 59 | (273) | NM | (1) | |||||||||||
|
|
|
|
|
|
|||||||||||
Net income |
359 | 255 | 104 | 40.8 | ||||||||||||
Net income attributable to noncontrolling interests |
(7) | (2) | (5) | NM | (1) | |||||||||||
|
|
|
|
|
|
|||||||||||
Net income attributable to Hilton stockholder |
$ | 352 | $ | 253 | $ | 99 | 39.1 | |||||||||
|
|
|
|
|
|
(1) | Fluctuation in terms of percentage change is not meaningful. |
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Year Ended
December 31, 2012 |
Variance
2012 vs. 2011 |
|||||||
Comparable Hotel Statistics |
||||||||
Owned and leased hotels |
||||||||
Occupancy |
74.5 | % | 2.3 | %pts | ||||
ADR |
$ | 183.29 | 1.0 | % | ||||
RevPAR |
$ | 136.55 | 4.2 | % | ||||
Managed and franchised hotels |
||||||||
Occupancy |
70.8 | % | 1.9 | %pts | ||||
ADR |
$ | 126.17 | 3.0 | % | ||||
RevPAR |
$ | 89.34 | 5.8 | % | ||||
System-wide |
||||||||
Occupancy |
71.1 | % | 1.9 | %pts | ||||
ADR |
$ | 131.35 | 2.9 | % | ||||
RevPAR |
$ | 93.38 | 5.7 | % |
Revenues
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 3,979 | $ | 3,898 | 2.1 | |||||||
Management and franchise fees and other |
1,088 | 1,014 | 7.3 | |||||||||
Timeshare |
1,085 | 944 | 14.9 | |||||||||
|
|
|
|
|||||||||
$ | 6,152 | $ | 5,856 | 5.1 | ||||||||
|
|
|
|
Revenues as presented in this section, excludes other revenues from managed and franchised properties of $3,124 million and $2,927 million during the years ended December 31, 2012 and 2011, respectively.
Owned and leased hotels
During the year ended December 31, 2012, the improved performance of our owned and leased hotels primarily was a result of improvement in RevPAR of 4.2 percent at our comparable owned and leased hotels.
As of December 31, 2012, we had 35 consolidated owned and leased hotels located in the U.S., comprising 24,054 rooms. Revenue at our U.S. owned and leased hotels for the years ended December 31, 2012 and 2011 totaled $1,922 million and $1,822 million, respectively. The increase of $100 million, or 5.5 percent, was primarily driven by an increase in RevPAR of 5.1 percent, which was due to increases in ADR and occupancy at our U.S. comparable owned and leased hotels of 1.5 percent and 2.7 percentage points, respectively.
Room revenue from transient guests at our U.S. comparable owned and leased hotels increased 10.4 percent, due to increases in transient ADR of 2.9 percent and transient occupancy of 7.3 percent. The increased transient room revenue was in part offset by decreases in room revenue from group travel at our U.S. comparable owned and leased hotels of 3.0 percent during the year ended December 31, 2012, compared to the year ended December 31, 2011. The decrease in group room revenue at our U.S. comparable owned and leased hotels was primarily due to one large group at one hotel driving significant group room revenue in 2011 that did not recur in 2012. Excluding this one hotel from the prior year results, our group room revenue at our U.S. comparable owned and leased hotels increased 2.0 percent.
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As of December 31, 2012, we had 94 consolidated owned and leased hotels located outside of the U.S., comprising 26,565 rooms. Revenue from our international owned and leased hotels totaled $2,057 million and $2,076 million for the years ended December 31, 2012 and December 31, 2011, respectively. The revenue decrease of $19 million, or 0.9 percent, was primarily due to an unfavorable movement in foreign currency rates of $76 million. On a currency neutral basis, international owned and leased hotel revenue increased $57 million, or 2.9 percent. The increase was primarily driven by an increase in RevPAR of 3.4 percent, which was due to an increase in occupancy at our comparable international owned and leased hotels of 1.9 percentage points, while ADR remained relatively consistent period over period. The increase was also due to recovery in Japan as operations stabilized in the third quarter of 2011 after the natural disasters negatively impacted revenues for the first half of 2011. This recovery, on a currency neutral basis, resulted in an increase in RevPAR at our comparable Japanese owned and leased hotels of 18.2 percent, which was driven by an increase in occupancy and ADR of 10.5 percentage points and 2.1 percent, respectively.
Management and franchise fees and other
Management and franchise fee revenue for the years ended December 31, 2012 and 2011 totaled $1,032 million and $965 million, respectively. The increase of $67 million, or 6.9 percent, in our management and franchise business reflects increases in RevPAR of 4.9 percent and 6.2 percent at our comparable managed and franchised properties, respectively. The increases in RevPAR for both comparable periods for managed and franchised hotels were primarily driven by increased occupancy and rates charged to guests.
The addition of new hotels to our managed and franchised system also contributed to the growth in revenue. We added 13 managed properties on a net basis, contributing an additional 4,265 rooms to our system, as well as 107 franchised properties on a net basis, providing an additional 14,007 rooms to our system. As new hotels are established in our system, we expect the fees received from such hotels to increase as they are part of our system for full periods.
Other revenues increased $7 million, or 14.3 percent, between periods, totaling $56 million and $49 million, respectively, for the years ended December 31, 2012 and 2011.
Timeshare
Timeshare revenue for the year ended December 31, 2012 was $1,085 million, an increase of $141 million, or 14.9 percent, from $944 million during the year ended December 31, 2011. This increase was primarily due to a $66 million increase in revenue from the sale of timeshare units developed by us, as well as an increase of $46 million in sales commissions and fees earned on projects developed by third parties. Additionally, our revenue from resorts operations and financing and other revenues both increased $9 million.
Operating Expenses
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 3,230 | $ | 3,213 | 0.5 | |||||||
Timeshare |
758 | 668 | 13.5 |
U.S. owned and leased hotel expense totaled $1,370 million and $1,345 million, respectively, for the years ended December 31, 2012 and 2011. The increase of $25 million, or 1.9 percent, was partially due to increased occupancy of 2.7 percentage points at our comparable U.S. owned and leased hotels, which resulted in an increase in labor and utility costs. The increase was also due to increases to sales and marketing expenses, insurance expenses, and property taxes at our U.S. owned and leased hotels.
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International owned and leased hotel expense decreased $8 million, or 0.4 percent, to $1,860 million from $1,868 million, respectively, for the year ended December 31, 2012 compared to the year ended December 31, 2011. However, there were foreign currency movements of $66 million between the years ended December 31, 2012 and 2011, which decreased owned and leased hotel expenses. International owned and leased hotel expenses, on a currency neutral basis, increased $58 million. The increase in currency neutral expense was primarily due to increased occupancy of 1.9 percentage points at our comparable international owned and leased hotels, which resulted in an increase in variable operating expenses and energy costs. The increase was also due to increases in rent expenses, certain of which have a variable component based on hotel revenues or profitability, as well as repair and maintenance expenses, insurance expenses, and property taxes at our international owned and leased hotels.
Timeshare expense increased $90 million for the year ended December 31, 2012, compared to the year ended December 31, 2011 primarily due to increased sales, marketing, general, and administrative costs associated with the increase in timeshare revenue during the same period.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Depreciation and amortization |
$ | 550 | $ | 564 | (2.5 | ) |
Depreciation and amortization expense decreased $14 million for the year ended December 31, 2012, compared to the year ended December 31, 2011. Depreciation expense, including amortization of assets recorded under capital leases, decreased $33 million primarily due to capital lease amendments which resulted in extending asset useful lives in the second half of 2011, as well as 2011 impairments, which resulted in lower depreciable asset bases for 2012. These instances led to lower depreciation expense on the same assets for the year ended December 31, 2012 compared to the year ended December 31, 2011. Amortization expense increased $19 million primarily due to capitalized software that was placed in service during the year ended December 31, 2012.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Impairment losses |
$ | 54 | $ | 20 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
During the year ended December 31, 2012, certain specific markets and properties, particularly in Europe, continued to face operating and competitive challenges. Such challenges caused a decline in market value of certain corporate buildings in the current year and in expected future results for certain owned and leased properties, which caused us to evaluate the carrying values of these affected properties for impairment. During 2012, we recognized impairment losses of $42 million related to our owned and leased hotels, $11 million of impairment losses related to certain corporate office facilities, and $1 million of impairment losses related to one cost method investment. During 2011, we recognized impairment losses of $17 million related to our owned and leased hotels and $3 million on timeshare properties.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
General, administrative, and other expense |
$ | 460 | $ | 416 | 10.6 |
General and administrative expenses consist of our corporate operations, compensation and related expenses, including share-based compensation, and other operating costs.
79
General and administrative expenses for the years ended December 31, 2012 and 2011 totaled $398 million and $377 million, respectively. In 2011, we recorded a one-time $20 million insurance recovery related to a prior year legal settlement. Excluding this recovery, general and administrative expenses increased $1 million for the year ended December 31, 2012, compared to the year ended December 31, 2011. The increase includes a $31 million increase in share-based compensation expense due to the acceleration of certain payments under our share-based compensation plan. These increases were offset by decreases in employee retirement costs from the acceleration of a $13 million prior service credit relating to the freeze of our U.K. Pension Plan agreed to in March 2012, reorganization costs of $16 million that were recorded in 2011, and other operating costs.
Other expenses were $62 million and $39 million, respectively, for the years ended December 31, 2012 and 2011. This increase of $23 million was due to an increase of $16 million in various operating expenses incurred for the incidental support of hotel operations and an increase of $3 million for guarantee payments.
Non-operating Income and Expenses
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Interest expense |
$ | 569 | $ | 643 | (11.5 | ) |
Interest expense decreased $74 million for the year ended December 31, 2012, compared to the year ended December 31, 2011. The decrease in interest expense was attributable to debt payments during the fourth quarter 2011, which resulted in lower 2012 debt principal balances to which interest was applied.
The weighted average effective interest rate on our outstanding debt was approximately 3.4 percent and 3.7 percent for the years ended December 31, 2012 and 2011, respectively.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Equity in losses from unconsolidated affiliates |
$ | 11 | $ | 145 | (92.4 | ) |
The $134 million decrease in the loss from prior year was primarily due to other-than-temporary impairments on our equity investments of $19 million for the year ended December 31, 2012, as compared to other-than-temporary impairments of $141 million for the year ended December 31, 2011 resulting from declines in certain joint ventures current and expected future operating results.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Gain (loss) on foreign currency transactions |
$ | 23 | $ | (21 | ) | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
The net gain (loss) on foreign currency transactions primarily relates to changes in foreign currency rates relating to short-term cross-currency intercompany loans.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Other gain, net |
$ | 15 | $ | 19 | (21.1 | ) |
80
The other gain, net for the year ended December 31, 2012 was primarily related to a pre-tax gain of $5 million resulting from the sale of our interest in an investment in affiliate accounted for under the equity method, as well as a $6 million gain due to the resolution of certain contingencies relating to historical asset sales.
The other gain, net for the year ended December 31, 2011 was primarily due to a gain of $16 million on the sale of our former headquarters building in Beverly Hills, California, as well a gain of $13 million related to the restructuring of a capital lease. These gains were offset by a loss of $10 million related to the sale of our interest in a hotel development joint venture.
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Income tax benefit (expense) |
$ | (214 | ) | $ | 59 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
Our income tax expense for the year ended December 31, 2012 was primarily a result of $201 million related to our U.S. federal income tax provision. For the year ended December 31, 2011, our income tax expense, which was primarily related to $69 million and $50 million in U.S. federal and foreign income tax provision, respectively, was offset by a release of $182 million in valuation allowance against our deferred tax assets related to U.S. federal foreign tax credits resulting in an overall tax benefit. Based on our consideration of all positive and negative evidence available, we believe that it is more likely than not we will be able to realize our U.S. federal foreign tax credits.
81
Segment Results
We evaluate our business segment operating performance using segment revenue and segment Adjusted EBITDA, as described in Note 22: Business Segments in our audited consolidated financial statements included elsewhere in this prospectus. Refer to those financial statements for a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income attributable to Hilton stockholder. For a discussion of our definition of EBITDA and Adjusted EBITDA, how we use it and material limitation on its usefulness, refer to Key Business and Financial Metrics Used by Management. The following table sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amounts, for the years ended December 31, 2012 and 2011:
Year ended December 31, |
Percent
Change |
|||||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||||
(in millions) | ||||||||||||
Revenues |
||||||||||||
Ownership |
$ | 4,006 | $ | 3,926 | 2.0 | |||||||
Management and franchise |
1,180 | 1,095 | 7.8 | |||||||||
Timeshare |
1,085 | 944 | 14.9 | |||||||||
|
|
|
|
|||||||||
Segment revenues |
6,271 | 5,965 | 5.1 | |||||||||
|
|
|
|
|||||||||
Other revenues from managed and franchised properties |
3,124 | 2,927 | 6.7 | |||||||||
Other |
66 | 58 | 13.8 | |||||||||
Intersegment fees elimination (1)(2)(3) |
(185) | (167) | 10.8 | |||||||||
|
|
|
|
|||||||||
$ | 9,276 | $ | 8,783 | 5.6 | ||||||||
|
|
|
|
|||||||||
Adjusted EBITDA: |
||||||||||||
Ownership (1)(4) |
$ | 793 | $ | 725 | 9.4 | |||||||
Management and franchise (2) |
1,180 | 1,095 | 7.8 | |||||||||
Timeshare |
252 | 207 | 21.7 | |||||||||
Corporate and other (3) |
(269) | (274) | (1.8) | |||||||||
|
|
|
|
|||||||||
$ | 1,956 | $ | 1,753 | 11.6 | ||||||||
|
|
|
|
(1) | Includes charges to our timeshare segment by our ownership segment for rental fees and fees for other amenities, which are eliminated in our consolidated financial statements. These charges totaled $24 million and $27 million for the years ended December 31, 2012 and 2011, respectively. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to ownership Adjusted EBITDA and a cost to the timeshare segment. Additionally, includes various other intercompany charges of $3 million for the year ended December 31, 2012, which are eliminated in our consolidated financial statements. |
(2) | Includes management, royalty, and intellectual property fees of $96 million and $88 million for the years ended December 31, 2012 and 2011, respectively. These fees are charged to consolidated owned and leased properties and are eliminated in our consolidated financial statements. Also, includes a licensing fee of $52 million and $43 million for the years ended December 31, 2012 and 2011, respectively, charged to our timeshare segment by our management and franchise segment and eliminated in our consolidated financial statements. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to management and franchise Adjusted EBITDA and a cost to the ownership and timeshare segments. |
(3) | Includes charges to consolidated owned and leased properties for laundry services of $10 million and $9 million for the years ended December 31, 2012 and 2011, respectively. These charges are earned by our Other category and therefore are eliminated in our consolidated financial statements. |
(4) | Includes unconsolidated affiliate Adjusted EBITDA. |
82
Ownership
Ownership segment revenues increased primarily due to an improvement in RevPAR of 4.2 percent at our comparable owned and leased hotels. Refer to RevenuesOwned and leased hotels within this section for further discussion on the increase in revenues from our comparable owned and leased hotels. Our ownership segments Adjusted EBITDA increased primarily as a result of the increase in ownership segment revenues of $80 million offset by an increase in operating expenses of $17 million at our owned and leased hotels. Refer to Operating ExpensesOwned and leased hotels within this section for further discussion on the increase in operating expenses at our owned and leased hotels.
Management and franchise
Management and franchise segment revenues increased primarily as a result of increases in RevPAR of 4.9 percent and 6.2 percent at our comparable managed and franchised properties, respectively, and the net addition of hotels added to our managed and franchised system. Refer to RevenuesManagement and franchise fees and other within this section for further discussion on the increase in revenues from our comparable managed and franchised properties. Our management and franchise segments Adjusted EBITDA increased as a result of the increase in management and franchise segment revenues.
Timeshare
Refer to RevenuesTimeshare within this section for a discussion of the increase in revenues from our timeshare segment. Our timeshare segments Adjusted EBITDA increased as a result of the $141 million increase in timeshare revenue, offset by a $90 million increase in timeshare operating expenses. Refer to Operating ExpensesTimeshare within this section for a discussion of the increase in operating expenses from our timeshare segment.
83
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
In 2011, we continued to experience the recovery in hotel room demand that began in 2010, as we had system-wide improvement in occupancy, ADR, and RevPAR during the year ended December 31, 2011 compared to the year ended December 31, 2010. System-wide occupancy increased 2.1 percentage points, in the year ended December 31, 2011, compared to the year ended December 31, 2010, although certain geographic regions had lower growth or occupancy, which was driven by unrest in the Middle East and the tsunami in Japan. Despite challenges in specific markets, we were able to increase rates in markets where demand outpaced supply. System-wide ADR increased 2.8 percent, on a currency neutral basis, in the year ended December 31, 2011, compared to the year ended December 31, 2010, reflecting an improvement in pricing power and stronger year-over-year revenue from business travel. The combination of improved occupancy and ADR drove a system-wide RevPAR increase of 5.9 percent, on a currency neutral basis, in the year ended December 31, 2011, compared to the year ended December 31, 2010.
Year Ended
December 31, |
Increase / (Decrease) | |||||||||||||||
2011 | 2010 | $ change | % change | |||||||||||||
(in millions) | ||||||||||||||||
Revenues |
||||||||||||||||
Owned and leased hotels |
$ | 3,898 | $ | 3,667 | $ | 231 | 6.3 | |||||||||
Management and franchise fees and other |
1,014 | 901 | 113 | 12.5 | ||||||||||||
Timeshare |
944 | 863 | 81 | 9.4 | ||||||||||||
|
|
|
|
|
|
|||||||||||
5,856 | 5,431 | 425 | 7.8 | |||||||||||||
Other revenues from managed and franchised properties |
2,927 | 2,637 | 290 | 11.0 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total revenues |
8,783 | 8,068 | 715 | 8.9 | ||||||||||||
Expenses |
||||||||||||||||
Owned and leased hotels |
3,213 | 3,009 | 204 | 6.8 | ||||||||||||
Timeshare |
668 | 634 | 34 | 5.4 | ||||||||||||
Depreciation and amortization |
564 | 574 | (10) | (1.7) | ||||||||||||
Impairment losses |
20 | 24 | (4) | (16.7) | ||||||||||||
General, administrative, and other |
416 | 637 | (221) | (34.7) | ||||||||||||
|
|
|
|
|
|
|||||||||||
4,881 | 4,878 | 3 | 0.1 | |||||||||||||
Other expenses from managed and franchised properties |
2,927 | 2,637 | 290 | 11.0 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total expenses |
7,808 | 7,515 | 293 | 3.9 | ||||||||||||
Operating income |
975 | 553 | 422 | 76.3 | ||||||||||||
Interest income |
11 | 9 | 2 | 22.2 | ||||||||||||
Interest expense |
(643) | (946) | 303 | (32.0) | ||||||||||||
Equity in losses from unconsolidated affiliates |
(145) | (12) | (133) | NM | (1) | |||||||||||
Gain (loss) on foreign currency transactions |
(21) | 18 | (39) | NM | (1) | |||||||||||
Gain on debt restructuring |
| 789 | (789) | NM | (1) | |||||||||||
Other gain, net |
19 | 8 | 11 | NM | (1) | |||||||||||
|
|
|
|
|
|
|||||||||||
Income before income taxes |
196 | 419 | (223) | (53.2) | ||||||||||||
Income tax benefit (expense) |
59 | (308) | 367 | NM | (1) | |||||||||||
|
|
|
|
|
|
|||||||||||
Net income |
255 | 111 | 144 | NM | (1) | |||||||||||
Net loss (income) attributable to noncontrolling interests |
(2) | 17 | (19) | NM | (1) | |||||||||||
|
|
|
|
|
|
|||||||||||
Net income attributable to Hilton stockholder |
$ | 253 | $ | 128 | $ | 125 | 97.7 | |||||||||
|
|
|
|
|
|
(1) | Fluctuation in terms of percentage change is not meaningful. |
84
Year Ended
December 31, 2011 |
Variance
2011 vs. 2010 |
|||||||
Comparable Hotel Statistics |
||||||||
Owned and leased hotels |
||||||||
Occupancy |
73.7 | % | 0.1 | %pts | ||||
ADR |
$ | 186.56 | 4.1 | % | ||||
RevPAR |
$ | 137.41 | 4.3 | % | ||||
Managed and franchised hotels |
||||||||
Occupancy |
69.4 | % | 2.3 | %pts | ||||
ADR |
$ | 124.11 | 2.7 | % | ||||
RevPAR |
$ | 86.09 | 6.3 | % | ||||
System-wide |
||||||||
Occupancy |
69.7 | % | 2.1 | %pts | ||||
ADR |
$ | 130.15 | 2.8 | % | ||||
RevPAR |
$ | 90.70 | 5.9 | % |
Revenues
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 3,898 | $ | 3,667 | 6.3 | |||||||
Management and franchise fees and other |
1,014 | 901 | 12.5 | |||||||||
Timeshare |
944 | 863 | 9.4 | |||||||||
|
|
|
|
|||||||||
$ | 5,856 | $ | 5,431 | 7.8 | ||||||||
|
|
|
|
Revenues as presented in this section, excludes other revenues from managed and franchised properties of $2,927 million and $2,637 million during the years ended December 31, 2011 and 2010, respectively.
Owned and leased hotels
During the year ended December 31, 2011, the improved performance of our owned and leased hotels primarily was a result of an increase in RevPAR of 4.3 percent at our comparable owned and leased hotels and an additional $35 million in revenue from the Hilton Orlando Lake Buena Vista, which we acquired in August 2010.
As of December 31, 2011, we had 35 consolidated owned and leased hotels located in the U.S., comprising 24,044 rooms. Revenue at our U.S. owned and leased hotels for the years ended December 31, 2011 and 2010 totaled $1,822 million and $1,707 million, respectively. The increase of $115 million, or 6.7 percent, was primarily driven by an increase in RevPAR of 5.1 percent, which was due to an increase in ADR at our U.S. comparable owned and leased hotels of 5.1 percent, while occupancy remained consistent.
Room revenue from group travel at our U.S. comparable owned and leased hotels increased 8.1 percent, due to increases in group ADR and group occupancy of 4.4 percent and 3.6 percent, respectively. Room revenue from transient guests at our U.S. comparable owned and leased hotels increased 3.3 percent, due to an increase in transient ADR of 6.0 percent, offset by a decrease in transient occupancy of 2.5 percent.
As of December 31, 2011, we had 94 consolidated owned and leased hotels located outside of the U.S., comprising 26,578 rooms. Revenue from our international owned and leased hotels totaled $2,076 million and $1,960 million for the years ended December 31, 2011 and December 31, 2010, respectively. The revenue increase of $116 million, or 5.9 percent, was primarily due to a favorable movement in foreign currency rates of
85
$82 million. On a currency neutral basis, international owned and leased hotel revenue increased $34 million, or 1.7 percent. The increase was primarily driven by an increase in RevPAR of 3.6 percent, which was due to an increase in ADR at our comparable international owned and leased hotels of 3.3 percent, while occupancy remained relatively flat.
Management and franchise fees and other
Management and franchise fee revenue for the years ended December 31, 2011 and 2010 totaled $965 million and $851 million, respectively. The increase of $114 million, or 13.4 percent, in our management and franchise business reflects increases in RevPAR of 4.9 percent and 6.8 percent at our comparable managed and franchised properties, respectively. The increases in RevPAR for both comparable periods for managed and franchised hotels were primarily driven by global economic recovery. Additionally, we recognized $24 million of termination fees during 2011, primarily related to the early termination of two management contracts.
The addition of new hotels to our managed and franchised system also contributed to the growth in revenue. We added 32 managed properties on a net basis, contributing an additional 8,122 rooms to our system, as well as 103 franchised properties on a net basis, providing an additional 15,431 rooms to our system. As new hotels are established in our system, we expect the fees received from such hotels to increase as they are part of our system for full periods.
Other revenues decreased $1 million, or 2.0 percent, between periods, totaling $49 million and $50 million, respectively, for the years ended December 31, 2011 and 2010.
Timeshare
Timeshare revenue for the year ended December 31, 2011 was $944 million, an increase of $81 million, or 9.4 percent, from $863 million during the year ended December 31, 2010. This increase was primarily due to an increase of $28 million in sales and marketing fee revenue from selling timeshare properties developed by third parties and a $23 million increase in revenue from the sale of timeshare units developed by us. Our revenue from resort operations and financing and other revenues also increased $19 million and $7 million, respectively.
Operating Expenses
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 3,213 | $ | 3,009 | 6.8 | |||||||
Timeshare |
668 | 634 | 5.4 |
U.S. owned and leased hotel expense totaled $1,345 million and $1,256 million, respectively, for the years ended December 31, 2011 and 2010. As occupancy was relatively unchanged between the years, the increase of $89 million, or 7.1 percent, was primarily due to increases in wages and benefits, energy costs, as well as an increase in food and beverage expenses at our U.S. comparable owned and leased hotels, which correlates with the increase in food and beverage revenue at those hotels.
International owned and leased hotel expense increased $115 million, or 6.6 percent, from $1,753 million to $1,868 million, respectively, for the year ended December 31, 2011, compared to the year ended December 31, 2010. The primary driver of this increase was foreign currency movements of $70 million between the years ended December 31, 2011 and 2010. International owned and leased hotel expenses, on a currency neutral basis, increased $45 million. As occupancy remained relatively consistent, the increase in currency neutral expense was primarily due to increases in wages and benefits at our international owned and leased hotels.
86
Timeshare expense increased $34 million for the year ended December 31, 2011, compared to the year ended December 31, 2010, primarily due to increased sales, marketing, general, and administrative costs as well as increased timeshare cost of sales.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Depreciation and amortization |
$ | 564 | $ | 574 | (1.7 | ) |
Depreciation and amortization expense decreased $10 million for the year ended December 31, 2011, compared to the year ended December 31, 2010, due to certain furniture, fixtures, and equipment being fully depreciated in 2011.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Impairment losses |
$ | 20 | $ | 24 | (16.7 | ) |
While the performance of our owned and leased portfolio generally improved during 2011, certain segments and markets continued to face challenges. Such challenges caused a decline in 2011 results and expected future results for certain owned and leased properties, which caused us to evaluate the carrying values of specific owned and leased properties. During 2011, we recognized impairment on various property and equipment, including $17 million related to our owned and leased hotels and $3 million on timeshare properties. During 2010, we recognized impairment of $23 million related to our owned and leased hotels and $1 million on timeshare properties.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
General, administrative, and other expenses |
$ | 416 | $ | 637 | (34.7 | ) |
General and administrative expenses consist of our corporate operations, compensation and related expenses, including share-based compensation, and other operating costs.
General and administrative expenses for the years ended December 31, 2011 and 2010 totaled $377 million and $578 million, respectively. In 2011, we recorded a one-time $20 million insurance recovery related to a prior year legal settlement. In 2010, we recorded $150 million of expense related to a legal settlement. Excluding this recovery and legal settlement, general and administrative expenses decreased $31 million. The decrease was primarily due to higher share-based compensation expense in 2010 of $37 million, resulting from the modification of our share-based compensation plan, offset by increases in various other general and administrative costs.
Other expenses were $39 million and $59 million, respectively, for the years ended December 31, 2011 and 2010. This decrease of $20 million, or 33.9 percent, was due to a decrease of $9 million in guarantee payments related to management contracts and a net decrease of $11 million in various operating expenses incurred for the incidental support of hotel operations.
87
Non-operating Income and Expenses
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Interest expense |
$ | 643 | $ | 946 | (32.0 | ) |
Interest expense decreased $303 million for the year ended December 31, 2011, compared to the year ended December 31, 2010. The decrease was primarily due to a decrease in our long-term debt that occurred as a result of the restructuring (the Debt Restructuring) of our senior mortgage loan and our secured mezzanine loans (collectively, the Secured Debt) in April 2010. The Debt Restructuring resulted in a $4.0 billion overall reduction in our indebtedness. Additionally, the decrease is the result of a reduction in the long-term debt balance due to principal payments of $726 million made during the year ended December 31, 2011 and the expiration of our interest rate swaps at the end of 2010. This decrease was partially offset by an increase in the interest rate spreads on certain portions of the Secured Debt in conjunction with the Debt Restructuring. The increases in the interest rate spreads were partially offset by a decrease in the London Interbank Offered Rate (LIBOR) between periods (see Liquidity and Capital Resources) and the reduction of the principal of third-party debt.
The weighted average effective interest rate on our outstanding debt was approximately 3.7 percent and 4.9 percent for the years ended December 31, 2011 and 2010, respectively.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Equity in losses from unconsolidated affiliates |
$ | 145 | $ | 12 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
The increase in the loss from prior year was primarily due to other-than-temporary impairments on our equity investments of $141 million for the year ended December 31, 2011, as compared to other than temporary impairments of $6 million for the year ended December 31, 2010. In connection with the economic downturn and recent valuations received for our equity method investments, which indicate a lack of recoverability to the fair values assigned during our acquisition in October 2007, we determined that we had an other-than-temporary impairment on 20 and three of our equity method investments during 2011 and 2010, respectively. These impairments resulted from declines in certain hotel joint ventures current and expected future operating results. The amount of the impairment was based on the excess of carrying amount of the assets over the fair value as calculated using discounted operating cash flows.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Gain (loss) on foreign currency transactions |
$ | (21 | ) | $ | 18 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
88
The net gain (loss) on foreign currency transactions primarily relates to changes in foreign currency rates relating to short-term cross-currency intercompany loans. Additionally, the gain in 2010 partially resulted from the settlement of our portfolio of Euro (EUR) and Australian dollar (AUD) foreign currency options with a notional value of approximately EUR 540 million and AUD 374 million, as well as the settlement of our remaining undesignated foreign currency options, for a gain of $20 million.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Gain on debt restructuring |
$ | | $ | 789 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
The gain on debt restructuring of $789 million for the year ended December 31, 2010 relates to the Debt Restructuring, of which $4 million of unamortized deferred financing costs were expensed and $39 million of fees were incurred as part of the overall transaction and were required to be expensed in accordance with the accounting guidance for debt modifications and extinguishments. See the table below for a reconciliation of the $789 million gain:
(in millions) | ||||
Gain on excess of carrying amount over reacquisition price of certain debt |
$ | 910 | ||
Less: write-off of existing deferred financing costs |
(4) | |||
Less: fees incurred as part of Debt Restructuring |
(39) | |||
Loss on excess of reacquisition price over carrying value of debt extinguished by an affiliate on behalf of the Company |
(78) | |||
|
|
|||
$ | 789 | |||
|
|
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Other gain, net |
$ | 19 | $ | 8 | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
The other gain, net for the year ended December 31, 2011 was primarily due to a gain of $16 million on the sale of our former headquarters building in Beverly Hills, California, as well a gain of $13 million related to the restructuring of a capital lease. These gains were offset by a loss of $10 million related to the sale of our interest in a hotel development joint venture.
The other gain, net for the year ended December 31, 2010 was primarily related to a gain of $11 million related to the discounted acquisition of senior unsecured debt in December 2010.
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Income tax benefit (expense) |
$ | 59 | $ | (308) | NM | (1) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
For the year ended December 31, 2011, our income tax expense, which was primarily related to $69 million and $50 million in U.S. federal and foreign income tax provision, respectively, was offset by a release of
89
$182 million in valuation allowance against our deferred tax assets related to U.S. federal foreign tax credits resulting in an overall tax benefit. Based on our consideration of all positive and negative evidence available, we believe that it is more likely than not that we will be able to realize our U.S. federal foreign tax credits. Our income tax expense for the year ended December 31, 2010 was primarily a result of $147 million related to our U.S. federal income tax provision and $185 million in provision for uncertain tax positions.
Segment Results
We evaluate our business segment operating performance using segment revenue and segment Adjusted EBITDA, as described in Note 22: Business Segments in our audited consolidated financial statements included elsewhere in this prospectus. Refer to those financial statements for a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income attributable to Hilton stockholder. For a discussion of our definition of EBITDA and Adjusted EBITDA, how we use it and material limitation on its usefulness, refer to Key Business and Financial Metrics Used by Management. The following table sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amounts, for the years ended December 31, 2011 and 2010:
Year ended December 31, |
Percent
Change |
|||||||||||
2011 | 2010 | 2011 vs. 2010 | ||||||||||
(in millions) | ||||||||||||
Revenues |
||||||||||||
Ownership |
$ | 3,926 | $ | 3,684 | 6.6 | |||||||
Management and franchise |
1,095 | 933 | 17.4 | |||||||||
Timeshare |
944 | 863 | 9.4 | |||||||||
|
|
|
|
|||||||||
Segment revenues |
5,965 | 5,480 | 8.9 | |||||||||
Other revenues from managed and franchised properties |
2,927 | 2,637 | 11.0 | |||||||||
Other |
58 | 59 | (1.7) | |||||||||
Intersegment fees elimination (1)(2)(3) |
(167) | (108) | 54.6 | |||||||||
|
|
|
|
|||||||||
$ | 8,783 | $ | 8,068 | 8.9 | ||||||||
|
|
|
|
|||||||||
Adjusted EBITDA: |
||||||||||||
Ownership (1)(4) |
$ | 725 | $ | 688 | 5.4 | |||||||
Management and franchise (2) |
1,095 | 927 | 18.1 | |||||||||
Timeshare |
207 | 212 | (2.4) | |||||||||
Corporate and other (3) |
(274) | (263) | 4.2 | |||||||||
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$ | 1,753 | $ | 1,564 | 12.1 | ||||||||
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(1) | Includes charges to our timeshare segment by our ownership segment for rental fees and fees for other amenities, which are eliminated in our consolidated financial statements. These charges totaled $27 million and $17 million for the years ended December 31, 2011 and 2010, respectively. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to ownership Adjusted EBITDA and a cost to the timeshare segment. |
(2) | Includes management, royalty, and intellectual property fees of $88 million and $82 million for the years ended December 31, 2011 and 2010, respectively. These fees are charged to consolidated owned and leased properties and are eliminated in our consolidated financial statements. Effective January 1, 2011, management and franchise began charging a licensing fee to our timeshare segment, which is also eliminated in our consolidated financial statements. This fee was $43 million for the year ended December 31, 2011. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to management and franchise Adjusted EBITDA and a cost to the ownership and timeshare segments. |
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(3) | Includes charges to consolidated owned and leased properties for services provided by our wholly-owned laundry business of $9 million for the years ended December 31, 2011 and 2010. These charges are eliminated in our consolidated financial statements. |
(4) | Includes unconsolidated affiliate Adjusted EBITDA. |
Ownership
Ownership segment revenues increased primarily due to an improvement in RevPAR of 4.3 percent at our comparable owned and leased hotels. Refer to RevenuesOwned and leased hotels within this section for further discussion on the increase in revenues from our comparable owned and leased hotels. Our ownership segments Adjusted EBITDA increased primarily as a result of the increase in ownership segment revenues of $242 million offset by an increase in operating expenses of $204 million at our owned and leased hotels. Refer to Operating ExpensesOwned and leased hotels within this section for further discussion on the increase in operating expenses at our owned and leased hotels.
Management and franchise
Management and franchise segment revenues increased primarily as a result of increases in RevPAR of 4.9 percent and 6.8 percent at our comparable managed and franchised properties, respectively, $24 million in termination fees recognized in 2011 and the net addition of hotels added to our managed and franchised system. Refer to RevenuesManagement and franchise fees and other within this section for further discussion on the increase in revenues from our comparable managed and franchised properties and the termination fees recognized in 2011. Our management and franchise segments Adjusted EBITDA increased as a result of the increase in management and franchise segment revenues.
Timeshare
Refer to RevenuesTimeshare within this section for a discussion of the increase in revenues from our timeshare segment. Our timeshare segments Adjusted EBITDA remained relatively flat as a result of the $81 million increase in revenues from our timeshare segment being offset by a $34 million increase in timeshare operating expenses. Refer to Operating ExpensesTimeshare within this section for a discussion of the increase in operating expenses from our timeshare segment. The increase in revenues from our timeshare segment was further offset by a $43 million licensing fee charged to our timeshare segment by our management and franchise segment, which was effective on January 1, 2011.
Liquidity and Capital Resources
Overview
As of September 30, 2013, we had total cash and cash equivalents of $1,226 million, including both restricted and unrestricted cash balances. Unrestricted cash and cash equivalents totaled $724 million as of September 30, 2013. Our restricted cash and cash equivalents totaled $502 million as of September 30, 2013. The majority of our restricted cash and cash equivalents balances related to cash collateral on our self-insurance programs and escrowed cash from our timeshare operations.
Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including corporate expenses, payroll and related benefits, legal costs, operating costs associated with the management of hotels, interest and scheduled principal payments on our outstanding indebtedness, contract acquisition costs and capital expenditures for renovations and maintenance at our owned hotels. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements at our owned and leased hotels, purchase commitments, costs associated with potential acquisitions and corporate capital expenditures.
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We finance our business activities primarily with existing cash and cash generated from our operations. We believe that this cash will be adequate to meet anticipated requirements for operating expenses and other expenditures, including corporate expenses, payroll and related benefits, legal costs and purchase commitments for the foreseeable future. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments across all three of our business segments.
The following table summarizes our net cash flows and key metrics related to our liquidity:
As of and for the nine months
ended September 30, |
Percent
Change |
|||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||
(in millions) | ||||||||||||
Net cash provided by operating activities |
$ | 1,024 | $ | 750 | 36.5 | |||||||
Net cash used in investing activities |
(252 | ) | (413 | ) | (39.0 | ) | ||||||
Net cash used in financing activities |
(789 | ) | (236 | ) | NM | (1) | ||||||
Working capital surplus (2) |
407 | 821 | (50.4 | ) |
As of and for the year ended
December 31, |
Percent Change | |||||||||||||||||||
2012 | 2011 | 2010 | 2012 vs. 2011 | 2011 vs. 2010 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Net cash provided by operating activities |
$ | 1,110 | $ | 1,167 | $ | 833 | (4.9 | ) | 40.1 | |||||||||||
Net cash used in investing activities |
(558 | ) | (463 | ) | (68 | ) | 20.5 | NM | (1) | |||||||||||
Net cash used in financing activities |
(576 | ) | (714 | ) | (703 | ) | (19.3 | ) | 1.6 | |||||||||||
Working capital surplus (2) |
478 | 826 | 1,093 | (42.1 | ) | (24.4 | ) |
(1) | Fluctuation in terms of percentage change is not meaningful. |
(2) | Total current assets less total current liabilities. |
Our ratio of current assets to current liabilities was 1.17, 1.20, and 1.37 as of September 30, 2013, December 31, 2012 and 2011, respectively.
Operating Activities
Cash flow from operating activities is primarily generated from management and franchise revenues, operating income from our owned and leased hotels and resorts and sales of timeshare units. In a recessionary market, we may experience significant declines in travel and, thus, declines in demand for our hotel and resort rooms and timeshare units. A decline in demand could have a material impact on our cash flow from operating activities.
Net cash provided by operating activities was $1,024 million for the nine months ended September 30, 2013, compared to $750 million for the nine months ended September 30, 2012. The $274 million increase was primarily due to an increase in operating income of $176 million and an improvement in our working capital surplus.
The net $57 million decrease in cash provided by operating activities during the year ended December 31, 2012, compared to the year ended December 31, 2011, was primarily due to changes in various working capital components and an increase in the change in restricted cash and cash equivalents of $65 million, which were partially offset by an increase in operating income of $125 million.
The net $334 million increase in cash provided by operating activities during the year ended December 31, 2011, compared to the year ended December 31, 2010, was primarily due to an increase in operating income of $422 million, changes in various working capital components, and a decrease in the change in restricted cash and cash equivalents of $39 million.
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Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2013 was $252 million, compared to $413 million during the nine months ended September 30, 2012. The $161 million decrease in cash used in investing activities was primarily attributable to a decrease in capital expenditures for property and equipment of $169 million and a decrease in software capitalization costs of $25 million. The decrease in capital expenditures was a result of the completion of renovations at a number of properties in 2012. The decrease in software capitalization costs was a result of corporate software projects that were completed in 2012. These decreases were offset by an increase in acquisitions of $30 million, primarily due to the acquisition of a parcel of land that we previously held under a long-term ground lease for $28 million. For the nine months ended September 30, 2013 and 2012, we capitalized labor costs relating to our investing activities, including capital expenditures and software development, of $10 million in both periods.
The $95 million increase in net cash used in investing activities during the year ended December 31, 2012, compared to the year ended December 31, 2011, was primarily attributable to an increase in capital expenditures for property and equipment of $44 million, a decrease in proceeds from asset dispositions of $80 million, and a decrease in contract acquisition costs of $22 million. The majority of the increase in capital expenditures related to improvements at existing hotel properties. The decrease in proceeds from asset dispositions was a result of proceeds of $8 million related to the sale of our interest in an investment accounted for under the equity method in 2012, compared to proceeds of $23 million and $65 million, respectively, from the sales of our interest in a hotel development joint venture and our former corporate headquarters office building in 2011. For the years ended December 31, 2012 and 2011, we capitalized labor costs relating to our investing activities, including capital expenditures and software development, of $14 million for both years.
The $395 million increase in net cash used in investing activities during the year ended December 31, 2011, compared to the year ended December 31, 2010, was primarily due to increases in capital expenditures for property and equipment of $241 million, contract acquisition costs of $47 million, and software capitalization costs of $73 million, offset by decreases in acquisition costs of $204 million, proceeds from asset dispositions of $88 million, and proceeds from the settlement of our foreign currency exchange derivative portfolio of $324 million. The majority of the increase in capital expenditures related to improvements at existing hotel properties. The decrease in acquisition costs was a result of the purchase of the Hilton Orlando Lake Buena Vista for a cash payment of $216 million in 2010, compared to acquisition costs of $12 million for the purchase of the remaining ownership interest in two hotels in 2011. For the years ended December 31, 2011 and 2010, we capitalized labor costs relating to our investing activities, including capital expenditures and software development, of $14 million and $3 million, respectively. The increase in the capitalization of labor was due to increased capital expenditures and increased software capitalization costs in 2011 compared to 2010.
Financing Activities
Net cash used in financing activities during the nine months ended September 30, 2013 was $789 million, compared to $236 million during the nine months ended September 30, 2012. The $553 million increase in cash used in financing activities was primarily attributable to an increase in net repayments of debt of $638 million primarily due to an increase in unscheduled, voluntary debt repayments.
Net cash used in financing activities during the year ended December 31, 2012, decreased $138 million compared to the year ended December 31, 2011, due to an increase in borrowings of $56 million, primarily related to our consolidated VIEs and a change in restricted cash and cash equivalents that increased cash available for financing activities by $212 million. The change in restricted cash and cash equivalents was primarily due to a decrease of $174 million in our prefunded cash reserves, which was a result of using the reserves for capital expenditures. These increases in cash provided by financing activities were partially offset by an increase in our debt repayments of $128 million, which primarily related to an increase in non-recourse debt repayments related to our consolidated VIEs of $90 million.
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Net cash used in financing activities during the year ended December 31, 2011 was $714 million compared to net cash used in financing activities during the year ended December 31, 2010 of $703 million, an increase of $11 million. During the year ended December 31, 2010, we had financing activities that resulted in $185 million of net cash used in financing activities that did not recur during the year ended December 31, 2011, primarily due to $111 million in net cash used in our debt restructuring that occurred in April 2010 (see Note 13: Debt in our audited consolidated financial statements included elsewhere in this prospectus for further discussion) and the acquisition of noncontrolling interests in two hotels for $107 million, offset by $33 million in contributions from noncontrolling interests.
The remaining increase in net cash used in financing activities during the year ended December 31, 2011 compared to the year ended December 31, 2010 was primarily a result of $448 million in additional repayment of debt offset by a smaller change in our restricted cash and cash equivalents of $224 million, both associated with requirements arising from our debt restructuring that occurred in April 2010.
Capital Expenditures
Our capital expenditures primarily include expenditures related to the renovation of existing owned and leased properties and our corporate facilities, as well as software capitalization costs related to various systems initiatives for the benefit of our hotel owners and our overall corporate operations. As of September 30, 2013, we had outstanding commitments under construction contracts of approximately $65 million for capital expenditures at certain owned and leased properties, including our consolidated VIEs. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.
Debt
As of September 30, 2013, our total indebtedness, excluding $309 million of our share of debt of our investments in affiliates, was approximately $15.0 billion, including $706 million of non-recourse debt. For further information on our total indebtedness, refer to Note 8: Debt in our unaudited condensed consolidated financial statements included elsewhere in this prospectus. In October 2013, prior to the Refinancing Transactions, we made an unscheduled, voluntary debt repayment of $450 million on our secured mezzanine loans.
Substantially all of our consolidated assets in which we hold an ownership interest are encumbered or have been pledged as collateral for our Secured Debt. Our debt contains certain restrictions on us incurring any additional indebtedness relating to secured assets, including the prohibition of us incurring indebtedness in the form of borrowed money and/or evidenced by bonds, debentures, notes or other similar instruments without prior approval from our creditors. Further, as a condition to permitting certain events under the Secured Debt, such as a release of certain assets as collateral for the loan or change of control of the Company, we must satisfy certain debt yield tests. We were able to satisfy all of the debt yield tests as of our most recent testing date.
As a result of our investment strategy, combined with our discipline for managing costs, we have increased our cash flow from operations from $833 million in 2010 to over $1.1 billion in 2012. As a result, we have taken steps to reduce our long-term debt by almost $2.4 billion between December 31, 2010 and September 30, 2013. The reduction in long-term debt has reduced our interest expense from approximately $946 million for the year ended December 31, 2010 to $569 million for the year ended December 31, 2012.
Debt Refinancing
In October 2013, we completed a refinancing of our existing indebtedness, which consisted of the issuance of the following:
| $1.0 billion senior secured revolving credit facility (with no amounts drawn at closing); |
| $7.6 billion senior secured term loan facility, of which $100 million was voluntarily prepaid in November 2013; |
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| $1.5 billion of 5.625% senior notes due in 2021; |
| $3.5 billion commercial mortgage-backed securities loan secured by 23 of our U.S. owned real estate assets; and |
| $525 million mortgage loan secured by our Waldorf Astoria New York property. |
We also entered into four interest rate swaps totaling $1.45 billion which swap floating three-month LIBOR to a fixed rate of 1.87 percent. We used the net proceeds of these transactions, additional borrowings of $300 million under our Timeshare Facility, cash proceeds from the Hilton HHonors point sales and available cash to repay our outstanding Secured Debt and plan to redeem our other unsecured notes due 2031 at a price equal to 100 percent of the principal amount of $96 million plus accrued interest. As of September 30, 2013, after giving pro forma effect to the debt refinancing, our long-term debt, including current maturities, would have been $13,255 million and our non-recourse debt, including current maturities would have been $1,006 million. Additionally, the contractual maturities of our long-term debt and non-recourse debt as of September 30, 2013 would have been as follows:
Year | (in millions) | |||
2013 (remaining) |
$ | 40 | ||
2014 |
126 | |||
2015 |
149 | |||
2016 |
698 | |||
2017 |
171 | |||
Thereafter |
13,115 | |||
|
|
|||
14,299 | ||||
Less: Discount |
(38) | |||
|
|
|||
Total long-term debt and non-recourse debt |
$ | 14,261 | ||
|
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Contractual Obligations
The following table summarizes our significant contractual obligations as of December 31, 2012:
Payments Due By Period | ||||||||||||||||||||
Total |
Less than
1 year |
1-3 years | 3-5 years |
More
than 5 years |
||||||||||||||||
(in millions) | ||||||||||||||||||||
Debt |
||||||||||||||||||||
Recourse (1)(3) |
$ | 18,019 | $ | 971 | $ | 16,273 | $ | 82 | $ | 693 | ||||||||||
Non-recourse (2)(3) |
49 | 5 | 29 | | 15 | |||||||||||||||
Mortgage notes |
134 | 32 | | 102 | | |||||||||||||||
Capital lease obligations (3) |
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Recourse |
194 | 8 | 27 | 13 | 146 | |||||||||||||||
Non-recourse (2) |
593 | 34 | 76 | 78 | 405 | |||||||||||||||
Operating leases |
3,528 | 265 | 492 | 456 | 2,315 | |||||||||||||||
Contract acquisition costs |
49 | 24 | 23 | 2 | | |||||||||||||||
Purchase commitments |
92 | 23 | 46 | 23 | | |||||||||||||||
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Total contractual obligations |
$ | 22,658 | $ | 1,362 | $ | 16,966 | $ | 756 | $ | 3,574 | ||||||||||
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(1) | The Secured Debt has five one-year extensions solely at our option that effectively extends the maturity date to November 12, 2015. We have assumed all extensions herein, including an extension fee equal to 50 basis points. |
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(2) | Non-recourse debt and capital lease obligations are related to our consolidated VIEs. |
(3) | Includes principal as well as interest payments. We have assumed a constant 30-day LIBOR rate of 0.21 percent as of December 31, 2012 for our Secured Debt. |
The total amount of unrecognized tax benefits as of December 31, 2012 was $469 million. These amounts are excluded from the table above because they are uncertain and subject to the findings of the taxing authorities in the jurisdictions in which we are subject to tax. It is possible that the amount of the liability for unrecognized tax benefits could change during the next twelve months. Refer to Note 18: Income Taxes in our audited consolidated financial statements included elsewhere in this prospectus for further discussion of our liability for unrecognized tax benefits.
In addition to the purchase commitments in the table above, in the normal course of business we enter into purchase commitments for which we are reimbursed by the owners of our managed and franchised hotels. These obligations have minimal or no impact on our net income and cash flow.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements as of September 30, 2013 included guarantees of $27 million for debt and obligations of third parties and performance guarantees with possible cash outlays totaling approximately $189 million, of which we have accrued for estimated probable exposure of up to $61 million as of September 30, 2013. Further, we had outstanding construction contract commitments of approximately $65 million for capital expenditures at certain owned and leased properties as of September 30, 2013. Additionally, during 2010, in conjunction with a lawsuit settlement, our owner entered into service contracts with the plaintiff. As part of the settlement, we entered into a guarantee with the plaintiff to pay any shortfall that our owner does not fund related to those service contracts. The remaining potential exposure under this guarantee as of September 30, 2013 was approximately $50 million. See Note 16: Commitments and Contingencies in our unaudited condensed consolidated financial statements included elsewhere in this prospectus for further discussion.
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. We believe that of our significant accounting policies, which are described in Note 2: Basis of Presentation and Summary of Significant Accounting Policies in our audited consolidated financial statements included elsewhere in this prospectus, the following accounting policies are critical because they involve a higher degree of judgment, and the estimates required to be made were based on assumptions that are inherently uncertain. As a result, these accounting policies could materially affect our financial position, results of operations, and related disclosures. On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that are believed to reflect the current circumstances. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on financial position or results of operations.
Management has discussed the development and selection of these critical accounting policies and estimates with the audit committee of the board of directors.
Property and Equipment and Intangible Assets with Finite Lives
We evaluate the carrying value of our property and equipment and intangible assets with finite lives by comparing the expected undiscounted future cash flows to the net book value of the assets if we determine there are indicators of potential impairment. If it is determined that the expected undiscounted future cash flows are
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less than the net book value of the assets, the excess of the net book value over the estimated fair value is recorded in our consolidated statements of operations as impairment losses.
As part of the process described above, we exercise judgment to:
| determine if there are indicators of impairment present. Factors we consider when making this determination include assessing the overall impact of trends in the hospitality industry and the general economy, historical experience, capital costs, and other asset-specific information; |
| determine the projected undiscounted future cash flows when indicators of impairment are present. Judgment is required when developing projections of future revenues and expenses based on estimated growth rates over the expected useful life of the asset group. These estimated growth rates are based on historical operating results, as well as various internal projections and external sources; and |
| determine the asset fair value when required. In determining the fair value, we often use internally-developed discounted cash flow models. Assumptions used in the discounted cash flow models include estimating cash flows, which may require us to adjust for specific market conditions, as well as capitalization rates, which are based on location, property or asset type, market-specific dynamics, and overall economic performance. The discount rate takes into account our weighted average cost of capital according to our capital structure and other market specific considerations. |
We had $9,071 million of property and equipment, net and $2,190 million of intangible assets with finite lives as of September 30, 2013. Changes in estimates and assumptions used in our impairment testing of property and equipment could result in future impairment losses, which could be material.
In conjunction with our regular assessment of impairment, we did not identify any property and equipment with indicators of impairment for which a 10% reduction in our estimate of undiscounted future cash flows would result in additional impairment losses.
Investments in Affiliates
We evaluate our investments in affiliates for impairment when there are indicators that the fair value of our investment may be less than our carrying value. We record an impairment loss when we determine there has been an other-than-temporary decline in the investments fair value. If an identified event or change in circumstances requires an evaluation to determine if the value of an investment may have an other-than-temporary decline, we assess the fair value of the investment based on the accepted valuation methods, which include discounted cash flows, estimates of sales proceeds, and external appraisals. If an investments fair value is below its carrying value and the decline is considered to be other-than-temporary, we will recognize an impairment loss in equity in earnings (losses) from unconsolidated affiliates for equity method investments or impairment losses for cost method investments in our consolidated statements of operations.
Our investments in affiliates consist primarily of our interests in entities that own and/or operate hotels. As such, the factors we consider when determining if there are indicators of potential impairment are similar to property and equipment discussed above. If there are indicators of potential impairment, we estimate the fair value of our equity method and cost method investments by internally developed discounted cash flow models. The principal factors used in our discounted cash flow models that require judgment are the same as the items discussed in property and equipment above.
We had $268 million of investments in affiliates as of September 30, 2013. Changes in the estimates and assumptions used in our investments in affiliates impairment testing can result in additional impairment expense, which can materially change our consolidated financial statements.
In conjunction with our regular assessment of impairment, we did not identify any investments in affiliates with indicators of impairment for which a 10% change in our projected future operating cash flows, capitalization rates and discount rates used to determine fair value would result in impairment losses.
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Goodwill
We review the carrying value of our goodwill by comparing the carrying value of our reporting units to their fair value. Our reporting units are the same as our operating segments as described in Note 22: Business Segments in our audited consolidated financial statements included elsewhere in this prospectus. We perform this evaluation annually or at an interim date if indicators of impairment exist. In any given year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or we decide to bypass the qualitative assessment, we proceed to the two-step quantitative process. In the first step, we evaluate the fair value of our reporting units quantitatively. When determining fair value, we utilize discounted future cash flow models, as well as market conditions relative to the operations of our reporting units. Under the discounted cash flow approach, we utilize various assumptions that require judgment, including projections of revenues and expenses based on estimated long-term growth rates, and discount rates based on weighted average cost of capital. Our estimates of long-term growth and costs are based on historical data, as well as various internal projections and external sources. The weighted average cost of capital is estimated based on each reporting units cost of debt and equity and a selected capital structure. The selected capital structure for each reporting unit is based on consideration of capital structures of comparable publicly traded companies operating in the business of that reporting unit. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step must be performed. In the second step, we estimate the implied fair value of goodwill, which is determined by taking the fair value of the reporting unit and allocating it to all of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination.
We had $6,205 million of goodwill as of September 30, 2013. Changes in the estimates and assumptions used in our goodwill impairment testing could result in future impairment losses, which could be material. A 10% change in our estimates of projected future operating cash flows, discount rates, and terminal growth rates used in our discounted cash flow calculations of the fair values of reporting units would not result in an impairment of any of our reporting units.
Brands
We evaluate our brand intangible assets for impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of the brand is below the carrying value. When determining fair value, we utilize discounted future cash flow models for hotels in which we have an ownership interest or a management or franchise contract. Under the discounted cash flow approach, we utilize various assumptions that require judgment, including projections of revenues and expenses based on estimated long-term growth rates and discount rates based on weighted average cost of capital. Our estimates of long-term growth and costs are based on historical data, as well as various internal estimates that are developed. If a brands estimated current fair value is less than its respective carrying value, the excess of the carrying value over the estimated fair value is recorded in our consolidated statements of operations within impairment losses.
We had $5,012 million brand intangible assets as of September 30, 2013. Changes in the estimates and assumptions used in our brands impairment testing, most notably revenue growth rates and discount rates, could result in future impairment losses, which could be material. A 10% change in our estimates of projected future operating cash flows used in our discounted cash flow calculations of the fair values of our brands would not result in an impairment of any of the brand intangible assets.
Hilton HHonors
Hilton HHonors defers revenue received from participating hotels and program partners in an amount equal to the estimated cost per point of the future redemption obligation. We engage outside actuaries to assist in determining the fair value of the future award redemption obligation using statistical formulas that project future point redemptions based on factors that require judgment, including an estimate of breakage (points that will
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never be redeemed), an estimate of the points that will eventually be redeemed, and the cost of the points to be redeemed. The cost of the points to be redeemed includes further estimates of available room nights, occupancy rates, room rates, and any devaluation or appreciation of points based on changes in reward prices or changes in points earned per stay.
We had $822 million of guest loyalty liability as of September 30, 2013. Changes in the estimates used in developing our breakage rate could result in a material change to our loyalty liability. Currently, a 10% decrease to the breakage estimate used in determining future award redemption obligations would increase our loyalty liability by approximately $29 million.
Allowance for Loan Losses
The allowance for loan losses is related to the receivables generated by our financing of timeshare interval sales, which are secured by the underlying timeshare properties. We determine our timeshare notes receivable to be past due based on the contractual terms of the individual mortgage loans. We use a technique referred to as static pool analysis as the basis for determining our general reserve requirements on our timeshare notes receivable. The adequacy of the related allowance is determined by management through analysis of several factors requiring judgment, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio, including assumed default rates.
We had $94 million of allowance for loan losses as of September 30, 2013. Changes in the estimates used in developing our default rates could result in a material change to our allowance. Currently, a 10% increase to our default rates used in the allowance calculation would increase our allowance for loan losses by approximately $34 million.
Income Taxes
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using currently enacted tax rates. We regularly review our deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be ultimately realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of reversals of existing temporary differences and the implementation of tax planning strategies. A change in these assumptions may increase or decrease our valuation allowance resulting in an increase or decrease in our effective tax rate, which could materially affect our consolidated financial statements.
We use a prescribed more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return if there is uncertainty in income taxes recognized in the financial statements. Assumptions and estimates are used to determine the more-likely-than-not designation. Changes to these assumptions and estimates can lead to an additional income tax expense (benefit), which can materially change our consolidated financial statements.
Legal Contingencies
We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. An estimated loss from a loss contingency should be accrued by a charge to income if it is probable and the amount of the loss can be reasonably estimated. Significant judgment is required when we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our consolidated financial statements.
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Consolidations
We use judgment evaluating whether we have a controlling financial interest in our partnership and other investments, including the assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests that are not controllable through voting interests. If the entity is considered to be a VIE, we use judgment determining whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interests in the entity. We consolidate entities when we own more than 50 percent of the voting shares of a company or have a controlling general partner interest of a partnership, assuming the absence of other factors determining control, including the ability of minority owners to participate in or block certain decisions. Changes to judgments used in evaluating our partnership and other investments could materially impact our consolidated financial statements.
Share-based Compensation
Certain members of our senior management team were offered the opportunity to participate in an executive compensation plan (the Promote plan). The Promote plan provides for the grant of a Tier I liability award, or an alternative cash payment in lieu thereof, and a Tier II equity award, representing Class B Units in BH Hotels Holdco, LLC (our Ultimate Parent). The awards vest based on service and performance conditions. Compensation expense associated with the Promote plan is recognized in general, administrative, and other expenses in our consolidated statements of operations. No compensation expense has been recognized to date related to the awards containing performance conditions. We estimate fair value of the Tier II equity awards using a lattice-based binomial model that requires the use of subjective assumptions, including share price volatility, the expected life of the award, risk free interest rate, and expected dividend yield. In developing our assumptions we take into account the following:
| As a result of our status as a private company for the last several years, we do not have sufficient history to estimate the volatility of our common share price. Our expected volatility is based on selected reasonably similar publicly traded companies for which historical information is available. We plan to continue to use the guideline peer group volatility information until the historical volatility of our common shares is relevant to measure expected volatility for future award grants; |
| We estimate the average expected life of the awards based on the projected liquidity event; |
| We determine the risk free interest rate by reference to implied yield available from United States Treasury securities with a remaining term equal to the expected life assumed at the grant date; and |
| Our dividend yield is based on our historical dividends paid. We have not historically paid dividends and have no current plans to pay dividends on our common stock. |
For further discussion of the Promote plan, including the assumptions used in estimating fair value of the awards, refer to our audited consolidated financial statements included elsewhere within this prospectus.
The following table presents the grant dates, the number of units granted and the estimated value for the Tier II equity awards granted to employees that were outstanding as of September 30, 2013:
Date of Grant |
Number of
Units Granted |
Estimated Fair
Value per Class B Unit at Grant Date |
Total Estimated
Value of Class B Units at Grant Date (in millions) |
|||||||||
December 3, 2010 |
210,059,544 | $ | 1.16 | $ | 244 | |||||||
June 27, 2011 |
5,176,830 | $ | 1.15 | $ | 6 | |||||||
March 3, 2013 |
8,628,050 | $ | 1.33 | $ | 11 |
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In connection with this offering, the Tier I liability awards that remain outstanding at the time of the pricing of the offering will vest as of the pricing date of this offering and will be paid in cash no later than 30 days following the pricing of this offering. Additionally, the Tier II equity awards that remain outstanding at the time of the pricing of the offering will be exchanged for restricted stock in the Company of equivalent economic value that will vest as follows:
| 40% of each award will vest as of the pricing date with respect to this offering; |
| 40% of each award will vest on the first anniversary of the pricing date with respect to this offering, contingent upon continued employment through that date; and |
| 20% of each award will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, contingent upon continued employment through that date. |
Upon the pricing date with respect to this offering, we expect to record incremental compensation expense of $ million as a result of modifying the vesting conditions of the Tier I liability award, as well as the exchange of the Tier II awards for restricted shares. The incremental compensation expense is a result of accelerating the recognition of the remaining amount of the Tier I liability award as of the effective date, the recognition of compensation expense for the full value of the restricted stock that will vest as of the effective date of this offering, and recognition of the proportionate value of the restricted stock that will vest on the first anniversary of the pricing date with respect to this offering based upon the portion of each employees requisite service that has been provided as of the effective date. The amount of compensation expense to be recognized for each of the awards will be based on the fair value of the awards as of the date of the initial public offering. Additionally, we expect to record additional compensation expense of $ million through the first anniversary of the pricing date with respect to this offering for the restricted stock awards that will vest on that date, representing the remaining vesting of these awards. No compensation expense will be recognized for the restricted stock that will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, as this performance condition has been determined to be not probable of occurring for accounting purposes.
The method applied to determine the fair value of the restricted stock awards will be substantially the same as that of the Tier II equity awards. The following table sets forth the value of the 2013 Tier II equity awards at grant date and at the time of the offering based on the mid-point of the anticipated price range of $ to $ per share.
Date of Grant |
Estimated Fair
Value of Class B Units at Grant Date (in millions) |
Assumed
Value at Initial Public Offering (in millions) |
||||
March 3, 2013 |
$ | 11 |
The increase in value between the value at the grant date and the value at the initial public offering is a result of improved operating results and reducing our outstanding indebtedness, including through the Refinancing Transactions.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk primarily from changes in interest rates and foreign currency exchange rates, which may impact future income, cash flows, and fair value of the Company, depending on changes to interest rates and/or foreign exchange rates. In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into derivative financial arrangements to the extent they meet the objective described above, and we do not use derivatives for trading or speculative purposes.
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Interest Rate Risk
We are exposed to interest rate risk on our floating rate debt. Interest rates on our floating rate debt discussed below are based on 30-day LIBOR, so we are most vulnerable to changes in this rate. The 30-day LIBOR rate decreased from 0.28 percent per annum as of December 31, 2011, to 0.21 percent per annum as of December 31, 2012. Changes in interest rates also affect the fair value of our fixed rate debt and our fixed rate financing receivables.
Under the terms of our Secured Debt, we are required to hedge interest rate risk using derivative instruments with an aggregate notional amount equal to the principal amount of the Secured Debt. As of December 31, 2012, we held ten interest rate caps with an aggregate notional amount of $15.2 billion that caps the floating portion of the interest rate on our Secured Debt at 6.5 percent. The caps were executed in August 2012 to replace the previous portfolio of interest rate caps that expired in November 2012 and expire in November 2013. We have elected not to designate any of the ten interest rate caps as effective hedging instruments. The fair values of our interest rate caps were immaterial to our consolidated balance sheet as of December 31, 2012. During the year ended December 31, 2012, we recorded a loss of $1 million in other gain, net in our consolidated statement of operations, which represented the premiums paid on these interest rate caps. No other gain or loss related to the ten undesignated interest rate caps in our current portfolio or previous portfolio that expired in November 2012 were recorded for the year ended December 31, 2012 as changes in the fair values of our interest rate caps were immaterial.
The following table sets forth the scheduled maturities and the total fair value as of December 31, 2012 for our financial instruments that are materially affected by interest rate risks (in millions, excluding average interest rates):
Maturities by Period |
Carrying
Value |
Fair
Value |
||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | |||||||||||||||||||||||||||
Fixed rate timeshare financing receivables |
$ | 131 | $ | 113 | $ | 113 | $ | 115 | $ | 115 | $ | 397 | $ | 984 | $ | 987 | ||||||||||||||||
Average interest rate (1) |
12.27 | % | ||||||||||||||||||||||||||||||
Fixed rate debt (2) |
$ | 33 | $ | | $ | | $ | 102 | $ | 53 | $ | 96 | $ | 284 | $ | 297 | ||||||||||||||||
Average interest rate (1) |
7.02 | % | ||||||||||||||||||||||||||||||
Floating rate Secured Debt |
$ | 357 | $ | 383 | $ | 14,468 | $ | | $ | | $ | | $ | 15,208 | $ | 15,571 | ||||||||||||||||
Average interest rate (1) |
3.36 | % |
(1) | Average interest rate as of December 31, 2012. |
(2) | Excludes capital lease obligations. |
Refer to our Note 16: Fair Value Measurements in our audited consolidated financial statements included elsewhere in this prospectus for further discussion of the fair value measurements of our financial assets and liabilities.
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Foreign Currency Exchange Rate Risk
We conduct business in various foreign currencies and are exposed to earnings and cash flow volatility associated with changes in foreign currency exchange rates. This exposure is primarily related to our international assets and liabilities, whose value could change materially in reference to our U.S. dollar (USD) reporting currency. The most significant impact of changes to foreign currency values include certain intercompany loans not deemed to be permanently invested and to transactions for management and franchise fee revenues earned in foreign currencies.
Our most significant foreign currency exposure relates to fluctuations in the foreign exchange rate between USD and the British Pound Sterling (GBP) and Euro (EUR). Historically, we used foreign exchange currency option agreements to hedge our exposure to changes in foreign exchange rates on certain of our foreign investments. Under the terms of these currency option contracts, we paid a premium to a counterparty for the right to sell a specified amount of foreign currency at a specified strike rate at the maturity date of the option. During 2010, we settled our remaining foreign currency options, and we have not held any foreign currency options since that time.
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Global Hotel Industry
The global hotel industry generated approximately $384 billion of room revenues during 2012, with approximately 157,000 hotels and 14.6 million hotel rooms as of September 2013, according to STR data. Since 2001, global hotel revenues have increased at a CAGR of 4.9%. While the top 10 hotel companies in the U.S. control 58% of U.S. hotel rooms, the industry is significantly more fragmented in markets outside the U.S., where no company controls more than 5% of global hotel rooms.
The following chart sets forth the number of rooms and relative market share for the top 10 global and U.S. hotel companies.
Top 10 Global Hotel Companies |
Rooms
(thousands) |
% of
Global |
Top 10 U.S. Hotel Companies |
Rooms
(thousands) |
% of
U.S. |
|||||||||||||
Hilton Worldwide |
666 | 5 | % | Hilton Worldwide | 517 | 10 | % | |||||||||||
Intercontinental Hotels Group |
658 | 5 | % | Marriott International | 506 | 10 | % | |||||||||||
Marriott International |
652 | 4 | % | Wyndham Worldwide | 448 | 9 | % | |||||||||||
Wyndham Worldwide |
629 | 4 | % | Choice Hotels International | 396 | 8 | % | |||||||||||
Choice Hotels International |
502 | 3 | % | Intercontinental Hotels Group | 371 | 8 | % | |||||||||||
Accor Company |
438 | 3 | % | Best Western Company | 162 | 3 | % | |||||||||||
Starwood Hotels & Resorts |
340 | 2 | % | Starwood Hotels & Resorts | 155 | 3 | % | |||||||||||
Best Western Company |
315 | 2 | % | G6 Hospitality | 106 | 2 | % | |||||||||||
Carlson Hospitality Company |
167 | 1 | % | Hyatt | 95 | 2 | % | |||||||||||
Hyatt |
141 | 1 | % | LQ Management LLC | 83 | 2 | % | |||||||||||
|
|
|
|
|||||||||||||||
Top 10 |
4,508 | 31 | % | Top 10 | 2,839 | 58 | % | |||||||||||
|
|
|
|
|||||||||||||||
Other |
10,097 | 69 | % | Other | 2,088 | 42 | % | |||||||||||
|
|
|
|
|||||||||||||||
Global Total |
14,605 | U.S. Total | 4,927 | |||||||||||||||
|
|
|
|
Source: STR Global Census, October 2013 (adjusted to September 2013), other than Hilton Worldwide room information which is based on internal room counts and excludes timeshare properties.
Hotel market performance generally is measured by three metrics: (1) average daily rate (ADR); (2) occupancy; and (3) revenue per available room (RevPAR). ADR represents hotel room revenue divided by total number of rooms sold in a given period, measuring average room price attained by a hotel. Occupancy represents the total number of rooms sold divided by the total number of rooms available at a hotel or group of hotels, measuring the utilization of hotels available capacity. RevPAR is calculated by dividing hotel room revenue by room nights available to guests for the period. Because RevPAR combines two key drivers of operations at hotels, ADR and occupancy, it is commonly used to measure performance over comparable periods.
According to STR data, during the past three years, global hotel demand has grown at a CAGR of 5.3%, whereas global hotel supply has grown at a CAGR of just 1.6%, which has driven positive RevPAR growth during the period. We believe this supply-demand imbalance provides a favorable operating environment for existing hotels, and this trend should continue for the next several years.
Hotel industry fundamentals can vary by region, largely driven by economic trends. Globally, according to STR data, the hotel industry has been in a period of recovery over the past three years despite headwinds in Europe and parts of the Middle East and Africa. In the Americas, RevPAR has increased at a CAGR of 6.9% over the past three years and demand has returned to pre-economic crisis levels. The Asia Pacific region also has experienced high RevPAR growth during the last three years, primarily fueled by China and to a lesser degree Southeast Asia. Weaker economic conditions in Europe dampened RevPAR growth, but recent trends show improvement. The Middle East and Africa region recovered in 2012 with strong growth in key countries,
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such as Egypt, the United Arab Emirates, and Saudi Arabia, but concerns remain over political unrest in this region. Third-party forecasts indicate that global GDP growth should improve from approximately 2% in 2013 to greater than 3% annually over the next three years. We believe that stronger global economic growth should in turn drive stronger hotel demand and RevPAR growth.
U.S. Hotel Industry
The U.S. has a greater share of global hotel revenues than any other country, with $115 billion in room revenues during 2012, according to STR data. As of September 2013, the U.S. hotel sector comprised approximately 53,000 hotels with 4.9 million hotel rooms, of which 69% were affiliated with a brand. Over the past 25 years, the sector revenue has grown at a CAGR of 4.8%.
According to data provided by STR, U.S. hotel demand has improved with the economic recovery in recent years, experiencing a CAGR of 4.9% over the last three years, while hotel supply growth has experienced a CAGR of 0.9%. This recent demand growth has exceeded the 25-year CAGR of 1.8%, while supply growth has trended lower than the 25-year CAGR of 2.0%. According to PKF-HR, room supply is expected to grow at relatively low rates of 0.8% and 1.1% in 2013 and 2014 respectively, while demand is expected to continue to outpace supply growth, growing at 2.4% and 3.1% in 2013 and 2014, respectively. This imbalance of low supply and high demand growth is expected by analysts to continue at least through 2015, which should drive strong RevPAR growth.
The following graph illustrates historical and projected U.S. supply, demand and RevPAR growth. The trends are derived from historical data provided by STR and projections provided by PKF-HR. Forecasts for RevPAR remain positive for the next several years as the hotel industry is expected to continue to benefit from a supply and demand imbalance, with RevPAR in the U.S. projected to grow at a CAGR of 7% over the next three years, according to PKF-HR, compared to a CAGR of 2% from 2005 to 2012 according to STR data.
Historical and Projected U.S. Supply, Demand and RevPAR Growth
Sources: STR (2005-2012), PKF-HR (2013-2015).
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Hilton Worldwide is one of the largest and fastest growing hospitality companies in the world, with 4,080 hotels, resorts and timeshare properties comprising 671,926 rooms in 90 countries and territories. In the nearly 100 years since our founding, we have defined the hospitality industry and established a portfolio of 10 world-class brands. Our flagship full-service Hilton Hotels & Resorts brand is the most recognized hotel brand in the world. Our premier brand portfolio also includes our luxury hotel brands, Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts, our full-service hotel brands, DoubleTree by Hilton and Embassy Suites Hotels, our focused-service hotel brands, Hilton Garden Inn, Hampton Inn, Homewood Suites by Hilton and Home2 Suites by Hilton, and our timeshare brand, Hilton Grand Vacations. We own or lease interests in 156 hotels, many of which are located in global gateway cities, including iconic properties such as The Waldorf Astoria New York, the Hilton Hawaiian Village, and the London Hilton on Park Lane. More than 311,000 team members proudly serve in our properties and corporate offices around the world, and we have approximately 39 million members in our award-winning customer loyalty program, Hilton HHonors.
We operate our business through three segments: (1) management and franchise; (2) ownership; and (3) timeshare. These complementary business segments enable us to capitalize on our strong brands, global market presence and significant operational scale. Through our management and franchise segment, which consists of 3,883 hotels with 603,271 rooms, we manage hotels, resorts and timeshare properties owned by third parties and we license our brands to franchisees. Our management and franchise segment generates high margins and long-term recurring cash flow, and has grown by 40% in terms of number of rooms since June 30, 2007, representing 98% of our overall room growth, with virtually no capital investment by us. Our ownership segment consists of 156 hotels with 62,251 rooms that we own or lease. Through our timeshare segment, which consists of 41 properties comprising 6,404 units, we market and sell timeshare intervals, operate timeshare resorts and a timeshare membership club and provide consumer financing.
In October 2007 we were acquired by affiliates of The Blackstone Group L.P. and assembled a new management team led by Christopher J. Nassetta, our President and Chief Executive Officer. Under our new leadership, we have transformed our business, creating a globally aligned organization and establishing a performance-driven culture. As part of our transformation, we focused on both top- and bottom-line operating performance, strengthening and expanding our brands and commercial services platform, and enhancing our growth rate, particularly in markets outside the U.S. where our brands historically had been underrepresented.
As a result of the transformation of our business, despite the sharp downturn in our industry, between June 30, 2007 and September 30, 2013, we have:
| increased the number of open rooms in our system by 36%, or 176,248 rooms, which represents the highest growth rate of any major lodging company; |
| grown the number of rooms in our development pipeline by 60% to an industry-leading 185,699 rooms, over 99% of which are within our higher-margin, capital light management and franchise segment; |
| increased our total number of rooms under construction by 133%, to an industry-leading 97,520 rooms, over 99% of which are within our management and franchise segment; |
| increased the geographic diversity of our pipeline, with rooms in the development pipeline outside the U.S. increasing from less than 20% to more than 60%, and rooms under construction outside the U.S. increasing from less than 15% to nearly 80%; |
| significantly enhanced our presence in key segments, brands and geographies; for example: |
| in the luxury segment, the number of hotels in our system and in our development pipeline is more than triple the number of luxury hotels in our system as of June 2007; |
| the number of DoubleTree by Hilton hotels has grown 97% since December 31, 2007, with 77% of the growth coming through conversions from other hotel brands; |
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| our number of hotels in Europe outside of our Hilton Hotels & Resorts and Conrad Hotels & Resorts brands (primarily DoubleTree by Hilton, Hampton Inn and Hilton Garden Inn) has increased from 9 open hotels to 215 hotels open or in our development pipeline; |
| our number of hotels in Greater China has grown from 6 open hotels to 171 open and pipeline hotels; and |
| our Home2 Suites by Hilton brand, which was launched in 2011 with the opening of its first hotel, now has 22 hotels open and another 95 in our development pipeline; |
| increased our management and franchise segments Adjusted EBITDA by 25% from the year ended December 31, 2007 to the year ended December 31, 2012 and grown the proportion of our aggregate segment Adjusted EBITDA contributed by our management and franchise segment from 47% to 53%; |
| increased the average global revenue per available room, or RevPAR, premium for all brands globally by approximately two percentage points to 15% on a trailing twelve month basis; |
| expanded membership in our Hilton HHonors program by 88% since December 31, 2007; |
| significantly outperformed our competitors in the timeshare segment, with annual interval sales increasing over 40% since the year ended December 31, 2007 and segment Adjusted EBITDA as a percentage of timeshare revenue increasing 435 basis points since the year ended December 31, 2010, while beginning a transformation of the business to a more capital-efficient model; for the twelve months ended September 30, 2013, 50% of our sales of timeshare intervals were developed by third parties versus 0% for the year ended December 31, 2009; and |
| significantly improved profitability, increasing our Adjusted EBITDA by an annual average of 12% from the year ended December 31, 2010 through the year ended December 31, 2012, and for the nine months ended September 30, 2013, increasing our Adjusted EBITDA by 12% compared to the nine months ended September 30, 2012. Net income attributable to Hilton stockholder increased by 68% on average from the year ended December 31, 2010 through the year ended December 31, 2012, and for the nine months ended September 30, 2013 net income attributable to Hilton stockholder increased 34% as compared to the nine months ended September 30, 2012. |
See SummarySummary Historical Financial Data for the definition of Adjusted EBITDA and a reconciliation of net income attributable to Hilton stockholder to Adjusted EBITDA.
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We believe this transformation positions us to continue to increase our share of the expanding global lodging industry, which continues to exhibit strong fundamentals and significant long-term growth prospects supported by increasing global travel and tourism. Our business has grown during times of economic expansion as well as during global economic downturns. For example, during the period between January 1, 2000 and September 30, 2013, we increased the total number of hotel rooms in our system every year, achieving total growth of 122% and a CAGR of 6%. We expect our global existing room supply and rooms under construction will enable us to build on our leading market position. As illustrated in the table below, our percentage of global rooms under construction of 18.5% significantly exceeds our percentage of the existing global hotel supply of 4.6%, according to data provided by STR.
Hilton Worldwide Rooms
Supply |
Hilton Worldwide Rooms
Under Construction |
|||||||||||||||
Market |
% of
Total |
Industry
Rank |
% of
Total |
Industry
Rank |
||||||||||||
Americas |
8.7 | % | #1 | 20.7 | % | #2 | ||||||||||
Europe |
1.4 | % | #6 | 22.5 | % | #1 | ||||||||||
Middle East and Africa |
2.7 | % | #4 | 21.8 | % | #1 | ||||||||||
Asia Pacific |
1.2 | % | #8 | 15.5 | % | #1 | ||||||||||
Global |
4.6 | % | #1 | 18.5 | % | #1 |
Source: STR Global Census, October 2013 (adjusted to September 2013) and STR Global New Development Pipeline (September 2013).
The transformation of our business since 2007 has enabled us to increase the number of hotels and timeshare units in our system at a more rapid rate than any other major lodging company. The following table illustrates our global room supply by business segment.
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Hilton Worldwide Value Proposition
|
Our value proposition starts with our award-winning brands and industry-leading commercial services platform
This leads to satisfied customers, including nearly 39 million HHonors loyalty members
As a result, we are able to drive premium performance to the hotels in our system
These hotel operating premiums drive strong financial returns, which benefit our hotel owners
Satisfied existing and new owners continue to invest in growing our brands, making us a global leader in hotel supply and pipeline
We believe the reinforcing nature of these activities will allow us to outperform the competition |
Our Competitive Strengths
We believe the following competitive strengths provide the foundation for our position as a leading global hospitality company.
| World-Class Hospitality Brands. Our globally recognized, world-class brands have defined the hospitality industry. Our flagship Hilton Hotels & Resorts brand often serves as an introduction to our wider range of brands that are designed to accommodate any customers needs anywhere in the world. Our brands have achieved an average global RevPAR index premium of 15% for the twelve months ended September 30, 2013, based on STR data. This means that our brands achieve on average 15% more revenue per room than competitive properties in similar markets. The global RevPAR index premium is the average RevPAR index premium of our comparable hotels (as defined in Managements Discussion and Analysis of Financial Condition and Results of OperationsKey Business and Financial Metrics Used by ManagementComparable Hotels on page 65, but excluding hotels that do not receive competitive set information from STR or do not participate with STR). The owner or manager of each Hilton comparable hotel exercises its discretion in identifying the competitive set of properties for such hotel, considering factors such as physical proximity, competition for similar customers, product features, services and amenities, quality and average daily rate, as well as STR rules regarding competitive set makeup. Accordingly, while the hotel brands included in the competitive set for any given Hilton comparable hotel depend heavily on market-specific conditions, the competitive sets for Hilton comparable hotels frequently include properties branded with the competing brands identified for the relevant Hilton comparable hotel listed under Selected Competitors on page 114. STR provides us with the relevant data for competitive sets that we submit for each of our comparable hotels, which we utilize to compute the RevPAR index for our comparable hotels. The demonstrated strength of our brands makes us a preferred partner for hotel owners, who have invested tens of billions of dollars since December 31, 2007 in the development and improvement of our branded hotels. |
|
Leading Global Presence and Scale. We are one of the largest hospitality companies in the world with 4,080 properties and 671,926 rooms in 90 countries and territories. We have hotels in key gateway cities such as New York, London, Dubai, Johannesburg, Tokyo, Shanghai and Sydney and 351 hotels located at or near airports around the world. Our global presence allows us to serve our loyal customers throughout the world and to introduce our award-winning brands to customers in new markets. These world-class brands facilitate system growth by providing hotel owners with a variety of options to address each markets specific needs. In addition, the diversity of our operations reduces our exposure |
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to business cycles, individual market disruptions and other risks. Our robust commercial services platform allows us to take advantage of our scale to more effectively deliver products and services that drive customer preference and enhance commercial performance on a global basis. |
| Large and Growing Loyal Customer Base. Serving our customers is our first priority. By continually adapting to customer preferences and providing our customers with superior experiences, we have improved our overall customer satisfaction ratings four of the last five years. We earned 32 first place awards in the J.D. Power North America Guest Satisfaction rankings since 1999, more than any multi-brand lodging company. Our hotels accommodated more than 127 million customer visits during the twelve months ended September 30, 2013, with members of our Hilton HHonors loyalty program contributing approximately 50% of the nearly 172 million resulting room nights. Hilton HHonors unites all our brands, encourages customer loyalty and allows us to provide tailored promotions, messaging and customer experiences. We have grown the membership in our Hilton HHonors program by approximately 88% from approximately 21 million as of December 31, 2007 to nearly 39 million as of September 30, 2013. |
| Significant Embedded Growth. All of our segments are expected to grow through improvement in same-store performance driven by strong anticipated industry fundamentals. PKF-HR predicts that the lodging industry RevPAR in the U.S., where 78% of our system rooms are located, will grow 7.2% in 2014 and 8.1% in 2015. Our management and franchise segment also is expected to grow through new room additions, as upon completion, our industry-leading development pipeline would result in a 28% increase in our room count with minimal capital investment from us. In addition, our franchise revenues should grow over time as franchise agreements renew at our published license rates, which are higher than our current effective rates. For the twelve months ended September 30, 2013, our weighted average effective license rate across our brands was 4.5% of room revenue, an increase of 13% since 2007, and our weighted average published license rate was 5.4% as of September 30, 2013. We also expect our incentive management fees, which are linked to hotel profitability measures, to increase as a result of the expected improvements in industry fundamentals. In our ownership segment, we believe we will benefit from strong growth in bottom-line earnings as industry fundamentals continue to improve as a result of this segments operating leverage, and our large hotels with significant meeting space should benefit from recent improvements in group demand, which we expect will exhibit strong growth as the current stage of the lodging cycle advances. Finally, our timeshare business has over five years of projected interval supply at our current sales pace in the form of existing owned inventory and executed capital light projects, which should enable us to continue to grow our earnings from the segment with lower levels of capital investment from us. |
| Strong Cash Flow Generation . We generate significant cash flow from operating activities with an increasing percentage from our growing capital light management and franchise and timeshare segments. During the five-year period ended December 31, 2012, we generated an aggregate of $3.6 billion in cash flow from operating activities. We increased our cash flow from operating activities from $219 million for the year ended December 31, 2008 to $1.1 billion for the year ended December 31, 2012. We believe that our focus on cash flow generation, the relatively low investment required to grow our management and franchise and timeshare segments, and our disciplined approach to capital allocation position us to maximize opportunities for profitability and growth while continuing to reduce our indebtedness over time. |
|
Iconic Hotels with Significant Underlying Real Estate Value. Our diverse global portfolio of owned and leased hotels includes a number of iconic properties in major gateway cities such as New York City, London, San Francisco, Chicago, São Paolo, Sydney and Tokyo. The portfolio also includes iconic hotels with significant embedded asset value, including: The Waldorf Astoria New York, a landmark luxury hotel with 1,413 rooms encompassing an entire city block in the heart of midtown Manhattan near Grand Central Terminal; the Hilton Hawaiian Village, a full-service beach resort with 2,860 rooms that sits on approximately 22 oceanfront acres along Waikiki Beach on the island of Oahu; and the London Hilton on Park Lane, a 453-room hotel overlooking Hyde Park in the exclusive |
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Mayfair district of London. Our ten owned hotels with the highest Adjusted EBITDA contributed 54% of our ownership segments Adjusted EBITDA during the year ended December 31, 2012, which highlights the quality of our key flagship properties. In addition, we believe the iconic nature of many of these properties creates significant value for our entire system of properties by reinforcing the world-class nature of our brands. We continually focus on increasing the value and enhancing the market position of our owned and leased hotels and have invested $1.8 billion in these properties between December 31, 2007 and September 30, 2013. Over time, we believe we can unlock significant incremental value through opportunistically exiting assets or executing on adaptive reuse plans for all or a portion of certain hotels as retail, residential or timeshare uses. |
| Market-Leading and Innovative Timeshare Platform. Our timeshare business complements our other segments and provides an alternative hospitality product that serves an attractive customer base. Our timeshare customers are among our most loyal hotel customers, with estimated spend in our hotel system increasing approximately 40% after the purchase of their timeshare interests. Historically, we have concentrated our timeshare efforts in four key markets: Florida, Hawaii, New York City and Las Vegas, which has helped us to increase annual sales of timeshare intervals by more than 40% since 2007 while yielding strong profit margins during a time when our competitors generally experienced declines in both sales and profit margins. As a result of this strong operating performance and the returns we were able to drive on our own timeshare developments, in 2010 we began a transformation of our timeshare business to a capital light model in which third-party timeshare owners and developers provide capital for development while we act as sales and marketing agent and property manager. Through these transactions, we receive a sales and marketing commission and branding fees on sales of timeshare intervals, recurring fees to operate the homeowners associations and revenues from resort operations. We also earn recurring fees in connection with the points-based membership programs we operate that provide for exclusive exchange, leisure travel and reservation services, and through fees related to the servicing of consumer loans. We have increased the sales of intervals developed by third parties from zero in 2009 to 50% for the twelve months ended September 30, 2013, which has dramatically reduced the capital requirements of our timeshare segment while continuing to drive strong earnings and cash flows. For the year ended December 31, 2012 and the nine months ended September 30, 2013, we incurred $56 million and $70 million, respectively, of capital expenditures for timeshare inventory, compared to an average of $405 million annually during 2007 and 2008. |
| Performance-Driven Culture. We are an organization of people serving people, thus it is imperative that we attract and retain best-in-class talent to serve our various stakeholders. We have a performance-driven culture that begins with an intense alignment around our mission, vision, values and key strategic priorities. Our President and Chief Executive Officer, Christopher J. Nassetta, has nearly 30 years of experience in the hotel industry, previously serving as President and Chief Executive Officer of Host Hotels & Resorts, Inc., where he was named Institutional Investor s 2007 REIT CEO of the Year. He and the balance of our executive management team have been instrumental in transforming our organization and installing a culture that develops leaders at all levels of the organization who are focused on delivering exceptional service to our customers every day. We rely on our over 311,000 team members to execute our strategy and continue to enhance our products and services to ensure that we remain at the forefront of performance and innovation in the lodging industry. |
Our Business and Growth Strategy
The following are key elements of our strategy to become the preeminent global hospitality companythe first choice of guests, team members and owners alike:
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Expand our Global Footprint . We intend to build on our leading position in the U.S. and expand our global footprint. In February 2006, we reacquired Hilton International Co., which had operated as a separate company since 1964, and in so doing, reacquired its international Hilton branding rights. Reuniting Hiltons U.S. and international operations has provided us with the platform to grow our |
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business and brands globally. As a result of the reacquisition and focus on global expansion, we currently rank number one or number two in every major region of the world by rooms under construction, based on STR data. We aim to increase the relative contribution of our international operations, which accounted for only 27% of our revenues during the year ended December 31, 2012. Of our new rooms under construction, 78% are located outside of the U.S. We plan to continue to expand our global footprint by introducing the right brands with the right product positioning in targeted markets and allocating business development resources effectively to drive new unit growth in every region of the world. |
| Grow our Fee-Based Businesses. We intend to grow our higher margin, fee-based businesses. We expect to increase the contribution of our management and franchise segment, which already accounts for more than half of our aggregate segment Adjusted EBITDA, through new third-party hotel development and the conversion of existing hotels to our brands. The number of rooms in our management and franchise segment grew by 40% from June 30, 2007 to September 30, 2013 and substantially all of our current development pipeline of 185,699 rooms consists of hotels in this segment. Upon completion, this pipeline of new, third-party owned hotels would result in a 31% increase in our management and franchise room count with minimal capital investment from us. In addition, we aim to increase the average effective franchise fees we receive over time by renewing and entering into new franchise agreements at our current published franchise fee rates. |
| Continue to Increase the Capital Efficiency of our Timeshare Business. Traditionally, timeshare operators have funded 100% of the investment necessary to acquire land and construct timeshare properties. In 2010, we began sourcing timeshare intervals through sales and marketing agreements with third-party developers. These agreements enable us to generate fees from the sales and marketing of the timeshare intervals and club memberships and from the management of the timeshare properties without requiring us to fund acquisition and construction costs. Our supply of third-party developed timeshare intervals has increased to 65,000 as of September 2013, compared to no supply in 2009, and the percentage of sales of timeshare intervals developed by third parties has already increased to 50% for the twelve months ended September 30, 2013. We will continue to seek opportunities to grow our timeshare business through this capital light model. |
| Optimize the Performance of our Owned and Leased Hotels. In addition to utilizing our commercial services platform to enhance the revenue performance of our owned and leased assets, we have focused on maximizing the cost efficiency of the portfolio by implementing labor management practices and systems and reducing fixed costs to drive profitability. Through our disciplined approach to asset management, we have developed and executed on strategic plans for each of our hotels and have invested $1.8 billion in our portfolio since December 31, 2007 to enhance the market position of each property. We expect to continue to enhance the performance of our hotels by improving operating efficiencies, and believe there is an opportunity to drive further improvements in operating margins and Adjusted EBITDA. The Adjusted EBITDA of our owned and leased portfolio for 2012 was still below 2008 levels. Further, at certain of our hotels, we are developing plans for the adaptive reuse of all or a portion of the property to residential, retail or timeshare uses. Finally, we expect to create value over time by opportunistically selling assets and restructuring or exiting leases. |
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Strengthen our Brands and Commercial Services Platform. We intend to enhance our world-class brands through superior brand management by continuing to develop products and services that drive increased RevPAR premiums. We will continue to refine our luxury brands to deliver modern products and service standards that are relevant to todays luxury traveler. We will continue to position our full-service operating model and product standards to meet evolving customer needs and drive financial results that support incremental owner investment in our hotels. In our focused-service brands, we will continue to position for growth in the U.S., and tailor our products as appropriate to meet the needs of customers and developers outside the U.S. We will continue to innovate and enhance our commercial services platform to ensure we have the most formidable sales, pricing, marketing and distribution platform in the industry to drive premium commercial performance to our entire system of hotels. We |
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also will continue to invest in our Hilton HHonors customer loyalty program to ensure it remains relevant to our customers and drives customer loyalty and value to our hotel owners. |
The Hilton Legacy
Our history dates to 1919, when Conrad Hilton purchased his first hotel in Cisco, Texas. During ensuing decades we expanded our hotel portfolio and established a track record of innovation in our industry, including the first in-room televisions, the first airport hotel and the first centralized reservation system for a hospitality company. Key events in our history are illustrated in the following timeline:
We are guided by a common vision, mission and values:
Vision: |
To fill the earth with the light and warmth of hospitality. | |
Mission: |
To be the preeminent global hospitality companythe first choice of guests, team members and owners alike. | |
Values: |
H ospitalityWe are passionate about delivering exceptional guest experiences. I ntegrityWe do the right thing, all the time. L eadershipWe are leaders in our industry and in our communities. T eamworkWe are team players in everything we do. O wnershipWe are the owners of our actions and decisions. N owWe operate with a sense of urgency and discipline. |
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Our Brand Portfolio
The goal of each of our brands is to deliver exceptional customer experiences and superior operating performance. Across our brands, we have improved our overall customer satisfaction ratings over the last five years, which we believe will develop increased customer loyalty to our brands. According to data from STR, all of our brands command premiums in their respective system-wide RevPAR indices, meaning they achieve higher revenue per available room than competitive properties in their respective markets.
September 30, 2013 | ||||||||||||||||||||
Brand (1) |
Segment |
Countries/
Territories |
Hotels | Rooms |
Percentage of
Total Rooms |
Selected Competitors (2) |
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Luxury | 10 | 24 | 10,335 | 1.5 | % | Ritz Carlton, Four Seasons, Peninsula, St. Regis, Mandarin Oriental | |||||||||||||
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Luxury | 17 | 23 | 7,877 | 1.2 | % | Park Hyatt, Sofitel, Intercontinental, JW Marriott, Fairmont | |||||||||||||
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Upper Upscale | 79 | 554 | 196,225 | 29.2 | % | Marriott, Sheraton, Hyatt, Radisson Blu, Renaissance, Westin, Sofitel, Swissotel, Moevenpick | |||||||||||||
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Upscale | 31 | 361 | 90,409 | 13.5 | % | Sheraton, Marriott, Crowne Plaza, Wyndham, Radisson, Moevenpick, Hotel Nikko, Holiday Inn, Renaissance | |||||||||||||
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Upper Upscale | 5 | 214 | 51,217 | 7.6 | % |
Renaissance, Sheraton, Hyatt, Residence Inn by Marriott |
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Upscale | 19 | 575 | 79,135 | 11.8 | % | Courtyard by Marriott, Holiday Inn, Hyatt Place, Novotel, Aloft, Four Points by Sheraton | |||||||||||||
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Upper Midscale | 15 | 1,929 | 189,681 | 28.2 | % | Fairfield Inn by Marriott, Holiday Inn Express, Comfort Inn, Quality Inn, La Quinta Inns, Wyngate by Wyndham | |||||||||||||
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Upscale | 3 | 329 | 36,237 | 5.4 | % | Residence Inn by Marriott, Hyatt House, Staybridge Suites, Candlewood Suites | |||||||||||||
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Upper Midscale | 1 | 22 | 2,423 | 0.4 | % | Candlewood Suites, AmericInn, Towne Place Suites | |||||||||||||
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Timeshare | 3 | 41 | 6,404 | 1.0 | % | Marriott Vacation Club, Starwood Vacation Ownership, Hyatt Residence Club, Wyndham Vacations Resorts |
(1) | The table above excludes 8 unbranded hotels with 1,983 rooms, representing approximately 0.2% of total rooms. |
(2) | The table excludes lesser known regional competitors. |
Waldorf Astoria Hotels & Resorts : What began as an iconic hotel in New York City is today a portfolio of 24 luxury hotels and resorts. In landmark destinations around the world, Waldorf Astoria Hotels & Resorts reflect their locations, each providing the inspirational environments and personalized attention that are the source of unforgettable moments. Properties typically include elegant spa and wellness facilities, high-end restaurants, golf courses (at resort properties), 24-hour room service, fitness and business centers, meeting, wedding and banquet facilities and special event and concierge services. We continue to extend the brands reach
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through the development of new properties in some of the worlds most sought after destinations, including recently opened hotels in Berlin, Shanghai and Panama City and hotels under construction in Beijing and Dubai. Between June 30, 2007 and September 30, 2013, we added 19 Waldorf Astoria hotels and 6,569 rooms to our system. There were 13 hotels with 2,592 rooms in the Waldorf Astoria Hotels & Resorts development pipeline as of September 30, 2013.
Conrad Hotels & Resorts : Conrad is a global luxury brand of properties offering guests personalized experiences with sophisticated, locally inspired surroundings and an intuitive service model based on customization and control, as demonstrated by the Conrad Concierge mobile application that enables guest control of on-property amenities and services. Properties typically include convenient and relaxing spa and wellness facilities, enticing restaurants, comprehensive room service, fitness and business centers, multi-purpose meeting facilities and special event and concierge services. With a strong global footprint, Conrad Hotels & Resorts has recently opened hotels in Beijing, Seoul and New York City and plans to add a significant number of new hotels to its portfolio in key gateway cities and resort destinations around the world, such as Hong Kong, Tokyo and Bali. Between June 30, 2007 and September 30, 2013, we added 6 Conrad hotels and 1,860 rooms to our system. There were 12 hotels with 3,238 rooms in the Conrad Hotels & Resorts development pipeline as of September 30, 2013.
Hilton Hotels & Resorts : Hilton is our global flagship brand and ranks number one for global brand awareness in the hospitality industry, with 554 hotels and resorts in 79 countries and territories across six continents. The brand primarily serves business and leisure upper-upscale travelers and meeting groups. Hilton hotels are full-service hotels that typically include meeting, wedding and banquet facilities and special event services, restaurants and lounges, food and beverage services, swimming pools, gift shops, retail facilities and other services. The brand was awarded the Harris Poll EquiTrend Brand of the Year Full Service Hotel for 2010 and 2011. Between June 30, 2007 and September 30, 2013, we added 46 Hilton hotels and 18,478 rooms to our system. There were 147 hotels with 48,499 rooms in the Hilton Hotels & Resorts development pipeline as of September 30, 2013.
DoubleTree by Hilton : DoubleTree by Hilton is an upscale, full-service hotel designed to provide true comfort to todays business and leisure travelers. DoubleTree is united by the brands CARE (Creating a Rewarding Experience) culture and a warm chocolate chip cookie served at check-in. DoubleTrees diverse portfolio includes historic icons, small contemporary hotels, resorts and large urban hotels. The brand is growing quickly around the world, both with new-build properties and via conversions of existing properties into DoubleTree hotels. Between June 30, 2007 and September 30, 2013, we added 182 DoubleTree by Hilton hotels and 44,312 rooms to our system. There were 137 hotels with 34,921 rooms in the DoubleTree by Hilton development pipeline as of September 30, 2013.
Embassy Suites Hotels : Embassy Suites are our upper upscale, all-suite hotels that feature two-room guest suites with a separate living room and dining/work area, a complimentary cooked-to-order breakfast and complimentary evening receptions every night. Embassy Suites bundled pricing ensures that guests receive value at a single price. Whether traveling for business, with family, with a group, or for leisure, our guests return again and again to experience the consistently award-winning customer service provided at Embassy Suites. Between June 30, 2007 and September 30, 2013, we added 28 Embassy Suites Hotels and 5,329 rooms to our system. There were 27 hotels with 5,321 rooms in the Embassy Suites Hotels development pipeline as of September 30, 2013.
Hilton Garden Inn : Hilton Garden Inn is our award-winning, upscale hotel brand that strives to ensure todays busy travelers have what they need to be productive on the road. From the Serta Perfect Sleeper bed, to complimentary Internet access, to a comfortable lobby pavilion, Hilton Garden Inn is the brand guests can count on to support them on their journeys. Hilton Garden Inn has received numerous awards, including being ranked by J.D. Power for Highest in Guest Satisfaction in its segment nine out of the past twelve years. Between June 30, 2007 and September 30, 2013, we added 249 Hilton Garden Inn hotels and 34,162 rooms to our system. There were 192 hotels with 30,295 rooms in the Hilton Garden Inn development pipeline as of September 30, 2013.
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Hampton : Hampton Inn hotels are our moderately priced upper midscale hotels with limited food and beverage facilities. The Hampton brand also includes Hampton Inn & Suites hotels, which offer both traditional hotel room accommodations and apartment style suites within one property. Across our over 1,900 Hampton locations around the world, guests receive free hot breakfast and free high-speed Internet access, all for a great price and all supported by the Hampton satisfaction guarantee. Hamptons numerous recognitions include #1 in Entrepreneur Magazine s 2013, 2012 and 2011 Franchise 500 ; Travel Weekly Readers Choice Awards SurveyBest Mid-Priced Hotel; Hospitality Sales & Marketing Association International Gold and Bronze Adrian Awards; and J.D. Power 2012 Customer Service Champion Award. Between June 30, 2007 and September 30, 2013, we added 500 Hampton hotels and 48,222 rooms to our system. There were 339 hotels with 38,299 rooms in the Hampton development pipeline as of September 30, 2013.
Homewood Suites by Hilton : Homewood Suites by Hilton are our upscale, extended-stay hotels that feature residential style accommodations including business centers, swimming pools, convenience stores and limited meeting facilities. The brand provides the touches, familiarity and comforts of home so that extended-stay travelers can feel at home on the road. Homewood Suites by Hilton is consistently ranked above the competition by guests, thanks to an appealing combination of bundled services and award-winning quality. J.D. Power ranked Homewood Suites by Hilton highest in Guest Satisfaction among Upper Extended Stay Hotels in 2013 and highest in segment in 10 out of the last 13 years. Between June 30, 2007 and September 30, 2013, we added 128 Homewood Suites by Hilton hotels and 14,142 rooms to our system. There were 107 hotels with 12,905 rooms in the Homewood Suites by Hilton development pipeline as of September 30, 2013.
Home2 Suites by Hilton : Home2 Suites by Hilton, our newest brand, are upper midscale hotels that provide a modern and savvy option to budget conscious extended-stay travelers. Offering innovative suites with contemporary design and cutting-edge technology, we strive to ensure that our guests are comfortable and productive, whether they are staying a few days or a few months. The hotel offers a complimentary continental breakfast, integrated laundry and exercise facility, recycling and sustainability initiatives and a pet-friendly policy. Home2 Suites by Hilton has grown rapidly since its first hotel opened in 2011, with 22 hotels open, 22 new hotels under construction and 73 additional hotels under development, each as of September 30, 2013. There were 95 hotels with 9,629 rooms in the Home2 Suites by Hilton development pipeline as of September 30, 2013.
Hilton Grand Vacations : Hilton Grand Vacations, or HGV, is our timeshare brand. Ownership of a deeded real estate interest with club membership points provides members with a lifetime of vacation advantages and the comfort and convenience of residential-style resort accommodations in select, renowned vacation destinations. Each club property provides a distinctive setting, while signature elements remain consistent, such as high-quality guest service, spacious units and extensive on-property amenities. HGVs developed timeshare properties are relatively concentrated in Florida, Nevada, Hawaii and New York, with additional properties available to Club Members at affiliated resorts in the U.S. and internationally. Between June 30, 2007 and September 30, 2013, we have added 8 HGV properties and 2,630 units to our system.
Commercial Services Platform
Our commercial services platform utilizes our global scale and formidable sales, pricing and marketing infrastructure to maximize commercial performance at our hotels, delivering RevPAR index premiums, higher customer loyalty and enhanced financial returns in a cost efficient manner.
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Hilton HHonors is our award-winning guest loyalty program that supports our portfolio of 10 brands and our entire system of hotels and timeshare properties. The program generates significant repeat business by rewarding guests with points for each stay at any of our more than 4,000 hotels worldwide, which are then redeemable for free hotel nights and other rewards. Members also can earn points with over 125 partners, including airlines, rail and car rental companies, credit card providers and others. The program provides targeted marketing, promotions and customized guest experiences to nearly 39 million members. Our HHonors members represented approximately 50% of our system-wide |
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occupancy and contributed hotel-level revenues of over $9 billion during the nine months ended September 30, 2013. Affiliation with our loyalty programs encourages members to allocate more of their travel spending to our hotels. The percentage of travel spending we capture from loyalty members increases as they move up the tiers of our program. Our HHonors members on average spend four times as much money in our system of hotels than our non-HHonors members. The program is funded by contributions from eligible revenues generated by HHonors members and collected by us from hotels in our system. These funds are applied to reimburse hotels and partners for HHonors points redemptions and to pay for program administrative expenses and marketing initiatives that support the program. The HHonors program has won many awards, including the 2013 Frequent Business Travelers GlobeRunner Award for Best Hotel Chain/Group Loyalty Program. |
| Hilton Worldwide Sales provides our portfolio of branded hotels with the advantages of scale, access, experience and regional expertise to more effectively compete for corporate, group and leisure travel business. The team includes over 700 sales professionals who conduct business in over 40 languages from 36 offices on 6 continents. These teams combine to sell directly to our customers, as well as through relationships with corporations, associations and other organizations. We also actively engage the third-party distribution market, where we continue to expand our relationships with leading online travel agencies, travel management companies and global distribution systems. |
| Hilton Reservations and Customer Care (HRCC ) provides over-the-phone reservations and customer service, serving our guests 24 hours per day, 7 days per week. HRCC is operated by over 3,000 team members with capabilities in over 10 languages. HRCC provides consistently high levels of customer satisfaction while handling over 30 million customer contacts annually. |
| Global Online Services operates our online and mobile channels. During the nine months ended September 30, 2013, Global Online Services generated over $6 billion in gross bookings, and with new websites and additional local language capability, we continue to ensure our online channels provide a compelling and easy customer experience. Hiltons mobile applications allow guests to book on-the-go, as well as take advantage of services such as eCheck-In and customized rooms via Requests Upon Arrival. As a result, the total online channel is growing rapidly and is our fastest growing reservations channel in revenue terms. In 2013, a study by Compete, Inc. designated Hilton as #1 in online hotel bookings market share in the U.S. |
| Revenue Management provides tools to assist our hotels in optimizing room rates through the lowest cost distribution channels. Our global revenue management team works together with hotels that have their own on-property revenue management resources. For hotels without dedicated resources, Revenue Management provides a suite of fee-for-service offerings that can handle all of a hotels revenue management activities. |
| Information Technology provides integrated solutions that support seamless online and in-person customer experiences. Our global central reservation system provides a single source of inventory and rates, ensuring that all reservation channels share the same information. Our guest profile management system ensures that team members have the information necessary to deliver superior customer experiences. Our proprietary OnQ property management system links our brands and hotels together to enhance customer service, as well as maximizes operational efficiencies. These three core elements of our information technology system are interlinked and deployed across our portfolio, providing us and our hotel owners a unified, integrated view of the business. |
| Hilton Supply Management (HSM) offers procurement solutions for our portfolio of hotels and third-party customers. This global program connects leading suppliers across all hospitality categories including food and beverage, operating supplies, furniture and equipment, and works to secure competitive pricing and timely delivery. In addition, HSM also provides project management services for new hotels and renovations. HSM creates value by ensuring supply chain stability, reducing costs and driving incremental revenue by providing services to third parties and franchisees. |
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Our Businesses
We operate our business across three segments: (1) management and franchise; (2) ownership; and (3) timeshare. For more information regarding our segments, see Managements Discussion and Analysis of Financial Condition and Results of Operations and Note 22: Business Segments in our audited consolidated financial statements included elsewhere in this prospectus.
Management and Franchise
Through our management and franchise segment we manage hotels and timeshare properties and license our brands to franchisees. This segment generates its revenue primarily from fees charged to hotel owners and to homeowners associations at timeshare properties.
Hotel and Timeshare Management
Our core management services consist of operating hotels under management agreements for the benefit of third parties, who either own or lease the hotels. Under our standard management agreement, we operate a hotel for the benefit of its owner, which either owns or leases the hotel and the associated personal property. Terms of our management agreements vary, but our fees generally consist of a base management fee based on a percentage of each hotels gross revenue, and we also may earn an incentive fee based on gross operating profits, cash flow, or a combination thereof. In general, the owner pays all operating and other expenses and reimburses our out-of-pocket expenses. In turn, our managerial discretion typically is subject to approval by the owner in certain major areas, including the approval of annual operating and capital expenditure budgets. As of September 30, 2013, we managed 489 hotels with 140,187 rooms, excluding our owned and leased hotels.
The initial terms of our management agreements for full service hotels typically are 20 years. In certain cases where we have entered into a franchise agreement as well as a management agreement, we classify these hotels as managed hotels in our portfolio. Extension options for our management agreements are negotiated and vary, but typically are more prevalent in full-service hotels. These extensions typically are either for five or ten years and can be exercised once or twice at our or the other partys option or by mutual agreement.
Some of our management agreements provide early termination rights to hotel owners upon certain events, including the failure to meet certain financial or performance criteria. Performance test measures typically are based upon the hotels performance individually and/or in comparison to specified competitive hotels. We often have a cure right by paying an amount equal to the performance shortfall over a specified period, although in some cases our cure rights are limited.
In addition to the third-party owned hotels we manage, we provide management services for 41 timeshare properties owned by homeowners associations and 156 owned, leased and joint venture hotels, from which we recognize management fee revenues.
Franchising
We franchise our brand names, trade and service marks and operating systems to hotel owners under franchise agreements. We do not directly participate in the day-to-day management or operation of franchised hotels. We conduct periodic inspections to ensure that brand standards are maintained and consult with franchisees concerning certain aspects of hotel operations. We approve the location for new construction of franchised hotels, as well as certain aspects of development. In some cases, we provide franchisees with product improvement plans that must be completed in accordance with brand standards to remain in the brand system. As of September 30, 2013, there were 3,394 franchised hotels with 463,084 rooms.
Each franchisee pays us a franchise application fee. Franchisees also pay a royalty fee, generally based on a percentage of the hotels total gross room revenue (and a percentage of food and beverage revenue in some
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brands). In addition to the franchise application fee and royalty fee, franchisees generally pay a monthly program fee based on a percentage of the total gross room revenue that covers the costs of advertising and marketing programs; internet, technology and reservation systems expenses; and quality assurance program costs. Franchisees also are responsible for various other fees and charges, including payments for participation in our Hilton HHonors reward program, training, consultation and procurement of certain goods and services.
Our franchise agreements typically have initial terms of approximately 20 years for new construction and approximately 10 to 20 years for properties that are converted from other brands. At the expiration of the initial term, we may relicense the hotel to the franchisee, at our or the other partys option or by mutual agreement, for an additional term ranging from 10 to 15 years. We have the right to terminate a franchise agreement upon specified events of default, including nonpayment of fees or noncompliance with brand standards. If a franchise agreement is terminated by us because of a franchisees default, the franchisee is contractually required to pay us liquidated damages.
Ownership
We are among the largest hotel owners in the world based upon the number of rooms at our owned, joint venture and leased hotels. Our diverse global portfolio of owned and leased properties includes a number of leading hotels in major gateway cities such as New York, London, San Francisco, Chicago, São Paolo, Sydney and Tokyo. The portfolio includes iconic hotels with significant underlying real estate value, including The Waldorf Astoria New York, the Hilton Hawaiian Village and the London Hilton on Park Lane. Real estate investment was a critical component of the growth of our business in our early years. Our real estate holdings grew over time through new construction, purchases or leases of hotels, investments in joint ventures, and the acquisition of other hotel companies. In recent years, we have expanded our hotel system less through real estate investment and more by increasing the number of management and franchise agreements we have with third-party hotel owners.
We utilize our commercial services platform to enhance the revenue performance of our owned and leased hotels. We have focused on maximizing the cost efficiency and profitability of the portfolio by, among other things, implementing new labor management practices and systems and reducing fixed costs. Through our disciplined approach to asset management, we have developed and executed on strategic plans for each of our hotels to enhance the market position of each property, and at many of our hotels we have renovated guest rooms and public spaces and added or enhanced meeting and retail space to improve profitability. At certain of our hotels, we are evaluating options for the adaptive reuse of all or a portion of the property to residential, retail or timeshare uses.
As of September 30, 2013, our hotel ownership segment included a portfolio of 156 owned and leased hotels (62,251 rooms), all of which we manage. We own and invest in real estate in a variety of ways:
| Owned Hotels As of September 30, 2013, we owned 48 hotels (27,046 rooms) that we own outright or through consolidated joint ventures. For some of these properties, we lease the underlying land. Under these ground leases, we typically own the buildings and leasehold improvements and all furniture and equipment located on the leased land; we are responsible for repairs, maintenance, operating expenses, and lease rentals; and we retain nearly complete managerial discretion over operations. |
| Joint Venture Hotels As of September 30, 2013, we had 32 hotels (12,426 rooms) in which we have a partial, non-controlling financial interest through one or more entities that own or lease the properties. We manage these hotels on behalf of the joint ventures that own them. |
| Leased Hotels As of September 30, 2013, we leased 76 hotels (22,779 rooms) that we lease directly or through consolidated joint ventures. We have nearly complete control over the management and operation of our leased hotels, but significant alterations to the physical structures of the hotels may require the consent of our landlords. Leases may require the payment of fixed rent payments, variable rent payments based on a percentage of revenue or income, or both. |
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Timeshare
Our timeshare segment generates revenue from three primary sources:
| Timeshare Sales We market and sell timeshare interests owned by Hilton and third parties. |
| Resort Operations We manage the HGV Club, receiving enrollment fees, annual dues and transaction fees from member exchanges for other vacation products. We generate rental revenue from unit rentals of unsold inventory and inventory made available due to ownership exchanges under our HGV Club program. We also earn revenue from the management of retail and spa outlets at our timeshare properties. |
| Financing We provide consumer financing, which includes interest income generated from the origination of consumer loans to customers to finance their purchase of timeshare intervals and revenue from servicing the loans on our timeshare properties. |
HGVs primary product is generally a fee-simple timeshare interest deeded in perpetuity. This ownership interest is an interest in real estate equivalent to annual usage rights for approximately one week at the timeshare resort where the timeshare interval was purchased. Each purchaser is automatically enrolled in the HGV Club, giving the purchaser an annual allotment of Club Points that allow the purchaser to exchange his or her annual usage rights for a number of options, including: a priority reservation period to stay at his or her home resort where his or her timeshare interval is deeded, stays at any resort in the HGV system, reservations for experiential travel such as cruises, conversion to Hilton HHonors points for stays at our hotels and other options, including stays at more than 5,000 resorts included in the RCI timeshare vacation exchange network. In addition, we operate the Hilton Club, which is currently limited to the Hilton Club located in New York City, but whose members also enjoy exchange benefits with the HGV Club. As of September 30, 2013, HGV managed a global system of 41 resorts and the HGV Club and the Hilton Club had more than 200,000 members in total.
Starting in 2010, we began sourcing timeshare intervals through sales and marketing agreements with third-party developers. This allows us to sell timeshare units on behalf of third-party developers in exchange for sales, marketing and branding fees on interval sales, and to earn fees from resort operations and the servicing of consumer loans.
Properties
As of September 30, 2013, we managed, franchised, owned or leased 4,080 properties, totaling 671,926 rooms in 90 countries and territories, including:
| 3,883 managed and franchised hotels (603,271 rooms), all of which are owned by third parties, that include |
| 3,394 franchised hotels (463,084 rooms) that are operated by third parties, and |
| 489 managed hotels (140,187 rooms), all of which we operate under management agreements with third parties; |
| 156 owned and leased hotels (62,251 rooms), all of which we manage, that include |
| 48 hotels owned by us (27,046 rooms), including through three consolidated joint ventures, |
| 32 hotels owned or leased by unconsolidated joint ventures (12,426 rooms), and |
| 76 hotels leased by us (22,779 rooms), including through three consolidated joint ventures; and |
| 41 timeshare properties (6,404 units), all of which we manage. |
Our properties are supported by a number of corporate offices, including our four regional headquarters in McLean, Virginia (Americas), which also serves as our corporate headquarters, Watford, England (Europe), Dubai (Middle East & Africa) and Singapore (Asia Pacific).
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As of September 30, 2013, our system included the following properties and rooms, by type, brand and region:
Owned / Leased (1) | Managed | Franchised | Total | |||||||||||||||||||||||||||||
Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | Hotels | Rooms | |||||||||||||||||||||||||
Waldorf Astoria Hotels & Resorts |
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U.S. |
2 | 1,601 | 13 | 5,816 | | | 15 | 7,417 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | 1 | 248 | 1 | 984 | 2 | 1,232 | ||||||||||||||||||||||||
Europe |
1 | 370 | 3 | 672 | | | 4 | 1,042 | ||||||||||||||||||||||||
MEA |
| | 2 | 384 | | | 2 | 384 | ||||||||||||||||||||||||
Asia Pacific |
| | 1 | 260 | | | 1 | 260 | ||||||||||||||||||||||||
Conrad Hotels & Resorts |
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U.S. |
| | 4 | 1,335 | | | 4 | 1,335 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | | | 1 | 294 | 1 | 294 | ||||||||||||||||||||||||
Europe |
2 | 778 | 1 | 154 | | | 3 | 932 | ||||||||||||||||||||||||
MEA |
1 | 617 | 2 | 641 | | | 3 | 1,258 | ||||||||||||||||||||||||
Asia Pacific |
| | 11 | 3,422 | 1 | 636 | 12 | 4,058 | ||||||||||||||||||||||||
Hilton Hotels & Resorts |
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U.S. |
23 | 21,096 | 43 | 25,235 | 181 | 53,877 | 247 | 100,208 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
3 | 1,836 | 21 | 7,339 | 19 | 5,791 | 43 | 14,966 | ||||||||||||||||||||||||
Europe |
74 | 19,008 | 56 | 15,798 | 21 | 5,309 | 151 | 40,115 | ||||||||||||||||||||||||
MEA |
6 | 2,279 | 43 | 13,411 | 1 | 410 | 50 | 16,100 | ||||||||||||||||||||||||
Asia Pacific |
8 | 3,957 | 48 | 18,059 | 7 | 2,820 | 63 | 24,836 | ||||||||||||||||||||||||
DoubleTree by Hilton |
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U.S. |
12 | 4,456 | 28 | 8,204 | 235 | 58,254 | 275 | 70,914 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | 3 | 637 | 8 | 1,217 | 11 | 1,854 | ||||||||||||||||||||||||
Europe |
| | 10 | 3,335 | 36 | 5,914 | 46 | 9,249 | ||||||||||||||||||||||||
MEA |
| | 2 | 299 | 3 | 431 | 5 | 730 | ||||||||||||||||||||||||
Asia Pacific |
| | 22 | 6,697 | 2 | 965 | 24 | 7,662 | ||||||||||||||||||||||||
Embassy Suites Hotels |
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U.S. |
18 | 4,561 | 39 | 10,450 | 150 | 34,463 | 207 | 49,474 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | 2 | 473 | 5 | 1,270 | 7 | 1,743 | ||||||||||||||||||||||||
Hilton Garden Inn |
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U.S. |
2 | 290 | 5 | 635 | 509 | 68,998 | 516 | 69,923 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | 5 | 685 | 23 | 3,575 | 28 | 4,260 | ||||||||||||||||||||||||
Europe |
| | 15 | 2,620 | 12 | 1,751 | 27 | 4,371 | ||||||||||||||||||||||||
MEA |
| | 1 | 180 | | | 1 | 180 | ||||||||||||||||||||||||
Asia Pacific |
| | 3 | 401 | | | 3 | 401 | ||||||||||||||||||||||||
Hampton Inn |
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U.S. |
1 | 130 | 52 | 6,556 | 1,796 | 172,707 | 1,849 | 179,393 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | 5 | 594 | 53 | 6,642 | 58 | 7,236 | ||||||||||||||||||||||||
Europe |
| | 4 | 492 | 17 | 2,488 | 21 | 2,980 | ||||||||||||||||||||||||
Asia Pacific |
| | | | 1 | 72 | 1 | 72 | ||||||||||||||||||||||||
Homewood Suites by Hilton |
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U.S. |
| | 38 | 4,342 | 280 | 30,725 | 318 | 35,067 | ||||||||||||||||||||||||
Americas (excluding U.S.) |
| | 1 | 102 | 10 | 1,068 | 11 | 1,170 | ||||||||||||||||||||||||
Home2 Suites by Hilton |
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U.S. |
| | | | 22 | 2,423 | 22 | 2,423 | ||||||||||||||||||||||||
Other |
3 | 1,272 | 5 | 711 | | | 8 | 1,983 | ||||||||||||||||||||||||
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Lodging |
156 | 62,251 | 489 | 140,187 | 3,394 | 463,084 | 4,039 | 665,522 | ||||||||||||||||||||||||
Hilton Grand Vacations |
| | 41 | 6,404 | | | 41 | 6,404 | ||||||||||||||||||||||||
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Total |
156 | 62,251 | 530 | 146,591 | 3,394 | 463,084 | 4,080 | 671,926 | ||||||||||||||||||||||||
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(1) | Includes hotels owned or leased by entities in which we own a non-controlling interest. |
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Owned or Controlled Hotels
As of September 30, 2013, we owned a majority or controlling financial interest in the following 48 hotels, representing 27,046 rooms.
Property |
Location | Rooms | Ownership | |||||
Waldorf Astoria Hotels & Resorts |
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The Waldorf Astoria New York |
New York, NY, USA | 1,413 | 100 | % | ||||
Hilton Hotels & Resorts |
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Hilton Hawaiian Village Beach Resort & Spa |
Honolulu, HI, USA | 2,860 | 100 | % | ||||
Hilton New York |
New York, NY, USA | 1,981 | 100 | % | ||||
Hilton San Francisco Union Square |
San Francisco, CA, USA | 1,908 | 100 | % | ||||
Hilton New Orleans Riverside |
New Orleans, LA, USA | 1,622 | 100 | % | ||||
Hilton Chicago |
Chicago, IL, USA | 1,544 | 100 | % | ||||
Hilton Waikoloa Village |
Waikoloa, HI, USA | 1,241 | 100 | % | ||||
Caribe Hilton |
San Juan, Puerto Rico | 915 | 100 | % | ||||
Hilton Chicago OHare Airport |
Chicago, IL, USA | 860 | 100 | % | ||||
Hilton Orlando Lake Buena Vista |
Orlando, FL, USA | 814 | 100 | % | ||||
Hilton Boston Logan Airport |
Boston, MA, USA | 599 | 100 | % | ||||
Hilton Sydney |
Sydney, Australia | 579 | 100 | % | ||||
Pointe Hilton Squaw Peak Resort |
Phoenix, AZ, USA | 563 | 100 | % | ||||
Hilton Miami Airport |
Miami, FL, USA | 508 | 100 | % | ||||
Hilton Atlanta Airport |
Atlanta, GA, USA | 507 | 100 | % | ||||
Hilton São Paulo Morumbi |
São Paulo, Brazil | 503 | 100 | % | ||||
Hilton McLean Tysons Corner |
McLean, VA, USA | 458 | 100 | % | ||||
Hilton Seattle Airport & Conference Center |
Seattle, WA, USA | 396 | 100 | % | ||||
Hilton Oakland Airport |
Oakland, CA, USA | 359 | 100 | % | ||||
Hilton Paris Orly Airport |
Paris, France | 340 | 100 | % | ||||
Hilton Durban |
Durban, South Africa | 327 | 100 | % | ||||
Hilton New Orleans Airport |
Kenner, LA, USA | 317 | 100 | % | ||||
Hilton Short Hills |
Short Hills, NJ, USA | 304 | 100 | % | ||||
Hilton Amsterdam Airport Schiphol |
Schiphol, Netherlands | 277 | 100 | % | ||||
Hilton Blackpool |
Blackpool, United Kingdom | 274 | 100 | % | ||||
Hilton Rotterdam |
Rotterdam, Netherlands | 254 | 100 | % | ||||
Hilton Suites Chicago/Oak Brook |
Oakbrook Terrace, IL, USA | 211 | 100 | % | ||||
Hilton Belfast |
Belfast, United Kingdom | 198 | 100 | % | ||||
Hilton London Islington |
London, United Kingdom | 184 | 100 | % | ||||
Hilton Edinburgh Grosvenor |
Edinburgh, United Kingdom | 184 | 100 | % | ||||
Hilton Coylumbridge |
Coylumbridge, United Kingdom | 175 | 100 | % | ||||
Hilton Bath City |
Bath, United Kingdom | 173 | 100 | % | ||||
Hilton Nuremberg |
Nuremberg, Germany | 152 | 100 | % | ||||
Hilton Milton Keynes |
Milton Keynes, United Kingdom | 138 | 100 | % | ||||
Hilton Templepatrick Hotel & Country Club |
Templepatrick, United Kingdom | 129 | 100 | % | ||||
Hilton Sheffield |
Sheffield, United Kingdom | 128 | 100 | % | ||||
Hilton Portsmouth (1) |
Portsmouth, United Kingdom | 119 | 100 | % | ||||
DoubleTree by Hilton |
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DoubleTree Hotel Crystal CityNational Airport |
Arlington, VA, USA | 631 | 100 | % | ||||
DoubleTree Hotel San Jose |
San Jose, CA, USA | 505 | 100 | % | ||||
DoubleTree Hotel Ontario Airport |
Ontario, CA, USA | 482 | 67 | % | ||||
DoubleTree Spokane-City Center |
Spokane, WA, USA | 375 | 10 | % | ||||
Fess Parkers DoubleTree Resort Santa Barbara |
Santa Barbara, CA, USA | 360 | 50 | % | ||||
Embassy Suites Hotels |
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Embassy Suites Washington D.C. |
Washington, D.C., USA | 318 | 100 | % | ||||
Embassy Suites AustinDowntown/Town Lake |
Austin, TX, USA | 259 | 100 | % | ||||
Embassy Suites PhoenixAirport at 24th Street |
Phoenix, AZ, USA | 182 | 100 | % | ||||
Hilton Garden Inn |
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Hilton Garden Inn LAX/El Segundo |
El Segundo, CA, USA | 162 | 100 | % | ||||
Hilton Garden Inn Chicago/Oak Brook |
Oakbrook Terrace, IL, USA | 128 | 100 | % | ||||
Hampton Inn |
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Hampton Inn & Suites MemphisShady Grove |
Memphis, TN, USA | 130 | 100 | % |
(1) | On October 3, 2013, we entered into an agreement to sell this property with an expected closing date in the fourth quarter of 2013. |
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Joint Venture Hotels
As of September 30, 2013, we had a minority or noncontrolling financial interest in and operated 32 properties, representing 12,426 rooms. We have a right of first refusal to purchase additional equity interests in certain of these joint ventures. We manage each of the partially owned hotels for the entity owning the hotel.
Property |
Location | Rooms | Ownership | |||||||
Waldorf Astoria Hotels & Resorts |
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The Waldorf Astoria Chicago |
Chicago, IL, USA | 188 | 15 | % | ||||||
Conrad Hotels & Resorts |
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Conrad Cairo |
Cairo, Egypt | 617 | 10 | % | ||||||
Conrad Istanbul |
Istanbul, Turkey | 587 | 25 | % | ||||||
Conrad Dublin |
Dublin, Ireland | 191 | 25 | % | ||||||
Hilton Hotels & Resorts |
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Hilton OrlandoOrange County Convention Center |
Orlando, FL | 1,417 | 20 | % | ||||||
Hilton San Diego Bayfront |
San Diego, CA, USA | 1,190 | 25 | % | ||||||
Hilton Tokyo Bay |
Urayasu-shi, Japan | 818 | 24 | % | ||||||
Hilton Berlin |
Berlin, Germany | 601 | 40 | % | ||||||
Capital Hilton |
Washington, D.C., USA | 544 | 25 | % | ||||||
Hilton Nagoya |
Nagoya, Japan | 448 | 24 | % | ||||||
Hilton La Jolla Torrey Pines |
La Jolla, CA, USA | 394 | 25 | % | ||||||
Hilton Mauritius Resort & Spa |
Flic-en-Flac, Mauritius | 193 | 20 | % | ||||||
Hilton Imperial Dubrovnik |
Dubrovnik, Croatia | 147 | 18 | % | ||||||
DoubleTree by Hilton |
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DoubleTree Las Vegas Airport |
Las Vegas, NV, USA | 190 | 50 | % | ||||||
DoubleTree Guest Suites Austin |
Austin, TX, USA | 188 | 10 | % | ||||||
DoubleTree Hotel Missoula/Edgewater |
Missoula, MT, USA | 171 | 50 | % | ||||||
Embassy Suites Hotels |
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Embassy Suites Atlantaat Centennial Olympic Park |
Atlanta, GA, USA | 321 | 36 | % | ||||||
Embassy Suites AlexandriaOld Town |
Alexandria, VA, USA | 288 | 50 | % | ||||||
Embassy Suites Parsippany |
Parsippany, NJ, USA | 274 | 50 | % | ||||||
Embassy Suites Kansas CityPlaza |
Kansas City, MO, USA | 266 | 50 | % | ||||||
Embassy Suites ChicagoLombard/Oak Brook |
Lombard, IL, USA | 262 | 50 | % | ||||||
Embassy Suites SecaucusMeadowlands |
Secaucus, NJ, USA | 261 | 50 | % | ||||||
Embassy Suites San AntonioInternational Airport |
San Antonio, TX, USA | 261 | 50 | % | ||||||
Embassy Suites AustinCentral |
Austin, TX, USA | 260 | 50 | % | ||||||
Embassy Suites Baltimoreat BWI Airport |
Linthicum, MD, USA | 251 | 10 | % | ||||||
Embassy Suites SacramentoRiverfront Promenade |
Sacramento, CA, USA | 242 | 25 | % | ||||||
Embassy Suites AtlantaPerimeter Center |
Atlanta, GA, USA | 241 | 50 | % | ||||||
Embassy Suites San RafaelMarin County |
San Rafael, CA, USA | 235 | 50 | % | ||||||
Embassy Suites RaleighCrabtree |
Raleigh, NC, USA | 225 | 50 | % | ||||||
Embassy Suites San AntonioNW I-10 |
San Antonio, TX, USA | 216 | 50 | % | ||||||
Embassy Suites Kansas CityOverland Park |
Overland Park, KS, USA | 199 | 50 | % | ||||||
Other |
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Myrtle Beach Kingston Plantation (condo management company) |
Myrtle Beach, SC, USA | 740 | 50 | % |
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Leased Hotels
As of September 30, 2013, we leased the following 76 hotels, representing 22,779 rooms.
Property |
Location | Rooms | ||||
Waldorf Astoria Hotels & Resorts |
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Waldorf Astoria Rome Cavalieri |
Rome, Italy | 370 | ||||
Hilton Hotels & Resorts |
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Hilton Tokyo (1) |
(Shinjuku-ku) Tokyo, Japan | 812 | ||||
Hilton Ramses |
Cairo, Egypt | 771 | ||||
Hilton London Kensington |
London, United Kingdom | 601 | ||||
Hilton Vienna |
Vienna, Austria | 579 | ||||
Hilton Tel Aviv |
Tel Aviv, Israel | 560 | ||||
Hilton Osaka (1) |
Osaka, Japan | 525 | ||||
Hilton Istanbul |
Istanbul, Turkey | 499 | ||||
Hilton Salt Lake City |
Salt Lake City, UT, USA | 499 | ||||
Hilton Munich Park |
Munich, Germany | 484 | ||||
Hilton Munich City |
Munich, Germany | 480 | ||||
London Hilton on Park Lane |
London, United Kingdom | 453 | ||||
Hilton Diagonal Mar Barcelona |
Barcelona, Spain | 433 | ||||
Hilton Mainz |
Mainz, Germany | 431 | ||||
Hilton Trinidad & Conference Centre |
Port of Spain, Trinidad | 418 | ||||
Hilton London Heathrow Airport |
London, United Kingdom | 398 | ||||
Hilton Izmir |
Izmir, Turkey | 380 | ||||
Hilton London Docklands Riverside |
London, United Kingdom | 378 | ||||
Hilton Addis Ababa |
Addis Ababa, Ethiopia | 372 | ||||
Hilton Vienna Danube |
Vienna, Austria | 367 | ||||
Hilton Frankfurt |
Frankfurt, Germany | 342 | ||||
Hilton Brighton Metropole |
Brighton, United Kingdom | 340 | ||||
Hilton Sandton |
Sandton, South Africa | 329 | ||||
Hilton Brisbane |
Brisbane, Australia | 319 | ||||
Hilton Glasgow |
Glasgow, United Kingdom | 319 | ||||
Hilton Milan |
Milan, Italy | 319 | ||||
Hilton Ankara |
Ankara, Turkey | 315 | ||||
Hilton Adana |
Adana, Turkey | 308 | ||||
Hilton Waldorf |
London, United Kingdom | 298 | ||||
Hilton Cologne |
Cologne, Germany | 296 | ||||
Hilton Slussen |
Stockholm, Sweden | 289 | ||||
Hilton Nairobi (1) |
Nairobi, Kenya | 287 | ||||
Hilton Madrid Airport |
Madrid, Spain | 284 | ||||
Hilton Parmelia Perth |
Parmelia Perth, Australia | 284 | ||||
Hilton London Canary Wharf |
London, United Kingdom | 282 | ||||
Hilton Amsterdam |
Amsterdam, Netherlands | 271 | ||||
Hilton Newcastle Gateshead |
Newcastle Upon Tyne, United Kingdom | 254 | ||||
Hilton Bonn |
Bonn, Germany | 252 | ||||
Hilton London Tower Bridge |
London, United Kingdom | 245 | ||||
Hilton London Stansted Airport |
Stansted, United Kingdom | 239 | ||||
Hilton Manchester Airport |
Manchester, United Kingdom | 230 | ||||
Hilton Vienna Plaza |
Vienna, Austria | 222 | ||||
Hilton Basel |
Basel, Switzerland | 220 | ||||
Hilton Bracknell |
Bracknell, United Kingdom | 215 | ||||
Hilton Antwerp |
Antwerp, Belgium | 210 |
124
Property |
Location | Rooms | ||||
Hilton Reading |
Reading, United Kingdom | 210 | ||||
Hilton Leeds City |
Leeds, United Kingdom | 208 | ||||
Hilton Watford |
Watford, United Kingdom | 200 | ||||
Hilton Mersin |
Mersin, Turkey | 186 | ||||
Hilton Warwick/Stratford-upon-Avon |
Warwick, United Kingdom | 181 | ||||
Hilton Leicester |
Leicester, United Kingdom | 179 | ||||
Hilton Innsbruck |
Innsbruck, Austria | 176 | ||||
Hilton Nottingham |
Nottingham, United Kingdom | 176 | ||||
Hilton Odawara Resort & Spa |
Odawara City, Japan | 172 | ||||
Hilton St. Annes Manor, Bracknell |
Wokingham, United Kingdom | 170 | ||||
Hilton Croydon |
Croydon, United Kingdom | 168 | ||||
Hilton London Green Park |
London, United Kingdom | 163 | ||||
Hilton Cobham |
Cobham, United Kingdom | 158 | ||||
Hilton Paris La Defense |
Paris, France | 153 | ||||
Hilton East Midlands |
Derby, United Kingdom | 152 | ||||
Hilton Maidstone |
Maidstone, United Kingdom | 146 | ||||
Hilton Avisford Park, Arundel |
Arundel, United Kingdom | 140 | ||||
Hilton Northampton |
Northampton, United Kingdom | 139 | ||||
Hilton London Hyde Park |
London, United Kingdom | 132 | ||||
Hilton York |
York, United Kingdom | 131 | ||||
Hilton Mainz City |
Mainz, Germany | 127 | ||||
Hilton Bradford (2) |
Bradford, United Kingdom | 121 | ||||
Hilton ParkSA Istanbul |
Istanbul, Turkey | 117 | ||||
Hilton Puckrup Hall, Tewkesbury |
Tewkesbury, United Kingdom | 112 | ||||
Hilton Glasgow Grosvenor |
Glasgow, United Kingdom | 97 | ||||
DoubleTree by Hilton |
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DoubleTree Hotel Seattle Airport |
Seattle, WA, USA | 850 | ||||
DoubleTree Hotel San Diego-Mission Valley |
San Diego, CA, USA | 300 | ||||
DoubleTree Hotel Sonoma Wine Country |
Rohnert Park, CA, USA | 245 | ||||
DoubleTree Hotel Durango |
Durango, CO, USA | 159 | ||||
Other |
||||||
Scandic Hotel Sergel Plaza |
Stockholm, Sweden | 403 | ||||
The Trafalgar London |
London, United Kingdom | 129 |
(1) | We own a majority or controlling financial interest, but less than a 100% interest, in entities that lease these properties. |
(2) | On October 7, 2013, we purchased this property from the lessor. |
Other Properties
Other non-operating real estate holdings include a centralized operations center and a centralized data center, both located in Memphis, Tennessee; and a Hilton Reservations and Customer Care office in Carrollton, Texas.
Corporate Headquarters and Regional Offices
Our corporate headquarters are located at 7930 Jones Branch Drive, McLean, Virginia 22102. These offices consist of approximately 160,596 square feet of leased space. The lease for this property initially expires on December 31, 2019, with options to renew and increase the rentable square feet.
Additionally, we lease the following properties to support our operations:
| European Regional office in Watford, United Kingdom; |
| Asia Pacific Regional office in Singapore; |
125
| Middle East and Africa Regional office in Dubai, United Arab Emirates; |
| Hilton HHonors and other commercial services office in Addison, Texas; |
| Hilton Grand Vacations headquarters in Orlando, Florida; and |
| Timeshare sales offices in Honolulu, Hawaii, Las Vegas, Nevada, New York, New York, Orlando, Florida, Tumon Bay, Guam and Tokyo, Japan. |
We believe that our existing office properties are in good condition and are sufficient and suitable for the conduct of our business. In the event we need to expand our operations, we believe that suitable space will be available on commercially reasonable terms.
Corporate Responsibility
We are committed to responsible global citizenship. We also believe being a good corporate citizen is a smart business practice and creates long-term value for our stockholders, team members, hotel owners, customers and operating communities. Through our corporate responsibility platform, Travel with Purpose, we focus on four areas where we can have the greatest impact: creating opportunities for current and future team members; strengthening our local operating communities; celebrating cultures and global connections; and living sustainably through the measurement, analysis and improvement of our use of natural resources. We engage in a number of programs and partnerships that complement our global footprint and provide financial, volunteer and in-kind support to organizations and issues that are committed to our focus areas. Our commitment to responsible global citizenship includes:
| becoming one of the first global, multi-brand hospitality companies to make sustainability performance a brand standard through the creation of LightStay, our proprietary sustainability measurement tool; |
| saving an estimated $253 million in the four years since establishing our sustainability goals in 2008. Our efficiency projects across our participating hotels have delivered a 12% reduction of energy use; a 13% reduction of carbon output; a 25% reduction of waste output; and a 10% reduction of water use. In 2012 we exceeded both the waste and water reduction targets we set in 2008; |
| being one of the first multi-brand hospitality companies to receive ISO 9001 certification for Quality Management Systems and ISO 14001 certification for Environmental Management Systems across our entire hotel portfolio; |
| signing the ECPAT Tourism Child-Protection Code of Conduct in 2011. Our efforts included training more than 1,000 general managers and hotel team members on child trafficking awareness and prevention and supporting public education efforts; |
| launching our Global Team Member Volunteer Program in 2012, which has resulted in team members volunteering over 136,000 hours of service to their communities; |
| creating our Travel with Purpose Action Grants program in 2013, an initiative that offers small grants to local community partners in the areas of sustainability awareness, youth education and life skills training and human rights; and |
| pledging to hire 10,000 U.S. military veterans over the next five years as part of Operation: Opportunity , a new program we established in 2013 to help veterans and their families with job opportunities and career development in the hospitality sector. This program complements our global commitment to youth employment and creating opportunities for young people in the hospitality sector. |
Competition
We encounter active and robust competition as a hotel, residential, resort and timeshare manager, franchisor and developer. Competition in the hotel and lodging industry generally is based on the attractiveness of the facility, location, level of service, quality of accommodations, amenities, food and beverage options and outlets,
126
public spaces and other guest services, consistency of service, room rate, brand reputation and the ability to earn and redeem loyalty program points through a global system. Our properties and brands compete with other hotels, resorts, motels and inns in their respective geographic markets or customer segments, including facilities owned by local interests, individuals, national and international chains, institutions, investment and pension funds and real estate investment trusts, or REITs. We believe that our position as a multi-branded owner, operator, manager and franchisor of hotels makes us one of the largest and most geographically diverse lodging companies in the world.
Our principal competitors include other branded and independent hotel operating companies, national and international hotel brands and ownership companies, including hotel REITs. While local and independent brand competitors vary, on a global scale our primary competitors are firms such as Accor S.A., Carlson Rezidor Group, Fairmont Raffles Hotels International, Hong Kong and Shanghai Hotels, Limited, Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International, Mövenpick Hotels and Resorts, Starwood Hotels & Resorts Worldwide and Wyndham Worldwide Corporation.
In the timeshare business, we compete with other hotel and resort timeshare operators for sales of timeshare intervals based principally on location, quality of accommodations, price, financing terms, quality of service, terms of property use and opportunity for timeshare owners to exchange into time at other timeshare properties or other travel rewards. In addition, we compete based on brand name recognition and reputation, as well as with national and independent timeshare resale companies and owners reselling existing timeshare intervals, which could reduce demand or prices for sales of new timeshare intervals. Our competitors in the timeshare space include Hyatt Residence Club, Marriott Vacations Worldwide Corp., Starwood Vacation Ownership and Wyndham Vacation Resorts.
Seasonality
The hospitality industry is seasonal in nature. The periods during which our lodging properties experience higher revenues vary from property to property, depending principally upon location and the customer-base served. We generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent quarters, with the fourth quarter being the highest.
Cyclicality
The hospitality industry is cyclical and demand generally follows, on a lagged basis, key macroeconomic indicators. There is a history of increases and decreases in demand for hotel rooms, in occupancy levels and in room rates realized by owners of hotels through economic cycles. The combination of changes in economic conditions and in the supply of hotel rooms can result in significant volatility in results for owners and managers of hotel properties. The costs of running a hotel tend to be more fixed than variable. As a result, in an environment of declining revenues the rate of decline in earnings can be higher than the rate of decline in revenues. The vacation ownership business also is cyclical as the demand for vacation ownership units is affected by the availability and cost of financing for purchases of vacation ownership units, as well as general economic conditions and the relative health of the housing market.
Intellectual Property
In the highly competitive hospitality industry in which we operate, trademarks, service marks, trade names and logos are very important to the success of our business. We have a significant number of trademarks, service marks, trade names, logos and pending registrations and expend significant resources each year on surveillance, registration and protection of our trademarks, service marks, trade names and logos, which we believe have become synonymous in the hospitality industry with a reputation for excellence in service and authentic hospitality.
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Government Regulation
Our business is subject to various foreign and U.S. federal and state laws and regulations, including: laws and regulations that govern the offer and sale of franchises, many of which impose substantive requirements on franchise agreements and require that certain materials be registered before franchises can be offered or sold in a particular state; and extensive state and federal laws and regulation relating to our timeshare business, primarily relating to the sale and marketing of timeshare intervals.
In addition, a number of states regulate the activities of hospitality properties and restaurants, including the sale of liquor at such properties, by requiring licensing, registration, disclosure statements and compliance with specific standards of conduct. Operators of hospitality properties also are subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions and work permit requirements. Compliance with, or changes in, these laws could reduce the revenue and profitability of our properties and could otherwise adversely affect our operations.
We also manage and own hotels with casino gaming operations as part of or adjacent to the hotels. However, with the exception of casinos at certain of our properties in Puerto Rico and one property in Egypt, third parties manage and operate the casinos. We hold and maintain the casino gaming license and manage the casinos located in Puerto Rico and Egypt and employ third-party compliance consultants and service providers. As a result, our business operations at these facilities are subject to the licensing and regulatory control of the local regulatory agency responsible for gaming licenses and operations in those jurisdictions.
Finally, as an international owner, operator and franchisor of hospitality properties in 90 countries and territories, we also are subject to the local laws and regulations in each country in which we operate, including employment laws and practices, privacy laws, tax laws, which may provide for tax rates that exceed those of the United States and which may provide that our foreign earnings are subject to withholding requirements or other restrictions, unexpected changes in regulatory requirements or monetary policy and other potentially adverse tax consequences.
Environmental Matters
We are subject to certain requirements and potential liabilities under various foreign and U.S. federal, state and local environmental, health and safety laws and regulations and incur costs in complying with such requirements. These laws and regulations govern actions including air emissions, the use, storage and disposal of hazardous and toxic substances, and wastewater disposal. In addition to investigation and remediation liabilities that could arise under such laws, we may also face personal injury, property damage, fines or other claims by third parties concerning environmental compliance or contamination. In addition to our hotel accommodations, we operate a number of laundry facilities located in certain areas where we have multiple properties. We use and store hazardous and toxic substances, such as cleaning materials, pool chemicals, heating oil and fuel for back-up generators at some of our facilities, and we generate certain wastes in connection with our operations. Some of our properties include older buildings, and some may have, or may historically have had, dry-cleaning facilities and underground storage tanks for heating oil and back-up generators. We have from time to time been responsible for investigating and remediating contamination at some of our facilities, such as contamination that has been discovered when we have removed underground storage tanks, and we could be held responsible for any contamination resulting from the disposal of wastes that we generate, including at locations where such wastes have been sent for disposal. In some cases, we may be entitled to indemnification from the party that caused the contamination, or pursuant to our management or franchise agreements, but there can be no assurance that we would be able to recover all or any costs we incur in addressing such problems. From time to time, we may also be required to manage, abate, remove or contain mold, lead, asbestos-containing materials, radon gas or other hazardous conditions found in or on our properties. We have implemented an on-going operations and maintenance plan at each of our owned and operated properties that seeks to identify and remediate these conditions as appropriate. Although we have incurred, and expect that we will continue to incur, costs relating to
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the investigation, identification and remediation of hazardous materials known or discovered to exist at our properties, those costs have not had, and are not expected to have, a material adverse effect on our financial condition, results of operations or cash flow.
Insurance
We maintain insurance coverage for general liability, property including business interruption, terrorism, workers compensation and other risks with respect to our business for all of our owned hotels. Most of our insurance policies are written with self-insured retentions or deductibles that are common in the insurance market for similar risks. These policies provide coverage for claim amounts that exceed our self-insured retentions or deductibles. Our insurance provides coverage related to any claims or losses arising out of the design, development and operation of our hotels.
U.S. hotels that we manage are permitted to participate in our insurance programs by mutual agreement with our hotel owners or, if not participating, must purchase insurance programs consistent with our requirements. U.S. franchised hotels are not permitted to participate in our insurance programs but rather must purchase insurance programs consistent with our requirements. Non-U.S. managed and franchised hotels are required to participate in certain of our insurance programs. All other insurance programs purchased by hotel owners must meet our requirements. In addition, our management and franchise agreements typically include provisions requiring the owner of the hotel property to indemnify us against losses arising from the design, development and operation of our hotels.
Employees
Our talent management strategy is driven by the simple principle of hiring the best person for each job and giving them the opportunity to do great work and to grow in their career. As of September 30, 2013, approximately 151,000 people were employed at our managed, owned, leased, timeshare and corporate locations in 90 countries and territories around the world. There are an additional estimated 160,000 individuals working at our franchised locations that we do not employ or supervise.
Approximately 27% of our employees globally (or 30% of our employees in the United States) are covered by various collective bargaining agreements generally addressing pay rates, working hours, other terms and conditions of employment, certain employee benefits and orderly settlement of labor disputes.
Legal Proceedings
We are involved in various claims and lawsuits arising in the normal course of business, some of which include claims for substantial sums, including proceedings involving tort and other general liability claims, employee claims, consumer protection claims and claims related to our management of certain hotel properties. Most occurrences involving liability, claims of negligence and employees are covered by insurance with solvent insurance carriers. For those matters not covered by insurance, which include commercial matters, we recognize a liability when we believe the loss is probable and can be reasonably estimated. The ultimate results of claims and litigation cannot be predicted with certainty. We believe we have adequate reserves against such matters. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect our future results of operations in a particular period.
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In re On-Line Travel Company (OTC)/Hotel Booking Antitrust Litigation
We are a defendant in a federal multi-district litigation, currently pending in the U.S. District Court for the Northern District of Texas, which consolidates 30 previously separate actions originally filed in federal courts between August 2012 and February 2013. The consolidated amended complaint alleges that approximately a dozen hotel and online travel company defendants engaged in an anti-competitive scheme to fix the prices of hotel rooms in violation of federal and state antitrust and consumer protection laws. The defendants have filed a joint motion to dismiss the amended complaint on the basis that, among other things, the plaintiffs have failed to demonstrate facts sufficient to support their allegations of an industry-wide conspiracy. We dispute the allegations and will defend our interests vigorously. We currently do not believe the ultimate outcome of this litigation will have a material effect on our consolidated financial position, results of operations or liquidity.
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Directors and Executive Officers
The following table sets forth the names, ages and positions of our directors and executive officers as of the date of this prospectus.
Name |
Age |
Position |
||||
Christopher J. Nassetta |
51 | President, Chief Executive Officer and Director | ||||
Jonathan D. Gray |
43 | Chairman of the Board of Directors | ||||
Michael S. Chae |
45 | Director | ||||
Tyler S. Henritze |
33 | Director | ||||
Judith A. McHale |
66 | Director | ||||
John G. Schreiber |
67 | Director | ||||
Douglas M. Steenland |
62 | Director | ||||
William J. Stein |
51 | Director | ||||
Kristin A. Campbell |
52 | Executive Vice President and General Counsel | ||||
Ian R. Carter |
52 | President, Development, Architecture and Construction | ||||
Jeffrey A. Diskin |
52 | Executive Vice President, Commercial Services | ||||
James E. Holthouser |
54 | Executive Vice President, Global Brands | ||||
Kevin J. Jacobs |
41 | Executive Vice President and Chief Financial Officer | ||||
Matthew W. Schuyler |
48 | Executive Vice President and Chief Human Resources Officer | ||||
Mark D. Wang |
56 | President, Global Sales & Hilton Grand Vacations |
Christopher J. Nassetta joined Hilton Worldwide as President and Chief Executive Officer in December 2007 and has served as a director of Hilton Worldwide since that time. Previously, he was President and Chief Executive Officer of Host Hotels and Resorts, Inc., a position he held from May 2000 until October 2007. He joined Host in 1995 as Executive Vice President and was elected Chief Operating Officer in 1997. Before joining Host, Mr. Nassetta co-founded Bailey Capital Corporation, a real estate investment and advisory firm, in 1991. Prior to this, he spent seven years at The Oliver Carr Company, a commercial real estate company, where he ultimately served as Chief Development Officer. Mr. Nassetta is an Advisory Board member for the McIntire School of Commerce at the University of Virginia and is Vice Chairman of the Corporate Fund for The John F. Kennedy Center for the Performing Arts. He is a member of Federal City Council, a member of the Steering Committee of Partners for a New Beginning, and is on the boards of the International Youth Foundation, the Wolf Trap Foundation for the Performing Arts, the Economic Club of Washington, D.C. and CoStar Group, Inc. He is also a member and a past Chairman of The Real Estate Roundtable, an Executive Committee member of the World Travel & Tourism Council and has served in various positions at the Arlington Free Clinic. Mr. Nassetta graduated from the McIntire School of Commerce at the University of Virginia with a degree in Finance.
Jonathan D. Gray has served as a director of Hilton Worldwide since 2007. Mr. Gray has served as Blackstones global head of real estate since January 2012 and a member of the board of directors of Blackstone since February 2012. He also sits on Blackstones management and executive committees. Prior to being named global head of real estate at Blackstone, Mr. Gray served as a senior managing director and co-head of real estate from January 2005 to December 2011. Since joining Blackstone in 1992, Mr. Gray has helped build the largest private equity real estate platform in the world with $69 billion in investor capital under management as of September 30, 2013. Mr. Gray received a B.S. in Economics from the Wharton School, as well as a B.A. in English from the College of Arts and Sciences at the University of Pennsylvania, where he graduated magna cum laude and was elected to Phi Beta Kappa. He currently serves as a board member of the Pension Real Estate Association and Trinity School and is Chairman of the Board of Harlem Village Academies. Mr. Gray and his wife, Mindy, recently established the Basser Research Center at the University of Pennsylvania School of Medicine focused on the prevention and treatment of certain genetically caused breast and ovarian cancers.
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Michael S. Chae has served as a director of Hilton Worldwide since 2007. Mr. Chae has been a senior managing director of Blackstone since January 2005 and serves as head of international private equity at Blackstone. Since joining Blackstone, Mr. Chae has been involved in numerous private equity investments for Blackstone globally. Before joining Blackstone, he worked at The Carlyle Group, L.P. and prior to that, with Dillon, Read & Co. He serves as a member of the Board of Trustees of the Lawrenceville School. Mr. Chae graduated from Harvard College, and received an M.Phil. from Cambridge University and a J.D. from Yale Law School.
Tyler S. Henritze has served as a director of Hilton Worldwide since 2013. Mr. Henritze has been a senior managing director in the real estate group at Blackstone since January 2013 and currently focuses on investment opportunities in the lodging sector. Prior to being named a senior managing director at Blackstone, Mr. Henritze served as a managing director from January 2011 to December 2012 and as principal from January 2009 to December 2010. Since joining Blackstone in 2004, Mr. Henritze has been involved in over $50 billion of real estate investments across all property types. He played a key role in acquisitions including Motel 6, Duke Realty Office Portfolio, Valad Property Group, Extended Stay Hotels, Equity Office Properties Trust, CarrAmerica Realty, La Quinta and Wyndham International. Before joining Blackstone, Mr. Henritze worked at Merrill Lynch in the real estate investment banking group and was involved in a variety of debt, equity and M&A transactions. Mr. Henritze received a B.S. in Commerce from The McIntire School at the University of Virginia, where he graduated with distinction. He is a member of the IREFAC Council of the American Hotel and Lodging Association and is active with City Year NY, serving on its investment community board.
Judith A. McHale has served as a director of Hilton Worldwide since 2013. Ms. McHale has served as President and Chief Executive Officer of Cane Investments, LLC since August 2011. From May 2009 to July 2011, Ms. McHale served as Under Secretary of State for Public Diplomacy and Public Affairs for the U.S. Department of State. From 2006 to March 2009, Ms. McHale served as a Managing Partner in the formation of GEF/Africa Growth Fund. Prior to that, Ms. McHale served as the President and Chief Executive Officer of Discovery Communications. Ms. McHale currently serves on the board of directors of Ralph Lauren Corporation and SeaWorld Entertainment, Inc. Ms. McHale graduated from the University of Nottingham in England and Fordham University School of Law.
John G. Schreiber has served as a director of Hilton Worldwide since 2007. Mr. Schreiber has served as the President of Centaur Capital Partners since April 1991 and a Partner and Co-Founder of Blackstone Real Estate Advisors (BREA) since October 1992. As Co-Chairman of the BREA Investment Committee, Mr. Schreiber has overseen all Blackstone real estate investments since 1992. During the past 20 years, Blackstone has invested over $40 billion of equity in a wide variety of real estate transactions. Previously, Mr. Schreiber served as Chairman and CEO of JMB Urban Development Co. and Executive Vice President of JMB Realty Corp. During his twenty-year career at JMB, Mr. Schreiber was responsible for over $10 billion of firm and client real estate investments and had overall responsibility for the firms shopping center development activities. Mr. Schreiber is a past board member of Urban Shopping Centers, Inc., Host Hotels & Resorts, Inc., The Rouse Company, AMLI Residential Properties Trust and General Growth Properties and he currently serves on the board of JMB Realty Corp., Brixmor Property Group and Blackstone Mortgage Trust and is a director/trustee to the mutual funds managed by T. Rowe Price Associates. Mr. Schreiber graduated from Loyola University of Chicago and received an M.B.A. from Harvard Business School.
Douglas M. Steenland has served as a director of Hilton Worldwide since 2009. Mr. Steenland worked for Northwest Airlines Corporation from September 1991 to October 2008, serving as Chief Executive Officer from April 2004 to October 2008 and as President from February 2001 to April 2004. During his tenure at Northwest Airlines, he also served as Executive Vice President, Chief Corporate Officer and Senior Vice President and General Counsel. Mr. Steenland was Chief Executive Officer of Northwest Airlines at the time it filed for Chapter 11 bankruptcy in 2005 following a period of rising fuel prices and other challenges and oversaw its emergence from bankruptcy in 2007. Mr. Steenland retired from Northwest Airlines upon its merger with Delta Air Lines, Inc. Prior to his time at Northwest Airlines, Mr. Steenland was a senior partner at a Washington, D.C.
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law firm that is now part of DLA Piper. Mr. Steenland is currently a director of American International Group, Inc., where he serves on the finance and risk management committee and the regulatory, compliance and public policy committee; Chrysler Group LLC, where he serves on the audit committee; Digital River, Inc., where he serves on the compensation committee; and Travelport Limited, where he serves on the compensation and audit committees. In the past five years, Mr. Steenland has also served as a director of Delta Airlines, Inc. and Northwest Airlines Corporation. Mr. Steenland received a B.A. from Calvin College and is a graduate from The George Washington University Law School.
William J. Stein has served as a director of Hilton Worldwide since 2007. Mr. Stein has been a senior managing director of Blackstone since January 2006 and serves as global head of asset management in Blackstones real estate group. Since joining Blackstone in 1997, Mr. Stein has been involved in the direct asset management and asset management oversight of Blackstones global real estate assets. Before joining Blackstone, Mr. Stein was a Vice President at Heitman Real Estate Advisors and JMB Realty Corp. Mr. Stein received a B.B.A. from the University of Michigan and an M.B.A. from the University of Chicago.
Kristin A. Campbell joined Hilton Worldwide as Executive Vice President and General Counsel in June 2011. She is responsible for leading Hilton Worldwides global legal, compliance and government relations functions. Prior to Hilton Worldwide, Ms. Campbell was Senior Vice President, General Counsel and Corporate Secretary of Staples, Inc., an international office products company from May 2007 to June 2011. Before joining Staples, Inc. in 1993, Ms. Campbell worked at the law firms Goodwin Procter LLP and Rackemann, Sawyer & Brewster. Ms. Campbell graduated summa cum laude from Arizona State University and received a J.D. from Cornell University Law School.
Ian R. Carter has served as President, Development, Architecture and Construction for Hilton Worldwide since October 2012 and previously oversaw Operations since August 2009 for Hilton Worldwide. He previously served as Chief Executive Officer of Hilton International Co. prior to its re-acquisition by Hilton Worldwide in February 2006. Prior to joining Hilton International in January 2005, Mr. Carter served as Officer and President of Black & Decker Corporation, Middle East, Africa and Asia. Prior to Black & Decker, Mr. Carter spent more than a decade with General Electric Plastics, ultimately serving as President of General Electric Specialty Chemical. Mr. Carter serves as a non-Executive Director on the Board of Burberry Group plc, where he serves as chairman of the compensation committee, and is a Patron of Hospitality in Action and Chairman of the Hilton in the Community Foundation. He is also Chairman of the International Tourism Partnership. He serves on the board of the International Business Leaders Forum and the board of advisors of Boston University School of Hospitality Administration, serves as a Commissioner of the California Travel and Tourism Commission and is a fellow of the Institute of Hospitality. Mr. Carter is a graduate of the University of West London, School of Business and Management, and received an honorary doctorate from the university.
Jeffrey A. Diskin has served as Executive Vice President of Commercial Services at Hilton Worldwide since November 2012 and oversees Customer Marketing, Revenue Management, E-Commerce and Online Service divisions globally, including our Hilton HHonors guest loyalty program. From March 2009 to November 2012, Mr. Diskin was Senior Vice President of Global Customer Marketing, and prior to that role he was Senior Vice President, Brand Management. Mr. Diskin first joined Hilton in 1988 and has held numerous marketing and management positions since that time, including roles where he was responsible for developing the companys customer marketing websites and online strategies to overseeing our Hilton and luxury brands. He was also President and Chief Operating Officer of the Hilton HHonors Worldwide subsidiary from March 1997 to June 2004. Before joining Hilton, Mr. Diskin worked for MPI, a subsidiary of United Airlines, specializing in loyalty program design and implementation. Mr. Diskin is Chairman of the Room Key board, and was previously a board director for Doubletree Hotel Systems, Inc., Hilton Inns, Inc. and Promus Hotels Inc. He was elected president of the Frequent Traveler Marketing Association, and has been a recipient of three annual Best in Show awards from Hospitality Sales and Marketing Association International.
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James E. Holthouser has served as Hilton Worldwides Executive Vice President of Global Brands since November 2012. In this role, he serves as our global leader for brand management and customer marketing. Mr. Holthouser also oversees the Product Management group and the Global Brands Strategy group. The Product Management group is responsible for the development and management of products for Food & Beverage, Meetings & Events, Spa, Fitness, Guest Technology and Sustainability. The Global Brands Strategy group is responsible for developing strategies for all brand and product groups across the enterprise. With more than 20 years of experience in the lodging, restaurant and gaming industries, Mr. Holthouser has held a series of senior management positions within Hilton Worldwide in the branding, franchising and marketing arenas. Most recently, he was Global Head of Full Service Brands and Global Head of Embassy Suites Hotels from June 2009 to November 2012, overseeing all aspects of brand management. From October 2005 to June 2009, Mr. Holthouser was Senior Vice President of Brand Management for Embassy Suites. From February 1999 to October 2005, Mr. Holthouser served as Senior Vice President of Brand Management for Homewood Suites by Hilton. His career with the company began in 1989 in Market Research for Promus. Mr. Holthouser received his M.A. in Economics and Political Science from the University of Louisville and his international M.B.A. from the American Graduate School of International Management. He received undergraduate degrees from the University of Louisville in Political Science and Foreign Languages.
Kevin J. Jacobs serves as Executive Vice President and Chief Financial Officer of Hilton Worldwide and is responsible for the oversight of all of our global finance, information technology and real estate functions. He joined Hilton Worldwide as Senior Vice President, Corporate Strategy in June 2008, was elected Treasurer in May 2009, became Executive Vice President and Chief of Staff in September 2012 and assumed his current role in August 2013. Previously, from July 2007 to June 2008 he was Senior Vice President, Mergers & Acquisitions and Treasurer of Fairmont Raffles Hotels International. Prior to joining Fairmont Raffles, Mr. Jacobs spent seven years with Host Hotels & Resorts, Inc., most recently as Vice President, Corporate Finance & Investor Relations. Prior to joining Host, Mr. Jacobs held various roles in the Hospitality Consulting practice of PricewaterhouseCoopers LLP and the Hospitality Valuation Group at Cushman & Wakefield, Inc. Mr. Jacobs is a member of the Advisory Board of the Center for Hospitality Research at Cornell University and a member of the Hotel Development Council of the Urban Land Institute. He is a graduate of the Cornell University School of Hotel Administration.
Matthew W. Schuyler has served as our Executive Vice President and Chief Human Resources Officer since June 2009 and leads the companys global human resources organization. Mr. Schuyler was previously Chief Human Resources Officer at Capital One Financial Corporation from April 2002 to June 2009. Prior to Capital One, Mr. Schuyler served as Vice President of Human Resources with Cisco Systems, Inc. and as a Partner with PricewaterhouseCoopers in the Global Human Resources Group. He serves on the board of the Make-A-Wish Foundation of America, where he serves as chairman of the compensation committee, and is a member of the Penn State University Business School Board of Visitors and Penn States College of Information Sciences and Technology Advisory Board. Mr. Schuyler holds a B.S. from Penn State University and an M.B.A. from the University of Michigan.
Mark D. Wang has served as President of Hilton Worldwide Global Sales since November 2012 and Hilton Grand Vacations since March 2008. In his Global Sales role, Mr. Wang is responsible for sales operations worldwide including hotel sales, distribution, reservations and customer care. He also oversees our global timeshare operations for Hilton Grand Vacations. Mr. Wang first joined Hilton in 1999 as Managing Director for Hawaii and Asia Pacific and has held a series of senior management positions within Hilton Grand Vacations. Before joining Hilton, Mr. Wang spent nearly 20 years in sales and marketing roles serving as President & Chief Operating Officer of Pahio Resorts, President of Aloha Resorts International and Founder of Grand Ownership Resorts. Mr. Wang serves on the Board of Directors of the American Resort Development Association.
There are no family relationships among any of our directors or executive officers.
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Our Corporate Governance
We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance include:
| Blackstone has advised us that, when it ceases to own a majority of our common stock, it will ensure that its employees will no longer constitute a majority of our board of directors; |
| our board of directors is not classified and each of our directors is subject to re-election annually; |
| under our bylaws and our corporate governance guidelines, directors (other than directors designated pursuant to our stockholders agreement) who fail to receive a majority of the votes cast in uncontested elections will be required to submit their resignation to our board of directors; |
| we will have a fully independent audit committee and independent director representation on our compensation and nominating and corporate governance committees immediately at the time of the offering, and our independent directors will meet regularly in executive sessions without the presence of our corporate officers or non-independent directors; |
| we anticipate that at least one of our directors will qualify as an audit committee financial expert as defined by the SEC; |
| we do not have a stockholder rights plan, and if our board of directors were ever to adopt a stockholder rights plan in the future without prior stockholder approval, our board of directors would either submit the plan to stockholders for ratification or cause the rights plan to expire within one year; and |
| we will implement a range of other corporate governance best practices, including placing limits on the number of directorships held by our directors to prevent overboarding and implementing a robust director education program. |
Composition of the Board of Directors after this Offering
Upon completion of this offering, our charter and bylaws will provide that our board of directors will consist of such number of directors as may from time to time be fixed by our board of directors. So long as our existing owners and their affiliates together continue to beneficially own at least 5% of the total shares of our common stock entitled to vote generally in the election of our directors as of the record date of such meeting, we will agree to nominate individuals designated by Blackstone for election as directors as specified in our stockholders agreement and Blackstone must consent to any change to the number of our directors. Each director will serve until our next annual meeting and until his or her successor is duly elected and qualifies or until the directors earlier death, resignation or removal. For a description of Blackstones right to require us to nominate its designees to our board of directors, see Certain Relationships and Related Person TransactionsStockholders Agreement.
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Background and Experience of Directors
When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each persons background and experience as reflected in the information discussed in each of the directors individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. In particular, the members of our board of directors considered the following important characteristics, among others:
| Mr. Nassettawe considered his experience as an executive in the hospitality industry, his extensive financial background and experience with real estate investments. Furthermore, we also considered how his additional role as our President and Chief Executive Officer would bring management perspective to board deliberations and provide valuable information about the status of our day-to-day operations. |
| Mr. Graywe considered his affiliation with Blackstone, his significant experience in working with companies controlled by private equity sponsors, particularly in the real estate industry, his experience in working with the management of various other companies owned by Blackstones funds, his experience with real estate investing and his extensive financial background. |
| Mr. Chaewe considered his affiliation with Blackstone, his significant experience in working with companies controlled by private equity sponsors, his experience in working with the management of various other companies owned by Blackstones funds and his extensive financial background. |
| Mr. Henritzewe considered his affiliation with Blackstone, his significant experience in working with companies controlled by private equity sponsors, particularly in the real estate industry, his experience in working with the management of various other companies owned by Blackstones funds, his experience with real estate investing and his extensive financial background. |
| Ms. McHalewe considered her extensive business and management expertise, including her experience as an executive officer and director of several public companies, as well as her prior service as a high-ranking official in the U.S. Department of State. |
| Mr. Schreiberwe considered his affiliation with Blackstone, his significant experience in working with companies controlled by private equity sponsors, particularly in the real estate industry, his experience in working with the management of various other companies owned by Blackstones funds, his experience with real estate investing and his extensive financial background. |
| Mr. Steenlandwe considered his experience in managing large, complex, international institutions generally and his experience as an executive in the travel and hospitality industries in particular. |
| Mr. Steinwe considered his 16-year tenure with Blackstone involving the direct asset management and asset management oversight of Blackstones global real estate assets, his extensive financial background and experience as an asset manager focusing on real estate and hospitality investments. |
Controlled Company Exception
After the completion of this offering, affiliates of Blackstone who are party to the stockholders agreement will continue to beneficially own shares representing more than 50% of the voting power of our shares eligible to vote in the election of directors. As a result, we will be a controlled company within the meaning of corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance standards, including the requirements (1) that a majority of our board of directors consist of independent directors, (2) that our board of directors have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committees purpose and responsibilities and (3) that our board of directors have a nominating and corporate governance committee that is
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comprised entirely of independent directors with a written charter addressing the committees purpose and responsibilities. For at least some period following this offering, we intend to utilize these exemptions. As a result, although we will have a fully independent audit committee and have independent director representation on our compensation and nominating and corporate governance committees upon closing this offering, immediately following this offering we do not expect the majority of our directors will be independent or that our compensation committee or nominating and corporate governance committee will be comprised entirely of independent directors. Accordingly, although we may transition to fully independent compensation and nominating and corporate governance committees prior to the time we cease to be a controlled company, for such period of time you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that we cease to be a controlled company and our shares continue to be listed on , we will be required to comply with these provisions within the applicable transition periods.
Committees of the Board of Directors
Our board of directors has an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will have the composition and responsibilities described below. Our board of directors may also establish from time to time any other committees that it deems necessary or desirable.
Audit Committee
Upon completion of this offering, we expect our audit committee will consist of Mr. Steenland and Ms. McHale, with Mr. Steenland serving as chair. Mr. Steenland and Ms. McHale qualify as independent directors under governance standards and the independence requirements of Rule 10A-3 of the Exchange Act. The audit committee has oversight responsibilities regarding:
| the adequacy and integrity of our financial statements and our financial reporting and disclosure practices; |
| the soundness of our system of internal controls regarding finance and accounting compliance; |
| the annual independent audit of our consolidated financial statements; |
| the independent registered public accounting firms qualifications and independence; |
| the engagement of the independent registered public accounting firm; |
| the performance of our internal audit function and independent registered public accounting firm; |
| our compliance with legal and regulatory requirements in connection with the foregoing; and |
| compliance with our Code of Conduct. |
The audit committee shall also prepare the report of the committee required by the rules and regulations of the SEC to be included in our annual proxy statement.
Compensation Committee
Upon completion of this offering, we expect our compensation committee will consist of Mr. Schreiber, Ms. McHale and Mr. Stein, with Mr. Schreiber serving as chair. The compensation committee is authorized to discharge the boards responsibilities relating to:
| the establishment, maintenance and administration of compensation and benefit policies designed to attract, motivate and retain personnel with the requisite skills and abilities to contribute to the long term success of the Company; |
| the goals, objectives and compensation of our President and Chief Executive Officer, including evaluating the performance of the President and Chief Executive Officer in light of those goals; |
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| the compensation of our other executives and non-management directors; |
| our compliance with the compensation rules, regulations and guidelines promulgated by , the SEC and other law, as applicable; and |
| the issuance of an annual report on executive compensation for inclusion in our annual proxy statement, once required. |
Nominating and Corporate Governance Committee
Upon completion of this offering, we expect our nominating and corporate governance committee will consist of Mr. Stein and Mr. Steenland, with Mr. Stein serving as chair. The nominating and corporate governance committee is authorized to:
| advise the board concerning the appropriate composition of the board and its committees; |
| identify individuals qualified to become board members; |
| recommend to the board the persons to be nominated by the board for election as directors at any meeting of stockholders; |
| recommend to the board the members of the board to serve on the various committees of the board; |
| develop and recommend to the board a set of corporate governance guidelines and assist the board in complying with them; and |
| oversee the evaluation of the board, the boards committees, and management. |
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
Director Compensation
None of our directors other than Mr. Steenland received compensation for the year ended December 31, 2012. For 2012, Mr. Steenland received a quarterly stipend of $31,250 for serving on our board of directors and as chairman of our audit committee. Our employee directors and Sponsor-affiliated directors receive no additional compensation for serving on the board of directors or committees thereof. Following this offering, each outside director (other than the directors employed by our Sponsor) will be entitled to annual compensation as follows:
| Cash retainer of $80,000, payable quarterly; |
| Additional cash retainer payable quarterly for serving on committees or as the chairperson of a committee as follows: |
| Each member (other than the chairperson) of the audit committee, the compensation committee and the nominating and corporate governance committee receives $7,500 for each committee on which he or she serves; and |
| The chairperson of the audit committee receives $25,000 and the chairperson of each of the compensation committee and the nominating and corporate governance committee receives an additional $20,000; and |
| Equity award of $130,000 payable annually in restricted stock units, which vest over three years in equal annual installments from the date of grant. |
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Our directors will not be paid any fees for attending meetings, however, our directors will be reimbursed for reasonable travel and related expenses associated with attendance at board or committee meetings. In addition, our independent directors will be reimbursed for reasonable personal hotel costs when they stay at Company-branded hotels.
We have also adopted a stock ownership policy effective upon the consummation of this offering. Each of our non-employee directors will be required to own stock in an amount equal to five times his or her annual cash retainer, provided that a non-employee director who is employed by a stockholder of the Company that meets the ownership requirements for a non-employee director shall be exempt from such requirement. For purposes of this requirement, a directors holdings include shares held directly or indirectly, individually or jointly, shares underlying vested options and shares held under a deferral or similar plan. Non-employee directors are expected to meet this ownership requirement within five years of the later of (x) the date on which we make our first broad-based equity incentive grants following this offering or (y) the date he or she first becomes subject to the stock ownership policy.
Executive Compensation
Compensation Discussion and Analysis
Section Overview
Our executive compensation program is designed to attract and retain individuals with the skills and qualifications to manage and lead the Company effectively. The overarching goal of our programs is to motivate our leaders to contribute to the achievement of our financial goals and to focus on long-term value creation for our stockholders.
Our named executive officers, or NEOs, for 2012 were:
Name |
Position |
|
Christopher J. Nassetta |
President and Chief Executive Officer (CEO) | |
Thomas C. Kennedy |
Former Executive Vice President and Chief Financial Officer (CFO) (1) | |
Ian R. Carter |
Executive Vice President and President, Development, Architecture & Construction | |
Mark D. Wang |
Executive Vice President, Global Sales and President, Hilton Grand Vacations (HGV) | |
Kristin A. Campbell |
Executive Vice President and General Counsel | |
Paul J. Brown |
Former Executive Vice President and President, Global Brands and Commercial Services (2) |
(1) | Mr. Kennedy served as our Executive Vice President and Chief Financial Officer from September 15, 2008 until his resignation from these positions effective August 8, 2013. Mr. Kennedy agreed to provide services to the Company following his resignation until the earlier of December 31, 2013 or the date he commences employment with a new employer. On August 8, 2013, Kevin J. Jacobs, previously our Executive Vice President and Chief of Staff, became our Executive Vice President and Chief Financial Officer. |
(2) | Mr. Brown served as our Executive Vice President and President, Global Brands and Commercial Services from November 13, 2008 until his resignation from this position effective November 1, 2012. Mr. Brown provided services to the Company as a Special Advisor to the CEO through April 30, 2013. |
Executive Summary
Compensation Philosophy and Approach . At Hilton Worldwide, we expect our executive team to possess and demonstrate strong leadership and management capabilities. To reward and retain our leaders, including our NEOs, we have designed a total compensation approach that rewards both short-term and long-term success.
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Compensation Objectives . Our compensation program for executives is designed to support the following objectives:
| foster a strong relationship between stockholder value and executive compensation by having a significant portion of compensation composed of equity-based incentive awards; |
| provide annual and long-term incentive awards that emphasize performance-based compensation contingent upon achieving corporate and individual performance goals; and |
| provide overall levels of compensation that are competitive to attract, retain and motivate highly-qualified executives to continue to enhance long-term equity value. |
Program Design . Our executive compensation program has three main components: (1) base salary; (2) annual cash incentive compensation; and (3) long-term incentive awards. Each component is designed to be consistent with the Companys compensation philosophy.
To align pay with the interests of our stockholders, we strive to create competitive compensation packages for all employees that cultivate long-term growth without taking unnecessary risks. We believe that a combination of both short-term and long-term compensation creates an optimal pay-for-performance environment. We motivate and reward NEOs for successfully executing our business strategy. The compensation program for our NEOs has been designed to emphasize variable pay over fixed pay, which directly ties to our objectives to retain valuable talent, yet also create a motivated work environment that rewards long-term achievements.
Pay for Performance . In structuring our executive compensation packages, the compensation committee of our board of directors considers how each element of compensation promotes retention and motivates performance. We believe that, to attract and retain senior executives, we must provide them with a competitive level of predictable compensation that rewards their continued service. We also believe that performance-based compensation plays the most significant role in aligning managements interests with those of our stockholders. For this reason, performance-based compensation constitutes a substantial portion of the overall compensation for our senior executives. Our compensation packages are designed to promote hospitality, integrity, leadership, teamwork, ownership and initiative by team members whose performance and responsibilities directly impact our results of operations.
As we transition from being privately held to publicly traded, we intend to critically evaluate our executive compensation program annually, or more frequently as circumstances require, to maintain a competitive environment for talent and to ensure that our incentive programs are achieving their desired results. Consistent with prior practice, we do not intend to adhere to rigid formulas or react to short-term changes in business performance in determining the amount and mix of compensation elements. We expect to continue to emphasize pay-for-performance and long-term incentive compensation when designing our executive officers compensation.
Employment Agreements . As discussed in more detail below, we previously entered into employment agreements with Messrs. Nassetta, Kennedy, Carter and Brown to attract and retain these executives. These agreements generally have similar provisions that define the nature of each NEOs employment, compensation and benefits provided in connection with his initial employment (such as initial base salary and/or other personal benefits or perquisites), compensation and benefits upon termination and restrictive covenants relating to intellectual property, confidential information and competitive business activities. See Narrative to Summary Compensation Table and 2012 Grants of Plan-Based AwardsEmployment Agreements. The compensation committee believes that employment agreements will no longer be necessary to attract members of our executive team following the offering, and therefore, the Company and Messrs. Nassetta and Carter have agreed to terminate these employment agreements in connection with this offering, such terminations to be effective on the earlier of the pricing of this offering or December 30, 2013. Due to the changing marketplace in which we
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compete for talent, the compensation committee intends to regularly review this practice to help ensure that we remain competitive in our industry.
Our Annual Compensation-Setting Process
Role of Our Compensation Committee . The compensation committee is responsible for overseeing key aspects of the executive compensation program, including executive salaries, goals and payouts under the annual cash incentive plan, the size and structure of equity awards and any executive perquisites or other benefits. The compensation committee is responsible for determining the compensation of the CEO and reviews and recommends compensation of other executive officers for the board of directors to approve. At the beginning of each performance cycle, the compensation committee approves financial goals designed to align executive pay with company performance and stockholder interests, provide competitive pay opportunities dependent on performance, retain talent, create optimal stockholder value and mitigate material risk.
Role of Management . The compensation committee approves all compensation decisions with respect to our NEOs. In setting executive compensation for 2012, our CEO and our Chief Human Resources Officer (CHRO) worked closely with the compensation committee in managing the executive compensation program and attended meetings of the compensation committee. Because of his daily involvement with the executive team, the CEO made recommendations to the compensation committee regarding compensation for the executive officers other than himself.
Role of the Compensation Consultant . The compensation committee has the authority to engage its own advisors to assist in carrying out its responsibilities. In May 2012, after completing a thorough review process, the compensation committee selected Exequity, LLP, or Exequity, as its independent compensation consultant to assist the compensation committee in providing analytical data and establishing and implementing our executive and director compensation strategy in the short- and long-term. Following their selection, Exequity has advised us in selecting our current Peer Group (as described below), provides us with compensation data for the Peer Group and has advised on best practices when developing executive pay programs and policies. Exequity reports to and is instructed in its duties by the compensation committee and carries out its responsibilities in coordination with the Human Resources department. Exequity performs no other services for the Company.
Use of Comparative Market Data. We aim to compensate our executive officers competitively in the market for executive talent. When determining final target pay levels, the compensation committee reviews and considers individual factors, such as the knowledge, experience and capabilities of each executive.
Historically, in order to gain a general understanding of current compensation practices, the compensation committee has analyzed pay of executives serving in similar positions at peer companies with whom we compete for hiring and retaining executive talent. The external market data reviewed for 2012 included peer group proxy data, several broad industry-comparative compensation surveys that included many of the companies contained in the Peer Group as defined below, and data provided by peer group companies that participate in Equilars Annual Top 25 Survey.
Following the retention of Exequity in May 2012, the compensation committee, with the assistance of Exequity, selected a group of peer companies, which we refer to as our Peer Group. Exequity provided the compensation committee with annual (base salary and annual incentive) and long-term (equity and long-term cash incentive) compensation for the Peer Group.
The metrics used for selecting the Peer Group included the industry, annual revenue, EBITDA, market capitalization, brand recognition, global presence and number of employees. Other factors considered were performance measures such as revenue growth, net income growth, earnings per share growth, return on equity and total stockholder return.
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The Peer Group currently consists of the following companies:
Avis Budget Group, Inc. |
McDonalds Corporation |
|
Darden Restaurants, Inc. |
MGM Resorts International |
|
FedEx Corporation |
Nike, Inc. |
|
General Mills, Inc. |
Starbucks Corporation |
|
Hyatt Hotels Corporation |
Starwood Hotels & Resorts Worldwide, Inc. |
|
Host Hotels & Resorts, Inc. |
United Continental Holdings, Inc. |
|
Kellogg Company |
The Walt Disney Company |
|
Las Vegas Sands Corp. |
Wyndham Worldwide Corporation |
|
Marriott International, Inc. |
Wynn Resorts, Limited |
The compensation committee generally reviewed the compensation data regarding the Peer Group and determined not to make any changes to the NEOs 2012 compensation. Going forward, the compensation committee does not intend to set compensation using a formula based solely on the Peer Group compensation data but instead intends to continue to use the Peer Group compensation data to generally inform the compensation committee regarding competitive pay levels with a focus on the median level for each pay component.
Compensation Elements
The compensation committee recognizes the need to develop a compensation program that responds to the executive talent market in such a way that we can attract individuals of the highest caliber. To accomplish this, the compensation committee considers the competitive landscape in determining the mix of compensation elements, the level of compensation and other specific terms of compensation packages. We seek to attract and retain executives by offering the opportunity to earn a competitive compensation package.
When designing and establishing NEO pay for the year ended December 31, 2012, the compensation committee worked with management, specifically our CEO and CHRO, to design a program that rewarded performance without encouraging excessive risk-taking to achieve such performance. We directed our corporate goals toward executing on our business strategy to achieve strong financial performance and company growth in 2012 and aligned incentives accordingly.
Base Salary
We believe it is important to provide a competitive fixed level of pay to attract and retain experienced and successful executives. In determining the amount of base salary that each NEO receives, we look to the executives current compensation, time in position, any change in the executives position or responsibilities, including complexity and scope and the relation of his or her position to those of other executives within the Company and in similar positions at peer companies. Base salaries are reviewed annually or at other times when appropriate and may be increased from time to time pursuant to such review, but other than with respect to Mr. Wang, have not been adjusted since each of the NEOs commencement of employment. Mr. Wangs base salary was adjusted by $13,000 in April 2012 in connection with the elimination of his auto allowance.
Annual Cash Incentive Compensation
Our annual cash incentive program rewards NEOs for their contributions towards specific annual, short-term financial and operational goals and is designed to motivate executive officers to focus on company-wide priorities and reward them for individual results and achievements with respect to their business units or function.
For the year ended December 31, 2012, our annual cash incentive compensation plan compensated and rewarded successful achievement of both short-term financial and non-financial goals that were closely aligned
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with the long-term goals of the Company. The 2012 annual incentive program was based on a combination of (1) financial performance and (2) individual performance.
The financial component of our NEOs annual bonus opportunity, other than for Mr. Wang, was based on the Companys consolidated Adjusted EBITDA (calculated as set forth in the section entitled SummarySummary Historical Financial Data). Due to Mr. Wangs role as President of HGV, 20% of the financial component for his annual bonus opportunity was based on the Companys consolidated Adjusted EBITDA and 80% of the financial component was based on our timeshare segments Adjusted EBITDA (calculated as set forth in SummarySummary Historical Financial Data).
The individual performance component was measured by (A) the performance of the consolidated business unit(s) that the executive oversaw and (B), as to our NEOs other than Mr. Nassetta, the executives achievement of individual competency goals. The financial component composed 50% of the total award opportunity, and the individual performance component composed 50% of the total award opportunity, with 80% (100% in the case of Mr. Nassetta) of the individual performance component based on the achievement of performance objectives tied to the consolidated business unit(s) that the executive oversaw and 20% of the individual performance component based on the executives achievement of individual competency goals.
Each NEOs target annual bonus is expressed as a percentage of his or her base salary and ranges from 60% to 100% of base salary. The annual incentive target bonus opportunities and corresponding minimum and maximum bonus as a percentage of each executives base salary are approved annually by the compensation committee. The annual incentive target bonus opportunities were established in 2008, or, if later, the NEOs commencement of employment, and have not been adjusted since that time. For the year ended December 31, 2012, the NEOs target and maximum bonus opportunity as a percentage of such executives base salary were as follows:
Name |
Target | Maximum | ||||||
Christopher J. Nassetta |
100.0% | 200.0 | % | |||||
Thomas C. Kennedy |
75.0% | 112.5 | % | |||||
Ian R. Carter |
60.0% | 90.0 | % | |||||
Mark D. Wang |
75.0% | 112.5 | % | |||||
Kristin A. Campbell |
75.0% | 112.5 | % | |||||
Paul J. Brown |
75.0% | 112.5 | % |
For the year ended December 31, 2012, the financial component of the bonus would be paid at 100% of target if the Companys consolidated Adjusted EBITDA was $1,903 million (and with respect to the 40% of Mr. Wangs total bonus opportunity subject to the performance of HGV, if our timeshare segments Adjusted EBITDA was $236 million). Participants were eligible to receive a threshold payout percentage, defined as 50% of the target bonus with respect to the financial component, if actual performance was 90% of target and were eligible to receive the maximum payout percentage, defined as 150% (200% with respect to Mr. Nassetta) of the target bonus with respect to the financial component, if actual performance met or exceeded 110% of target. For actual performance between the specified threshold, target and maximum levels, the resulting payout percentage would be adjusted on a linear basis.
For the year ended December 31, 2012, the Companys actual consolidated Adjusted EBITDA achieved was $1,956 million, or 103% of target, resulting in a payout percentage of 114% of target (128% for Mr. Nassetta) with respect to the company-wide financial component. The actual timeshare segment Adjusted EBITDA achieved was $252 million, or 107% of target, resulting in a payout percentage of 135% of target with respect to 40% of Mr. Wangs total bonus opportunity.
The remaining 50% portion of each NEOs annual cash incentive award, other than for Mr. Nassetta, was determined based on individual performance where 80% of the individual performance component was based on
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the achievement of performance objectives tied to the consolidated business unit(s) that the executive oversaw and 20% of the individual performance component was based on the executives achievement of qualitative individual competency goals.
In establishing the individual performance goals, Mr. Nassetta works with senior management to establish business priorities at the beginning of each performance year. These business priorities are used to create the individual performance objectives for our annual cash incentive program for each of the NEOs. The compensation committee then reviews and approves the individual performance objectives recommended for each NEO.
For the year ended December 31, 2012, the personal objectives of each NEO were generally focused on the core duties of his or her position. Each personal objective was given a specific weighting based on the scope, importance and overall time burden of the task. For the year ended December 31, 2012, the individual performance objectives (and the weightings assigned to each individual performance objective) for each of the NEOs were as follows:
| For Mr. Nassetta, the individual performance component of his annual compensation award was reviewed and approved by the compensation committee and was based on the Companys overall performance as well as a compilation of all of his direct reports objectives and success rates, each of which accounted for 12.5% of his individual performance component. The compensation committee considered the performance of our overarching business units, which include: Global Brands and Commercial Services; Operations and Development; Hilton Grand Vacations; Architecture, Design and Construction and Real Estate; Finance; Corporate Communications; Human Resources; and Legal. |
| For Mr. Kennedy, in addition to the qualitative individual competency goals which account for 20% of the individual performance component, the compensation committee considered his preparation for the Companys public offering and status as a public company (16%); his implementation of global financial management information systems (16%); his success defining an optimal corporate structure (16%); his efforts improving productivity and reducing operating costs (12%); his expansion and standardization of a captive procurement organization (10%); and cost effectiveness (10%). |
| For Mr. Carter, in addition to the qualitative individual competency goals of 20%, the compensation committee considered the Companys operating margins (10%) and market share (8%); customer satisfaction (6%); his cost effectiveness (10%) and operational initiatives (10%); hotel openings (10%); hotel construction starts (10%); hotel development approvals (10%); and other development initiatives (6%). |
| For Mr. Wang, in addition to the qualitative individual competency goals of 20%, the compensation committee considered approved deals with a capital efficient structure (20%); efforts increasing industry-leading margins (20%) and maximizing synergy with Hilton Worldwide (14%); contributing to HGV member loyalty (6%); sales cost effectiveness (10%); and HGV cost effectiveness (10%). |
| For Ms. Campbell, in addition to the qualitative individual competency goals of 20%, the compensation committee considered her contribution to corporate governance policies, practices and structure (20%); efforts supporting the client base (20%), team member engagement (20%) and cost management (10%); and contribution to the Companys business plan (10%). |
| For Mr. Brown, in addition to the qualitative individual competency goals of 20%, the compensation committee considered his contribution to market share (8%); customer satisfaction (8%); IT initiatives (10%); development approvals (8%); implementation of sales and marketing initiatives (10%); other key initiatives (20%); organizational synergies (8%); and cost effectiveness (8%). |
Shortly after the completion of the year ended December 31, 2012, the compensation committee, with the help of the CEO, conducted a rigorous evaluation of each NEOs accomplishments in relation to the personal objectives set at the beginning of the year.
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Actual annual cash incentive awards were calculated by multiplying each NEOs base salary by his or her target bonus potential, which was then adjusted by an achievement factor based on the combined achievement of the financial component and the individual performance objectives. Each of the NEOs earned annual cash incentive awards for the year ended December 31, 2012 as follows, which are included in the Non-Equity Incentive Plan column of the Summary Compensation Table:
Name |
2012 Year-
End Base Salary |
Target Bonus
as a Percentage of Base Salary |
Target Bonus
Potential |
Combined
Achievement Factor as a Percent of Target |
2012 Amount
Earned under Annual Cash Incentive Program* |
|||||||||||||||
Christopher J. Nassetta |
$ | 850,000 | 100 | % | $ | 850,000 | 127 | % | $ | 1,077,375 | ||||||||||
Thomas C. Kennedy |
650,000 | 75 | % | 487,500 | 117 | % | 572,569 | |||||||||||||
Ian R. Carter |
690,000 | 60 | % | 414,000 | 119 | % | 493,488 | |||||||||||||
Mark D. Wang (1) |
513,000 | 75 | % | 375,000 | 108 | % | 405,600 | |||||||||||||
Kristin A. Campbell (2) |
500,000 | 75 | % | 375,000 | 114 | % | 427,613 | |||||||||||||
Paul J. Brown |
600,000 | 75 | % | 450,000 | 110 | % | 497,025 |
* | Amounts may not total due to rounding. |
(1) | The compensation committee determined it was appropriate to award Mr. Wang an additional bonus of $94,400 in recognition of his increased duties and responsibilities overseeing Global Sales beginning October 2012. This additional discretionary bonus awarded to Mr. Wang is reported in the Bonus column of the Summary Compensation Table. Mr. Wangs bonus was calculated based on his $500,000 salary at the beginning of the year. |
(2) | Ms. Campbell was guaranteed a bonus pursuant to her terms of employment of no less than $500,000 with respect to the year ended December 31, 2012. Therefore, Ms. Campbell received an additional bonus amount equal to $72,387, which reflects the guaranteed portion of her bonus in excess of the amount earned under the annual cash incentive program. This additional amount is reported in the Bonus column of the Summary Compensation Table. |
Long-Term Incentive Awards
Like the annual cash incentive compensation described above, long-term incentive awards are a key component of our executive compensation program.
Each NEO has been granted long-term incentive awards that provide our executives an incentive to remain in the Companys service and align executives interests with those of our equity holders and the investors in our parent company, BH Hotels Holdco LLC, which we refer to as BH Hotels or our Ultimate Parent. We believe this helps motivate performance and attracts and fosters the retention of senior executives.
Because we have been privately held, the long-term incentive compensation awarded to our NEOs primarily consisted of the opportunity to make investments in the capital interests (called A-2 Units) of our Ultimate Parent, as discussed below and the grant of awards under a Tier I long-term equity-based incentive program that generally provides for the payment of cash amounts to selected participants based on the value of our Ultimate Parents equity over an extended period of time. In addition, our NEOs had the opportunity to receive Class B Units in our Ultimate Parent, which we sometimes refer to as Tier II awards. The principal terms of each of these grants are summarized immediately below and in Narrative to Summary Compensation Table and 2012 Grants of Plan-Based AwardsEquity Awards.
Tier I Awards . In December 2010, we offered certain members of our senior management team, including the NEOs employed at that time, the opportunity to participate in an equity-based incentive plan. These Tier I awards provided participants the opportunity to share in a portion of our Ultimate Parents equity value up to a specified amount based on the achievement of specified service and performance conditions. The maximum value available to be distributed in respect of all Tier I awards was approximately $230 million or 2.75% of the
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equity value of the Company (capped at a total equity value of $8.352 billion). The Tier I awards generally are payable in cash by us on the date that our Sponsor ceases to own 50% or more of the Class A Units in our Ultimate Parent (the Acceleration Date), so long as the participant is employed on that date. If, prior to the date on which a Tier I award becomes payable, a participants employment is terminated by us without cause or by the participant for good reason or as a result of disability or death, a portion of the award vests based on length of service (20% per year, with the vesting of a portion of the Tier I award payable to Mr. Nassetta measured from the date on which he commenced employment with the Company). The entire Tier I award is payable by us on an Acceleration Date or, if the Acceleration Date did not occur by April 2013, the program is structured to pay installments of a maximum aggregate value of $50 million per year (depending on the overall percentage of Tier I awards owned by participants) over three years, with the remaining value payable upon an Acceleration Date. Because none of our long-term incentive arrangements had resulted in any cash payments to our team between the end of 2007 and 2012, the compensation committee decided in the first quarter of 2012 to accelerate the installment payments. During the first quarter of 2012, the first installment payments for the Tier I awards were accelerated for our participating NEOs (other than Mr. Nassetta). In addition, during the fourth quarter of 2012, the second and third installment payments for the Tier I awards were accelerated and paid for our participating NEOs (other than Mr. Nassetta). With respect to Mr. Nassettas Tier I award, during the fourth quarter of 2012, our compensation committee determined to accelerate the payment of his remaining installment payments and Mr. Nassetta also received payment of an additional portion of such award as contemplated by the terms and conditions thereof. As a result of these payments as of December 31, 2012, the maximum potential remaining payment under the Tier I award was approximately $64.7 million across all Tier I recipients, including our NEOs. The amounts paid to each of the NEOs for their Tier I awards are reflected in the 2012 Option Exercises and Stock Vested table below, and the remaining value of each NEOs Tier I award is reflected in the Outstanding Equity Awards at 2012 Fiscal Year End table below. Notwithstanding the foregoing summary, in connection with this offering, we expect to accelerate the vesting of all Tier I awards that remain outstanding at the time of the pricing of the offering and pay the remaining value in respect of such awards in cash no later than 30 days following the pricing of this offering.
Tier II (Class B Units) . The Tier II units (Class B Units) of our Ultimate Parent are profits interests having economic characteristics similar to stock appreciation rights. Therefore, the Class B Units only have value to the extent there is an appreciation in the value of our business from and after the applicable date of grant. All of the Class B Units are exit-vesting units and will vest on the date when our Sponsor ceases to beneficially own more than 50% of the Class A Units, subject to the NEOs continued employment with the Company on such date. In addition, if the executives employment is terminated without cause, as a result of a constructive termination or as a result of disability or death (each as defined in the management subscription agreement for the Class B Units), then 20% of the Class B Units will be deemed to have vested ratably in equal, annual installments over five years, beginning on April 8, 2011 (or June 27, 2011 with respect to Ms. Campbell). For example, if the executive is terminated without cause on April 8, 2014, then 80% of the executives Class B Units will vest. As a further example, if a termination without cause occurs on or after April 8, 2015, then 100% of the Class B Units will vest. If the NEOs employment is terminated voluntarily by the NEO, other than as a result of a constructive termination, no unvested Class B Units will vest and, if the executive is terminated for cause, all Class B Units, whether vested or unvested, will be forfeited. The Class B Units awarded to our NEOs and outstanding as of fiscal year end are included in the Outstanding Equity Awards at 2012 Fiscal Year End table below.
Notwithstanding the foregoing summary, in connection with this offering, we expect to accelerate the vesting of the Class B Units held by all Class B Unit holders, including our NEOs, such that (1) 40% will vest as of the pricing date with respect to this offering, (2) 40% will vest on the first anniversary of the pricing date with respect to this offering, contingent upon continued employment through that date, and (3) 20% will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, contingent upon continued employment through that date. In addition, if the executives employment is terminated without cause, as a result of a constructive termination or as a result of disability or death, all remaining unvested Class B Units will vest.
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In connection with this offering, we also expect that our executive officers (including our NEOs) will surrender their (1) Class A-2 Units and vested Class B Units and receive in exchange vested shares of our common stock and (2) unvested Class B Units and receive in exchange unvested shares of our restricted stock. The number of vested shares of common stock and shares of restricted stock delivered to these equity holders of our Ultimate Parent will be determined in a manner intended to replicate the respective economic value associated with the Class A-2 Units and the Class B Units, as applicable, based upon the valuation derived from the initial public offering price. The shares of our restricted stock delivered upon the surrender of the unvested Class B Units will be subject to the same vesting terms as described in the immediately preceding paragraph above. See Managements Discussion and Analysis and Results of OperationsCritical Accounting Policies and EstimatesShare-based Compensation for additional information concerning the accounting treatment.
The number of Class B Units granted to each NEO was determined based on each NEOs position, role and responsibilities within the organization as well as the overall market practice for privately held portfolio companies of private equity firms. No equity awards of Class B Units were made to the NEOs during the year ended December 31, 2012. The table below sets forth the total number of Class B Units previously granted to our NEOs.
Name |
Class B
Units Granted (#) |
|||
Christopher J. Nassetta |
81,028,782 | |||
Thomas C. Kennedy |
13,804,880 | |||
Ian R. Carter |
21,432,076 | |||
Mark D. Wang |
8,628,050 | |||
Kristin A. Campbell |
5,176,830 | |||
Paul J. Brown (1) |
17,256,100 |
(1) | In connection with his resignation, Mr. Brown forfeited all of his Class B Units. |
Class A Units . In addition to the Tier I awards and the Class B Units described above, Messrs. Nassetta, Kennedy, Carter, Wang and Brown also purchased for cash at fair market value Class A-2 Units in Parent, and Mr. Nassetta received a grant of 5,000,000 restricted equity units in our Ultimate Parent in connection with the commencement of his employment. On December 31, 2012, the restricted equity units vested and were converted into Class A-2 Units. The Class A-2 Units are equity interests, have economic characteristics that are similar to those of shares of common stock in a corporation and have no vesting schedule. As described above, the Class A-2 Units will be exchanged for vested shares of our common stock in connection with this offering.
Perquisites and Other Benefits
Our team members, including the NEOs, are eligible for specified benefits, such as group health, dental and disability insurance and basic life insurance premiums. These benefits are intended to provide competitive and adequate protection in case of sickness, disability or death, and the NEOs participate in these plans on the same basis as all other team members.
We provide specified perquisites to our NEOs when determined to be necessary and appropriate, particularly in connection with enabling the executives and their families to transition from previous positions, which may require relocation. In addition, we provide our NEOs with the opportunity for an annual physical examination service and pay for personal hotel costs when they stay at Company-branded hotels. We also provide Mr. Nassetta with a life insurance benefit for his family and the associated taxes and Mr. Carter with
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tuition reimbursement and tax preparation services. In addition, given our wide geographic footprint, Mr. Nassetta has use of the Company aircraft for both business and personal travel. The value of these perquisites and other personal benefits are reflected in the All Other Compensation column to the Summary Compensation Table and the accompanying footnote. We believe that these benefits are competitive in our industry and consistent with our overall compensation program. The cost of these benefits is a small percentage of the overall compensation package, and the compensation committee believes that they allow the executives to work more efficiently.
Retirement Benefits
The Company maintains a tax-qualified 401(k) plan, under which the Company matches each team members contributions up to 3% dollar-for-dollar and $0.50 for every $1 for the next 2% contributed. In addition to the 401(k) plan, the Company also offers the NEOs and other senior management the opportunity to supplement their retirement and other tax-deferred savings through Hilton Worldwides Executive Deferred Compensation Plan, or EDCP. Those that are eligible to participate in the EDCP may elect to defer up to 100% of both their annual salary and bonus. The Company currently provides no contribution or match to the EDCP. Additional information about the EDCP is reflected in 2012 Non-Qualified Deferred Compensation below.
Pension Benefits
In addition to our 401(k) plan and EDCP, one of our NEOs, Mr. Carter, participated in two of our defined benefit pension plans, the Hilton U.K. Pension Plan (the U.K. Pension Plan) and the Hilton U.K. Hotels Employer-Finance Retirement Benefit Plan (the Supplemental U.K. Pension Plan) between 2005 and 2009. Mr. Carters benefit under the U.K. Pension Plan was closed to further accrual in 2009, and the Supplemental U.K. Pension Plan was frozen to all participants in 2009. See the Pension Benefits table and accompanying narrative below for a description of these defined-benefit pension plans.
Severance Benefits
The compensation committee believes that with carefully structured severance benefits, the NEOs are better able to perform their duties with respect to any potential proposed corporate transaction without concern for the impact of the transaction on their individual employment. In addition, the compensation committee believes that the interests of our stockholders are better protected and enhanced by providing greater certainty regarding executive pay obligations in the context of planning and negotiating any potential corporate transactions.
The employment agreements with Messrs. Nassetta, Kennedy, Carter and Brown provide for severance benefits in connection with a termination of employment under certain specified qualifying termination events. The severance benefits under these agreements are contingent upon the affected executives execution of a general release of claims and compliance with specified post-termination restrictive covenants. See Potential Payments Upon Termination or Change in Control which describes the payments that each of these NEOs may be entitled to under these agreements.
The Company also provides severance benefits under a broad-based protection plan (the Severance Plan). We believe the Severance Plan is necessary to attract and retain the talent necessary for our long-term success. We view the Severance Plan as a recruitment and retention device that helps secure the continued employment and dedication of team members, including when we are considering strategic alternatives. The Severance Plan provides severance benefits to eligible team members who are not entitled to severance pay under the terms of another agreement (i.e., an employment agreement) and who are involuntarily terminated by us without cause or as a result of a constructive termination, each as defined in the Severance Plan and each a qualifying termination. The severance benefits under the Severance Plan are contingent upon the executive experiencing a qualifying termination (and as such, in the case of a change of control, are double trigger arrangements) and are further contingent upon and non-revocation of a release of claims against us, and continued compliance with
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agreed upon restrictive covenants. Ms. Campbell and Mr. Wang are each entitled to severance under the Severance Plan, however, in connection with her hiring, the Company agreed to increase the amount of Ms. Campbells cash severance upon a qualifying termination. In addition, with respect to Ms. Campbell, a constructive termination has substantially the same meaning as that under the employment agreements for our other NEOs. See Potential Payments upon Termination or Change in Control, which describes the payments to which each of the NEOs may be entitled under the Severance Plan. In connection with this offering, we approved the terms of a new severance plan, which is described below under Committee Actions Taken in 2013Severance Plan.
Where there is a termination from the Company or reduction in the executives role in connection with a change in control, the Company does not provide for tax gross-ups on any benefits but limits the payments and benefits to avoid adverse tax consequences to the Company. Specifically, each of these payments and benefits is subject to a cut-back, so that the amount payable will not be provided to the extent it would result in the loss of a tax deduction by the Company or imposition of excise taxes under the golden parachute excess parachute payment provisions of the Internal Revenue Code.
In addition to the Severance Plan and the terms of the employment agreements, any compensation and benefits to be made in connection with a separation are determined at the discretion of the compensation committee and may be based on the executive, his or her position, nature of the potential separation and such executives compliance with specified post-termination restrictive covenants. In connection with their resignations, the compensation committee determined that, in consideration for entering into a general release of claims and each serving as a Special Advisor, it was appropriate to enter into a separation agreement with each of Messrs. Brown and Kennedy, which agreements are described under Potential Payments Upon Termination or Change in Control below.
Tax and Accounting Considerations
The compensation committee recognizes the tax and regulatory factors that can influence the structure of executive compensation programs. Section 162(m) of the Internal Revenue Code will limit the Companys federal income tax deduction for compensation in excess of $1 million paid to NEOs except for the Chief Financial Officer. However, performance-based compensation can be excluded from the limitation as long as specified requirements are met.
Following this offering, we expect to be able to claim the benefit of a special exemption rule that applies to compensation paid (or compensation in respect of equity awards such as stock options or restricted stock granted) during a specified transition period. This transition period may extend until the first annual stockholders meeting that occurs after the close of the third calendar year following the calendar year in which this offering occurs, unless the transition period is terminated earlier under the Section 162(m) post-offering transition rules. At such time as we are subject to the deduction limitations of Section 162(m), we expect that the compensation committee will take the deductibility limitations of Section 162(m) into account in its compensation decisions; however, the compensation committee may, in its judgment, authorize compensation payments that are not exempt under Section 162(m) when it believes that such payments are appropriate to attract or retain talent.
The compensation committee also intends to regularly consider the accounting implications of our future equity-based awards, including the variable accounting treatment of the performance share units under the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation .
The compensation committee is also cognizant of Section 409A of the Internal Revenue Code, the limitations of which in the case of the Company primarily relate to the deferral and payment of benefits under the Executive Deferred Compensation Plan. The compensation committee continues to consider the impact of the changes to Section 409A and in general, the evolving tax and regulatory landscape in which its compensation decisions are made.
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Committee Actions Taken in 2013
New Chief Financial Officer
On August 8, 2013, Kevin J. Jacobs, previously our Executive Vice President and Chief of Staff, was appointed as Executive Vice President and Chief Financial Officer of our Company. It is expected that the compensation committee will increase Mr. Jacobss base salary and annual bonus target and grant Mr. Jacobs a long-term incentive award commensurate with his new role. Consistent with our overall approach to our compensation programs following this offering, we do not intend to enter into an employment agreement with Mr. Jacobs. Mr. Jacobs will be eligible to participate in our broad-based severance plan.
Actions Taken in Connection with This Offering
Following this offering, as the Company transitions from being privately held to being publicly traded, we intend to critically evaluate our executive compensation program annually, or more frequently as circumstances require, to maintain a competitive environment for talent and ensure that our incentive programs are achieving their desired results. In 2013, the Company spent considerable time reviewing and preparing a compensation framework to align our pay practices with stockholders, the marketplace, and government requirements. After reviewing best practices and the approach taken by our peer companies and industry competitors, the compensation committee has agreed upon a general framework for our ongoing executive compensation programs.
New Long-Term Incentive Program
In connection with and prior to this offering, we expect that our Board of Directors will adopt, and our stockholders will approve, an Omnibus Incentive Plan. Following this offering, we will award our executives equity-based awards and we expect all such equity-based awards to be granted under the Omnibus Incentive Plan. For long-term awards, the compensation committee agreed that long-term incentive awards will be granted based on annual market data assessments of pay components for each NEO relative to their respective role. We expect the awards will consist of performance shares, restricted stock and stock options. See Omnibus Incentive Plan.
Ownership Guidelines
In connection with this offering, we have adopted an executive stock ownership program for our NEOs and other executives that will take effect following this offering. Each of our NEOs is expected to own shares of our common stock in the following amounts within five years of the later of (x) the date on which we make our first broad-based equity incentive grants following this offering or (y) the date he or she first becomes subject to the stock ownership policy:
Chief Executive Officer |
5 times base salary | |
All other executive officers |
3 times base salary |
For purposes of this requirement, an executives holdings include shares held directly and indirectly, individually or jointly, time vested restricted stock and time vested restricted stock unit awards (whether vested or not), shares or equivalents held in savings or deferred compensation accounts and shares underlying vested options (based on the excess of the market price of the stock over the exercise price). Under this requirement, Executives must retain net (after-tax) vested Restricted Stock or Restricted Stock Units and the net (after payment of option exercise price and taxes) shares resulting from any exercise of stock options granted under the new Omnibus Incentive Plan until the ownership requirements are satisfied.
Clawback Policy
In connection with this offering, we have adopted a clawback policy that will take effect immediately for incentive compensation plans put into place following this offering. Consistent with the Companys core values, the compensation committee determined that it may be appropriate to recover annual and/or long-term incentive compensation in specified situations. If the compensation committee determines that incentive compensation of
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its current and former officers subject to reporting under Section 16 of the Exchange Act or any other employee designated by the compensation committee, was overpaid, in whole or in part, as a result of a restatement of the reported financial results of the Company or any of its segments due to material non-compliance with financial reporting requirements (unless due to a change in accounting policy or applicable law) caused or contributed by such employees fraud, willful misconduct or gross negligence, the compensation committee will review the incentive compensation paid, granted, vested or accrued based on the prior inaccurate results. If the compensation committee determines to seek recovery for the overpayment, the Company has the right to demand that the employee pay the Company for, or forfeit, any overpayment paid or awarded during the three-year period preceding the date on which the Company is required to prepare any restatement of its financial statements. To the extent the employee refuses to pay the overpayment, the Company has the right to sue for repayment and enforce the employees obligation to make payment through the reduction or cancellation of outstanding and future incentive compensation.
Severance Plan
In connection with this offering, the Company has approved the terms of a new, broad-based severance benefits plan (the New Severance Plan), which will replace all executive level severance arrangements, including those described under Compensation ElementsSeverance Benefits.
Under the terms of the New Severance Plan, if an eligible team members employment is terminated by us without cause, or if the eligible team member terminates his or her employment for good reason (each, qualifying termination), then subject to the eligible team members execution and non-revocation of a release of claims against us, and continued compliance with restrictive covenants related to post-employment non-solicitation and non-compete covenants for one year following termination, and indefinite covenants covering confidentiality and non-disparagement, he or she will be eligible to receive a severance payment amount determined based on the team members rank, tenure, and/or then-current compensation (including, if applicable, target bonus). Under the terms of the New Severance Plan, our NEOs will be eligible to receive a severance pay amount equal to 2.99 times, in the case of Mr. Nassetta, and 2.0 times, in the case of our other NEOs, the sum of his or her annual base salary and annual target bonus at the time of termination. In addition to cash severance payments, upon a qualifying termination, the NEO will also be entitled to continued medical, dental and basic life insurance for one year following termination, outplacement services, as needed, for one year following termination and other expenses such as moving expenses based on the NEOs individual circumstances.
The NEOs will also be entitled to the same level of severance benefits upon a qualifying termination in connection with a change in control except that severance benefits may be reduced if doing so would result in the executive realizing a better after-tax result following the imposition of any applicable parachute-tax provisions in the Internal Revenue Code Section 4999.
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Summary Compensation Table
The following table presents summary information regarding the total compensation awarded to, earned by, or paid to each of our NEOs for services rendered in all capacities for the fiscal year ended December 31, 2012.
Name and Principal Position |
Salary (1) | Bonus |
Stock
Awards |
Option
Awards |
Non-Equity
Incentive Plan Compensation |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings (6) |
All Other
Compensation (7) |
Total | ||||||||||||||||||||||||
Christopher J. Nassetta |
$ | 850,000 | $ | | $ | | $ | | $ | 1,077,375 | $ | | $ | 114,330 | $ | 2,041,705 | ||||||||||||||||
(President & Chief Executive Officer) |
||||||||||||||||||||||||||||||||
Thomas C. Kennedy (2) |
650,000 | | | | 572,569 | | 17,285 | 1,239,854 | ||||||||||||||||||||||||
(Former Executive Vice President and Chief Financial Officer) |
||||||||||||||||||||||||||||||||
Ian R. Carter |
690,000 | | | | 493,488 | 82,700 | 239,452 | 1,505,640 | ||||||||||||||||||||||||
(Executive Vice President and President, Development, Architecture & Construction) |
||||||||||||||||||||||||||||||||
Mark D. Wang |
508,500 | 94,400 | (3) | | | 405,600 | | 14,577 | 1,023,077 | |||||||||||||||||||||||
(Executive Vice President, Global Sales and President, Hilton Grand Vacations) |
||||||||||||||||||||||||||||||||
Kristin A. Campbell |
500,000 | 72,387 | (4) | | | 427,613 | | 12,742 | 1,012,742 | |||||||||||||||||||||||
(Executive Vice President and General Counsel) |
||||||||||||||||||||||||||||||||
Paul J. Brown (5) |
600,000 | | | | 497,025 | | 8,748,268 | 9,845,293 | ||||||||||||||||||||||||
(Former Executive Vice President and President, Global Brands and Commercial Services) |
(1) | Amounts in this column reflect the salary earned during the fiscal year, whether paid or deferred under the Companys employee benefit plans. |
(2) | Mr. Kennedy served as our Executive Vice President and Chief Financial Officer from September 2008 until his resignation effective August 8, 2013. Mr. Kennedy agreed to provide services to the Company following his resignation until the earlier of December 31, 2013 or the date he commences employment with a new employer. In connection with his resignation, Mr. Kennedy forfeited all of his remaining Tier I award and all of his Class B Units. On August 8, 2013, Kevin J. Jacobs became our Executive Vice President and Chief Financial Officer. |
(3) | Amount reported represents the discretionary bonus paid to Mr. Wang. See Compensation Discussion and AnalysisCompensation ElementsAnnual Cash Incentive Compensation. |
(4) | Amount reported represents the guaranteed portion of Ms. Campbells bonus in excess of the amount earned under the annual cash incentive program. See Compensation Discussion and AnalysisCompensation ElementsAnnual Cash Incentive Compensation. |
(5) | Mr. Brown served as our Executive Vice President and President, Global Head of Brands and Commercial Services from November 2008 until his resignation effective November 1, 2012. Mr. Brown provided services to the Company as a Special Advisor to the CEO through April 30, 2013. In connection with his resignation, Mr. Brown forfeited all of his remaining Tier I award and all of his Class B Units. |
(6) |
Amounts reported represent the aggregate increase in the actuarial present value of Mr. Carters accumulated benefit under the defined-benefit pension plans during the year ended December 31, 2012. See the Pension Benefits table and the accompanying narrative below. The present value is calculated by the Trustee of the U.K. Pension Plan and represents the |
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present value of the retirement pension due based on assumptions described below. This value is the sum that would be payable should Mr. Carter choose to transfer his benefits from the U.K. Pension Plan in full as of December 31, 2012 and 2011. The key financial assumptions used in the calculation of the present value included discount rates of 4.5% and 4.55% for 2012 and 2011, respectively, CPI inflation of 1.15% and 1.75% for 2012 and 2011, respectively and pension inflation of 1.2% and 1.45% for 2012 and 2011, respectively. |
(7) | All other compensation for 2012 includes: |
Name |
Company
401(k) Match |
Personal Use
of Company Aircraft (a) |
Reimbursements
for Taxes Incurred for Specified Perquisites (b) |
Severance
Benefits (c) |
Other (d) | Total | ||||||||||||||||||
Christopher J. Nassetta |
$ | 9,800 | $ | 11,277 | $ | 41,567 | $ | | $ | 51,686 | $ | 114,330 | ||||||||||||
Thomas C. Kennedy |
10,000 | | | | 7,285 | 17,285 | ||||||||||||||||||
Ian R. Carter |
| | | | 239,452 | 239,452 | ||||||||||||||||||
Mark D. Wang |
9,800 | | | | 4,777 | 14,577 | ||||||||||||||||||
Kristin A. Campbell |
10,000 | | | | 2,742 | 12,742 | ||||||||||||||||||
Paul J. Brown |
9,800 | | | 8,737,957 | 511 | 8,748,268 |
(a) | Amounts reported reflect the incremental costs associated with guests accompanying Mr. Nassetta on the Company aircraft during the year ended December 31, 2012. For purposes of the Summary Compensation Table, we value the incremental cost associated with these accompanying guests by using a method that takes into account the variable costs. Since the aircraft is used primarily for business travel, the calculation does not include the fixed costs that do not change based on usage, such as crew salaries, hangar storage costs and cost of maintenance not related to trips. |
(b) | Reflects for Mr. Nassetta, $9,645 of employer-paid taxes owed with respect to personal use of the Company aircraft, $26,968 of employer-paid taxes owed with respect to Mr. Nassettas personal use of Company-branded hotels and $4,954 of employer-paid taxes owed in connection with his employer-paid executive life insurance policy. |
(c) | Reflects amounts paid or accrued during the year ended December 31, 2012 pursuant to the terms of Mr. Browns separation agreement as follows: an $8.5 million separation payment paid to Mr. Brown on November 13, 2012, $55,000 of which represents the gain on his Class A Units in our Ultimate Parent repurchased by the Company in 2012, $50,000 paid for executive consulting services, $40,000 accrued with respect to a lump sum payment to be paid as soon as practicable following the Separation Date (as defined in the separation agreement) representing the portion of the monthly premiums for group health coverage for Mr. Brown and his family paid by the Company, multiplied by 24, $80,769 for all accrued but unused vacation time through the Separation Date and $12,188 paid for reimbursement of legal fees incurred in connection with his separation agreement. |
(d) | For Mr. Nassetta, this amount includes $40,962 employer-paid expenses incurred at Company-branded hotels while on personal travel, the cost of his executive physical and premiums for life insurance policies. |
For Mr. Kennedy, this amount includes employer-paid expenses incurred at Company-branded hotels while on personal travel and premiums for a life insurance policy.
For Mr. Carter, this amount includes a $207,000 payment for a retirement benefit pursuant to the terms of his employment agreement, $30,000 for tuition reimbursement pursuant to the terms of his employment agreement, tax preparation services, reimbursement for the cost of his executive physical and premiums for a life insurance policy.
For Mr. Wang, this amount represents the employer-paid auto-allowance, which he received through April 2012, and premiums for a life insurance policy.
For Ms. Campbell, this amount represents a one-time payment for her 2011 relocation to McLean, Virginia and premiums for a life insurance policy.
For Mr. Brown, this amount represents the employer-paid life insurance premium.
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2012 Grants of Plan-Based Awards
The following table sets forth information concerning grants of plan-based awards to the NEOs during the fiscal year ended December 31, 2012.
Estimated Possible Payouts under Non-Equity
Incentive Plan Awards (1) |
||||||||||||
Name |
Threshold | Target | Maximum | |||||||||
Christopher J. Nassetta |
$ | 26,563 | $ | 850,000 | $ | 1,700,000 | ||||||
Thomas C. Kennedy |
12,188 | 487,500 | 731,250 | |||||||||
Ian R. Carter |
6,210 | 414,000 | 621,000 | |||||||||
Mark D. Wang |
5,771 | 375,000 | 562,500 | |||||||||
Kristin A. Campbell (2) |
9,375 | 375,000 | 562,500 | |||||||||
Paul J. Brown |
9,000 | 450,000 | 675,000 |
(1) | Reflects the possible payouts of cash incentive compensation under the 2012 Annual Incentive Program. Amounts reported in the Threshold column assumes that there is no payout under the financial component of the annual cash incentive program and that the NEO only earns the minimum payout for the one individual performance objective that has been assigned the lowest weighting. The actual amounts paid are described in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
(2) | Ms. Campbell was guaranteed a bonus for the year ended December 31, 2012 of no less than $500,000. Since Ms. Campbells bonus payout under the annual cash incentive program was less than $500,000, Ms. Campbell received an additional bonus amount which represented the guaranteed portion of her bonus in excess of the amount earned under the annual cash incentive program. This additional amount is reported in the Bonus column of the Summary Compensation Table. |
Narrative to Summary Compensation Table and 2012 Grants of Plan-Based Awards
Employment Agreements
Upon their commencement of employment, some of our NEOs entered into employment agreements, each of which contain substantially similar terms. Each of the employment agreements provides for a five-year initial employment term that extends automatically for additional one-year periods unless either we or the executive elects not to extend the term. Under the employment agreements, each executive is eligible to receive a minimum base salary, as set forth in the applicable agreement, and annual cash incentive compensation based on the achievement of specified financial and individual goals as defined by the compensation committee each year. If these goals are achieved, each executive may receive a cash bonus based on a target percentage of his or her base salary as described below. Each NEO is also entitled to participate in all employee benefit plans, programs and arrangements made available to other executive officers generally.
Following are the material individual provisions of the NEOs employment agreements, except with respect to potential payments and other benefits upon specified terminations, which are summarized below in Potential Payments Upon Termination or Change in Control.
Mr. Nassettas Employment Agreement. Mr. Nassettas employment agreement dated as of January 4, 2011 provides that he is to serve as Hilton Worldwides President and Chief Executive Officer, and is eligible to receive a base salary of $850,000, subject to periodic adjustments as may be approved by the Board. Mr. Nassetta is also eligible to receive a target bonus of 100% of his annual base salary at the end of the fiscal year if targets established by the Board are achieved, 50% of his base salary if minimum performance objectives are achieved and 200% of his base salary if high performance objectives are achieved. Mr. Nassettas agreement also provides for the reasonable payment of premiums for his existing life insurance policy and provides that Mr. Nassetta may use the Company airplane for business and personal travel. In connection with this offering, Mr. Nassetta agreed to terminate his employment agreement, such termination to be effective on the earlier of the pricing of this offering or December 30, 2013.
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Mr. Kennedys Employment Agreement. Mr. Kennedys employment agreement dated as of September 15, 2008 provides that he was to serve as Hilton Worldwides Executive Vice President and Chief Financial Officer and was eligible to receive a base salary of $650,000, subject to periodic adjustments as approved by our Board. Mr. Kennedy was also eligible to receive a target bonus of 75% of his annual base salary at the end of the fiscal year if performance objectives and targets established by the Board were achieved.
Mr. Kennedy resigned as Executive Vice President and Chief Financial Officer as of August 8, 2013, but will continue his employment as a Special Advisor to the CEO through December 31, 2013.
Mr. Carters Employment Agreement. Mr. Carters employment agreement dated as of January 1, 2010, provides that he is to serve as Hilton Worldwides President, Global Operations, or a commensurate role, and is eligible to receive a base salary of $690,000, subject to periodic adjustments as may be approved by our Board. Mr. Carter is also eligible to receive a target bonus of 60% of his base salary if targets established by the Board are achieved and 90% of his base salary if high performance objectives are achieved. Mr. Carters agreement did not provide a threshold award percentage if minimum performance objectives were achieved. In connection with this offering, Mr. Carter agreed to terminate his employment agreement, such termination to be effective on the earlier of the pricing of this offering or December 30, 2013.
Mr. Browns Employment Agreement. Mr. Browns employment agreement dated November 13, 2008 provided that he was to serve as Hilton Worldwides Executive Vice President and President, Global Brands and Commercial Services and was eligible to receive a base salary of $600,000, subject to periodic adjustments as may be approved by our Board. Mr. Brown was also eligible to receive a target bonus of 75% of his annual base salary at the end of the fiscal year if targets established by the Board were achieved.
Mr. Brown resigned as Executive Vice President and President, Global Brands and Commercial Services as of November 1, 2012, but continued his employment through April 30, 2013. On October 31, 2012, we entered into a separation agreement with Mr. Brown. The material terms of the separation agreement are summarized below under Potential Payments upon Termination or Change in Control.
In addition, each employment agreement, other than that for Mr. Carter, provides for the following:
| Reimbursement by us for specified expenses, such as business travel; and |
| Reimbursements at Company-branded hotels for the executive and his family. |
Each employment agreement provides for reimbursement by us on a grossed up basis for all taxes incurred in connection with certain specific benefits and payments provided by the respective agreements.
Each employment agreement may be terminated by us with or without cause, or by the executive as a result of constructive termination, each as defined in the respective employment agreement. We refer to a termination without cause or by the executive as a result of constructive termination collectively as a qualifying termination.
The employment agreements define cause generally as willful misconduct in connection an executives role with our Company. The employment agreements define constructive termination generally as a diminution of the material conditions of the executives employment with the company including pay, responsibilities and place of employment.
Each of the employment agreements also contains restrictive covenants, including an indefinite covenant on confidentiality of information and covenants related to non-competition and non-solicitation of employees and customers of the Company and its affiliates at all times during the executives employment, and for one year after any termination of his employment. If a termination occurs after our Sponsor and its affiliated funds cease to beneficially own 25% of the voting power of the Company, however, the entire non-competition covenant lapses.
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Equity Awards
As a condition to receiving the Class B Units, each NEO was required to enter into a subscription agreement with our Ultimate Parent to become a party to our Ultimate Parents limited liability company agreement as well as an equity holders agreement. These agreements generally govern the NEOs rights with respect to their Class B Units.
The Class B Units are profits interests having economic characteristics similar to stock appreciation rights and represent the right to share in any increase in the equity value of our Ultimate Parent. Therefore, the Class B Units only have value to the extent there is an appreciation in the value of our business from and after the applicable date of grant. All of the Class B Units are exit-vesting units and have the vesting terms described in Compensation Discussion and AnalysisCompensation ElementsLong-Term Incentive Awards above and in Potential Payments Upon Termination or Change in Control below.
In addition to the Class B Units, in November 2010, our Ultimate Parent offered some members of our senior management team, including the NEOs (other than Ms. Campbell who joined the Company in 2011), the opportunity to participate in a Tier I award. The Tier I awards have such vesting terms described in Compensation Discussion and AnalysisCompensation ElementsLong-Term Incentive Awards above. As discussed above, the installment payments for the Tier I awards were accelerated in the year ended December 31, 2012. There was no incremental fair value recognized in connection with these accelerations, and therefore no amounts are reflected in the Summary Compensation Table or the 2012 Grants of Plan-Based Awards table above. The amounts paid to each of the participating NEOs for their Tier I awards are reflected in the 2012 Option Exercises and Stock Vested table below.
The subscription agreements also contain restrictive covenants that are substantially similar to the restrictive covenants contained in the employment agreements with the NEOs, including an indefinite covenant on confidentiality of information and covenants related to non-competition and non-solicitation of employees and customers of the Company and its affiliates at all times during the executives employment, and for one year after any termination of his or her employment. If a termination occurs after our Sponsor ceases to beneficially 25% of the voting power of the Company, however, the non-competition lapses.
As described above, in connection with this offering,
| we expect to accelerate the vesting of all Tier I awards which remain outstanding at the time of the pricing of the offering, and pay the remaining value in respect of such awards in cash no later than 30 days following the pricing of this offering; |
| we expect to accelerate the vesting of Class B Units held by all Class B Unit holders, including our NEOs, such that (1) 40% will vest as of the pricing date with respect to this offering, (2) 40% will vest on the first anniversary of the pricing date with respect to this offering, contingent upon continued employment through that date, and (3) 20% will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, contingent upon continued employment through that date; and |
| we expect our executive officers (including our NEOs) to surrender their Class A-2 Units and Class B Units and receive in exchange a combination of vested shares of common stock and unvested shares of restricted common stock. |
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Outstanding Equity Awards at 2012 Fiscal Year-End
The following table sets forth information regarding outstanding equity awards made to our NEOs as of December 31, 2012.
Grant
Date |
Number of
Shares of Units of Stock That Have Not Vested |
Market
Value of Shares of Units of Stock That Have Not Vested |
Stock Awards | |||||||||||||||||
Name |
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested |
Equity Incentive
Plan Awards: Market Value of Shares, Units or Other Rights That Have Not Vested |
||||||||||||||||||
(#) | ($) | (#) | ($) | |||||||||||||||||
Christopher J. Nassetta |
12/03/2010 | 81,028,782 | (1) | 36,608,804 | | | ||||||||||||||
12/03/2010 | | 18,710,074 | (3) | | | |||||||||||||||
Thomas C. Kennedy |
12/03/2010 | 13,804,880 | (1) | 6,237,045 | (2) | |||||||||||||||
12/03/2010 | 3,187,363 | (3) | ||||||||||||||||||
Ian R. Carter |
12/03/2010 | 21,432,076 | (1) | 9,683,012 | (2) | | | |||||||||||||
12/03/2010 | | 4,948,381 | (3) | | | |||||||||||||||
Mark D. Wang |
12/03/2010 | 8,628,050 | (1) | 3,898,153 | (2) | | | |||||||||||||
12/03/2010 | | 1,992,102 | (3) | | | |||||||||||||||
Kristin A. Campbell |
06/27/2011 | 5,176,830 | (1) | 2,338,892 | (2) | | | |||||||||||||
Paul J. Brown (4) |
| | | | |
(1) | Reflects the number of Class B Units, all of which vest on the date when our Sponsor ceases to beneficially own 50% or more of the Class A Units in our Ultimate Parent, subject to the NEOs continued employment on such date. In addition, if the executives employment is terminated without cause, as a result of a constructive termination or as a result of disability or death (each as defined in the management subscription agreement for the Class B Units), then the executive will vest in a percentage of Class B Units based on a vesting schedule where 20% of the Class B Units will be deemed to have vested ratably in equal, annual installments over five years, beginning on April 8, 2011 (or June 27, 2011 with respect to Ms. Campbell). As described above, in connection with this offering, we expect to accelerate the vesting of Class B Units held by all Class B Unit holders, including our NEOs, such that (1) 40% will vest as of the pricing date with respect to this offering, (2) 40% will vest on the first anniversary of the pricing date with respect to this offering, contingent upon continued employment through that date, and (3) 20% will vest on the date that our Sponsor and its affiliates cease to own 50% or more of the shares of the Company, contingent upon continued employment through that date. Additional terms of the Class B Units are described under Compensation Discussion and AnalysisCompensation ElementsLong-Term Incentive Program above and Potential Payments Upon Termination or Change in Control below. |
(2) | Based on the appreciation in the value of our business from and after the date of grant through December 31, 2012. |
(3) | Reflects the remaining value of each NEOs Tier I award. The Tier I awards originally granted were represented as a percentage of the total dollar amount available to be awarded and were not expressed as a number of units. The amount in the table reflects the cash value to be realized on vesting. Vesting of the outstanding Tier I awards occurs on the date that our Sponsor ceases to own 50% or more of the Class A Units in our Ultimate Parent. In connection with this offering, we expect to accelerate the vesting of all Tier I awards that remain outstanding at the time of the pricing of this offering and pay the remaining value in respect of such awards in cash no later than 30 days following the pricing of this offering. |
(4) | In connection with his resignation, Mr. Brown forfeited all of his Class B Units and his outstanding Tier I awards. |
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2012 Option Exercises and Stock Vested
The following table provides information regarding the number of Tier I Units held by our NEOs that vested during 2012.
Option Awards | Stock Awards (1) | |||||||||||||||
Name |
Number of Shares
Acquired on Exercise (#) |
Value Realized
on Exercise ($) |
Number of Shares
Acquired on Vesting (#) |
Value Realized
on Vesting ($) |
||||||||||||
Christopher J. Nassetta |
| | 5,000,000 | 41,617,450 | ||||||||||||
Thomas C. Kennedy |
| | | 6,000,000 | ||||||||||||
Ian R. Carter |
| | | 9,315,000 | ||||||||||||
Mark D. Wang |
| | | 3,750,000 | ||||||||||||
Kristin A. Campbell |
| | | | ||||||||||||
Paul J. Brown |
| | | 2,500,000 |
(1) | Reflects the amounts paid to the NEOs for their Tier I award installment payments that were accelerated during the year ended December 31, 2012. The amount of Tier I awards originally granted were represented as a percentage of the total dollar amount available to be awarded and were not expressed as a number of units. The amount in the table reflects the cash value realized on vesting. The amount for Mr. Nassetta also reflects the additional portion of his Tier I award paid to him in December 2012 as well as $6.4 million, which was the value realized upon the vesting of the 5,000,000 restricted equity units originally granted in our Ultimate Parent in 2008 pursuant to the terms of Mr. Nassettas employment agreement. These restricted equity units vested and were converted into Class A-2 Units of our Ultimate Parent on December 31, 2012. |
2012 Pension Benefits
Name |
Plan Name |
Number of
Years Credited Service (#) |
Present Value
of Accumulated Benefit ($) (1) |
Payments
During Last Fiscal Year ($) |
||||||||||
Christopher J. Nassetta |
| | | |||||||||||
Thomas C. Kennedy |
| | | |||||||||||
Ian R. Carter |
Hilton UK Pension Plan (2) |
4 | 459,739 | | ||||||||||
Hilton UK Hotels Employer-Finance Retirement Benefit (3) | 3 | 691,822 | | |||||||||||
Mark D. Wang |
| | | |||||||||||
Kristin A. Campbell |
| | | |||||||||||
Paul J. Brown |
| | |
(1) | The present value is calculated by the Trustee of the U.K. Pension Plan and represents the present value of the retirement pension due based on assumptions described below. This value is the sum that would be payable should Mr. Carter choose to transfer his benefits from the U.K. Pension Plan in full as of December 31, 2012. The key financial assumptions used in the calculation of the present value included discount rates of 4.5% and 4.55% for 2012 and 2011, respectively, CPI inflation of 1.15% and 1.75% for 2012 and 2011, respectively, and pension inflation of 1.2% and 1.45% for 2012 and 2011, respectively. |
(2) |
The U.K. Pension Plan is a defined benefit pension plan in the U.K., for which benefit payments are payable monthly from retirement age (age 60 in accordance with the terms of the plan). The pension value is determined based on years of service, final salary of active membership (final salary in the final year of the membership in the plan minus applicable restrictions of earning offsets) in the plan and an accrual ratio. The funds are invested through a trustee, who has full investment discretion. For Mr. Carter, the U.K. Pension Plan has been frozen since 2009, and neither the Company, nor Mr. Carter have contributed to the plan since that time. The purpose of the U.K. Pension Plan is to provide a retirement benefit based on U.K. market |
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practice. The U.K. Pension Plan does not provide special policies such as granting extra years of credited service, however, it provides tax advantages such as tax relief on employee contributions and a tax-free cash payment at retirement. |
(3) | The Supplemental U.K. Pension Plan is a supplement to the U.K. Pension Plan and provides an additional retirement benefit to top management of the Company in the U.K. Mr. Carter participated in the Supplemental U.K. Pension Plan from 2006 to 2009, after which the Company ceased contributing to the plan and the plan was frozen. The funds in the Supplemental U.K. Pension Plan have been invested based on Mr. Carters elected investment portfolio. The terms of the U.K. Pension Plan provide that the funds be paid in lump sum upon retirement, or age 60 in accordance with the terms of the plan. The annual amount the Company contributed was calculated based on a percentage of Mr. Carters base salary above the annual earnings cap under the U.K. Pension Plan. The Supplemental U.K. Pension Plan does not provide any special tax treatment, and payment under this plan is triggered upon Mr. Carters retirement. |
2012 Non-Qualified Deferred Compensation
The Company offers to its executives, including all of the NEOs, the opportunity to participate in the Executive Deferred Compensation Plan (EDCP). The table below provides information as of December 31, 2012, for those NEOs who chose to participate in this plan.
Name |
Executive
Contributions in Last FY (1) |
Registrant
Contributions in the Last FY |
Aggregate
Earnings in Last FY (2) |
Aggregate
Withdrawals/ Distributions |
Aggregate
Balance at Last FYE |
|||||||||||||||
Christopher J. Nassetta |
$ | | $ | | $ | 12,251 | $ | | $ | 175,853 | ||||||||||
Thomas C. Kennedy |
| | | | | |||||||||||||||
Ian R. Carter |
| | | | | |||||||||||||||
Mark D. Wang |
93,308 | | 75,811 | | 783,521 | |||||||||||||||
Kristin A. Campbell |
| | | | | |||||||||||||||
Paul J. Brown |
| | | | |
(1) | The amount in this column is included in the Salary column for 2012 in the Summary Compensation Table above. |
(2) | Amounts in this column are not reported as compensation for fiscal year 2012 in the Summary Compensation Table since they do not reflect above-market or preferential earnings. |
Narrative to Non-Qualified Deferred Compensation Table
Pursuant to our EDCP, specified eligible employees, including our NEOs, may defer up to 100% of either or both their annual salary and bonus. Deferral elections are made by eligible employees in the calendar year preceding the year compensation is otherwise payable. Contributions to the EDCP consist solely of participants elective deferral contributions with no matching or other employer contributions. Eligible employees are permitted to make individual investment elections that will determine the rate of return on their deferral amounts under the elective nonqualified deferred compensation plan. Participants may change their investment elections at any time. Deferrals are only deemed to be invested in the investment options selected. Participants have no ownership interest in any of the funds as investment elections are used only as an index for crediting gains or losses to participants accounts. The investment options consist of a variety of well-known mutual funds including certain non-publicly traded mutual funds available through variable insurance products. Investment gains or losses in the funds are credited to the participants accounts daily, net of investment option related expenses. The EDCP does not provide any above-market returns or preferential earnings to participants, and the deferrals and their earnings are always 100% vested.
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The table below shows the funds available under the EDCP, and their annual rate of return for the calendar year ended December 31, 2012:
Name of Investment Fund |
1-Year Rate of Return
% (as of 12/31/12) |
|||
Oakmark Equity and IncomeClass I Shares |
9.05 | % | ||
MFS Emerging Markets EquityA Shares |
18.69 | % | ||
(MSF) BlackRock Money MarketClass A |
0.00 | % | ||
Vanguard Intermediate-Term TreasuryAdmiral Shares |
2.78 | % | ||
PIMCO Total ReturnAdmin Class |
10.09 | % | ||
MFS ValueR4 Shares |
16.42 | % | ||
MainStay Large Cap GrowthClass R1 |
13.09 | % | ||
Perkins Mid Cap ValueClass T Shares |
10.32 | % | ||
Columbia AcornClass Z |
17.93 | % | ||
AllianzGI NFJ Small-Cap ValueClass A |
10.33 | % | ||
Neuberger Berman GenesisInstl Class |
10.10 | % | ||
American Funds Capital World Growth and IncomeR5 Shares |
19.50 | % | ||
American Funds EuroPacific GrowthR5 Shares |
19.57 | % | ||
Henssler EquityInvestor Class |
7.65 | % | ||
Vanguard 500 IndexAdmiral Shares |
15.96 | % | ||
Investco Small Cap DiscoveryClass A |
16.77 | % | ||
Oppenheimer Real EstateA Shares |
15.65 | % | ||
Janus Global TechnologyClass T Shares |
19.28 | % | ||
Gateway FundClass |
4.76 | % |
NEOs may elect to receive in-service distributions of such amounts at the time they make their deferral elections. In addition, upon a showing of financial hardship due to death, illness, accident or similar extraordinary or unforeseeable circumstances, an executive may be allowed to access funds in his or her deferred compensation account before he otherwise would have been eligible. The participant must make two payout elections, one in the case of termination and one in the case of retirement. Benefits can generally be received either as a lump sum payment or in installments over a period not to exceed 20 years in the case of retirement, 5 years in the case of termination and 5 years for in-service distributions. In the event of a change in control, 100% of the value of the eligible employees deferred compensation account will be distributed.
Potential Payments upon Termination or Change in Control
The following table describes the potential payments and benefits that would have been payable to our NEOs under existing plans assuming (1) a termination of employment and/or (2) a change in control (CIC) occurred, in each case, on December 31, 2012. The amounts shown in the table do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the NEOs. These include certain accrued rights (such as earned but unpaid salary or bonus), distributions of plan balances under our 401(k) savings plan and distributions of plan balances under the pension plans and the non-qualified deferred compensation plan. For purposes of the table below, a qualifying termination for Messrs. Nassetta, Kennedy and Carter has the same meaning as described in Narrative to Summary Compensation Table and 2012 Grants of Plan-Based Awards TableEmployment Agreements and, for Ms. Campbell and Mr. Wang, has the meaning described in Compensation Discussion and AnalysisCompensation ElementsSeverance Benefits. Because the disclosures in the table assume the occurrence of a termination or CIC as of a particular date and under a particular set of circumstances and therefore make a number of important assumptions, the actual amounts to be paid to each of our named executive officers upon a termination or CIC may vary significantly from the amounts included herein. Factors that could affect these amounts include the timing during the year of any such event, the continued availability of benefit policies at similar prices and the type of termination event that occurs (as set forth in the first column in the table below).
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Name |
Cash
Severance ($) (1) |
Continuation
of Health Benefits ($) (2) |
Value of
Accelerated Equity ($) (3) |
Accrued but
Unused Vacation ($) (4) |
Total
($) |
|||||||||||||||
Christopher J. Nassetta |
||||||||||||||||||||
Qualifying Termination |
850,000 | 36,883 | 14,643,521 | 130,769 | 15,661,173 | |||||||||||||||
Qualifying Termination after CIC |
850,000 | 36,883 | 55,318,878 | 130,769 | 56,336,530 | |||||||||||||||
CIC without Termination |
| | 55,318,878 | | 55,318,878 | |||||||||||||||
Death or Disability (5) |
850,000 | 36,883 | 14,643,521 | 130,769 | 15,661,173 | |||||||||||||||
Thomas C. Kennedy |
||||||||||||||||||||
Qualifying Termination prior to CIC |
650,000 | 36,521 | 2,494,818 | 87,500 | 3,268,839 | |||||||||||||||
Qualifying Termination after CIC |
650,000 | 36,521 | 9,424,408 | 87,500 | 10,198,429 | |||||||||||||||
CIC without Termination |
| | 9,424,408 | | 9,424,408 | |||||||||||||||
Death or Disability (5) |
650,000 | 36,521 | 2,494,818 | 87,500 | 3,268,839 | |||||||||||||||
Ian R. Carter |
||||||||||||||||||||
Qualifying Termination prior to CIC |
414,000 | 36,883 | 3,873,205 | 66,346 | 4,390,434 | |||||||||||||||
Qualifying Termination after CIC |
414,000 | 36,883 | 14,631,393 | 66,346 | 15,148,622 | |||||||||||||||
CIC without Termination |
| | 14,631,393 | | 14,631,393 | |||||||||||||||
Death or Disability (5) |
414,000 | 36,883 | 3,873,205 | 66,346 | 4,390,434 | |||||||||||||||
Mark D. Wang |
||||||||||||||||||||
Qualifying Termination |
| 33,141 | 1,559,261 | 106,546 | 1,698,948 | |||||||||||||||
Qualifying Termination after CIC |
| 33,141 | 5,890,255 | 106,546 | 6,029,942 | |||||||||||||||
CIC without Termination |
| | 5,890,255 | | 5,890,255 | |||||||||||||||
Death or Disability (5) |
| 33,141 | 1,559,261 | 106,546 | 1,698,948 | |||||||||||||||
Kristin A. Campbell |
||||||||||||||||||||
Qualifying Termination |
2,000,000 | 26,210 | 467,778 | 57,656 | 2,551,644 | |||||||||||||||
Qualifying Termination after CIC |
2,000,000 | 26,210 | 2,338,892 | 57,656 | 4,422,758 | |||||||||||||||
CIC without Termination |
| | 2,338,892 | | 2,338,892 | |||||||||||||||
Death or Disability (5) |
| 26,210 | 467,778 | 57,656 | 551,644 |
(1) | Under his employment agreement, each of Messrs. Nassetta, Kennedy and Carter would have been entitled to receive a cash severance amount consisting of: |
(A) | in the case of a qualifying termination, an annual bonus payable at the target percentage of base salary (100% of base salary as to Mr. Kennedy) in effect at the date of termination and pro-rated based on the number of days during the fiscal year that such executive was employed prior to the termination date (the prorated bonus); and |
(B) | in the case of a qualifying termination prior to a change in control, Messrs. Kennedy and Carter would have been entitled to receive, in addition to the prorated bonus, an amount equal to the excess, if any, of (x) the Applicable Severance Amount over (y) the value of the Tier I awards and the Class B Units granted to the named executive officer. The Applicable Severance Amount for each executive is an amount equal to 200% (for Mr. Kennedy) or 100% (for Mr. Carter) of the sum of (x) the executives base salary, and (y) annual bonus (if any) payable in respect of the fiscal year immediately prior to the termination date. |
The amounts reported under Qualifying Termination for Mr. Nassetta and Qualifying Termination prior to CIC for Messrs. Nassetta, Kennedy and Carter reflect each NEOs target annual (100% of base salary as to Mr. Kennedy) bonus for the year ended December 31, 2012. In addition, the amounts reported under Qualifying Termination prior to CIC for Messrs. Kennedy and Carter, assume, based on the cash value of the outstanding Tier I awards and the market value of the Class B Units as of December 31, 2012, that, if a qualifying termination had occurred on December 31, 2012 and prior to a change in control, the Applicable Severance Amount for each of Messrs. Kennedy and Carter would not have exceeded the value of their respective Tier I awards and the Class B Units and, therefore, that no additional cash severance for such named executive officers would have been paid under their employment agreements.
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Under the Severance Plan, in connection with a qualifying termination, Mr. Wang would have been entitled to receive a cash severance amount equal to the sum of (x) twelve months of base salary plus (y) an amount equal to the actual bonus paid in respect of the previous fiscal year, provided that the total cash payment is reduced by the value of such executives Tier I awards and Class B Units. The amounts reported for Mr. Wang under Qualifying Termination and Qualifying Termination after CIC assume, based on the cash value of the outstanding Tier I Awards and the market value of the Class B Units as of December 31, 2012, that, if a qualifying termination had occurred on December 31, 2012, the severance benefits payable under the Severance Plan would not have exceeded the value of the Tier I awards and the Class B Units and, therefore, that no additional cash severance would have been paid to Mr. Wang.
Pursuant to the terms of her employment, in connection with a qualifying termination, Ms. Campbell would have been entitled to receive a cash severance amount equal to the sum of (x) two times her then current annualized base salary and (y) two times her most recent annualized bonus payment (or guaranteed annualized minimum if no payment had been made). The amounts reported for Ms. Campbell under Qualifying Termination and Qualifying Termination after CIC reflect the sum of (x) two times her annualized base salary of $500,000 and (y) two times her guaranteed annualized minimum bonus of $500,000 for fiscal 2012.
If the employment of Messrs. Nassetta, Kennedy or Carter was terminated for death or disability, such executive would have been entitled to receive his prorated bonus. Amounts reported under Death or Disability for Messrs. Nassetta, Kennedy and Carter reflect each NEOs target annual bonus for the year ended December 31, 2012.
(2) | Reflects the cost of providing the NEO and his or her eligible dependents continued group health insurance for 24 months following the date of termination pursuant to the Companys historical practice, assuming 2013 rates. |
(3) | Upon a change in control in which our Sponsor ceases to beneficially own more than 50% of the Class A Units in our Ultimate Parent, the remaining outstanding Tier I awards will become payable and all the Class B Units will vest. Upon a qualifying termination, death or disability, the Class B Units will vest in a percentage of based on a vesting schedule where 20% of the Class B Units will be deemed to have vested ratably in equal, annual installments over five years, beginning on April 8, 2011 (or June 27, 2011 with respect to Ms. Campbell). The amounts reported are based on the cash value of the outstanding Tier I awards and, with respect to the Class B Units, the appreciation in the value of our Ultimate Parents equity from and after the applicable date of grant through December 31, 2012. |
(4) | Amounts shown represent the following number of accrued but unused vacation days: Mr. Nassetta 40 days; Mr. Kennedy, 35 days; Mr. Carter, 25 days; Mr. Wang, 54 days; Ms. Campbell, 31 days; and Mr. Brown, 35 days. |
(5) | In the event of death of an NEO, in addition to amounts reported in the table above, each NEO will receive benefits from third-party payors under our employer-paid premium life insurance plans. All of our team members are eligible for one times regular annual eligible wages at death (up to $1,500,000). In addition, the Company has provided Mr. Nassetta with additional executive life insurance with a $10,500,000 death benefit. Therefore, if such benefits were triggered for the NEOs on December 31, 2012 under our life insurance plans the legally designated beneficiary(ies) of each NEO would have received the following amounts: Mr. Nassetta ($12,000,000); Mr. Kennedy ($1,159,000); Mr. Carter ($1,500,000); Mr. Wang ($839,000); and Ms. Campbell ($500,000). |
Paul J. Brown Separation Agreement
On October 31, 2012, we entered into a separation agreement with Mr. Brown, the Companys former Executive Vice President and President, Global Brands and Commercial Services, with respect to Mr. Browns resignation of employment with the Company. Pursuant to the separation agreement, beginning November 1, 2012, Mr. Brown agreed to provide services to the Company as a Special Advisor to the CEO until the earlier of April 30, 2013 or the date he commenced employment with a new employer, such date, referred to as the Brown
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Separation Date. In consideration for Mr. Brown providing a general release of claims against the Company, we agreed to provide Mr. Brown with the following payments and benefits:
| payment of his current base salary rate through April 30, 2013; |
| his annual bonus in respect of the year ended December 31, 2012 assuming he remained employed as President, Global Brands and Commercial Services through the applicable payment date, which amount was $497,025; |
| cash separation payments consisting of: |
| an $8.5 million lump-sum payment payable as soon as practicable following the effective date of the separation agreement; |
| $2.0 million payment payable as soon as practicable following the earlier of (1) his commencement of employment with a new employer, but no earlier than January 1, 2013, or (2) October 31, 2013 conditional upon adherence to the agreement; |
| $2.0 million payment payable as soon as practicable following the earlier of (1) the one year anniversary of the commencement of his employment with a new employer, but no earlier than January 1, 2014, or (2) April 30, 2014, conditional upon adherence to the agreement; |
| $80,769 for all accrued but unused vacation time through the Brown Separation Date; |
| executive consulting services, which amounted to $50,000; |
| $12,188 for the cost of legal fees incurred in connection with his separation agreement; and |
| a lump sum payment of $40,000 to be paid as soon as practicable following the Brown Separation Date representing the portion of the monthly premiums for group health coverage for Mr. Brown and his family paid by the Company, multiplied by 24. |
In addition, in connection with his separation, Mr. Brown forfeited his outstanding Tier I award and all of his Class B Units and the Company agreed to repurchase his equity investment in Class A Units of $220,000 for an amount equal to $275,000, less any and all applicable U.S. federal, state and local withholding taxes.
Mr. Browns cash separation payments are contingent on his continued compliance with certain restrictive covenants, including an indefinite covenant on confidentiality of information and covenants related to non-competition and non-solicitation of employees and customers of the Company and its affiliates for one year after the Brown Separation Date.
Thomas C. Kennedy Separation Agreement
On September 24, 2013, we entered into a separation agreement with Mr. Kennedy, our former Executive Vice President and Chief Financial Officer, with respect to Mr. Kennedys termination of employment with the Company. Pursuant to the separation agreement, beginning August 8, 2013, Mr. Kennedy agreed to continue his employment with the Company as a Special Advisor to the CEO until December 31, 2013 or until he commenced employment with a new employer, such date referred to as the Kennedy Separation Date. In consideration for Mr. Kennedy providing a general release of claims against the Company, we agreed to provide Mr. Kennedy with the following payments and benefits:
| his current base salary and continuation of his current benefits through the Kennedy Separation Date; |
| his annual bonus in respect of the year ended December 31, 2013 assuming he remained employed as Executive Vice President and Chief Financial Officer through the applicable payment date and with any discretionary targets established for Mr. Kennedy fixed at the maximum payout value; |
| $1,058,500 annually (representing approximately his current base salary and target annual incentive compensation) for a period of three years as soon as practicable following each of the first, second and third anniversaries of the Kennedy Separation Date; |
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| a $2,275,000 lump-sum cash severance payment (representing approximately two times his current base salary and target annual incentive compensation) payable as soon as practicable following December 31, 2014; |
| $87,500 for all accrued but unused vacation through the Kennedy Separation Date; |
| up to $75,000 for the cost of reasonable legal fees incurred in connection with the separation agreement; and |
| a lump sum payment of $50,000 to be paid as soon as practicable following the Kennedy Separation Date representing twenty-four months of estimated before tax health care insurance premiums that Mr. Kennedy would incur for group health coverage for him and his family. |
In addition, in connection with his separation, the Company agreed to pay Mr. Kennedy a cash payment of $3,187,363 representing his Tier I award and a cash payment of $6,699,938 for the cancellation of his Class B Units. The Company also agreed to repurchase Mr. Kennedys equity investment in Class A Units of $1,107,780 for an amount equal to $1,772,448.
The foregoing payments and benefits are contingent on Mr. Kennedys continued compliance with certain restrictive covenants, including an indefinite confidentiality of information covenant, a covenant related to non-competition for three years after the Kennedy Separation Date and a covenant related to non-solicitation of employees and customers of the Company and its affiliates for one year after the Kennedy Separation Date.
Omnibus Incentive Plan
In connection with this offering, our board of directors expects to adopt, and our stockholders expect to approve, the Omnibus Incentive Plan prior to the completion of the offering.
Purpose
The purpose of the Omnibus Incentive Plan is to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders.
Administration
The Omnibus Incentive Plan will be administered by the compensation committee of our board of directors or such other committee of our board of directors to which it has delegated power, or if no such committee or subcommittee thereof exists, the board of directors (as applicable, the Committee). The Committee has the sole and plenary authority to establish the terms and conditions of any award consistent with the provisions of the Omnibus Incentive Plan. The Committee is authorized to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Omnibus Incentive Plan and any instrument or agreement relating to, or any award granted under, the Omnibus Incentive Plan; establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee deems appropriate for the proper administration of the Omnibus Incentive Plan; and to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Omnibus Incentive Plan. Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it in accordance with the terms of the Omnibus Incentive Plan. Any such allocation or delegation may be revoked by the Committee at any time. Unless otherwise expressly provided in the Omnibus Incentive Plan, all designations, determinations,
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interpretations, and other decisions under or with respect to the Omnibus Incentive Plan or any award or any documents evidencing awards granted pursuant to the Omnibus Incentive Plan are within the sole discretion of the Committee, may be made at any time and are final, conclusive and binding upon all persons or entities, including, without limitation, us, any holder or beneficiary of any award, and any of our stockholders.
Shares Subject to the Omnibus Incentive Plan
The Omnibus Incentive Plan provides that the total number of shares of common stock that may be issued under the Omnibus Incentive Plan is . Of this amount, the maximum number of shares for which incentive stock options may be granted is ; the maximum number of shares for which options or stock appreciation right may be granted to any individual participant during any single fiscal year is 5,000,000; the maximum number of shares for which performance compensation awards denominated in shares may be granted to any individual participant in respect of a single fiscal year is 5,000,000 (or if any such awards are settled in cash, the maximum amount may not exceed the fair market value of such shares on the last day of the performance period to which such award relates); the maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, shall not exceed $1,000,000 in total value; and the maximum amount that may be paid to any individual for a single fiscal year under a performance compensation award denominated in cash is $15,000,000. Except for substitute awards (as described below), in the event any award terminates, lapses, or is settled without the payment of the full number of shares subject to such award, including as a result of net settlement of the award or as a result of the award being settled in cash, the undelivered shares may be granted again under the Omnibus Incentive Plan, unless the shares are surrendered after the termination of the Omnibus Incentive Plan, and only if stockholder approval is not required under the then-applicable rules of the exchange on which the shares of common stock are listed. Awards may, in the sole discretion of the Committee, be granted in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by us or with which we combine (referred to as substitute awards), and such substitute awards shall not be counted against the total number of shares that may be issued under the Omnibus Incentive Plan, except that substitute awards intended to qualify as incentive stock options shall count against the limit on incentive stock options described above. No award may be granted under the Omnibus Incentive Plan after the tenth anniversary of the effective date (as defined therein), but awards theretofore granted may extend beyond that date.
Options
The Committee may grant non-qualified stock options and incentive stock options under the Omnibus Incentive Plan, with terms and conditions determined by the Committee that are not inconsistent with the Omnibus Incentive Plan; provided that all stock options granted under the Omnibus Incentive Plan are required to have a per share exercise price that is not less than 100% of the fair market value of our common stock underlying such stock options on the date an option is granted (other than in the case of options that are substitute awards), and all stock options that are intended to qualify as incentive stock options must be granted pursuant to an award agreement expressly stating that the option is intended to qualify as an incentive stock option, and will be subject to the terms and conditions that comply with the rules as may be prescribed by Section 422 of the Code. The maximum term for stock options granted under the Omnibus Incentive Plan will be ten years from the initial date of grant, or with respect to any stock options intended to qualify as incentive stock options, such shorter period as prescribed by Section 422 of the Code. However, if a non-qualified stock option would expire at a time when trading of shares of common stock is prohibited by the Companys insider trading policy (or Company-imposed blackout period), the term will automatically be extended to the 30th day following the end of such period. The purchase price for the shares as to which a stock option is exercised may be paid to us, to the extent permitted by law (1) in cash or its equivalent at the time the stock option is exercised, (2) if there is a public market for the shares at such time, through the delivery of irrevocable instructions to a broker to sell the shares being acquired upon the exercise of the stock option and to deliver to us the amount of the proceeds of such sale equal to the aggregate exercise price for the shares being purchased, (3) in shares having a fair market
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value equal to the aggregate exercise price for the shares being purchased and satisfying any requirements that may be imposed by the Committee, or (4) by such other method as the Committee may permit in its sole discretion, including without limitation (A) in other property having a fair market value on the date of exercise equal to the purchase price, or (B) through a net exercise procedure effected by withholding the minimum number of shares needed to pay the exercise price and the minimum amount of statutory withholding liability. Any fractional shares of common stock will be settled in cash.
Stock Appreciation Rights
The Committee may grant stock appreciation rights, with terms and conditions determined by the Committee that are not inconsistent with the Omnibus Incentive Plan. Generally, each stock appreciation right will entitle the participant upon exercise to an amount (in cash, shares or a combination of cash and shares, as determined by the Committee) equal to the product of (1) the excess of (A) the fair market value on the exercise date of one share of common stock, over (B) the strike price per share, times (2) the numbers of shares of common stock covered by the stock appreciation right. The strike price per share of a stock appreciation right will be determined by the Committee at the time of grant but in no event may such amount be less than the fair market value of a share of common stock on the date the stock appreciation right is granted (other than in the case of stock appreciation rights granted in substitution of previously granted awards). The Committee may in its sole discretion substitute, without the consent of the holder or beneficiary of such stock appreciation rights, stock appreciation rights settled in shares of common stock (or settled in shares or cash in the sole discretion of the Committee) for nonqualified stock options.
Restricted Shares and Restricted Stock Units
The Committee may grant restricted shares of our common stock or restricted stock units, representing the right to receive, upon the expiration of the applicable restricted period, one share of common stock for each restricted stock unit, or, in its sole discretion of the Committee, the cash value thereof (or any combination thereof). As to restricted shares of our common stock, subject to the other provisions of the Omnibus Incentive Plan, the holder will generally have the rights and privileges of a stockholder as to such restricted shares of common stock, including without limitation the right to vote such restricted shares of common stock (except, that if the lapsing of restrictions with respect to such restricted shares of common stock is contingent on satisfaction of performance conditions other than or in addition to the passage of time, any dividends payable on such restricted shares of common stock will be retained and delivered without interest to the holder of such shares when the restrictions on such shares lapse). To the extent provided in the applicable award agreement, the holder of outstanding restricted stock units will be entitled to be credited with dividend equivalent payments (upon the payment by us of dividends on shares of common stock) either in cash or, at the sole discretion of the Committee, in shares of common stock having a value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which will be payable at the same time as the underlying restricted stock units are settled following the release of restrictions on such restricted stock units.
Other Stock-Based Awards
The Committee may issue unrestricted common stock, rights to receive grants of awards at a future date, or other awards denominated in shares of common stock (including, without limitation, performance shares or performance units), under the Omnibus Incentive Plan, including performance-based awards.
Performance Compensation Awards
The Committee may also designate any award as a performance compensation award intended to qualify as performance-based compensation under Section 162(m) of the Code. The Committee also has the authority to make an award of a cash bonus to any participant and designate such award as a performance compensation
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award under the Omnibus Incentive Plan. The Committee has sole discretion to select the length of any applicable performance periods, the types of performance compensation awards to be issued, the applicable performance criteria and performance goals, and the kinds and/or levels of performance goals that are to apply. The performance criteria that will be used to establish the performance goals may be based on the attainment of specific levels of performance of the Company (and/or one or more affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and are limited to the following, which may be determined in accordance with Generally Accepted Accounting Principles (GAAP) or on a non-GAAP basis: (1) net earnings or net income (before or after taxes); (2) basic or diluted earnings per share (before or after taxes); (3) net revenue or net revenue growth; (4) gross revenue or gross revenue growth, gross profit or gross profit growth; (5) net operating profit (before or after taxes); (6) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (7) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital), which may but are not required to be measured on a per share basis; (8) earnings before or after taxes, interest, depreciation and/or amortization (including EBIT and EBITDA); (9) gross or net operating margins; (10) productivity ratios; (11) share price (including, but not limited to, growth measures and total stockholder return); (12) expense targets or cost reduction goals, general and administrative expense savings; (13) operating efficiency; (14) objective measures of customer satisfaction; (15) working capital targets; (16) measures of economic value added or other value creation metrics; (17) inventory control; (18) enterprise value; (19) sales; (20) stockholder return; (21) competitive market metrics; (22) employee retention; (23) timely completion of new product roll-outs; (24) timely opening of new facilities; (25) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, dispositions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (26) system-wide revenues; (27) franchise and/or royalty income; (28) comparisons of continuing operations to other operations; (29) market share; (30) cost of capital, debt leverage year-end cash position or book value; (31) strategic objectives, development of new product lines and related revenue, sales and margin targets; (32) franchise growth and retention, co-branding or international operations; (33) management fee or licensing fee growth; (34) capital expenditures; (35) guest satisfaction; (36) RevPAR (revenue per available room); or (37) any combination of the foregoing. Any one or more of the performance criteria may be stated as a percentage of another performance criteria, or used on an absolute or relative basis to measure the performance of the Company and/or one or more affiliates as a whole or any of our divisions or operational and/or business units, product lines, brands, business segments, administrative departments of the Company and/or one or more affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above performance criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. Unless otherwise determined by the Committee at the time a performance compensation award is granted, the Committee shall, during the first 90 days of a performance period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the performance compensation awards granted to any participant for such performance period to fail to qualify as performance-based compensation under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a performance goal for such performance period, based on and to appropriately reflect the following events: (1) asset write-downs; (2) litigation or claim judgments or settlements; (3) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (4) any reorganization and restructuring programs; (5) extraordinary nonrecurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in managements discussion and analysis of financial condition and results of operations appearing in our annual report to stockholders for the applicable year; (6) acquisitions or divestitures; (7) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (8) foreign exchange gains and losses; (9) discontinued operations and nonrecurring charges; and (10) a change in our fiscal year.
Following the completion of a performance period, the Committee will review and certify in writing whether, and to what extent, the performance goals for the performance period have been achieved and, if so,
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calculate and certify in writing that amount of the performance compensation awards earned for the period based upon the performance formula. In determining the actual amount of an individual participants performance compensation award for a performance period, the Committee has the discretion to reduce or eliminate the amount of the performance compensation award consistent with Section 162(m) of the Code. Unless otherwise provided in the applicable award agreement, the Committee does not have the discretion to (A) grant or provide payment in respect of performance compensation awards for a performance period if the performance goals for such performance period have not been attained; or (B) increase a performance compensation award above the applicable limitations set forth in the Omnibus Incentive Plan.
Effect of Certain Events on Omnibus Incentive Plan and Awards
In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of common stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of our shares of common stock or other securities, issuance of warrants or other rights to acquire our shares of common stock or other securities, or other similar corporate transaction or event (including, without limitation, a change in control, as defined in the Omnibus Incentive Plan) that affects the shares of common stock, or (b) unusual or nonrecurring events (including, without limitation, a change in control) affecting us, any affiliate, or the financial statements of us or any affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate, then the Committee must make any such adjustments in such manner as it may deem equitable, including without limitation, any or all of: (i) adjusting any or all of (A) the share limits applicable under the Omnibus Incentive Plan with respect to the number of awards which may be granted hereunder, (B) the number of our shares of common stock or other securities which may be delivered in respect of awards or with respect to which awards may be granted under the Omnibus Incentive Plan and (C) the terms of any outstanding award, including, without limitation, (1) the number of shares of common stock subject to outstanding awards or to which outstanding awards relate (with any increase requiring the approval of our board of directors), (2) the exercise price or strike price with respect to any award or (3) any applicable performance measures; (ii) providing for a substitution or assumption of awards, accelerating the exercisability of, lapse of restrictions on, or termination of, awards or providing for a period of time for participants to exercise outstanding awards prior to the occurrence of such event; and (iii) cancelling any one or more outstanding awards and causing to be paid to the holders holding vested awards (including any awards that would vest as a result of the occurrence of such event but for such cancellation) the value of such awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of common stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of options and stock appreciation rights, a cash payment equal to the excess, if any, of the fair market value of the shares of common stock subject to the option or stock appreciation right over the aggregate exercise price thereof. For the avoidance of doubt, the Committee may cancel any stock option or stock appreciation right for no consideration if the fair market value of the shares subject to such option or stock appreciation right is less than or equal to the aggregate exercise price or strike price of such stock option or stock appreciation right.
Nontransferability of Awards
An award will not be transferable or assignable by a participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance will be void and unenforceable against us or any affiliate. However, the Committee may, in its sole discretion, permit awards (other than incentive stock options) to be transferred, including transfers to a participants family members, any trust established solely for the benefit of participant or such participants family members, any partnership or limited liability company of which participant, or participant and participants family members, are the sole member(s), and a beneficiary to whom donations are eligible to be treated as charitable contributions for tax purposes.
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Amendment and Termination
The board of directors may amend, alter, suspend, discontinue, or terminate the Omnibus Incentive Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination may be made without stockholder approval if (1) such approval is necessary to comply with any regulatory requirement applicable to the Omnibus Incentive Plan or for changes in GAAP to new accounting standards, (2) it would materially increase the number of securities which may be issued under the Omnibus Incentive Plan (except for adjustments in connection with certain corporate events), or (3) it would materially modify the requirements for participation in the Omnibus Incentive Plan; provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any participant or any holder or beneficiary of any award shall not to that extent be effective without such individuals consent. The Committee may also, to the extent consistent with the terms of any applicable award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any award granted or the associated award agreement, prospectively or retroactively, subject to the consent of the affected participant if any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination would materially and adversely affect the rights of any participant with respect to such award; provided, further, that without stockholder approval, except as otherwise permitted in the Omnibus Incentive Plan, (1) no amendment or modification may reduce the exercise price of any option or the strike price of any stock appreciation right, (2) the Committee may not cancel any outstanding option or stock appreciation right and replace it with a new option or stock appreciation right (with a lower exercise price or strike price, as the case may be) or other award or cash payment that is greater than the value of the cancelled option or stock appreciation right, and (3) the Committee may not take any other action which is considered a repricing for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which our securities are listed or quoted.
Dividends and Dividend Equivalents
The Committee in its sole discretion may provide part of an award with dividends or dividend equivalents, on such terms and conditions as may be determined by the Committee in its sole discretion; provided, that no dividend equivalents shall be payable in respect of outstanding (1) options or stock appreciation rights or (2) unearned performance compensation awards or other unearned awards subject to performance conditions (other than or in addition to the passage of time) (although dividend equivalents may be accumulated in respect of unearned awards and paid within 15 days after such awards are earned and become earned, payable or distributable).
Clawback/Forfeiture
An award agreement may provide that the Committee may in its sole discretion cancel such award if the participant, while employed by or providing services to us or any affiliate or after termination of such employment or service, violates a non-competition, non-solicitation or non-disclosure covenant or agreement or otherwise has engaged in or engages in other detrimental activity that is in conflict with or adverse to our interests or the interests of any affiliate, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. The Committee may also provide in an award agreement that if the participant otherwise has engaged in or engages in any activity referred to in the preceding sentence, the participant will forfeit any gain realized on the vesting or exercise of such award, and must repay the gain to us. The Committee may also provide in an award agreement that if the participant receives any amount in excess of what the participant should have received under the terms of the award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the participant shall be required to repay any such excess amount to us. Without limiting the foregoing, all awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Stockholders Agreement
In connection with this offering, we intend to enter into a stockholders agreement with Blackstone. This agreement will require us to nominate a number of individuals designated by Blackstone for election as our directors at any meeting of our stockholders, each a Sponsor Director, such that, upon the election of each such individual and each other individual nominated by or at the direction of our board of directors or a duly-authorized committee of the board, as a director of our company, the number of Sponsor Directors serving as directors of our company will be equal to: (1) if our existing owners and their affiliates together continue to beneficially own at least 50% of the shares of our common stock entitled to vote generally in the election of our directors as of the record date for such meeting, the lowest whole number that is greater than 50% of the total number of directors comprising our board of directors; (2) if our existing owners and their affiliates together continue to beneficially own at least 40% (but less than 50%) of the shares of our common stock entitled to vote generally in the election of our directors as of the record date for such meeting, the lowest whole number that is at least 40% of the total number of directors comprising our board of directors; (3) if our existing owners and their affiliates together continue to beneficially own at least 30% (but less than 40%) of the total shares of our common stock entitled to vote generally in the election of our directors as of the record date for such meeting, the lowest whole number that is at least 30% of the total number of directors comprising our board of directors; (4) if our existing owners and their affiliates together continue to beneficially own at least 20% (but less than 30%) of the total shares of our common stock entitled to vote generally in the election of our directors as of the record date for such meeting, the lowest whole number that is at least 20% of the total number of directors comprising our board of directors; and (5) if our existing owners and their affiliates together continue to beneficially own at least 5% (but less than 20%) of the total shares of our common stock entitled to vote generally in the election of our directors as of the record date for such meeting, the lowest whole number that is at least 10% of the total number of directors comprising our board of directors. For so long as the stockholders agreement remains in effect, Sponsor Directors may be removed only with the consent of Blackstone. In the case of a vacancy on our board created by the removal or resignation of a Sponsor Director, the stockholders agreement will require us to nominate an individual designated by our Sponsor for election to fill the vacancy.
The stockholders agreement will remain in effect until our Sponsor is no longer entitled to nominate a Sponsor Director pursuant to the stockholders agreement, unless our Sponsor requests that it terminate at an earlier date.
Registration Rights Agreement
In connection with this offering, we intend to enter into a registration rights agreement that will provide Blackstone an unlimited number of demand registrations and customary piggyback registration rights. The registration rights agreement will also provide that we will pay certain expenses relating to such registrations and indemnify the registration rights holders against certain liabilities which may arise under the Securities Act.
Indemnification Agreements
We intend to enter into indemnification agreements with our directors and executive officers. These agreements will require us to indemnify these individuals to the fullest extent permitted by Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
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Management, Franchise and Timeshare Products and Services
Affiliates of Blackstone directly and indirectly own hotels that we currently manage or franchise, or that we may manage or franchise in the future, and receive fees in connection with those management and franchise agreements. We recognized management and franchise fee revenue of $29 million, $23 million and $16 million, respectively, for the years ended December 31, 2012, 2011 and 2010 related to these hotels. We recognized reimbursements and reimbursable costs for these hotels, primarily related to payroll and marketing expenses, of $135 million, $101 million, and $93 million for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012 and 2011, we had accounts receivable due from these hotels related to these management and franchise fees and reimbursements of $28 million and $19 million, respectively. In addition, in certain cases, we incur costs to acquire management and franchise contracts with hotels owned by affiliates of Blackstone. We incurred acquisition costs of $5 million for the year ended December 31, 2011 related to these contracts. There were no acquisition costs for the years ended December 31, 2012 and 2010 related to these contracts.
We may also enter into timeshare-related arrangements with affiliates of Blackstone which may involve, among other things, our sale of certain owned properties to affiliates of Blackstone for their development into timeshare properties and our selling and marketing related timeshare intervals and providing management and other services to operate the homeowners associations, rental programs, resort recreational programs and retail outlets at these properties. In particular, in connection with a timeshare project to be developed, we expect to sell a land parcel, including easement rights and entitlements, to an affiliate of Blackstone for approximately $25 million in cash. The Blackstone affiliate will reimburse us for certain development costs for expenses we incur relating to the planning, design, legal, architectural and other pre-construction activities. The sale of this property will facilitate a fee-for-service transaction whereby the affiliate of Blackstone will develop the timeshare project and HGV will provide development management, sales and marketing, resort operations, club management and other related services for fees.
Products and Services
From time to time, we have purchased products and services from entities affiliated with or owned by Blackstone.
Entities affiliated with Travelport Limited, or Travelport, in which certain affiliates of Blackstone have an interest, provide computerized reservations and ticketing and other services to travel agencies and others in the travel industry. We are party to a hotel reservations sales agreement with Travelport whereby we agree to pay specified fees per hotel booking and to purchase certain advertising services. Our payments for services from Travelport totaled $23 million, $20 million and $19 million for the fiscal years ended December 31, 2012, 2011 and 2010, respectively.
Equity Healthcare LLC, or Equity Healthcare, which is owned by Blackstone, provides us certain negotiating, monitoring and other services in connection with our health benefit plans pursuant to an employer health program agreement we have entered into with Equity Healthcare. In consideration for Equity Healthcares services, we pay Equity Healthcare fees based on the number of participating employees in our health benefit plans. Our payments to Equity Healthcare totaled $0.6 million and $0.3 million, respectively, for the fiscal years ended December 31, 2012 and 2011. We did not make any payments to Equity Healthcare during the fiscal year ended December 31, 2010.
Service Contract Guarantees
In 2010, in connection with the settlement of a lawsuit, we entered into a guarantee that requires us to pay any shortfalls under certain service contracts that affiliates of our Sponsor entered into with the plaintiff. The initial maximum exposure under the guarantee was $75 million, which has subsequently been reduced to approximately $50 million as of September 30, 2013 as a result of the plaintiffs receipt of payments from the counterparties of such service contracts.
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Statement of Policy Regarding Transactions with Related Persons
Prior to the completion of this offering, our board of directors will adopt a written statement of policy regarding transactions with related persons, which we refer to as our related person policy. Our related person policy requires that a related person (as defined as in Item 404(a) of Regulation S-K, which includes security holders who beneficially own more than 5% of our common stock, including our Sponsor) must promptly disclose to our General Counsel any related person transaction (defined as any transaction that is anticipated would be reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The General Counsel will then promptly communicate that information to our board of directors. No related person transaction will be executed without the approval or ratification of our board of directors or a duly authorized committee of our board of directors. It is our policy that directors interested in a related person transaction will recuse themselves from any vote on a related person transaction in which they have an interest.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of shares of our common stock immediately after this offering by (1) the selling stockholder, (2) each person known to us to beneficially own more than 5% of our outstanding common stock, (3) each of our directors and named executive officers and (4) all of our directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC.
Hilton Global Holdings LLC currently holds all of our issued and outstanding common stock. Immediately prior to this offering, Hilton Global Holdings LLC plans to distribute all of the shares of our common stock held by it, other than the shares it may sell in this offering, to its members in accordance with the terms of its limited liability company agreement. (If the underwriters option to purchase additional shares is not exercised in full, Hilton Global Holdings LLC will distribute its remaining shares of our common stock to its members.) All shares of our common stock distributed by Hilton Global Holdings LLC will be subject to restrictions on transfer as described in the third paragraph under Shares Eligible for Future SaleLock-Up Arrangements. Cash proceeds received by Hilton Global Holdings LLC from the sale of shares of our common stock in this offering, net of underwriting discounts and the payment to us described in the next sentence, will be distributed to those members of Hilton Global Holdings LLC that have elected to receive this cash payment in lieu of shares of our common stock that would otherwise have been distributed to such members. For facilitating this liquidity event for certain of its members, Hilton Global Holdings LLC has agreed to make a payment to us in an amount equal to the amount by which proceeds, net of underwriting discounts, received by it exceed % of the aggregate initial public offering price of the shares sold by it. No private equity or real estate opportunity fund or co-investment vehicle sponsored or managed by Blackstone has elected to receive any cash in lieu of shares of our common stock.
* | Represents less than 1%. |
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(1) | The managing member of Hilton Global Holdings LLC is Hilton Hotels Holdings LLC, which following the distribution of shares of Hilton Worldwide Holdings Inc. described above, will cease to own any economic interest in Hilton Global Holdings LLC, but will continue to control such entity. See footnote (2) below for additional details. |
(2) | Reflects shares of our common stock directly held by Hilton Hotels Holdings LLC and Blackstone A23 Holdings LLC. The sole member of Hilton Hotels Holdings LLC is BH Hotels Holdco LLC (BH Hotels). The managing members of each of BH Hotels and Blackstone A23 Holdings LLC are Blackstone Real Estate Partners VI L.P. and Blackstone Capital Partners V L.P. The general partner of Blackstone Capital Partners V L.P. is Blackstone Management Associates V L.L.C. The sole member of Blackstone Management Associates V L.L.C is BMA V L.L.C. The general partner of Blackstone Real Estate Partners VI L.P. is Blackstone Real Estate Associates VI L.P. The general partner of Blackstone Real Estate Associates VI L.P. is BREA VI L.L.C. The managing member of each of BREA VI L.L.C. and BMA V L.L.C. is Blackstone Holdings III L.P. The general partner of Blackstone Holdings III L.P. is Blackstone Holdings III GP L.P. The general partner of Blackstone Holdings III GP L.P. is Blackstone Holdings III GP Management L.L.C. The sole member of Blackstone Holdings III GP Management L.L.C. is The Blackstone Group L.P. The general partner of The Blackstone Group L.P. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstones senior managing directors and controlled by its founder, Steven A. Schwarzman. Each of such Blackstone entities (other than Hilton Global Holdings LLC to the extent of its direct holdings) and Mr. Schwarzman may be deemed to beneficially own the shares beneficially owned by Hilton Global Holdings LLC directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such shares. John G. Schreiber may be deemed to share dispositive power over the shares of common stock held by the Hilton Global Holdings LLC but disclaims beneficial ownership of such shares. The address of each of Mr. Schwarzman and each of the entities listed in this footnote is c/o The Blackstone Group L.P., 345 Park Avenue, New York, New York 10154. |
(3) | Messrs. Gray, Chae, Henritze and Stein are each employees of Blackstone, but each disclaims beneficial ownership of the shares beneficially owned by Blackstone. |
(4) | Mr. Schreiber is a partner and co-founder of Blackstone Real Estate Advisors, which is affiliated with Blackstone. Mr. Schreiber disclaims beneficial ownership of the shares beneficially owned by Blackstone. |
The foregoing table assumes that the initial public offering price for shares of our common stock to be sold in this offering is $ per share, which is the midpoint of the price range indicated on the front cover of this prospectus. However, as is discussed above with regard to shares of our common stock that will be distributed by Hilton Global Holdings LLC to its members and under ManagementCompensation Discussion and AnalysisCompensation ElementsLong-Term Equity Awards with respect to equity interests held by members of our management, the holdings of shares of our common stock by particular existing owners would differ from that presented in the table above if the actual initial public offering price differs from this assumed price. For example, if the initial public offering price per share of common stock in this offering is $ , which is the low-point of the price range indicated on the front cover of this prospectus, the beneficial ownership of shares of our common stock by Blackstone, Christopher J. Nassetta, Ian R. Carter, Mark D. Wang and Kristin A. Campbell and our directors and executive officers as a group, after this offering, would be , , , and , shares, respectively. Conversely, if the initial public offering price per share of common stock in this offering is $ , which is the high-point of the price range indicated on the front cover of this prospectus, the beneficial ownership of shares of our common stock by Blackstone, Christopher J. Nassetta, Ian R. Carter, Mark D. Wang and Kristin A. Campbell and our directors and executive officers as a group, after this offering, would be , , , and , shares, respectively.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following description is a summary of the material terms of our material indebtedness. In addition, as of September 30, 2013, our consolidated VIEs recorded non-recourse debt and capital lease obligations of $318 million.
Senior Secured Credit Facilities
On October 25, 2013, we entered into a credit agreement with Deutsche Bank AG New York Branch, as administrative agent, collateral agent, swing line lender and L/C issuer, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc. and Goldman Sachs Lending Partners LLC, as joint lead arrangers and joint bookrunners, Wells Fargo Securities, LLC, as joint bookrunner and the other agents and lenders from time to time party thereto.
The credit agreement provides for senior secured credit facilities consisting of:
| a $7.6 billion senior secured term loan facility, or term loans, which will mature on October 25, 2020; and |
| a $1.0 billion senior secured revolving credit facility, or revolving credit facility, $150 million of which is available in the form of letters of credit, which will mature on October 25, 2018. |
Our wholly owned subsidiary, Hilton Worldwide Finance LLC, or borrower, is the borrower under the senior secured credit facilities. The revolving credit facility includes borrowing capacity available for letters of credit and for short-term borrowings referred to as the swing line borrowings. In addition, the senior secured credit facilities also provide the borrower with the option to raise incremental credit facilities (including an uncommitted incremental facility that provides the borrower the option to increase the amount available under the term loan facilities and/or the revolving credit facility by an aggregate of up to $1.5 billion, subject to additional increases upon satisfaction of certain leverage-based tests), refinance the loans with debt incurred outside the credit agreement and extend the maturity date of the revolving credit facility and term loans, subject to certain limitations.
Interest Rate and Fees
Borrowings under the term loans bear interest, at the borrowers option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agents prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the term loans is 2.00%, in the case of base rate loans, and 3.00%, in the case of LIBOR rate loans, subject to one step-down of 0.25% upon the achievement of a first lien net leverage ratio of less than or equal to 3.85 to 1.00 and subject to one step down of 0.25% following a qualifying initial public offering, subject to a base rate floor of 2.00%, and a LIBOR floor of 1.00%.
Borrowings under the revolving credit facility will bear interest, at the borrowers option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agents prime lending rate, (2) the federal funds effective rate plus 1/2 of 1% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margins for the revolving credit facility are 1.50%, in the case of base rate loans, and 2.50%, in the case of LIBOR rate loans, subject to two step-downs of 0.25% upon the achievement of a first lien net leverage ratio of less than or equal to 3.85 to 1.00 and 3.25 to 1.00, respectively, and subject to one step down of 0.25% following a qualifying initial public offering.
In addition to paying interest on outstanding principal under the senior secured credit facilities, the borrower is required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The commitment fee rate is 0.50% per annum subject to a step-down to 0.375%, upon
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achievement of a first lien net leverage ratio less than or equal to 3.85 to 1.00. The borrower is also required to pay customary letter of credit fees.
Prepayments
The senior secured credit facilities require us to prepay outstanding term loans, subject to certain exceptions, with:
| 50% (which percentage will be reduced to 25% and 0%, as applicable, subject to attaining certain first lien net leverage ratios) of annual excess cash flow, calculated in accordance with the credit agreement; |
| 100% of the net cash proceeds (including insurance and condemnation proceeds) of all non-ordinary course asset sales or other dispositions of property by the borrower and its restricted subsidiaries, subject to de minimis thresholds, if those net cash proceeds are not reinvested in assets to be used in the borrowers business or to make certain other permitted investments (a) within 12 months of the receipt of such net cash proceeds or (b) if the borrower commits to reinvest such net cash proceeds within 12 months of the receipt thereof, within 180 days of the date of such commitment (although in connection with any such prepayment, the borrower may also repay other first lien debt to the extent it is so required); and |
| 100% of the net proceeds of any incurrence of debt by the borrower or any of its restricted subsidiaries, other than debt permitted to be incurred or issued under the senior secured credit facilities. |
Notwithstanding any of the foregoing, each lender of term loans will have the right to reject its pro rata share of mandatory prepayments described above, in which case we may retain the amounts so rejected.
The foregoing mandatory prepayments will be applied pro rata to installments of term loans in direct order of maturity.
The borrower has the ability to voluntarily repay outstanding loans at any time without premium or penalty, other than prepayment premium on voluntary prepayment of term loans in connection with a repricing transaction on or prior to April 25, 2014 and customary breakage costs with respect to LIBOR loans.
Amortization
The borrower is required to repay installments on the term loans in quarterly installments equal to 0.25% of the original principal amount of the term loans, with the remaining amount payable on the applicable maturity date with respect to such term loans.
Guarantees
The obligations under the senior secured credit facilities are unconditionally and irrevocably guaranteed by each of Hilton Worldwide Holdings Inc., Hilton Worldwide Finance Corp., a finance subsidiary that co-issued our senior notes due 2021, any subsidiary of Hilton Worldwide Holdings Inc. that directly or indirectly owns 100% of the issued and outstanding equity interests of the borrower, and, subject to certain exceptions, each of the borrowers existing and future material domestic wholly owned subsidiaries (collectively referred to as the credit agreement guarantors). In addition, the senior secured credit facilities will be collateralized by first priority or equivalent security interests in (i) all the capital stock of, or other equity interests in, the borrower and each of the borrowers and guarantors material direct or indirect wholly owned restricted domestic subsidiaries and 65% of the capital stock of, or other equity interests in, each of the borrowers or any subsidiary guarantors direct wholly owned first-tier restricted foreign subsidiaries, and (ii) certain tangible and intangible assets of the borrower and those of the credit agreement guarantors (subject to certain exceptions and qualifications).
As of the closing date for the senior secured credit facilities, none of our foreign subsidiaries, our non-wholly owned domestic subsidiaries that are restricted subsidiaries, our subsidiaries that are prohibited from
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providing guarantees as a result of the agreements governing our revolving non-recourse timeshare notes credit facility and/or or 2.28% notes backed by a portion of our timeshare financing receivables, or our unrestricted subsidiaries (which consist of our U.S. real estate subsidiaries that hold U.S. owned real estate that secure our new commercial mortgage-backed securities loans and our mortgage loan secured by our Waldorf Astoria New York property) will guarantee the senior secured credit facilities.
Certain Covenants and Events of Default
The senior secured credit facilities contain a number of significant affirmative and negative covenants and customary events of default. Such covenants, among other things, will limit or restrict, subject to certain exceptions, the ability of the borrower and its restricted subsidiaries to:
| incur additional indebtedness, make guarantees and enter into hedging arrangements; |
| create liens on assets; |
| enter into sale and leaseback transactions; |
| engage in mergers or consolidations; |
| sell assets; |
| make fundamental changes; |
| pay dividends and distributions or repurchase our capital stock; |
| make investments, loans and advances, including acquisitions; |
| engage in certain transactions with affiliates; |
| make changes in the nature of their business; and |
| make prepayments of junior debt. |
In addition, if, on the last day of any period of four consecutive quarters on or after June 30, 2014, the aggregate principal amount of revolving credit loans, swing line loans and/or letters of credit (excluding up to $50 million of letters of credit and certain other letters of credit that have been cash collateralized or back-stopped) that are issued and/or outstanding is greater than 25% of the revolving credit facility, the new credit agreement will require the borrower to maintain a consolidated first lien net leverage ratio not to exceed 7.9 to 1.0.
During the period in which the borrowers corporate issuer rating is equal to or higher than Baa3 (or the equivalent) according to Moodys Investors Service, Inc. or BBB- (or the equivalent) according to Standard & Poors Ratings Services and no default has occurred and is continuing, the restrictions in the senior secured credit facilities regarding incurring additional indebtedness, dividends and distributions or repurchases of capital stock and transactions with affiliates will not apply to the borrower and its restricted subsidiaries during such period.
Our senior secured credit facilities also contain certain customary representations and warranties, affirmative covenants and events of default. If an event of default occurs, the lenders under the senior secured credit facilities will be entitled to take various actions, including the acceleration of amounts due under the senior secured credit facilities and all actions permitted to be taken by a secured creditor.
5.625% Senior Notes due 2021
On October 4, 2013, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp., as co-issuers, issued $1.5 billion aggregate principal amount of their 5.625% Senior Notes due 2021, or senior notes, under an indenture dated as of October 4, 2013. Interest on the senior notes is payable semi-annually in cash in arrears on April 15 and October 15 of each year, beginning on April 15, 2014. The senior notes are guaranteed on a senior unsecured basis by Hilton Worldwide Holdings Inc. and each of our wholly owned domestic restricted subsidiaries that guarantee any of our indebtedness under our new senior secured credit facilities.
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We may redeem the notes, in whole or in part, at any time prior to October 15, 2016, at a price equal to 100% of the principal amount, plus an applicable make-whole premium and accrued and unpaid interest. Beginning on October 15, 2016, we may redeem some or all of the notes at a redemption price of 102.813% of the principal amount of senior notes to be redeemed, plus any accrued and unpaid interest to the date of redemption. The redemption price decreases to 101.406% and 100.000% of the principal amount of senior notes to be redeemed on October 15, 2017 and 2018, respectively. In addition, at any time prior to October 15, 2016, we may, at our option, redeem up to 40% of the aggregate principal amount of the senior notes with the net cash proceeds from certain equity offerings at the redemption price of 105.625%, plus accrued and unpaid interest.
The indenture governing the senior notes contains covenants that, among other things, limit the co-issuers ability and the ability of their restricted subsidiaries, subject to certain exceptions, to:
| incur or guarantee additional debt or issue disqualified stock or certain preferred stock; |
| pay dividends and make other distributions on, or redeem or repurchase, capital stock; |
| make certain investments; |
| incur certain liens; |
| enter into transactions with affiliates; |
| merge or consolidate; |
| enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to the issuers; |
| designate restricted subsidiaries as unrestricted subsidiaries; and |
| transfer or sell certain assets. |
The indenture governing the senior notes contains change of control triggering event provisions and certain customary affirmative covenants and events of default.
Subject to certain exceptions, the indenture governing senior notes permits us and our restricted subsidiaries to incur additional indebtedness, including secured indebtedness.
CMBS Loan
On October 25, 2013, JPMorgan Chase Bank, National Association, German American Capital Corporation, Bank of America, N.A., Morgan Stanley Mortgage Capital Holdings, LLC and GS Commercial Real Estate LP extended to certain of our U.S. real estate subsidiaries that hold U.S. owned real estate, collectively referred to as the CMBS borrowers, a $3.5 billion commercial mortgage-backed securities loan, or CMBS loan. The CMBS loan is secured by 23 hotels owned by the CMBS borrowers, including the New York Hilton, Hilton Hawaiian Village, Hilton Waikoloa Village and Hilton New Orleans. The CMBS loan has two components: (1) a fixed-rate component in the amount of $2.625 billion and (2) a floating rate component in the amount of $0.875 billion.
Term
The fixed rate component of the CMBS loan has a term of five years.
The floating rate component has an initial term of two years with three extension options of 12 months each. The CMBS borrowers have the right to exercise any extension period so long as no event of default exists, and they purchase an extension of the applicable interest rate hedge agreements described below which caps one-month LIBOR for the principal amount of the CMBS loan at the greater of 6.0% and the rate that, when added to the spread on the floating rate component of the CMBS loan, results in a weighted average debt service coverage ratio together with the fixed rate component of at least 1.25:1.00. In addition, in order to exercise the final
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extension period, the CMBS borrowers must pay an increase in the spread applicable to the floating rate component of 0.25%.
Interest and Fees
The interest rate payable on the fixed rate component of the CMBS loan is equal to 4.465% per annum.
The interest rate payable on the floating rate component is equal to the sum of (1) one-month LIBOR plus (2) 2.65% per annum. The CMBS borrowers were required to enter into, and pledge as security for the CMBS loan, one or more interest rate hedge agreements in the notional amount of the floating rate component which cap one-month LIBOR at 6.0% for the initial term of the floating rate component.
In addition to paying interest on the CMBS loan, we were also required to pay an origination fee of 1.00% of the CMBS loan at closing.
Amortization
The CMBS loan has no amortization payments.
Prepayments
The CMBS borrowers are permitted to voluntarily prepay all or any portion of the floating rate component without prepayment penalty or premium at any time. In addition, the CMBS borrowers are permitted to prepay (1) up to 50% of the fixed rate component, subject to payment of a yield maintenance premium to the extent repaid during the first 12 payment dates and (2) the remaining 50% of the fixed rate component, subject to payment of a yield maintenance premium to the extent repaid during the first 24 payment dates.
In addition to the above, any prepayments of the CMBS loan, whether in whole in part, will also be subject to (1) the payment of actual LIBOR breakage costs incurred by the lenders and (2) the payment of all interest scheduled to accrue through to the end of the applicable interest period.
Mandatory prepayments are required in connection with certain casualties or condemnations of a property.
Once repaid, no further borrowings will be permitted under the CMBS loan.
Guarantee
Certain obligations of the CMBS borrowers with respect to the CMBS loan are guaranteed by certain of our U.S. real estate subsidiaries that hold U.S. owned real estate entities and that are considered unrestricted subsidiaries for purposes of our new senior secured credit facilities and our senior notes, or U.S. owned real estate guarantors. Under the CMBS guarantee, (1) the U.S. owned real estate guarantors have agreed to indemnify CMBS loan lenders for losses with respect to customary bad-boy acts of the CMBS borrowers and their affiliates and (2) that the CMBS loan will become fully recourse to such guarantors upon a voluntary or collusive involuntary bankruptcy of the CMBS borrowers. Notwithstanding the foregoing, the aggregate liability of the U.S. owned real estate guarantors as a result of clause (1) and (2) above is capped at 10% of the then outstanding principal balance of the CMBS loan.
The U.S. owned real estate guarantors are subject to a net worth covenant requiring that they maintain a minimum ongoing net worth of $500.0 million (exclusive of the collateral securing the CMBS loan). If the U.S. owned real estate guarantors fail to meet the net worth requirement, the CMBS borrowers will be required to either provide a replacement guarantee, or cash collateral or a letter of credit in the amount of $175.0 million (subject to a reduction in certain instances).
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Covenants and Other Matters
The CMBS loan includes certain customary affirmative and negative covenants and events of default. Such covenants, among other things, will restrict, subject to certain exceptions, the ability of the CMBS borrowers to, among other things: incur additional debt; create liens on assets; transfer, pledge or assign certain equity interests; pay any dividends or make any distributions to its direct or indirect owners if an event of default exists or if the debt yield under the CMBS loan (calculated based on the outstanding balance of the CMBS loan) is below 8.25% for two consecutive quarters; make certain investments, loans and advances; consolidate, merge, sell or otherwise dispose of all or any part of its assets or to purchase, lease or otherwise acquire all or any substantial part of assets of any other person; enter into certain transactions with affiliates; engage in any business other than the ownership of the properties and business activities ancillary thereto; and amend or modify the CMBS borrowers articles or certificate of incorporation, by-laws and certain agreements. The CMBS loan also includes affirmative covenants requiring the CMBS borrowers to, among other things, exist as special purpose entities, maintain, while a low debt yield trigger exists, certain reserve funds in respect of furniture, fixtures and equipment, taxes and insurance, and rents due under ground leases (unless such amounts have been paid or are being collected by the property manager), and comply with other customary obligations for commercial mortgage-backed securities loan financings.
In addition, revenues will be required to be deposited into certain segregated accounts, to be used by the property manager to make certain payments relating to the properties securing the CMBS loan. So long as there is no event of default under the loan and the debt yield for the CMBS loan (calculated based on the outstanding principal balance of the CMBS loan) does not fall below 8.25% for two consecutive quarters, then any excess cash in those accounts would be available to the CMBS borrowers for any purpose, including the payment of dividends or distributions to their direct or indirect owners.
Waldorf Astoria Loan
On October 25, 2013, HSBC Bank USA, N.A., DekaBank Deutsche Girozentrale and certain lenders selected by them, as lead arrangers, extended to a subsidiary of ours, or the Waldorf borrower, a mortgage loan secured by the Waldorf Astoria New York property, or Waldorf Astoria loan, in an aggregate principal amount of $525 million. The Waldorf Astoria loan will mature on October 25, 2018.
Interest and Fees
The interest rate payable on the Waldorf Astoria loan is equal to the sum of one-month LIBOR plus 2.15%. The Waldorf borrower is required to enter into, and pledge as security for the Waldorf Astoria loan, an interest rate hedge agreement in the notional amount of the Waldorf Astoria loan which has the effect of capping one-month LIBOR at 4.0% for the first 24 months. Thereafter, the Waldorf borrower is required to renew the interest rate hedge agreement annual, except that each renewal will have the effect of capping one-month LIBOR at the greater of 4.0% and the rate that a results in a debt service coverage ratio that is at least 1.35:1.00.
In addition to paying interest on the Waldorf Astoria loan, we were required to pay an upfront fee of 0.65% of the Waldorf Loan amount at closing of the loan.
Amortization
The Waldorf Astoria loan has no amortization payments.
Prepayments
The Waldorf borrower is permitted to voluntarily prepay amounts outstanding under the Waldorf Astoria loan, subject to (1) if the prepayment is during the first six months following the closing date for the Waldorf Astoria loan, the payment of a spread maintenance amount (generally determined as the spread that
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would have been received through the end of the six months spread maintenance period) and (2) the payment of accrued interest and any customary breakage costs incurred by the lenders. Once repaid, no further borrowings will be permitted under the Waldorf Astoria loan.
Mandatory prepayments will be required in connection with certain casualties or condemnations of the property.
Guarantee
Certain obligations of the Waldorf borrower with respect to the Waldorf Astoria loan will be guaranteed by the U.S. owned real estate guarantors. Under the Waldorf guarantee, (1) the U.S. owned real estate guarantors will agree to indemnify Waldorf Astoria loan lenders for losses with respect to customary bad-boy acts of the Waldorf borrower and their affiliates and (2) that the Waldorf Astoria loan will become fully recourse to such guarantors upon a voluntary or collusive involuntary bankruptcy of the Waldorf borrower. Notwithstanding the foregoing, the aggregate liability of the U.S. owned real estate guarantors as a result of clause (1) and (2) above will be capped at 15% of the then outstanding principal balance of the Waldorf Astoria loan.
Covenants and Other Matters
The Waldorf Astoria loan includes certain customary affirmative and negative covenants and events of default. Such covenants, among other things, will restrict, subject to certain exceptions, the ability of the Waldorf borrower to, among other things: incur additional debt (other than certain trade payables); create liens on assets; transfer, pledge or assign certain equity interests; pay any dividends or make any distributions to its direct or indirect owners if an event of default exists or if the debt yield (calculated based on the outstanding amount of the Waldorf Astoria loan) has been less than 7.5% for two consecutive quarters; and make material changes to the organizational documents of the Waldorf borrower that would have a material adverse effect on its ability to perform its obligations under the Waldorf Astoria loan. The Waldorf Astoria loan includes affirmative covenants requiring the Waldorf borrower to, among other things, exist as special purpose entities, maintain while a debt yield trigger period exists certain reserve funds in respect of taxes and insurance, ongoing capital expenditures and such other purposes as determined by the agent of the lenders (unless such amounts have been paid or are being collected by the property manager), and comply with other customary obligations for real estate financings.
In addition, revenues are required to be deposited into certain segregated accounts, to be used by the property management to make certain payments relating to the properties securing the Waldorf Astoria loan. So long as there is no event of default under the loan and the debt yield for the loan (calculated based on the outstanding amount of the Waldorf Astoria loan) does not fall below 7.5% for two consecutive quarters, then any excess cash in those accounts would be available to the Waldorf borrower for any purpose, including the payment of dividends or distributions to their direct or indirect owners.
Timeshare Facility
On May 9, 2013, Hilton Grand Vacations Trust I LLC, our wholly owned subsidiary, entered into a loan agreement with Wells Fargo Bank, National Association, as paying agent, a commercial paper conduit lender, Deutsche Bank AG, New York Branch and Bank of America, N.A., as committed lenders, and Deutsche Bank Securities Inc., as administrative agent, pursuant to which the lenders have committed to lend up to $400 million. On October 25, 2013, we entered into an amendment which increased commitments by $50 million to $450 million in aggregate. The loans are secured by timeshare loans secured by first mortgages or deeds of trust on timeshare interests in one or more residential units at timeshare resorts developed by Hilton Resorts Corporation, our wholly owned subsidiary, or HRC, or a subsidiary of HRC. The timeshare loans are required to satisfy certain eligibility criteria. Borrowings under the loan agreement are subject to availability under a borrowing base. The advance rate is generally 90% of the outstanding principal amounts of the eligible timeshare loans.
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Interest on the loans is payable at a variable interest rate which, in the case of a commercial paper conduit lender, is such lenders cost of funds in the commercial paper market plus a usage fee or, in the case of any other lender (including a committed lender funding through its backstop funding commitments), one-month LIBOR plus a usage fee, and, in the case of any other lender, is daily one-month LIBOR plus a usage fee. The usage fee is 1.25% per annum, increasing to 1.75% per annum after the end of the commitment term. Interest is payable monthly. The commitment term ends on May 9, 2015, subject to extension in accordance with the terms of the loan agreement. All loans will become due and payable 12 months after the end of the commitment term.
The borrower under the loan agreement is a special purpose bankruptcy-remote direct subsidiary of HRC which was established to purchase the timeshare loans on a periodic basis from HRC, and the loans are non-recourse obligations of the borrower. Grand Vacations Services LLC, our wholly owned subsidiary, acts as the servicer of the timeshare loans pursuant to a servicing agreement, which contains customary representations, warranties and covenants. The servicer is entitled to receive a monthly fee from the borrower for servicing the timeshare loans. HRC has provided a performance guaranty to the lenders ensuring the performance and obligations (including the payment obligations) of the servicer under the servicing agreement.
The loan agreement contains customary affirmative covenants, including, among other things, maintenance of existence, further assurances and filing financing statements, maintenance of books and records, audit rights, notice of certain events, payment of taxes and compliance with laws and regulations. The loan agreement also contains customary negative covenants that generally limit the borrowers ability to incur any debt other than as contemplated by the loan agreement, create liens other than under the loan agreement, guarantee obligations of any other person subject to certain exceptions, enter into transactions with affiliates subject to certain exceptions, engage in asset sales, mergers, consolidations or dispositions, pay dividends or make other payments in respect of equity interests after the occurrence of certain events and make certain petitions in bankruptcy against the commercial paper conduit lenders.
The loan agreement also contains certain customary events of default, including a change of control, breach of certain HRC financial covenants and certain timeshare loan performance measures.
Securitized Timeshare Debt
On August 8, 2013, HGV Depositor LLC, our wholly owned subsidiary, or Depositor, offered $250 million in aggregate principal amount of 2.28% notes backed by timeshare financing receivables, or asset-backed notes, issued by Hilton Grand Vacations Trust 2013-A, a Delaware statutory trust, or Trust, in a private transaction that was not subject to the registration requirements of the Securities Act. The asset-backed notes were sold pursuant to a note purchase agreement dated August 1, 2013, by and among HRC, the Depositor, and Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchasers. The asset-backed notes are backed by a pledge of assets of the Trust, consisting primarily of a pool of timeshare loans secured by first mortgages or deeds of trust on timeshare interests in one or more residential units at timeshare resorts developed by HRC, or a subsidiary of HRC. The asset-backed notes bear interest at a fixed rate of 2.28% per annum and have a stated maturity of January 25, 2026. The asset-backed notes are non-recourse obligations of the Trust and are payable solely from the pool of timeshare loans and related assets. A portion of the net proceeds from the asset-backed notes were used to pay a portion of the revolving non-recourse timeshare notes credit facility.
The asset-backed notes were issued pursuant to an indenture, which includes customary representations, warranties and covenants. In addition, the amended and restated trust agreement pursuant to which the Trust was established includes customary representations, warranties and covenants. The timeshare loans are serviced by Grand Vacations Services LLC, our wholly owned subsidiary, or Servicer, pursuant to a servicing agreement, which contains customary representations, warranties and covenants. The Servicer performs certain servicing and administrative functions with respect to the timeshare loans and is entitled to receive a monthly fee from the Trust for servicing the timeshare loans. HRC has guaranteed the performance of the Servicers obligations under the servicing agreement pursuant to a performance guaranty. HRC acts as the administrator of the Trust under an administration agreement, which includes customary representations, warranties and covenants.
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In connection with this offering, we will amend and restate our certificate of incorporation and our bylaws. The following is a description of the material terms of, and is qualified in its entirety by, our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be in effect upon the consummation of this offering, the forms of which are filed as exhibits to the registration statement of which this prospectus forms a part. Under Description of Capital Stock, we, us, our and our company refer to Hilton Worldwide Holdings Inc. and not to any of its subsidiaries.
Our purpose is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware, or DGCL. Upon the consummation of this offering, our authorized capital stock will consist of shares of common stock, par value $0.01 per share, and shares of preferred stock, par value $0.01 per share. Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.
Common Stock
Holders of shares of our common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. The holders of our common stock do not have cumulative voting rights in the election of directors.
Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common stock will be entitled to receive pro rata our remaining assets available for distribution. All shares of our common stock that will be outstanding at the time of the completion of the offering will be fully paid and non-assessable. The common stock will not be subject to further calls or assessment by us. Holders of our common stock do not have preemptive, subscription, redemption or conversion rights. There will be no redemption or sinking fund provisions applicable to the common stock. The rights, powers, preferences and privileges of holders of our common stock will be subject to those of the holders of any shares of our preferred stock we may authorize and issue in the future.
Preferred Stock
No shares of preferred stock will be issued or outstanding immediately after the public offering contemplated by this prospectus. Our amended and restated certificate of incorporation authorizes our board of directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law or any stock exchange, the authorized shares of preferred stock will be available for issuance without further action by the holders of our common stock. Our board of directors is able to determine, with respect to any series of preferred stock, the powers (including voting powers), preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, including, without limitation:
| the designation of the series; |
| the number of shares of the series, which our board of directors may, except where otherwise provided in the preferred stock designation, increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding); |
| whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series; |
| the dates at which dividends, if any, will be payable; |
| the redemption rights and price or prices, if any, for shares of the series; |
| the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series; |
| the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Company; |
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| whether the shares of the series will be convertible into shares of any other class or series, or any other security, of the Company or any other entity, and, if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates, any rate adjustments, the date or dates as of which the shares will be convertible and all other terms and conditions upon which the conversion may be made; |
| restrictions on the issuance of shares of the same series or of any other class or series; and |
| the voting rights, if any, of the holders of the series. |
We could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of the holders of our common stock might believe to be in their best interests or in which the holders of our common stock might receive a premium over the market price of the common stock. Additionally, the issuance of preferred stock may adversely affect the holders of our common stock by restricting dividends on the common stock, diluting the voting power of the common stock or subordinating the liquidation rights of the common stock. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock.
Dividends
The DGCL permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Surplus is defined as the excess of the net assets of the corporation over the amount determined to be the capital of the corporation by its board of directors. The capital of the corporation is typically calculated to be (and cannot be less than) the aggregate par value of all issued shares of capital stock. Net assets equals the fair value of the total assets minus total liabilities. The DGCL also provides that dividends may not be paid out of net profits if, after the payment of the dividend, remaining capital would be less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets. Declaration and payment of any dividend will be subject to the discretion of our board of directors.
Stockholder Meetings
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that annual stockholder meetings will be held at a date, time and place, if any, as exclusively selected by our board of directors. Our amended and restated bylaws provide that special meetings of the stockholders may be called only by or at the direction of the board of directors, the chairman of our board or the chief executive officer or upon the request of holders of not less than a majority of the total voting power of all the then outstanding shares of our capital stock. To the extent permitted under applicable law, we may conduct meetings by remote communications, including by webcast.
Anti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and Certain Provisions of Delaware Law
Undesignated Preferred Stock
The ability to authorize undesignated preferred stock will make it possible for our board of directors to issue preferred stock with super majority voting, special approval, dividend or other rights or preferences on a discriminatory basis that could impede the success of any attempt to acquire us or otherwise effect a change in control of us. These and other provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.
We do not have a stockholder rights plan or any series of preferred stock designated in connection with such a plan, and if our board of directors were ever to adopt a stockholder rights plan in the future without prior
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stockholder approval, our board of directors would either submit the plan to stockholders for ratification or cause the rights plan to expire within one year.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. For any matter to be properly brought before a meeting, a stockholder will have to comply with advance notice requirements and provide us with certain information. Additionally, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders. Our amended and restated bylaws provide for certain procedures with respect to the resignation of any director (other than a director nominated or designated pursuant to our stockholders agreement) who does not receive a majority of the votes cast in an uncontested election. Our amended and restated bylaws allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to influence or obtain control of our company.
Our certificate of incorporation provides that the board of directors is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 80% or more of all of the outstanding shares of our capital stock entitled to vote.
No Cumulative Voting
The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting.
Stockholder Action by Written Consent
Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the companys amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation provides that from and after the date on which the parties to our stockholders agreement cease to beneficially own at least 40% of the total voting power of all the then outstanding shares of our capital stock any action, any action required or permitted to be taken by our stockholders may not be effected by consent in writing by stockholders unless such action is recommended by all directors then in office.
Delaware Anti-Takeover Statute
We have opted out of Section 203 of the DGCL. Section 203 provides that, subject to certain exceptions specified in the law, a publicly-held Delaware corporation shall not engage in certain business combinations with any interested stockholder for a three-year period after the date of the transaction in which the person became an interested stockholder. These provisions generally prohibit or delay the accomplishment of mergers, assets or stock sales or other takeover or change-in-control attempts that are not approved by a companys board of directors.
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However, our amended and restated certificate of incorporation and bylaws provide that in the event the parties to our stockholders agreement cease to beneficially own at least 5% of the then outstanding shares of our common stock, we will automatically become subject to Section 203 of the DGCL. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:
| prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
| upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
| on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. |
Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporations outstanding voting stock.
Under certain circumstances, Section 203 makes it more difficult for a person who would be an interested stockholder to effect various business combinations with a corporation for a three-year period. Accordingly, Section 203 could have an anti-takeover effect with respect to certain transactions our board of directors does not approve in advance. The provisions of Section 203 may encourage companies interested in acquiring the Company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder. However, Section 203 also could discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders. These provisions also may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Dissenters Rights of Appraisal and Payment
Under the DGCL, with certain exceptions, our stockholders will have appraisal rights in connection with a merger or consolidation of our company. Pursuant to the DGCL, stockholders who properly request and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.
Stockholders Derivative Actions
Under the DGCL, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of our shares at the time of the transaction to which the action relates or such stockholders stock thereafter devolved by operation of law.
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Exclusive Forum
Our amended and restated certificate of incorporation will provide that unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf, to the fullest extent permitted by law, of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director or officer of our company to our company or our companys stockholders, creditors or other constituents, (iii) action asserting a claim against our company or any director or officer of our company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) action asserting a claim against our company or any director or officer of our company governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of our company shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. However, it is possible that a court could find our forum selection provision to be inapplicable or unenforceable.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. Our amended and restated certificate of incorporation will, to the maximum extent permitted from time to time by Delaware law, renounce any interest or expectancy that we have in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to our officers, directors or stockholders or their respective affiliates, other than those officers, directors, stockholders or affiliates who are our or our subsidiaries employees. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, none of Blackstone or any of its affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates. In addition, to the fullest extent permitted by law, in the event that Blackstone or any non-employee director acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself or himself or its or his affiliates or for us or our affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to us or any of our affiliates and they may take any such opportunity for themselves or offer it to another person or entity. Our amended and restated certificate of incorporation will not renounce our interest in any business opportunity that is expressly offered to a non-employee director solely in his or her capacity as a director or officer of the Company. To the fullest extent permitted by law, no business opportunity will be deemed to be a potential corporate opportunity for us unless we would be permitted to undertake the opportunity under our amended and restated certificate of incorporation, we have sufficient financial resources to undertake the opportunity and the opportunity would be in line with our business.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors fiduciary duties, subject to certain exceptions. Our amended and restated certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. The effect of these provisions is to eliminate the rights of us and our stockholders, through stockholders derivative suits on our behalf, to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director.
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Our amended and restated bylaws provide that we must indemnify and advance expenses to our directors and officers to the fullest extent authorized by the DGCL. We also are expressly authorized to carry directors and officers liability insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification and advancement provisions and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability, indemnification and advancement provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Indemnification Agreements
We intend to enter into an indemnification agreement with each of our directors and executive officers as described in Certain Relationships and Related Person TransactionsIndemnification Agreements. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable.
Transfer Agent and Registrar
The transfer agent and registrar for shares of our common stock will be .
Listing
We intend to apply to have our common stock approved for listing on under the symbol .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for shares of our common stock. We cannot predict the effect, if any, future sales of shares of common stock, or the availability for future sale of shares of common stock, will have on the market price of shares of our common stock prevailing from time to time. The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate. See Risk FactorsRisks Related to this Offering and Ownership of Our Common StockIf we or our existing investors sell additional shares of our common stock after this offering, the market price of our common stock could decline.
Upon completion of this offering we will have a total of shares of our common stock outstanding (or shares if the underwriters exercise in full their option to purchase additional shares). Of the outstanding shares, the shares sold in this offering (or shares if the underwriters exercise in full their option to purchase additional shares) will be freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described below. The remaining outstanding shares of common stock held by our existing owners after this offering will be deemed restricted securities under Rule 144 and may be sold in the public market only if registered or if they qualify for an exemption from registration, including the exemptions pursuant to Rule 144 which we summarize below.
We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our Omnibus Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover shares.
Registration Rights
In connection with this offering, we intend to enter into a registration rights agreement that will provide Blackstone an unlimited number of demand registrations and customary piggyback registration rights. The registration rights agreement also provides that we will pay certain expenses relating to such registrations and indemnify the registration rights holders against certain liabilities which may arise under the Securities Act. Securities registered under any such registration statement will be available for sale in the open market unless restrictions apply. See Certain Relationships and Related Person TransactionsRegistration Rights Agreement.
In connection with this offering, we intend to enter into a registration rights agreement that will provide certain former members of Hilton Global Holdings LLC with customary piggyback registration rights with respect to shares of our common stock that they receive from Hilton Global Holdings LLC prior to or following the consummation of this offering. The registration rights agreement will also provide that we will pay certain expenses relating to such registrations and indemnify the registration rights holders against certain liabilities which may arise under the Securities Act. See Principal and Selling Stockholders for more information regarding Hilton Global Holdings LLC.
Lock-Up Arrangements
We have agreed, subject to certain customary exceptions, that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any such offer, sale, pledge,
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disposition or filing, without the prior written consent of the representatives of the underwriters for a period of 180 days after the date of this prospectus. However, in the event that either (1) during the last 17 days of the lock-up period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, then in either case the expiration of the lock-up will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the representatives of the underwriters waive, in writing, such an extension.
Our officers, directors, Blackstone and certain other existing owners, including the selling stockholder, have agreed, subject to certain customary exceptions, that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of the representatives of the underwriters for a period of 180 days after the date of this prospectus. However, in the event that either (1) during the last 17 days of the lock-up period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, then in either case the expiration of the lock-up will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless the representatives of the underwriters waive, in writing, such an extension.
Members of Hilton Global Holdings LLC who receive shares of our common stock from Hilton Global Holdings LLC, including Blackstone, will be prohibited from transferring such shares for six months beginning on the date of receipt of such shares. One third of the shares they receive may be transferred between 6 and 12 months following the date of receipt and one third of the shares they receive may be transferred between 13 and 18 months after the date of receipt. The transfer restrictions applicable to such holders will lapse after 18 months after the date of receipt.
Rule 144
In general, under Rule 144, as currently in effect, a person who is not deemed to be our affiliate for purposes of Rule 144 or to have been one of our affiliates at any time during the three months preceding a sale and who has beneficially owned the shares of common stock proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares of common stock without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares of common stock proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares of common stock without complying with any of the requirements of Rule 144. In general, under Rule 144, as currently in effect, our affiliates or persons selling shares of common stock on behalf of our affiliates are entitled to sell, within any three-month period, a number of shares of common stock that does not exceed the greater of (1) 1% of the number of shares of common stock then outstanding and (2) the average weekly trading volume of the shares of common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. Sales under Rule 144 by our affiliates or persons selling shares of common stock on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF OUR COMMON STOCK
The following is a summary of the material U.S. federal income and estate tax consequences to a non-U.S. holder (as defined below) of the purchase, ownership and disposition of our common stock as of the date hereof. Except where noted, this summary deals only with common stock that is held as a capital asset.
A non-U.S. holder means a person (other than a partnership) that is not for U.S. federal income tax purposes any of the following:
| an individual citizen or resident of the United States; |
| a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. |
This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the Code), and regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income and estate tax consequences different from those summarized below. This summary does not address all aspects of U.S. federal income and estate taxes and does not deal with foreign, state, local or other tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances. In addition, it does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws (including if you are a U.S. expatriate, controlled foreign corporation, passive foreign investment company or a partnership or other pass-through entity for U.S. federal income tax purposes). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.
If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.
If you are considering the purchase of our common stock, you should consult your own tax advisors concerning the particular U.S. federal income and estate tax consequences to you of the ownership of the common stock, as well as the consequences to you arising under the laws of any other taxing jurisdiction.
Dividends
Dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment) are not subject to withholding, provided certain certification and disclosure requirements are satisfied. Instead, such dividends are subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under the Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
A non-U.S. holder of our common stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to complete Internal Revenue
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Service Form W-8BEN (or other applicable form) and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our common stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable U.S. Treasury regulations.
A non-U.S. holder of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.
Gain on Disposition of Common Stock
Any gain realized on the disposition of our common stock generally will not be subject to U.S. federal income tax unless:
| the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder); |
| the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or |
| we are or have been a United States real property holding corporation for U.S. federal income tax purposes. |
A non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates applicable to such holder if it were a United States person as defined under the Code. In addition, if a non-U.S. holder described in the first bullet point immediately above is a corporation for U.S. federal income tax purposes, it may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.
An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States.
We believe we are not and do not anticipate becoming a United States real property holding corporation for U.S. federal income tax purposes. If we are or become a United States real property holding corporation, so long as our common stock continues to be regularly traded on an established securities market, a non-U.S. holder who holds or held directly, indirectly or constructively (at any time during the shorter of the five year period preceding the date of disposition or the holders holding period) more than 5% of our common stock will be subject to U.S. federal income tax on the disposition of our common stock in the same manner as gain that is effectively connected with a trade or business of the non-U.S. holder in the United States, except that the branch profits tax generally will not apply.
Federal Estate Tax
Common stock held by an individual non-U.S. holder at the time of death will be included in such holders gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
We must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in other countries under the provisions of an applicable income tax treaty.
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A non-U.S. holder will be subject to backup withholding for dividends paid to such holder unless such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code), or such holder otherwise establishes an exemption.
Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale of our common stock within the United States or conducted through certain U.S.-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holders U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.
Additional Withholding Requirements
Under legislation enacted in 2010, regulations and administrative guidance, a 30% United States federal withholding tax may apply to any dividends paid after June 30, 2014, and to the gross proceeds from a disposition of our common stock occurring after December 31, 2016, in each case paid to (i) a foreign financial institution (as specifically defined in the legislation), whether such foreign financial institution is the beneficial owner or an intermediary, unless such foreign financial institution agrees to verify, report and disclose its United States account holders (as specifically defined in the legislation) and meets certain other specified requirements or (ii) a non-financial foreign entity, whether such non-financial foreign entity is the beneficial owner or an intermediary, unless such entity provides a certification that the beneficial owner of the payment does not have any substantial United States owners or provides the name, address and taxpayer identification number of each such substantial United States owner and certain other specified requirements are met. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. You should consult your own tax advisor regarding this legislation and whether it may be relevant to your ownership and disposition of our common stock.
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and are acting as representatives of each of the underwriters named below. Subject to the terms and conditions of the underwriting agreement, the underwriters named below have severally agreed to purchase from us and the selling stockholder the following respective number of shares of common stock at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:
Underwriter |
Number of
Shares |
|
Deutsche Bank Securities Inc. |
||
Goldman, Sachs & Co. |
||
Merrill Lynch, Pierce, Fenner & Smith
Incorporated |
||
Morgan Stanley & Co. LLC |
||
|
||
Total |
||
|
The underwriting agreement provides that the underwriters obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement including:
| the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below), if any of the shares are purchased; |
| the representations and warranties made by us and the selling stockholder to the underwriters are true; |
| there is no material change in our business or the financial markets; and |
| customary closing documents are delivered to the underwriters. |
The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters right to reject any order in whole or in part.
Commissions and Expenses
The following table summarizes the underwriting discounts and commissions we and the selling stockholder will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase additional shares. The underwriting fee is the difference between the initial offering price to the public and the amount the underwriters pay us and the selling stockholder for the shares.
Per Share | Total | |||||||
No
Exercise |
Full
Exercise |
No
Exercise |
Full
Exercise |
|||||
Public offering price |
||||||||
Underwriting discounts and commissions: |
||||||||
Paid by Hilton Worldwide Holdings Inc. |
||||||||
Paid by the selling stockholder |
The representatives of the underwriters have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $ per share. The underwriters may allow, and the selected dealers may re-allow, a discount from the concession not in excess of $ per share to brokers and dealers. After the offering, the representatives may change the offering price and other selling terms.
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The expenses of the offering that are payable by us are estimated to be approximately $ (excluding underwriting discounts and commissions), including approximately $ in connection with the qualification of the offering with FINRA by counsel to the underwriters.
Option to Purchase Additional Shares
The selling stockholder has granted the underwriters an option exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of shares at the public offering price less underwriting discounts and commissions. To the extent the underwriters exercise this option, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares of common stock proportionate to that underwriters initial commitment as indicated in the preceding table, and the selling stockholder will be obligated to sell the additional shares of common stock to the underwriters.
No Sales of Similar Securities
We, our executive officers and directors and certain of our other existing security holders, including the selling stockholder, have agreed, subject to certain customary exceptions, not to sell or transfer any common stock or securities convertible into, exchangeable for, exercisable for, or repayable with common stock, for 180 days after the date of this prospectus without first obtaining the written consent of the representatives of the underwriters. Specifically, we and these other persons have agreed, with certain limited exceptions, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any common stock, or any options or warrants to purchase any common stock, or any securities convertible into, exchangeable for or that represent the right to receive common stock, whether now owned or hereinafter acquired, owned directly by us or these other persons (including holding as a custodian) or with respect to which we or such other persons has beneficial ownership within the rules and regulations of the SEC. We and such other persons have agreed that these restrictions expressly preclude us and such other persons from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of our or such other persons common stock if such common stock would be disposed of by someone other than us or such other persons. Prohibited hedging or other transactions includes any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of our or such other persons common stock or with respect to any security that includes, relates to, or derives any significant part of its value from such common stock.
In the event that either (x) during the last 17 days of the lock-up period referred to above, we issue an earnings release or material news or a material event relating to us occurs or (y) prior to the expiration of the lock-up period, we announce that we will release earnings results or become aware that material news or a material event will occur during the 16-day period beginning on the last day of the lock-up period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless the representatives of the underwriters waive, in writing, such extension.
Offering Price Determination
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated among us, the selling stockholder and the representatives. In determining the initial public offering price of our common stock, the representatives will consider:
| the history and prospects for the industry in which we compete; |
| our financial information; |
| the ability of our management, present stage of development and our business potential and earning prospects; |
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| the prevailing securities markets at the time of this offering; and |
| the recent market prices of, and the demand for, publicly traded shares of generally comparable companies. |
Indemnification
We and the selling stockholder have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, liabilities arising from breaches of the representations and warranties contained in the underwriting agreement and to contribute to payments that the underwriters may be required to make for these liabilities.
Stabilization, Short Positions and Penalty Bids
The underwriters may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock, in accordance with Regulation M under the Exchange Act.
| Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
| A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares, in whole or in part, and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
| Syndicate covering transactions involve purchases of our common stock in the open market after the distribution has been completed to cover syndicate short positions. |
| Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the or otherwise and, if commenced, may be discontinued at any time.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
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Electronic Distribution
In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, certain of the underwriters may facilitate Internet distribution for this offering to certain of its Internet subscription customers. Such underwriters may allocate a limited number of shares for sale to its online brokerage customers. A prospectus in electronic format is being made available on Internet web sites maintained by one or more of the bookrunners of this offering and may be made available on web sites maintained by other underwriters. Other than the prospectus in electronic format, the information on any underwriters web site and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which the prospectus forms a part.
Listing
We have applied to list our common stock on the under the symbol .
Discretionary Sales
The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares offered by them.
Stamp Taxes
Purchasers of the shares of our common stock offered in this prospectus may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus. Accordingly, we urge you to consult a tax advisor with respect to whether you may be required to pay those taxes or charges, as well as any other tax consequences that may arise under the laws of the country of purchase.
Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they may receive customary fees and expenses. In particular, Deutsche Bank Securities Inc. is the administrative agent, collateral agent swing line lender and letter of credit issuer under our $7.6 billion senior secured term loan and $1.0 billion senior secured revolving facility. In addition, Deutsche Bank Securities Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and affiliates of Morgan Stanley & Co. LLC and Goldman, Sachs & Co. were joint lead arrangers and joint bookrunners in connection with, and are expected to be lenders under, our new $7.6 billion senior secured term loan and $1.0 billion senior secured revolving facility. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. LLC were joint book-running managers in connection with our offering of $1.5 billion aggregate principal amount of 5.625% senior notes due 2021. Affiliates of Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC and Goldman, Sachs & Co. are expected to be lenders under our $3.5 billion commercial mortgage-backed securities loan secured by 23 hotels owned by certain of our subsidiaries. Deutsche Bank Securities Inc. is the administrative agent under the $400 million non-recourse timeshare notes credit facility of one of our subsidiaries; affiliates of Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, are also lenders thereunder. Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated were also initial purchasers in connection with the offering by one of our subsidiaries of $250 million aggregate principal amount of 2.28% notes backed by timeshare financing receivables. In addition, as of November 8, 2013, affiliates of Goldman, Sachs & Co. and Morgan
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Stanley & Co. LLC hold, directly or indirectly, limited liability company interests in Hilton Global Holdings LLC, the immediate parent company of Hilton Worldwide Holdings Inc., and are expected to receive shares of our common stock or cash from Hilton Global Holdings LLC as a result of this offering. See Principal and Selling Stockholders.
In addition, in the ordinary course of business, the underwriters and their respective affiliates may make or hold a broad array of investments including serving as counterparties to certain derivative and hedging arrangements and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, no offer of shares may be made to the public in that Relevant Member State other than:
A. | to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
B. | to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or |
C. | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall require the Company or the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. |
Each person in a Relevant Member State (other than a Relevant Member State where there is a Permitted Public Offer) who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (A) it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive, and (B) in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors as defined in the Prospectus Directive, or in circumstances in which the prior consent of the Subscribers has been given to the offer or resale. In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.
The Company, the representatives and their affiliates will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement.
This prospectus has been prepared on the basis that any offer of shares in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus
198
for offers of shares. Accordingly any person making or intending to make an offer in that Relevant Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the Company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Company nor the underwriters have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for the Company or the underwriters to publish a prospectus for such offer.
For the purpose of the above provisions, the expression an offer to the public in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.
Notice to Prospective Investors in the United Kingdom
Each underwriter agrees that:
(a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the Company; and |
(b) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom. |
Notice to Prospective Investors in Hong Kong
The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to professional investors within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
199
Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.
Notice to Prospective Investors in Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each Underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the Exempt Investors) who are sophisticated investors (within the meaning of section 708(8) of the Corporations Act), professional investors (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
200
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in Switzerland
We have not and will not register with the Swiss Financial Market Supervisory Authority (FINMA) as a foreign collective investment scheme pursuant to Article 119 of the Federal Act on Collective Investment Scheme of 23 June 2006, as amended (CISA), and accordingly the securities being offered pursuant to this prospectus have not and will not be approved, and may not be licenseable, with FINMA. Therefore, the securities have not been authorized for distribution by FINMA as a foreign collective investment scheme pursuant to Article 119 CISA and the securities offered hereby may not be offered to the public (as this term is defined in Article 3 CISA) in or from Switzerland. The securities may solely be offered to qualified investors, as this term is defined in Article 10 CISA, and in the circumstances set out in Article 3 of the Ordinance on Collective Investment Scheme of 22 November 2006, as amended (CISO), such that there is no public offer. Investors, however, do not benefit from protection under CISA or CISO or supervision by FINMA. This prospectus and any other materials relating to the securities are strictly personal and confidential to each offeree and do not constitute an offer to any other person. This prospectus may only be used by those qualified investors to whom it has been handed out in connection with the offer described herein and may neither directly or indirectly be distributed or made available to any person or entity other than its recipients. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in Switzerland or from Switzerland. This prospectus does not constitute an issue prospectus as that term is understood pursuant to Article 652a and/or 1156 of the Swiss Federal Code of Obligations. We have not applied for a listing of the securities on the SIX Swiss Exchange or any other regulated securities market in Switzerland, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange.
201
The validity of the shares of common stock will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York. Certain legal matters in connection with the offering will be passed upon for the underwriters by Davis Polk & Wardwell LLP, New York, New York. An investment vehicle comprised of selected partners of Simpson Thacher & Bartlett LLP, members of their families, related persons and others owns an interest representing less than 1% of the capital commitments of funds affiliated with The Blackstone Group L.P.
The consolidated financial statements of Hilton Worldwide Holdings Inc. at December 31, 2012 and 2011, and for each of the three years in the period ended December 31, 2012, appearing in this prospectus and the registration statement of which this prospectus forms a part have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered by this prospectus. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement and its exhibits and schedules, portions of which have been omitted as permitted by the rules and regulations of the SEC. For further information about us and our common stock, we refer you to the registration statement and to its exhibits and schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and in each instance we refer you to the copy of such contract, agreement or document filed as an exhibit to the registration statement. Anyone may inspect the registration statement and its exhibits and schedules without charge at the public reference facilities the SEC maintains at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of these materials from the SEC upon the payment of certain fees prescribed by the SEC. You may obtain further information about the operation of the SECs Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also inspect these reports and other information without charge at a website maintained by the SEC. The address of this site is http://www.sec.gov.
Upon completion of this offering, we will become subject to the informational requirements of the Exchange Act, and will be required to file reports and other information with the SEC. You will be able to inspect and copy these reports and other information at the public reference facilities maintained by the SEC at the address noted above. You also will be able to obtain copies of this material from the Public Reference Room of the SEC as described above, or inspect them without charge at the SECs website. We intend to make available to our common stockholders annual reports containing consolidated financial statements audited by an independent registered public accounting firm.
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F-2 | ||||
Consolidated Financial Statements: |
||||
Consolidated Balance Sheets as of December 31, 2012 and 2011 |
F-3 | |||
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 |
F-4 | |||
F-5 | ||||
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 |
F-6 | |||
Consolidated Statements of Equity (Deficit) for the years ended December 31, 2012, 2011 and 2010 |
F-7 | |||
F-8 | ||||
Unaudited Condensed Consolidated Financial Statements: |
||||
Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 |
F-54 | |||
F-55 | ||||
F-56 | ||||
F-57 | ||||
Condensed Consolidated Statements of Equity for the nine months ended September 30, 2013 and 2012 |
F-58 | |||
F-59 |
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholder of
Hilton Worldwide Holdings Inc.
We have audited the accompanying consolidated balance sheets of Hilton Worldwide Holdings Inc. as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), equity (deficit), and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hilton Worldwide Holdings Inc. at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
McLean, Virginia
September 6, 2013
F-2
Hilton Worldwide Holdings Inc.
Consolidated Balance Sheets
(in millions, except share data)
December 31, | ||||||||
2012 | 2011 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 755 | $ | 781 | ||||
Restricted cash and cash equivalents |
550 | 658 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $39 and $39 |
719 | 638 | ||||||
Inventories |
415 | 552 | ||||||
Deferred income tax assets |
76 | 74 | ||||||
Current portion of financing receivables, net |
119 | 103 | ||||||
Prepaid expenses |
153 | 136 | ||||||
Other |
40 | 91 | ||||||
|
|
|
|
|||||
Total current assets (variable interest entities - $49 and $53) |
2,827 | 3,033 | ||||||
|
|
|
|
|||||
Property, Investments, and Other Assets: |
||||||||
Property and equipment, net |
9,197 | 9,117 | ||||||
Financing receivables, net |
815 | 770 | ||||||
Investments in affiliates |
291 | 334 | ||||||
Goodwill |
6,197 | 6,175 | ||||||
Brands |
5,029 | 5,025 | ||||||
Management and franchise contracts, net |
1,600 | 1,748 | ||||||
Other intangible assets, net |
744 | 703 | ||||||
Deferred income tax assets |
104 | 112 | ||||||
Other |
262 | 295 | ||||||
|
|
|
|
|||||
Total property, investments, and other assets (variable interest entities - $168 and $194) |
24,239 | 24,279 | ||||||
|
|
|
|
|||||
TOTAL ASSETS |
$ | 27,066 | $ | 27,312 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable, accrued expenses, and other |
$ | 1,922 | $ | 1,806 | ||||
Current maturities of long-term debt |
392 | 342 | ||||||
Current maturities of non-recourse debt and capital lease obligations of consolidated variable interest entities |
15 | 42 | ||||||
Income taxes payable |
20 | 17 | ||||||
|
|
|
|
|||||
Total current liabilities (variable interest entities - $51 and $77) |
2,349 | 2,207 | ||||||
Long-term debt |
15,183 | 15,969 | ||||||
Non-recourse debt and capital lease obligations of consolidated variable interest entities |
405 | 439 | ||||||
Deferred income tax liabilities |
4,948 | 5,006 | ||||||
Liability for guest loyalty program |
503 | 512 | ||||||
Other |
1,523 | 1,477 | ||||||
|
|
|
|
|||||
Total liabilities (variable interest entities - $485 and $534) |
24,911 | 25,610 | ||||||
Commitments and contingencies - see Note 23 |
||||||||
Equity: |
||||||||
Common stock, $0.01 par value, 2012 and 2011 - 1,000 shares authorized; 100 issued and outstanding |
1 | 1 | ||||||
Additional paid-in capital |
8,452 | 8,454 | ||||||
Accumulated deficit |
(5,746) | (6,098) | ||||||
Accumulated other comprehensive loss |
(406) | (489) | ||||||
|
|
|
|
|||||
Total Hilton stockholders equity |
2,301 | 1,868 | ||||||
Noncontrolling interests |
(146) | (166) | ||||||
|
|
|
|
|||||
Total equity |
2,155 | 1,702 | ||||||
|
|
|
|
|||||
TOTAL LIABILITIES AND EQUITY |
$ | 27,066 | $ | 27,312 | ||||
|
|
|
|
See notes to consolidated financial statements.
F-3
Hilton Worldwide Holdings Inc.
Consolidated Statements of Operations
(in millions)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Revenues |
||||||||||||
Owned and leased hotels |
$ | 3,979 | $ | 3,898 | $ | 3,667 | ||||||
Management and franchise fees and other |
1,088 | 1,014 | 901 | |||||||||
Timeshare |
1,085 | 944 | 863 | |||||||||
|
|
|
|
|
|
|||||||
6,152 | 5,856 | 5,431 | ||||||||||
Other revenues from managed and franchised properties |
3,124 | 2,927 | 2,637 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
9,276 | 8,783 | 8,068 | |||||||||
Expenses |
||||||||||||
Owned and leased hotels |
3,230 | 3,213 | 3,009 | |||||||||
Timeshare |
758 | 668 | 634 | |||||||||
Depreciation and amortization |
550 | 564 | 574 | |||||||||
Impairment losses |
54 | 20 | 24 | |||||||||
General, administrative, and other |
460 | 416 | 637 | |||||||||
|
|
|
|
|
|
|||||||
5,052 | 4,881 | 4,878 | ||||||||||
Other expenses from managed and franchised properties |
3,124 | 2,927 | 2,637 | |||||||||
|
|
|
|
|
|
|||||||
Total expenses |
8,176 | 7,808 | 7,515 | |||||||||
Operating income |
1,100 | 975 | 553 | |||||||||
Interest income |
15 | 11 | 9 | |||||||||
Interest expense |
(569) | (643) | (946) | |||||||||
Equity in losses from unconsolidated affiliates |
(11) | (145) | (12) | |||||||||
Gain (loss) on foreign currency transactions |
23 | (21) | 18 | |||||||||
Gain on debt restructuring |
| | 789 | |||||||||
Other gain, net |
15 | 19 | 8 | |||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
573 | 196 | 419 | |||||||||
Income tax benefit (expense) |
(214) | 59 | (308) | |||||||||
|
|
|
|
|
|
|||||||
Net income |
359 | 255 | 111 | |||||||||
Net loss (income) attributable to noncontrolling interests |
(7) | (2) | 17 | |||||||||
|
|
|
|
|
|
|||||||
Net income attributable to Hilton stockholder |
$ | 352 | $ | 253 | $ | 128 | ||||||
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
Hilton Worldwide Holdings Inc.
Consolidated Statements of Comprehensive Income (Loss)
(in millions)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Net income |
$ | 359 | $ | 255 | $ | 111 | ||||||
Other comprehensive income (loss), net of tax benefit (expense): |
||||||||||||
Currency translation adjustment: |
||||||||||||
Currency translation adjustment, net of tax of $102, $(2), and $(87) |
138 | (82) | (151) | |||||||||
Loss on net investment hedges, net of tax of $, $, and $(22) |
| | 36 | |||||||||
|
|
|
|
|
|
|||||||
Total currency translation adjustment |
138 | (82) | (115) | |||||||||
Pension liability adjustment: |
||||||||||||
Net actuarial gain (loss), net of tax of $20, $10, and $(10) |
(35) | (21) | 23 | |||||||||
Prior service credit (cost), net of tax of $4, $(2), and $2 |
(8) | 3 | (6) | |||||||||
Amortization of net gain, net of tax of $(1), $(2), and $(4) |
2 | 5 | 10 | |||||||||
|
|
|
|
|
|
|||||||
Total pension liability adjustment |
(41) | (13) | 27 | |||||||||
Cash flow hedge adjustment: |
||||||||||||
Unrealized gains, net of tax of $, $, and $(63) |
| | 101 | |||||||||
Reclassification into earnings, net of tax of $, $(1), and $(3) |
| 1 | 4 | |||||||||
|
|
|
|
|
|
|||||||
Total cash flow hedge adjustment |
| 1 | 105 | |||||||||
|
|
|
|
|
|
|||||||
Total other comprehensive income (loss) |
97 | (94) | 17 | |||||||||
|
|
|
|
|
|
|||||||
Comprehensive income |
456 | 161 | 128 | |||||||||
Comprehensive loss (income) attributable to noncontrolling interests |
(21) | 1 | 37 | |||||||||
|
|
|
|
|
|
|||||||
Comprehensive income attributable to Hilton stockholder |
$ | 435 | $ | 162 | $ | 165 | ||||||
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
Hilton Worldwide Holdings Inc.
Consolidated Statements of Cash Flows
(in millions)
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Operating Activities: |
||||||||||||
Net income |
$ | 359 | $ | 255 | $ | 111 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Impairment losses |
54 | 20 | 24 | |||||||||
Depreciation and amortization |
550 | 564 | 574 | |||||||||
Equity in losses from unconsolidated affiliates |
11 | 145 | 12 | |||||||||
Loss (gain) on foreign currency transactions |
(23) | 21 | (18) | |||||||||
Gain on debt restructuring |
| | (789) | |||||||||
Other gain, net |
(15) | (19) | (8) | |||||||||
Share-based compensation |
50 | 19 | 56 | |||||||||
Amortization of deferred financing costs and other |
(5) | 6 | 31 | |||||||||
Distributions from unconsolidated affiliates |
31 | 13 | 18 | |||||||||
Deferred income taxes |
73 | (187) | 18 | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable, net |
(82) | (43) | (40) | |||||||||
Inventories |
137 | 119 | 155 | |||||||||
Prepaid expenses |
(15) | (7) | 4 | |||||||||
Other current assets |
51 | (29) | (21) | |||||||||
Accounts payable, accrued expenses, and other |
71 | 151 | (69) | |||||||||
Income taxes payable |
3 | | (1) | |||||||||
Change in restricted cash and cash equivalents |
(79) | (14) | 25 | |||||||||
Change in timeshare notes receivable |
(68) | (53) | (55) | |||||||||
Change in liability for guest loyalty program |
6 | 128 | 92 | |||||||||
Change in other liabilities |
(56) | 83 | 709 | |||||||||
Other |
57 | (5) | 5 | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
1,110 | 1,167 | 833 | |||||||||
|
|
|
|
|
|
|||||||
Investing Activities: |
||||||||||||
Capital expenditures for property and equipment |
(433) | (389) | (148) | |||||||||
Acquisitions |
| (12) | (216) | |||||||||
Payments received on other financing receivables |
8 | 7 | 4 | |||||||||
Issuance of other financing receivables |
(4) | | (2) | |||||||||
Additional investments in affiliates |
(3) | (11) | (4) | |||||||||
Proceeds from asset dispositions |
8 | 88 | | |||||||||
Contract acquisition costs |
(31) | (53) | (6) | |||||||||
Software capitalization costs |
(103) | (93) | (20) | |||||||||
Proceeds from settlement of derivative instruments |
| | 324 | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(558) | (463) | (68) | |||||||||
|
|
|
|
|
|
|||||||
Financing Activities: |
||||||||||||
Borrowings |
96 | 40 | 18 | |||||||||
Repayment of debt |
(854) | (726) | (278) | |||||||||
Cash paid in debt restructuring |
| | (895) | |||||||||
Debt restructuring costs |
| | (35) | |||||||||
Change in restricted cash and cash equivalents |
187 | (25) | (249) | |||||||||
Equity contribution from Parent |
| | 819 | |||||||||
Contribution from noncontrolling interests |
| | 33 | |||||||||
Distributions to noncontrolling interests |
(4) | (3) | (9) | |||||||||
Acquisition of noncontrolling interests |
(1) | | (107) | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities |
(576) | (714) | (703) | |||||||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents |
(2) | (5) | (4) | |||||||||
Net increase (decrease) in cash and cash equivalents |
(26) | (15) | 58 | |||||||||
Cash and cash equivalents, beginning of period |
781 | 796 | 738 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ | 755 | $ | 781 | $ | 796 | ||||||
|
|
|
|
|
|
For supplemental disclosures, see Note 25: Supplemental Disclosures of Cash Flow Information.
See notes to consolidated financial statements.
F-6
Hilton Worldwide Holdings Inc.
Consolidated Statements of Equity (Deficit)
(in millions)
Equity (Deficit) Attributable to Hilton Stockholder | ||||||||||||||||||||||||
Common
Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
Noncontrolling
Interests |
Total | |||||||||||||||||||
Balance as of December 31, 2009 |
$ | 1 | $ | 5,431 | $ | (6,460) | $ | (435) | $ | (7) | $ | (1,470) | ||||||||||||
Impact of adoption of new accounting standard |
| | (19) | | (114) | (133) | ||||||||||||||||||
Equity contribution from parent entities |
| 919 | | | | 919 | ||||||||||||||||||
Fair value of contribution by affiliate in excess of the carrying value of debt exchanged |
| 78 | | | | 78 | ||||||||||||||||||
Share-based compensation |
| (2) | | | | (2) | ||||||||||||||||||
Debt extinguishment by parent entity |
| 2,078 | | | | 2,078 | ||||||||||||||||||
Acquisition of noncontrolling interest |
| (50) | | | (28) | (78) | ||||||||||||||||||
Net income (loss) |
| | 128 | | (17) | 111 | ||||||||||||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||||||
Currency translation adjustment |
| | | (95) | (20) | (115) | ||||||||||||||||||
Pension liability adjustment |
| | | 27 | | 27 | ||||||||||||||||||
Cash flow hedge adjustment |
| | | 105 | | 105 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) |
| | | 37 | (20) | 17 | ||||||||||||||||||
Contributions |
| | | | 33 | 33 | ||||||||||||||||||
Distributions |
| | | | (9) | (9) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of December 31, 2010 |
$ | 1 | $ | 8,454 | $ | (6,351) | $ | (398) | $ | (162) | $ | 1,544 | ||||||||||||
Net income |
| | 253 | | 2 | 255 | ||||||||||||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||||||
Currency translation adjustment |
| | | (79) | (3) | (82) | ||||||||||||||||||
Pension liability adjustment |
| | | (13) | | (13) | ||||||||||||||||||
Cash flow hedge adjustment |
| | | 1 | | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive loss |
| | | (91) | (3) | (94) | ||||||||||||||||||
Distributions |
| | | | (3) | (3) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of December 31, 2011 |
$ | 1 | $ | 8,454 | $ | (6,098) | $ | (489) | $ | (166) | $ | 1,702 | ||||||||||||
Share-based compensation |
| 2 | | | | 2 | ||||||||||||||||||
Acquisition of noncontrolling interest |
| (4) | | | 3 | (1) | ||||||||||||||||||
Net income |
| | 352 | | 7 | 359 | ||||||||||||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||||||
Currency translation adjustment |
| | | 124 | 14 | 138 | ||||||||||||||||||
Pension liability adjustment |
| | | (41) | | (41) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income |
| | | 83 | 14 | 97 | ||||||||||||||||||
Distributions |
| | | | (4) | (4) | ||||||||||||||||||
Balance as of December 31, 2012 |
$ | 1 | $ | 8,452 | $ | (5,746) | $ | (406) | $ | (146) | $ | 2,155 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Organization
Hilton Worldwide Holdings Inc. (Hilton together with its subsidiaries, we, us, our, or the Company) was formed on March 18, 2010 to hold, directly or indirectly, all of the equity of Hilton Worldwide, Inc. (HWI). Hilton Worldwide Holdings Inc. is incorporated in the state of Delaware and has no operations other than its ownership of HWI, which occurred on April 7, 2010. The accompanying financial statements for the year ended December 31, 2010 combine the consolidated results of HWI for the period January 1, 2010 through April 6, 2010 with the consolidated results of Hilton Worldwide Holdings Inc. from the date of formation through December 31, 2010, which includes the consolidation of HWI from April 7, 2010 through December 31, 2010.
Hilton is one of the largest and most recognized hospitality companies in the world based upon the number of hotel rooms and timeshare units under our ten distinct brands. We are engaged in owning, leasing, managing, developing, and franchising hotels, resorts, and timeshare properties. As of December 31, 2012, we owned, leased, managed, or franchised 3,926 hotel and resort properties, totaling 646,676 rooms in 90 countries and territories, as well as 40 timeshare properties comprised of 6,281 units.
On October 24, 2007, HWI became a wholly owned subsidiary of BH Hotels Holdco, LLC (BH Hotels or our Ultimate Parent), an affiliate of The Blackstone Group (Blackstone), following the completion of a merger (the Merger). BH Hotels and its subsidiaries subsequently formed Hilton Global Holdings LLC, (HGH or our Parent), which has directly owned 100 percent of our stock since our formation.
Note 2: Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Principles of Consolidation
The consolidated financial statements include the accounts of Hilton, our wholly owned subsidiaries, and entities in which we have a controlling financial interest, including variable interest entities (VIEs) where we are the primary beneficiary. Entities in which we have a controlling financial interest generally comprise majority owned real estate ownership and management enterprises.
The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of rights held by other ownership interests. If the entity is considered to be a VIE, we determine whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interests in the entity. We consolidate entities when we own more than 50 percent of the voting shares of a company or have a controlling general partner interest of a partnership, assuming the absence of other factors determining control, including the ability of minority owners to participate in or block certain decisions. As of December 31, 2012, we consolidated six non-wholly owned entities in which we own more than 50 percent of the voting shares of the entities or we have determined we are the primary beneficiary of a VIE.
All material intercompany transactions and balances have been eliminated in consolidation. References in these financial statements to net income (loss) attributable to Hilton stockholder and Hilton stockholders equity (deficit) do not include noncontrolling interests, which represent the outside ownership interests of our six consolidated, non-wholly owned entities and are reported separately.
Use of Estimates
The preparation of financial statements in conformity with United States of America (U.S.) generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates.
F-8
Summary of Significant Accounting Policies
Revenue Recognition
Revenues are primarily derived from the following sources and are generally recognized as services are rendered and when collectability is reasonably assured:
| Owned and leased hotel revenues primarily consist of room rentals and food and beverage sales from owned, leased, and consolidated non-wholly owned hotel properties. Revenues are recorded when rooms are occupied or goods and services have been rendered. |
| Management fees represent fees earned from hotels and timeshare properties that we manage, usually under long-term contracts with the property owner. Management fees from hotels usually include a base fee, which is generally a percentage of hotel revenues, and an incentive fee, which is generally based on a fixed or variable percentage of hotel profits and in some cases may be subject to a stated return threshold to the owner, normally over a one-calendar year period. Additionally, we receive one-time upfront fees upon execution of certain management contracts. We recognize base fees as revenue when earned in accordance with the terms of the management agreement. For incentive fees, we recognize those amounts that would be due if the contract was terminated at the financial statement date. One-time, upfront fees are recognized when all conditions have been substantially performed or satisfied by us. Management fees from timeshare properties are generally a fixed amount as stated in the management agreement and are recognized as the services are performed. |
| Franchise fees represent fees earned in connection with the licensing of one of our hotel brands, usually under long-term contracts with the hotel owner. We charge a monthly franchise royalty fee, generally based on a percentage of room revenue, as well as application and initiation fees for new hotels entering the system. Royalty fees for our full service brands may also include a percentage of gross food and beverage revenues and other revenues, where applicable. We recognize franchise fee revenue as the fees are earned, which is when all material services or conditions have been performed or satisfied. |
| Other revenues include revenues generated by the incidental support of hotel operations for owned, leased, managed, and franchised hotels, and other rental income. This includes any revenues received for vendor rebate arrangements we participate in as a manager of hotel and timeshare properties. |
| Timeshare revenues consist of revenues generated from our Hilton Grand Vacations timeshare business. Timeshare revenues are principally generated from the sale and financing of timeshare intervals. Revenue from a deeded timeshare sale is recognized when the customer has executed a binding sales contract, a minimum ten percent down payment has been received, certain minimum sales thresholds for a timeshare project have been attained, the purchasers period to cancel for a refund has expired, and the related receivable is deemed to be collectible. We defer revenue recognition for sales that do not meet these criteria. During periods of construction, revenue from timeshare sales is recognized under the percentage-of-completion method. One of our timeshare products is accounted for as a long-term lease with a reversionary interest, rather than the sale of a deeded interest in real estate. In this case, sales revenue is recognized on a straight-line basis over the term of the lease. Revenue from the financing of timeshare sales is recognized on the accrual method as earned based on the outstanding principal, interest rate, and terms stated in each individual financing agreement. See Financing Receivables section below for further discussion of the policies applicable to our timeshare notes receivable. Additionally, we receive sales commissions from certain third-party developers that we assist in selling their timeshare inventory. We recognize revenue from commissions on these sales as intervals are sold and we fulfill the service requirements under the respective sales agreements with the developers. We also generate revenues from enrollment and other fees, rentals of timeshare units, food and beverage sales, and other ancillary services at our timeshare properties that are recognized when units are rented or goods and services are rendered. |
F-9
| Other revenues from managed and franchised properties represent payroll and related costs, certain other operating costs of the managed and franchised hotels operations, marketing expenses, and other expenses associated with our brands and shared services that are contractually reimbursed to us by the hotel owners or paid from fees collected in advance from these hotels. The corresponding expenses are presented as other expenses from managed and franchised properties in our consolidated statements of operations, resulting in no impact to operating income (loss) or net income (loss). |
We are required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. We have a legal obligation to act as a collection agent. We do not retain these taxes and fees and, therefore, they are not included in revenues. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable taxing authority or other appropriate governmental agency.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents include cash balances established as security for certain guarantees, lender reserves, ground rent and property tax escrows, reserves statutorily required to be held by our captive insurance subsidiary, and advance deposits received on timeshare sales that are held in escrow until the contract is closed. For purposes of our consolidated statements of cash flows, changes in restricted cash and cash equivalents caused by changes in required legal reserves are shown as operating activities. The remaining changes in restricted cash and cash equivalents are the direct result of restrictions under our loan agreements, and, as such, are reflected in financing activities.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is provided on accounts receivable when losses are probable based on historical collection activity and current business conditions.
Inventories
Inventories comprise unsold timeshare intervals at our timeshare properties, as well as hotel inventories consisting of operating supplies that have a period of consumption of one year or less, guest room items, and food and beverage items.
Timeshare inventory is carried at the lower of cost or market, based on the relative sales value or net realizable value. Capital expenditures associated with our non-lease timeshare products are reflected as inventory until the timeshare intervals are sold. Consistent with industry practice, timeshare inventory is classified as a current asset despite an operating cycle that exceeds 12 months. The majority of sales and marketing costs incurred to sell timeshare intervals are expensed when incurred. Certain direct and incremental marketing and selling costs are deferred on a contract until 100 percent of the revenue has been recognized.
In accordance with the accounting standards for costs and the initial rental operations of real estate projects, we use the relative sales value method of costing our timeshare sales and relieving inventory. In addition, we continually assess our timeshare inventory and, if necessary, impose pricing adjustments to accelerate sales pace. It is possible that any future changes in our development and sales strategies could have a material impact on the carrying value of certain projects and inventory. We monitor our projects and inventory on an ongoing basis and complete an evaluation each reporting period to ensure that the inventory is stated at the lower of cost or market.
Hotel inventories are generally valued at the lower of cost (using first-in, first-out, or FIFO) or market.
F-10
Property and Equipment
Property and equipment are recorded at cost and interest applicable to major construction or development projects is capitalized. Costs of improvements that extend the economic life or improve service potential are also capitalized. Capitalized costs are depreciated over their estimated useful lives. Costs for normal repairs and maintenance are expensed as incurred.
Depreciation is recorded using the straight-line method over the assets estimated useful lives, which are generally as follows: buildings and improvements (8 to 40 years), furniture and equipment (3 to 8 years), and computer equipment and acquired software (3 years). Leasehold improvements are depreciated over the shorter of the estimated useful life, based on the lives estimates above, or the lease term.
Gains or losses on the sales of assets are included in net income (loss) when the assets are disposed, provided there is more than reasonable certainty of the collectability of the sales price and any future activities required to be performed by us relating to the disposal of the assets are complete or insignificant.
We evaluate the carrying value of our property and equipment if there are indicators of potential impairment. We perform an analysis to determine the recoverability of the assets carrying value by comparing the expected undiscounted future cash flows to the net book value of the asset. If it is determined that the expected undiscounted future cash flows are less than the net book value of the asset, the excess of the net book value over the estimated fair value is recorded in our consolidated statements of operations within impairment losses. Fair value is generally estimated using valuation techniques that consider the discounted cash flows of the asset using discount and capitalization rates deemed reasonable for the type of asset, as well as prevailing market conditions, appraisals, recent similar transactions in the market, and, if appropriate and available, current estimated net sales proceeds from pending offers.
If sufficient information exists to reasonably estimate the fair value of a conditional asset retirement obligation, including environmental remediation liabilities, we recognize the fair value of the obligation when the obligation is incurred, which is generally upon acquisition, construction, or development and/or through the normal operation of the asset.
Financing Receivables
We define financing receivables as financing arrangements that represent a contractual right to receive money either on demand or on fixed or determinable dates, which are recognized as an asset in our consolidated balance sheets. We record all financing receivables at amortized cost in current and long-term financing receivables. We recognize interest income as earned and provide an allowance for cancellations and defaults. We have divided our financing receivables into two portfolio segments based on the level of aggregation at which we develop and document a systematic methodology to determine the allowance for credit losses. Based on their initial measurement, risk characteristics, and our method for monitoring and assessing credit risk, we have determined the classes of financing receivables to correspond to our identified portfolio segments as follows:
|
Timeshare notes receivable comprise loans related to our financing of timeshare interval sales and secured by the underlying timeshare properties. We determine our timeshare notes receivable to be past due based on the contractual terms of the individual mortgage loans. We recognize interest income on our timeshare notes receivable as earned. The interest rate charged on the notes correlates to the risk profile of the borrower at the time of purchase and the percentage of the purchase that is financed, among other factors. We record an estimate of uncollectibility as a reduction of sales revenue at the time revenue is recognized on a timeshare interval sale. We evaluate this portfolio collectively, since we hold a large group of homogenous timeshare notes receivable, which are individually immaterial. We monitor the credit quality of our receivables on an ongoing basis. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. With the exception of the financing provided to customers of our timeshare business, we do not normally require |
F-11
collateral or other security to support credit sales. We use a technique referred to as static pool analysis as the basis for determining our general reserve requirements on our timeshare notes receivable. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging, and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio. Once a note is 90 days past due or is determined to be uncollectible prior to 90 days past due, we cease accruing interest and reverse the accrued interest recognized up to that point. We apply payments we receive for loans, including those in non-accrual status, to amounts due in the following order: servicing fees, late charges, interest, and principal. We resume interest accrual for loans for which we had previously ceased accruing interest once the loan is less than 90 days past due. We fully reserve for a timeshare note receivable, in the month following the date that the loan is 120 days past due and, subsequently, we write the uncollectible note off against the reserve once the foreclosure process is complete and we receive the deed for the foreclosed unit. |
| Other notes receivable primarily comprise individual loans and other types of unsecured financing arrangements provided to hotel owners. We individually assess all financing receivables in this portfolio for collectability and impairment. We measure loan impairment based on the present value of expected future cash flows discounted at the loans effective interest rate. For impaired loans, we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows. We do not recognize interest income on unsecured financing to hotel owners for notes that are greater than 90 days past due and only resume interest recognition if the financing receivable becomes current. We fully reserve unsecured financing to hotel owners when we determine that the receivables are uncollectible and when all commercially reasonable means of recovering the receivable balances have been exhausted. |
Investments in Affiliates
We hold investments in affiliates that primarily own or lease hotels under one of our nine distinct hotel brands. If the entity does not meet the definition of a VIE, we evaluate our voting interest or general partnership interest to determine if we have a controlling financial interest in the entity. Investments in affiliates over which we exercise significant influence, but lack a controlling financial interest, are accounted for using the equity method. We account for investments using the equity method when we own more than a minimal investment, but have no more than a 50 percent voting interest or do not otherwise control the investment. Investments in affiliates over which we are not able to exercise significant influence are accounted for under the cost method.
Our proportionate share of earnings (losses) from our equity method investments is presented as equity in earnings (losses) from unconsolidated affiliates in our consolidated statements of operations. Cash distributions from investments in unconsolidated entities are presented as an operating activity in our consolidated statements of cash flows when such distributions are a return on investment. Distributions from unconsolidated affiliates are recorded as an investing activity in our consolidated statements of cash flows when such distributions are a return of investment.
We assess the recoverability of our equity method and cost method investments if there are indicators of potential impairment. If an identified event or change in circumstances requires an evaluation to determine if an investment may have an other-than-temporary impairment, we assess the fair value of the investment based on the accepted valuation methodologies, which include discounted cash flows, estimates of sales proceeds, and external appraisals. If an investments fair value is below its carrying value and the decline is considered to be other-than-temporary, we will recognize an impairment loss in equity in earnings (losses) from unconsolidated affiliates for equity method investments or impairment losses for cost method investments in our consolidated statements of operations.
F-12
Goodwill
Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We do not amortize goodwill, but rather evaluate goodwill for potential impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below the carrying amount.
We review the carrying value of our goodwill by comparing the carrying value of our reporting units to their fair value. Our reporting units are the same as our operating segments as described in Note 22: Business Segments. We perform this evaluation annually or at an interim date if indicators of impairment exist. In any year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or we decide to bypass the qualitative assessment, we proceed to the two-step quantitative process. In the first step, we determine the fair value of each of our reporting units. The valuation is based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting units. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. However, if the carrying amount of a reporting unit exceeds its estimated fair value, then the second step must be performed. In the second step, we estimate the implied fair value of goodwill, which is determined by taking the fair value of the reporting unit and allocating it to all of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. If the carrying amount of the reporting units goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Brands
We own, operate, and franchise hotels under our portfolio of brands. There are no legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives of these brands and, accordingly, the useful lives of these brands are considered to be indefinite. Our hotel brand portfolio includes Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts, DoubleTree by Hilton (including DoubleTree Suites by Hilton), Embassy Suites Hotels, Hilton Garden Inn, Hampton Inn (including Hampton Inn & Suites and, outside of the U.S., Hampton by Hilton), Homewood Suites by Hilton, and Home2 Suites by Hilton. In addition, we also develop and operate timeshare properties under our Hilton Grand Vacations brand.
At the time of the Merger, our brands were assigned a fair value based on a common valuation technique known as the relief from royalty approach. Home2 Suites by Hilton was launched post-Merger and, as such, it was not assigned a fair value. We evaluate our brands for impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of the brand is below the carrying value. If a brands estimated current fair value is less than its respective carrying value, the excess of the carrying value over the estimated fair value is recorded in our consolidated statements of operations within impairment losses.
Intangible Assets with Finite Useful Lives
We have certain finite lived intangible assets that were initially recorded at their fair value at the time of the Merger. These intangible assets consist of management agreements, franchise contracts, leases, certain proprietary technologies, and our guest loyalty program, Hilton HHonors. Additionally, we capitalize management and franchise contract acquisition costs as finite lived intangible assets. Intangible assets with finite useful lives are amortized using the straight-line method over their respective estimated useful lives.
We capitalize costs incurred to develop internal-use computer software. Internal and external costs incurred in connection with development of upgrades or enhancements that result in additional functionality are also capitalized. These capitalized costs are amortized on a straight-line basis over the estimated useful life of the software. These capitalized costs are recorded in other intangible assets in our consolidated balance sheets.
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We review all finite lived intangible assets for impairment when circumstances indicate that their carrying amounts may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of carrying value over the fair value in our consolidated statements of operations.
Hilton HHonors
Hilton HHonors is a guest loyalty program provided to hotels. All of our owned, leased, managed, and franchised hotels and timeshare properties participate in the Hilton HHonors program. Hilton HHonors members earn points based on their spending at most of our hotel and timeshare properties and through participation in affiliated partner programs. When points are earned by Hilton HHonors members, the property or affiliated partner pays Hilton HHonors based on an estimated cost per point for the costs of operating the program, which include marketing, promotion, communication, administration, and the estimated cost of award redemptions. Hilton HHonors member points are accumulated and may be redeemed for certificates that entitle the holder to the right to stay at participating properties, as well as other opportunities with third parties, including, but not limited to, airlines, car rentals, cruises, vacation packages, shopping, and dining. We provide Hilton HHonors as a marketing program to participating hotels, with the objective of operating the program on a break-even basis to us.
Hilton HHonors defers revenue received from participating hotels and program partners in an amount equal to the estimated cost per point of the future redemption obligation. We engage outside actuaries to assist in determining the fair value of the future award redemption obligation using statistical formulas that project future point redemptions based on factors that include historical experience, an estimate of breakage (points that will never be redeemed), an estimate of the points that will eventually be redeemed, and the cost of reimbursing hotels and other third parties in respect to other redemption opportunities available to members. Revenue is recognized by participating hotels and resorts only when points that have been redeemed for hotel stay certificates are used by members or their designees at the respective properties. Additionally, when members of the Hilton HHonors loyalty program redeem award certificates at our owned and leased hotels, we recognize room rental revenue.
Fair Value Measurements - Valuation Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (an exit price). We use the three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized below:
| Level 1 - Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| Level 2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. |
| Level 3 - Valuation is based upon other unobservable inputs that are significant to the fair value measurement. |
The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.
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Derivative Instruments
We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. Under the terms of our loan agreements, we are required to maintain derivative financial instruments to manage interest rates. We do not enter into derivative financial instruments for trading or speculative purposes.
We record all derivatives at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (cash flow hedge), a hedge of the fair value of a recognized asset or liability (fair value hedge), a hedge of our foreign currency exposure (net investment hedge), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) (OCI) in the consolidated statements of comprehensive income (loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the consolidated statements of cash flows. Cash flows from undesignated derivative financial instruments are included as an investing activity in the consolidated statements of cash flows.
If we determine that we qualify for and will designate a derivative as a hedging instrument, at the designation date we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions, linking all derivatives designated as fair value hedges to specific assets and liabilities in our consolidated balance sheets, and determining the foreign currency exposure of net investment of the foreign operation for a net investment hedge.
On a quarterly basis, we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations via use of the Hypothetical Derivative Method. This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions. Thus, the hypothetical hedging instrument is presumed to perfectly offset the hedged cash flows. Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument. We discontinue hedge accounting prospectively, when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated, or exercised.
Currency Translation
The United States Dollar (USD) is our reporting currency and is the functional currency of our consolidated and unconsolidated entities operating in the U.S. The functional currency for our consolidated and unconsolidated entities operating outside of the U.S. is the currency of the primary economic environment in which the respective entity operates. Assets and liabilities measured in foreign currencies are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in equity. Income and expense accounts are translated at the average exchange rate for the period. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables denominated in a currency other than an entitys functional currency that are not of a long-term investment nature are reported as a component of gain (loss) on foreign currency transactions in our consolidated statements of operations.
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Self-Insurance
We are self-insured for various levels of general liability, auto liability, workers compensation, and employee health insurance coverage at our owned properties. Additionally, the majority of employees at managed hotels, of which we are the employer, participate in our workers compensation and employee health insurance coverage. Also, a number of our managed hotels participate in our general liability, auto liability, excess liability and property insurance programs. We purchase insurance coverage for claim amounts which exceed our self-insured retentions. Our insurance reserves are accrued based on estimates of the ultimate cost of claims that occurred during the covered period, which includes claims incurred but not reported. These estimates are prepared with the assistance of outside actuaries and consultants. The ultimate cost of claims for a covered period may differ from our original estimates. Our provision for insured events for the years ended December 31, 2012, 2011, and 2010 was $27 million, $33 million, and $30 million, respectively. Our insured claims and adjustments paid for the years ended December 31, 2012, 2011, and 2010 were $37 million, $33 million, and $29 million, respectively.
Share-based compensation
We recognize the cost of services received in a share-based payment transaction with an employee as services are received and recognize either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria.
The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that we are obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation cost for an award classified as an equity instrument is recognized ratably over the requisite service period. The requisite service period is the period during which an employee is required to provide service in exchange for an award.
Liability awards under a share-based payment arrangement are measured based on the awards fair value, and the fair value is remeasured at each reporting date until the date of settlement. Compensation cost for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the instrument for each reporting period.
Compensation cost for awards with performance conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. If such performance conditions are not considered probable until they occur, no compensation expense for these awards is recognized.
Income Taxes
We account for income taxes using the asset and liability method. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, to recognize the deferred tax assets and liabilities that relate to tax consequences in future years, which result from differences between the respective tax basis of assets and liabilities and their financial reporting amounts, and tax loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the respective temporary differences or operating loss or tax credit carry forwards are expected to be recovered or settled. The realization of deferred tax assets and tax loss and tax credit carry forwards is contingent upon the generation of future taxable income and other restrictions that may exist under the tax laws of the jurisdiction in which a deferred tax asset exists. Valuation allowances are provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized.
We use a prescribed recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. For all income tax positions, we first determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related
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appeals or litigation processes, based on the technical merits of the position. If it is determined that a position meets the more-likely-than-not recognition threshold, the benefit recognized in the financial statements is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.
Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167), which was subsequently codified in Accounting Standards Codification (ASC) Section 810, Consolidations . We prospectively adopted SFAS 167 on January 1, 2010. Upon adoption of this accounting guidance, we deconsolidated the entity holding the Hilton Orlando Lake Buena Vista, Florida (Hilton Orlando Lake Buena Vista). To account for the deconsolidation, we were required to initially measure any retained interest in the Hilton Orlando Lake Buena Vista at the amount at which any retained interest would have been carried in our consolidated financial statements if the new accounting guidance had been effective when we first became involved with the Hilton Orlando Lake Buena Vista. As we retained no interest in the Hilton Orlando Lake Buena Vista, the difference between the net amounts removed from our consolidated balance sheet in deconsolidation ($19 million) was recognized as a cumulative effect adjustment to increase accumulated deficit by $19 million. We subsequently acquired the Hilton Orlando Lake Buena Vista in August 2010 and consolidated the property upon our acquisition. See Note 3: Acquisitions for further discussion of this acquisition.
In July 2012, the FASB issued Accounting Standards Update (ASU) No. 2012-02 (ASU 2012-02), Intangibles - Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment . This ASU permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. This ASU was effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 14, 2012. We adopted ASU 2012-02 prospectively as of January 1, 2013; however, our annual indefinite-lived intangible impairment tests will not be performed until the fourth quarter of 2013, at which time the provisions of the ASU will be applied. We do not expect the application of ASU 2012-02 to have a material impact on our consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02 (ASU 2013-02), Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income . This ASU amends existing guidance by requiring companies to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income in the same reporting period. For amounts which are not required to be reclassified in their entirety to net income in the same reporting period, companies will be required to cross reference other disclosures that provide information about those amounts. We adopted ASU 2013-02 prospectively as of January 1, 2013. The adoption of this ASU did not have a material impact on our consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05 (ASU 2013-05), Foreign Currency Matters (Topic 830): Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity . The ASU clarifies when a cumulative translation adjustment should be released to net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate) within a foreign entity. We plan to adopt ASU 2013-05 prospectively as of January 1, 2014 and we are currently evaluating the impact, if any, that this ASU will have on our consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-11 (ASU 2013-11), Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit
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Carryforward Exists. This ASU provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists in the applicable jurisdiction to settle any additional income taxes that would result from disallowance of the tax position. We plan to adopt ASU 2013-11 prospectively as of January 1, 2014 and we are currently evaluating the impact, if any, that this ASU will have on our consolidated financial statements.
Note 3: Acquisitions
In conjunction with business combinations, we record the assets acquired, liabilities assumed, and non-controlling interests at fair value as of the acquisition date, including any contingent consideration. Furthermore, acquisition-related costs, such as due diligence, legal, and accounting fees, are expensed in the period incurred and are not capitalized or applied in determining the fair value of the acquired assets.
Odawara Hilton Co., LTD
In December 2012, we purchased the remaining 53.5 percent ownership interest in Odawara Hilton Co., LTD (OHC), which leased the Hilton Odawara that we managed, for a cash payment of Japanese Yen (JPY) 155 million, or approximately $1 million. Prior to the acquisition, we had a 46.5 percent ownership interest in OHC, with the remaining interest held by nine stockholders each of whom had no more than a 10 percent ownership interest. We were considered to be the primary beneficiary of this VIE and, as such, OHC was consolidated in our consolidated financial statements. Upon completion of the acquisition of the remaining interests, we wholly own OHC. The equity transaction resulted in a decrease of approximately $4 million to additional paid-in capital.
In conjunction with this acquisition and predicated upon the fact that it would occur, in December 2012, OHC executed a binding purchase agreement with the owner of the Hilton Odawara to purchase the building and the surrounding land. However, the closing of the sale, which will include the exchange of cash and the acquisition of the title by Hilton, will not occur until December 2015. As a result of this purchase agreement and other factors, the Hilton Odawara lease, which was previously accounted for as an operating lease, was recorded as a capital lease asset and obligation of $15 million as of December 31, 2012.
Oakbrook Suites and Garden Inn, LLC
In August 2011, we purchased the remaining 50 percent ownership interest in Oakbrook Suites and Garden Inn, LLC (Oakbrook LLC), which owned the Hilton Suites Oakbrook and the Hilton Garden Inn Oakbrook Terrace, for a cash payment of $12 million. Prior to the acquisition, we had a 50 percent ownership interest in Oakbrook LLC, which was accounted for using the equity method of accounting. Upon completion of the acquisition of the remaining interests, we wholly owned Oakbrook LLC and it was consolidated in our financial statements. The fair value of the net assets acquired was $24 million. Our cash paid for the acquisition, along with the carrying value of our investment in Oakbrook LLC, was allocated to the net assets acquired, which consisted primarily of land, buildings, and furniture and equipment.
Hilton New Orleans Riverside
In November 2010, we acquired the 25 percent interest in the Hilton New Orleans Riverside that we did not previously own from the minority partner for $100 million. Upon completing the transaction, the hotel was wholly owned by us.
Prior to the acquisition of the remaining 25 percent interest, the operations of the Hilton New Orleans Riverside were consolidated based on our controlling interest in the entity that owned the hotel. Upon acquiring the remaining ownership interest, we reduced to zero the noncontrolling interest balance related to the former partner and reflected the difference in the amount of cash paid and the noncontrolling interest balance of approximately $47 million in Hiltons additional paid-in capital.
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Hilton Orlando Lake Buena Vista, Florida
In August 2010, we completed the acquisition of the Hilton Orlando Lake Buena Vista for a total purchase price of $250 million, which was the stated price of a put option held by the former owner to us. The purchase was funded with cash on hand. The purchase included the assumption of a net $5 million liability relating to working capital of the hotel assumed in the acquisition. As of the date of purchase, we had recognized a put liability of $103 million related to our estimated purchase price obligation, which reflected the difference between the fair value of the hotel of $147 million and the total put option purchase price.
The acquisition cost of the hotel was allocated as follows:
(in millions) | ||||
Building |
$ | 137 | ||
Furniture and equipment |
10 | |||
Extinguishment of put liability |
103 | |||
|
|
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Purchase price |
250 | |||
Working capital deficit acquired |
(5) | |||
Repayment of capital improvement loan |
(30) | |||
Transaction costs incurred |
1 | |||
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|
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Total net cash paid for acquisition |
$ | 216 | ||
|
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The hotel is subject to a ground lease and has certain retail leases, which were assumed by us as part of the purchase. We evaluated these leases to determine whether the terms were favorable or unfavorable compared with the market terms of leases of the same or similar items at the date of acquisition. Based upon the third-party appraisal at the time of the transaction, the terms of these leases approximated current market rates and, as such, none of the purchase price was allocated to these leases.
Hilton Belfast
In February 2010, we purchased the remaining 25 percent of ownership interest in the Hilton Belfast from a minority owner for British Pound Sterling (GBP) 5 million, or approximately $7 million. Upon completing the transaction, we owned 100 percent of the entity that owns the hotel. Prior to the acquisition of the remaining 25 percent interest, the operations of the Hilton Belfast were consolidated based on our controlling interest in the entity. Upon acquiring the remaining ownership interest, we reduced to zero the noncontrolling interest balance related to the former partner and reflected the difference in the amount of cash paid and the noncontrolling interest balance of approximately $3 million in Hiltons additional paid-in capital.
Note 4: Disposals
India Joint Venture
In December 2011, we completed the sale of our 26 percent interest in a hotel development joint venture located in India for GBP 15 million, or approximately $23 million. As a result of the sale, we reclassified the currency translation adjustment of $8 million, which was previously recognized in accumulated other comprehensive loss, to earnings within our consolidated statement of operations for the year ended December 31, 2011. Further, we recognized a related pre-tax loss on the sale of $10 million that was included in other gain, net in our consolidated statement of operations for the year ended December 31, 2011.
Beverly Hills Office Building
In January 2011, we completed the sale of our former corporate headquarters office building in Beverly Hills, California for approximately $65 million and recognized a pre-tax gain of $16 million that was included in other gain, net in our consolidated statement of operations for the year ended December 31, 2011.
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Note 5: Inventories
Inventories were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Timeshare |
$ | 389 | $ | 529 | ||||
Hotel |
26 | 23 | ||||||
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$ | 415 | $ | 552 | |||||
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During the years ended December 31, 2012, 2011, and 2010, we capitalized interest of $3 million, $1 million, and $1 million, respectively, in timeshare inventory related to our timeshare development projects.
In May 2011, we purchased a non-operating hotel in Honolulu, Hawaii for $32 million. We are converting the property to a timeshare development. The acquisition value of the building, as well as subsequent conversion costs incurred were included in timeshare inventory as of December 31, 2012 and 2011.
Note 6: Property and Equipment
Property and equipment were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Land |
$ | 4,090 | $ | 4,142 | ||||
Buildings and leasehold improvements |
5,450 | 5,185 | ||||||
Furniture and equipment |
1,111 | 960 | ||||||
Construction-in-progress |
88 | 95 | ||||||
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10,739 | 10,382 | |||||||
Accumulated depreciation and amortization |
(1,542) | (1,265) | ||||||
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|
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$ | 9,197 | $ | 9,117 | |||||
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Depreciation and amortization expense on property and equipment, including amortization of assets recorded under capital leases, recognized during the years ended December 31, 2012, 2011, and 2010 was $290 million, $323 million, and $341 million, respectively. We capitalized $5 million, $6 million, and $1 million of interest as a cost of construction during the years ended December 31, 2012, 2011, and 2010, respectively.
As of December 31, 2012 and 2011, property and equipment included approximately $157 million and $148 million, respectively, of capital lease assets primarily consisting of buildings and leasehold improvements, net of $71 million and $60 million, respectively, of accumulated depreciation and amortization.
The following table details the impairment losses recognized on our assets included in property and equipment, by property type:
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Owned and leased hotels |
$ | 42 | $ | 17 | $ | 23 | ||||||
Timeshare properties |
| 3 | 1 | |||||||||
Corporate office facilities |
11 | | | |||||||||
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$ | 53 | $ | 20 | $ | 24 | |||||||
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The amount of each impairment was based on the excess of the assets carrying value over the fair value.
Note 7: Financing Receivables
Financing receivables were as follows:
December 31, 2012 | December 31, 2011 | |||||||||||||||||||||||
Timeshare | Other | Total | Timeshare | Other | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Financing receivables |
$ | 853 | $ | 44 | $ | 897 | $ | 809 | $ | 50 | $ | 859 | ||||||||||||
Less: allowance |
(81) | (1) | (82) | (85) | (4) | (89) | ||||||||||||||||||
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772 | 43 | 815 | 724 | 46 | 770 | |||||||||||||||||||
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|
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Current portion of financing receivables |
131 | | 131 | 115 | | 115 | ||||||||||||||||||
Less: allowance |
(12) | | (12) | (12) | | (12) | ||||||||||||||||||
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119 | | 119 | 103 | | 103 | |||||||||||||||||||
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Total financing receivables |
$ | 891 | $ | 43 | $ | 934 | $ | 827 | $ | 46 | $ | 873 | ||||||||||||
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Timeshare notes receivable
As of December 31, 2012, we had 49,310 timeshare notes outstanding with interest rates ranging from zero percent to 23.50 percent, an average interest rate of 12.27 percent, a weighted average remaining term of 7.5 years, and maturities through 2024. As of December 31, 2012 and 2011, we had ceased accruing interest on timeshare notes with aggregate principal balances of $30 million and $31 million, respectively. The changes in our allowance for uncollectible timeshare notes were as follows:
(in millions) | ||||
Balance as of December 31, 2009 |
$ | 77 | ||
Write-offs |
(41) | |||
Provision for uncollectibles on sales |
65 | |||
|
|
|||
Balance as of December 31, 2010 |
101 | |||
Write-offs |
(36) | |||
Provision for uncollectibles on sales |
32 | |||
|
|
|||
Balance as of December 31, 2011 |
97 | |||
Write-offs |
(33) | |||
Provision for uncollectibles on sales |
29 | |||
|
|
|||
Balance as of December 31, 2012 |
$ | 93 | ||
|
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Our timeshare notes receivable mature as follows:
Year | (in millions) | |||
2013 |
$ | 131 | ||
2014 |
113 | |||
2015 |
113 | |||
2016 |
115 | |||
2017 |
115 | |||
Thereafter |
397 | |||
|
|
|||
984 | ||||
Less: allowance |
(93) | |||
|
|
|||
$ | 891 | |||
|
|
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The following table details an aged analysis of our gross timeshare notes receivable balance:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Current |
$ | 940 | $ | 879 | ||||
30 - 89 days past due |
14 | 14 | ||||||
90 - 119 days past due |
4 | 3 | ||||||
120 days and greater past due |
26 | 28 | ||||||
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|
|
|
|||||
$ | 984 | $ | 924 | |||||
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Note 8: Investments in Affiliates
Investments in affiliates were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Equity investments |
$ | 276 | $ | 318 | ||||
Other investments |
15 | 16 | ||||||
|
|
|
|
|||||
$ | 291 | $ | 334 | |||||
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|
We maintain investments in affiliates accounted for under the equity method, which are primarily investments in entities that owned or leased 32 hotels as of December 31, 2012 and 2011.
Our investments in affiliates accounted for under the equity method totaled $276 million and $318 million, representing approximately one percent of total assets as of December 31, 2012 and 2011. We are a partner in joint ventures with Felcor Hotels, LLC and affiliates that own 14 hotels in which our ownership interest ranges from 10 percent to 50 percent, as well as a management company in which we have a 50 percent interest. The total carrying amount of our investments with Felcor Hotels, LLC and affiliates was $107 million and $120 million as of December 31, 2012 and 2011, respectively. We are also partners in other significant joint ventures with the following ownership interests and carrying amounts: a 25 percent ownership interest in Ashford HHC Partners III, LP, which owns two hotels and had a carrying amount of $37 million and $36 million as of December 31, 2012 and 2011, respectively; and, a 40 percent interest in Domhotel GmbH, Berlin, which owns one hotel and had a carrying amount of $35 million and $32 million as of December 31, 2012 and 2011, respectively. We also have investments in 15 other joint ventures in which our ownership interest ranges from 10 percent to 50 percent.
The equity investments had total debt of approximately $1.1 billion as of December 31, 2012 and 2011. Substantially all of the debt is secured solely by the affiliates assets or is guaranteed by other partners without recourse to us. We were the creditor on $20 million and $23 million of total debt from unconsolidated affiliates as of December 31, 2012 and 2011, respectively, which were included in financing receivables, net in our consolidated balance sheets.
We identified certain indicators of impairment in 2012, 2011, and 2010 relative to the carrying value of certain of our investments and, as a result, determined that we had impairments on these investments during the years ended December 31, 2012, 2011, and 2010. The amount of the impairment was based on the excess of the carrying amount of the asset over its fair value, as calculated using discounted operating cash flows. We recorded $19 million, $141 million, and $6 million of impairment losses on certain equity method investments during the years ended December 31, 2012, 2011, and 2010, respectively, which were included in equity in losses from unconsolidated affiliates in our consolidated statements of operations. Additionally in 2012, we recorded a $1 million impairment loss on one of our other investments, which was included in impairment losses in our consolidated statement of operations for the year ended December 31, 2012.
F-22
In connection with the Merger, we recorded our equity method investments at their estimated fair value, which resulted in an increase to our historical basis in those entities, primarily as a result of an increase in the fair value of the real estate assets of the investee entities. The basis difference is being amortized as a component of equity in losses from unconsolidated affiliates over a period of approximately 40 years and it is also adjusted for impairment charges. The unamortized basis was $120 million and $141 million, as of December 31, 2012 and 2011, respectively. We estimate our future amortization expense to be approximately $3 million per year for the remaining amortization period.
Note 9: Consolidated Variable Interest Entities
As of December 31, 2012, we consolidated three VIEs as required by the accounting standards related to the consolidation of VIEs. As of December 31, 2011 and 2010, we consolidated four VIEs.
Two out of three of these VIEs lease hotels from unconsolidated affiliates in Japan. We hold a significant ownership interest in these VIEs and have the power to direct the activities that most significantly impact their economic performance. Our consolidated balance sheets included the assets and liabilities of these entities, which primarily comprised $29 million and $24 million of cash and cash equivalents, $66 million and $79 million of property and equipment, net, and $408 million and $464 million of debt and capital lease obligations as of December 31, 2012 and 2011, respectively. The debt and capital lease obligations are non-recourse to us and were reflected as non-recourse debt and capital lease obligations of consolidated variable interest entities in our consolidated balance sheets. The assets of these entities are only available to settle the obligations of these entities. Interest expense related to the non-recourse debt and capital lease obligations of these two consolidated VIEs was $33 million during the years ended December 31, 2012 and 2011 and $37 million during the year ended December 31, 2010 and was included in interest expense in our consolidated statements of operations.
In 2012, we acquired the remaining ownership interest in OHC, which was previously one of our consolidated VIEs located in Japan. See Note 3: Acquisitions for further discussion of this transaction. Our consolidated balance sheet as of December 31, 2011 included the assets and liabilities of this entity, which primarily comprised $4 million of cash and cash equivalents, and $5 million of debt and capital lease obligations.
In 2011, two of our consolidated VIEs located in Japan restructured their lease agreements which were accounted for as capital leases. These lease restructurings resulted in a reduction of our capital lease assets and obligations of $76 million and $73 million, respectively, as of December 31, 2011. Additionally, we recognized a gain associated with one of the lease restructurings of $13 million during the year ended December 31, 2011, resulting from the difference between the fair value of the new lease terms and the carrying value of the former lease. This gain was recognized in other gain, net, in our consolidated statement of operations for the year ended December 31, 2011. Additionally, $7 million of the gain was recognized as being attributable to noncontrolling interests based on their ownership interest in the VIE, and was included in net income attributable to noncontrolling interests in our consolidated statement of operations for the year ended December 31, 2011.
As of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011, and 2010, we also consolidated a VIE that owned one hotel that was immaterial to our consolidated financial statements.
During the years ended December 31, 2012, 2011, and 2010, we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.
Note 10: Goodwill
In 2007, as part of the purchase accounting for the Merger, we recorded $10.5 billion of goodwill representing the excess purchase price over the fair value of the other identified assets and liabilities. During the year ended December 31, 2008, we recognized approximately $4.3 billion of impairment charges relating to our goodwill,
F-23
including impairment losses of $795 million on our goodwill assigned to our timeshare reporting unit which had no remaining goodwill assigned to that reporting unit as of December 31, 2012, 2011, and 2010. In the fourth quarter of each year, we performed our annual assessment for impairment and concluded that there was no impairment of our goodwill for the years ended December 31, 2012, 2011, and 2010. Changes to our goodwill during the years ended December 31, 2012, 2011, and 2010 were due to foreign currency translations. Our goodwill balances, by reporting unit, were as follows:
Ownership |
Management
and Franchise |
Total | ||||||||||
(in millions) | ||||||||||||
Goodwill |
$ | 4,557 | $ | 5,158 | $ | 9,715 | ||||||
Accumulated impairment losses |
(3,527) | | (3,527) | |||||||||
|
|
|
|
|
|
|||||||
Balance as of December 31, 2010 |
1,030 | 5,158 | 6,188 | |||||||||
Foreign currency translation |
(2) | (11) | (13) | |||||||||
Goodwill |
4,555 | 5,147 | 9,702 | |||||||||
Accumulated impairment losses |
(3,527) | | (3,527) | |||||||||
|
|
|
|
|
|
|||||||
Balance as of December 31, 2011 |
1,028 | 5,147 | 6,175 | |||||||||
Foreign currency translation |
4 | 18 | 22 | |||||||||
Goodwill |
4,559 | 5,165 | 9,724 | |||||||||
Accumulated impairment losses |
(3,527) | | (3,527) | |||||||||
|
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|
|
|
|||||||
Balance as of December 31, 2012 |
$ | 1,032 | $ | 5,165 | $ | 6,197 | ||||||
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|
|
Note 11: Other Intangible Assets
Other intangible assets were as follows:
December 31, 2012 | ||||||||||||
Gross Carrying
Amount |
Accumulated
Amortization |
Net Carrying
Amount |
||||||||||
(in millions) | ||||||||||||
Amortizing Intangible Assets: |
||||||||||||
Management agreements |
$ | 836 | $ | (259) | $ | 577 | ||||||
Franchise agreements |
1,706 | (683) | 1,023 | |||||||||
Leases |
408 | (107) | 301 | |||||||||
Other (1) |
646 | (203) | 443 | |||||||||
|
|
|
|
|
|
|||||||
$ | 3,596 | $ | (1,252) | $ | 2,344 | |||||||
|
|
|
|
|
|
|||||||
Non-amortizing Intangible Assets: |
||||||||||||
Brands |
$ | 5,029 | $ | | $ | 5,029 |
December 31, 2011 | ||||||||||||
Gross Carrying
Amount |
Accumulated
Amortization |
Net Carrying
Amount |
||||||||||
(in millions) | ||||||||||||
Amortizing Intangible Assets: |
||||||||||||
Management agreements |
$ | 802 | $ | (207) | $ | 595 | ||||||
Franchise agreements |
1,704 | (551) | 1,153 | |||||||||
Leases |
399 | (85) | 314 | |||||||||
Other (1) |
529 | (140) | 389 | |||||||||
|
|
|
|
|
|
|||||||
$ | 3,434 | $ | (983) | $ | 2,451 | |||||||
|
|
|
|
|
|
|||||||
Non-amortizing Intangible Assets: |
||||||||||||
Brands |
$ | 5,025 | $ | | $ | 5,025 |
F-24
(1) | Includes capitalized software with a net balance of $191 million and $112 million as of December 31, 2012 and 2011, respectively, and the Hilton HHonors intangible with a net balance of $236 million and $256 million as of December 31, 2012 and 2011, respectively. We recorded amortization expense on capitalized software of $30 million, $15 million, and $5 million for the years ended December 31, 2012, 2011, and 2010, respectively, and amortization expense on the Hilton HHonors intangible of $22 million for each of the years ended December 31, 2012, 2011, and 2010. |
Our amortizing intangible assets related to management and franchise agreements, leases, proprietary technologies, capitalized software, and Hilton HHonors have finite lives and, accordingly, we recorded amortization expense of $260 million, $241 million, and $233 million for the years ended December 31, 2012, 2011, and 2010, respectively. Changes to our brands intangible asset during the years ended December 31, 2012 and 2011 were due to foreign currency translations.
During the years ended December 31, 2012, 2011, and 2010, we recorded no impairment relating to our other intangible assets.
We estimate our future amortization expense for our finite lived intangible assets to be as follows:
Year | (in millions) | |||
2013 |
$ | 297 | ||
2014 |
293 | |||
2015 |
274 | |||
2016 |
240 | |||
2017 |
227 | |||
Thereafter |
1,013 | |||
|
|
|||
$ | 2,344 | |||
|
|
Note 12: Accounts Payable, Accrued Expenses, and Other
Accounts payable, accrued expenses, and other were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Accrued employee compensation and benefits |
$ | 530 | $ | 432 | ||||
Accounts payable |
286 | 294 | ||||||
Liability for guest loyalty program, current |
262 | 247 | ||||||
Deposit liabilities |
169 | 102 | ||||||
Deferred revenue |
61 | 86 | ||||||
Self insurance reserves, current |
47 | 44 | ||||||
Other accrued expenses |
567 | 601 | ||||||
|
|
|
|
|||||
$ | 1,922 | $ | 1,806 | |||||
|
|
|
|
Deferred revenue and deposit liabilities are related to our timeshare business and hotel operations. Other accrued expenses consist of taxes, rent, interest, and other accrued balances.
F-25
Note 13: Debt
Debt balances, including obligations for capital leases, and associated interest rates were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Senior mortgage loans with a rate of 2.51%, due 2015 (1) |
$ | 7,271 | $ | 7,596 | ||||
Secured mezzanine loans with an average rate of 4.12%, due 2015 (1) |
7,697 | 7,698 | ||||||
Secured mezzanine loans with a rate of 4.71%, due 2015 (1) |
240 | 250 | ||||||
Unsecured notes (2) |
| 389 | ||||||
Mortgage notes with an average rate of 6.14%, due 2013 to 2016 |
134 | 158 | ||||||
Other unsecured notes with an average rate of 7.82%, due 2017 to 2031 |
149 | 153 | ||||||
Capital lease obligations with an average rate of 5.69%, due 2015 to 2097 |
83 | 66 | ||||||
Contingently convertible notes with a rate of 3.38%, due 2023 |
1 | 1 | ||||||
|
|
|
|
|||||
Total long-term debt, including current maturities |
15,575 | 16,311 | ||||||
Less: current maturities of long-term debt |
(392) | (342) | ||||||
|
|
|
|
|||||
Total long-term debt |
$ | 15,183 | $ | 15,969 | ||||
|
|
|
|
(1) | Initial due date was November 12, 2010, with up to five additional one-year extensions at our option. We have extended the scheduled maturity date to November 12, 2013 by exercising our first, second, and third extension options. The fourth and fifth extension options are at our sole discretion, and require an extension fee equal to 50 basis points of the then outstanding principal balance. Combined, the extensions effectively extend the maturity of our senior mortgage and senior mezzanine debt to November 12, 2015. |
(2) | As discussed below, we redeemed these unsecured notes in December 2012. |
Debt Restructuring
In April 2010, we completed a restructuring (the Debt Restructuring) of our senior mortgage loan and secured mezzanine loans (collectively, the Secured Debt) for which HWI and its subsidiaries were the primary obligor. The transaction resulted in an overall reduction of debt of $4.0 billion. Key components of the Debt Restructuring were:
| A $76 million principal reduction payment on our senior mortgage loan. Funding for the principal repayment of the senior mortgage loan was provided from certain of our restricted cash and cash equivalents balances, which restrictions were required under the terms of the loan agreement. |
| The repurchase of $1.8 billion of secured mezzanine debt for a cash payment of $819 million, representing a 54 percent discount from par value. Funding for the repurchase of the secured mezzanine debt was provided through an equity contribution of $819 million from our Parent. |
| The extinguishment, by our Parent, of the two most-junior tranches of our secured mezzanine loans with an aggregate outstanding principal amount of $2.0 billion, as well as the respective outstanding deferred cash interest payments through the date of the Debt Restructuring, totaling $87 million. |
| The amendment of our Secured Debt loan agreement provides for the adjustment of the interest rate spreads of our Secured Debt from a range of 30-day LIBOR plus 80-525 basis points, to a range of 30-day LIBOR plus 175-425 basis points. The decrease in the upper end of the range of interest rates is due to the acquisition of the two most-junior tranches of the secured mezzanine debt by our Parent as discussed above. |
F-26
As a result of the Debt Restructuring, we recognized a gain of $789 million in gain on debt restructuring in our consolidated statement of operations for the year ended December 31, 2010, which was comprised of the following components:
(in millions) | ||||
Gain on excess of carrying amount over reacquisition price of certain debt |
$ | 910 | ||
Less: write-off of existing deferred financing costs |
(4) | |||
Less: fees incurred as part of Debt Restructuring |
(39) | |||
Loss on excess of reacquisition price over carrying value of debt extinguished |
(78) | |||
|
|
|||
$ | 789 | |||
|
|
From certain lenders that were a party to the Debt Restructuring, we only reacquired a portion of the secured mezzanine debt tranches for which those specific entities were the lenders. The total cash payments we expect to make to these lenders, including interest, is greater than the pre-restructuring principal balance. These transactions involving a modification of terms were accounted for prospectively and the carrying amount of the debt held by these lenders was $240 million and $250 million as of December 31, 2012 and 2011, respectively. Interest expense for these revised loans was computed using the interest method, with the interest rate determined as the amount that equates to the present value of the future cash payments specified by the new terms of the carrying amount of the debt.
Secured Debt
Our Secured Debt totaled $15.2 billion and $15.5 billion as of December 31, 2012 and 2011, respectively. Interest under the Secured Debt is payable monthly and includes both variable and fixed components. The Secured Debt is secured by substantially all of our consolidated assets in which we hold an ownership interest and contains significant restrictions on the incurrence of any additional indebtedness by us, including the prohibition of any additional indebtedness for borrowed money evidenced by bonds, debentures, notes, or other similar instruments. Additionally, under the terms of our Secured Debt, we are restricted from declaring dividends.
We are required to deposit with the lender certain cash reserves that may, upon our request, be used for, among other things, debt service, capital expenditures, and general corporate purposes. These reserves, totaling $147 million and $321 million as of December 31, 2012 and 2011, respectively, were included in restricted cash and cash equivalents in our consolidated balance sheets as a current asset, since we have the ability to access the cash within the 12 months following the dates of the consolidated balance sheets, subject to necessary lender notification.
As a condition to permitting certain events under the Secured Debt, such as a release of certain assets as collateral for the loan or change of control of the Company, we must satisfy certain debt yield tests. We were able to satisfy all of the debt yield tests as of our most recent testing date.
Repayment of Debt
During the years ended December 31, 2012, 2011, and 2010, we made scheduled debt repayments on our Secured Debt of $314 million, $299 million, and $24 million, respectively. We also made the following additional debt repayments:
| In December 2012, we redeemed the outstanding $389 million in unsecured notes that were due in 2013, which included 100 percent of the principal amount, as well as any accrued and unpaid interest. |
| In December 2012, we paid the outstanding mortgage of $23 million for a property purchased for a timeshare development in Honolulu, Hawaii in May 2011. |
F-27
| In November 2011, we purchased $335 million of our senior mortgage debt from one lender for a cash payment of $300 million, representing a purchase price at 89.5 percent of the face value. This repayment was accounted for as a modification as the expected net present value of our cash flows on our indebtedness to that lender changed by less than ten percent as a result of the paydown. This modification was accounted for prospectively and the interest expense for these revised loans was computed using the interest method, with the interest rate determined as the amount that equaled the present value of the future cash payments specified by the new terms of the carrying amount of the debt. |
| In January 2011, we completed sales of our former corporate headquarters office building in Beverly Hills, California for approximately $65 million and our 26 percent investment interest in an Indian joint venture for approximately $23 million. The office building and our investment in the Indian joint venture were pledged as collateral under our Secured Debt; therefore, the proceeds from these sales were used to repay a portion of our Secured Debt during the year ended December 31, 2011. See Note 4: Disposals for further discussion of these transactions. |
| In December 2010, we purchased $111 million of our $500 million outstanding unsecured notes for a cash payment of $100 million, representing a purchase price at 90 percent of the face value. As a result of this transaction, we recognized a gain of $11 million included in other gain, net, in our consolidated statement of operations for the year ended December 31, 2010. |
Non-Recourse Debt and Capital Lease Obligations of Consolidated Variable Interest Entities
In addition to our long-term debt, our consolidated balance sheets included debt and capital lease obligations related to consolidated VIEs that are non-recourse to us as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Capital lease obligations with an average rate of 6.34%, due 2018 to 2025 |
$ | 373 | $ | 425 | ||||
Non-recourse debt |
47 | 56 | ||||||
|
|
|
|
|||||
420 | 481 | |||||||
Less: current maturities of non-recourse debt and capital lease obligations of consolidated variable interest entities |
(15) | (42) | ||||||
|
|
|
|
|||||
Non-recourse debt and capital lease obligations of consolidated variable
|
$ | 405 | $ | 439 | ||||
|
|
|
|
Debt Maturities
The contractual debt maturities as of December 31, 2012, including maturities of non-recourse debt and capital lease obligations of consolidated variable interest entities, were as follows:
Year | (in millions) | |||
2013 |
$ | 407 | ||
2014 |
410 | |||
2015 (1) |
14,521 | |||
2016 |
123 | |||
2017 |
75 | |||
Thereafter |
459 | |||
|
|
|||
$ | 15,995 | |||
|
|
(1) | The Secured Debt has five one-year extensions solely at our option that effectively extend maturity to November 12, 2015. We have assumed all extensions for purposes of calculating maturity dates. |
F-28
Note 14: Other Liabilities
Other long-term liabilities were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Program surplus |
$ | 263 | $ | 179 | ||||
Pension obligations |
262 | 240 | ||||||
Other long-term tax liabilities |
340 | 341 | ||||||
Deferred employee compensation and benefits |
129 | 79 | ||||||
Deferred revenue |
82 | 90 | ||||||
Self insurance reserves |
80 | 85 | ||||||
Guarantee liability |
57 | 88 | ||||||
Other |
310 | 375 | ||||||
|
|
|
|
|||||
$ | 1,523 | $ | 1,477 | |||||
|
|
|
|
Deferred revenue is related to our timeshare business and hotel operations. Guarantee liability is related to obligations under our outstanding performance guarantees. Program surplus represents obligations to operate our marketing, sales, and brand programs on behalf of our hotel owners. Our obligations related to the self insurance claims are expected to be satisfied over the next three years.
Note 15: Derivative Instruments and Hedging Activities
Cash Flow Hedges
Under the terms of our Secured Debt, we are required to hedge interest rate risk using derivative instruments with an aggregate notional amount equal to the principal amount of the Secured Debt. As such, during the years ended December 31, 2012, 2011, and 2010, derivatives were used to hedge the variable cash flows associated with existing variable rate debt.
As of December 31, 2012, we held ten interest rate caps with an aggregate notional amount of $15.2 billion. The caps were executed in August 2012 to replace the previous portfolio of interest rate caps that expired in November 2012. These interest rate caps expire in November 2013. We have elected not to designate any of the ten interest rate caps as effective hedging instruments. During the year ended December 31, 2012, we recorded a loss of $1 million in other gain, net in our consolidated statement of operations, which represented the premiums paid on these interest rate caps. No other gain or loss related to the ten undesignated interest rate caps in our current portfolio or previous portfolio were recorded in the year ended December 31, 2012 as changes in the fair values of our interest rate caps were immaterial.
As of December 31, 2011, we held ten interest rate caps with an aggregate notional amount of $15.9 billion. The caps were executed in October 2011 to replace our previous portfolio of eleven interest rate caps maturing in November 2011. We elected not to designate any of the ten interest rate caps as effective hedges for accounting purposes. During the year ended December 31, 2011, we recognized a loss of $3 million in other gain, net, in our consolidated statement of operations, related to hedge ineffectiveness on our eight designated interest rate caps in our previous portfolio and premiums paid for our ten undesignated interest rate caps.
As of December 31, 2010, we held eleven interest rate caps with an aggregate notional amount of $16.2 billion. The caps were executed in October 2010 to replace our previous portfolio maturing in November 2010. We had designated eight interest rate caps with an aggregate notional amount of $14.6 billion as effective hedging instruments. We did not designate three of our interest rate cap agreements entered into during 2010 as hedging instruments. As of December 31, 2010, the notional amount of the undesignated portion of the interest rate cap agreements was $1.6 billion.
F-29
During the year ended December 31, 2010, we recognized $5 million as a reduction in interest expense in our consolidated statement of operations related to hedge ineffectiveness primarily attributable to one of our interest rate swaps that had a fair market value other than zero at the time of designation. The related interest rate swap matured in November 2010.
The fair value of our interest rate caps was immaterial to our consolidated balance sheets as of December 31, 2012 and 2011.
Net Investment Hedges
Our most significant foreign currency exposure relates to fluctuations in the foreign exchange rate between USD and GBP. Historically, we used foreign exchange currency option agreements to hedge our exposure to changes in foreign exchange rates on certain of our foreign investments. Under the terms of these currency option contracts, we paid a premium to a counterparty for the right to sell a specified amount of foreign currency at a specified strike rate at the maturity date of the option. During 2010, we settled our remaining GBP foreign currency options, designated as net investment hedges, with an aggregate notional value of approximately GBP 505 million, for proceeds of $234 million, and we have not had any further designated foreign currency options held as net investment hedges since that time.
For the year ended December 31, 2010, we recognized $58 million of gains within OCI related to our net investment hedges in foreign entities. We have total deferred gains related to these net investment hedges in accumulated other comprehensive income of $170 million as of December 31, 2012 and 2011. The amounts related to these net investment hedges will be released as we substantially liquidate or sell our original hedged investments in GBP and release amounts recorded in our cumulative translation adjustment component of accumulated other comprehensive income related to such investments.
Non-designated Hedges
Historically, we have held certain derivatives, as economic hedges of our foreign exchange exposure, which were not designated as hedges for accounting purposes. During 2010, we settled our portfolio of Euro (EUR) and Australian dollar (AUD) foreign exchange options with aggregate notional values of approximately EUR 540 million and AUD 374 million, respectively, for proceeds of $59 million and $31 million, respectively. These foreign exchange options were not designated as hedges in qualifying hedging relationships. We have not had any further undesignated foreign currency options since that time. For the year ended December 31, 2010, we recorded a gain of $20 million in gain (loss) on foreign currency transactions on undesignated foreign currency hedging instruments in our consolidated statement of operations.
There was no effect of derivatives not designated as hedging instruments to our consolidated statements of operations for the years ended December 31, 2012 and 2011.
The following table summarizes the effect of derivative designated as hedging instruments in our consolidated statements of operations and consolidated statements of comprehensive income (loss) before any effect for income taxes for the years ended December 31, 2012, 2011, and 2010:
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Deferred gains (losses) from derivatives in AOCI, beginning of period |
$ | 170 | $ | 168 | $ | (61) | ||||||
Gains recognized in OCI from derivative instruments |
| | 222 | |||||||||
Reclassification of losses from OCI |
| 2 | 7 | |||||||||
|
|
|
|
|
|
|||||||
Deferred gains from derivatives in AOCI, end of period |
$ | 170 | $ | 170 | $ | 168 | ||||||
|
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F-30
Note 16: Fair Value Measurements
The carrying amounts and estimated fair values of our financial assets and liabilities, which included related current portions, were as follows:
December 31, 2012 | December 31, 2011 | |||||||||||||||
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
|||||||||||||
(in millions) | ||||||||||||||||
Cash equivalents (1) |
$ | 561 | $ | 561 | $ | 578 | $ | 578 | ||||||||
Cash equivalents - restricted (1) |
322 | 322 | 408 | 408 | ||||||||||||
Timeshare notes receivable (2) |
984 | 987 | 924 | 931 | ||||||||||||
Other long-term debt (2)(3) |
284 | 297 | 701 | 668 | ||||||||||||
Secured Debt (2)(4) |
15,208 | 15,571 | 15,544 | 14,668 |
(1) | Classified as Level 2 under the fair value hierarchy. |
(2) | Classified as Level 3 under the fair value hierarchy. |
(3) | Excludes capital lease obligations with a carrying value of $83 million and $66 million as of December 31, 2012 and 2011, respectively. |
(4) | We assumed the exercise of all extensions on the Secured Debt for purposes of calculating fair value. |
We believe the carrying amounts of our current financial assets and liabilities and other notes receivable approximated fair value as of December 31, 2012 and 2011. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair value. Proper placement of fair value measurements within the valuation hierarchy is considered each reporting period. Third-party information received for calculating Level 3 fair value measurements is reviewed to ensure it is in accordance with U.S. GAAP. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.
Cash equivalents and cash equivalents - restricted are primarily comprised of short-term interest-bearing money market funds with maturities of less than 90 days, time deposits, and commercial paper. The estimated fair values were based on available market pricing information of similar financial instruments.
The estimated fair values of timeshare notes receivable, net and other long-term debt were calculated based on the expected future cash flows discounted at risk-adjusted rates. The primary sensitivity in these calculations is based on the selection of appropriate discount rates. Fluctuations in these assumptions will result in different estimates of fair value. An increase in the discount rate would result in a decrease in the fair value.
The estimated fair value of our Secured Debt was based on estimates of market spreads when quoted market values did not exist, on the current rates offered to us for debt of the same maturities, or quoted market prices for the same or similar issues. In determining the current market rate for the fixed rate debt, a market spread was added to the quoted yields on federal government treasury securities with similar maturity dates. The primary sensitivity in these calculations is based on the selection of appropriate market spreads. Fluctuations in these assumptions will result in different estimates of fair value. An increase in market spreads would result in a decrease in the fair value.
Our financial and nonfinancial assets that are measured at fair value on a nonrecurring basis include property and equipment, investments in affiliates, goodwill, brands, management and franchise contracts, and other intangible assets. As of December 31, 2012 and 2011, there were certain financial and nonfinancial assets that were determined to be impaired and therefore the carrying amount of those assets were recorded at their fair value. The estimated fair values of our impaired financial and nonfinancial assets were calculated based on the expected future discounted cash flows of the respective asset. The key assumptions used were projected revenues, projected net operating income, long-term growth rates, terminal capitalization rates, and discount rates. The fair value measurements were considered Level 3 under the fair value hierarchy.
F-31
The estimated fair values of our financial and nonfinancial assets that were measured at fair value on a nonrecurring basis as a result of impairments losses during the years ended December 31, 2012, 2011, and 2010 were as follows:
2012 | 2011 | 2010 | ||||||||||||||||||||||
Fair Value (1) |
Impairment
Losses |
Fair Value (1) |
Impairment
Losses |
Fair Value (1) |
Impairment
Losses |
|||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Property and equipment, net |
$ | 24 | $ | 53 | $ | 5 | $ | 20 | $ | 61 | $ | 24 | ||||||||||||
Investments in affiliates |
29 | 20 | 205 | 141 | 25 | 3 |
(1) | Fair value measurements using significant unobservable inputs (Level 3). |
During the years ended December 31, 2012, 2011, and 2010, property and equipment, net with carrying value of $77 million, $25 million, and $85 million before impairment, respectively, was reduced to its estimated fair value, resulting in impairment losses of $53 million, $20 million, and $24 million, respectively. Using estimates of undiscounted net cash flows, we concluded that the carrying value of the assets were not fully recoverable. We estimated the fair value of the assets using discounted cash flow analyses, with estimated stabilized growth rates ranging from 2 percent to 3 percent, a discounted cash flow term of 10 years, terminal capitalization rates ranging from 8 percent to 11 percent, and discount rates ranging from 9 percent to 12 percent. The discount and terminal capitalization rates used for the fair value of the assets reflect the risk profile of the individual markets where the assets are located, and are not necessarily indicative of our hotel portfolio as a whole.
During the years ended December 31, 2012, 2011, and 2010, investments in affiliates with a carrying value of $49 million, $346 million, and $28 million before impairment, respectively, were reduced to their estimated fair value, resulting in impairment losses of $20 million, $141 million, and $3 million, respectively, related to our investments in entities that own or lease hotels. We estimated the fair value of the investments using discounted cash flow analyses, with estimated stabilized growth rates ranging from 3 percent to 7 percent, a discounted cash flow term of 10 years, terminal capitalization rates ranging from 8 percent to 12 percent, and discount rates ranging from 10 percent to 22 percent. The discount and terminal capitalization rates used for the fair value of our investments reflect the risk profile of the individual markets where the assets subject to our investment are located, and are not necessarily indicative of our investment portfolio as a whole.
Note 17: Leases
We lease hotel properties, land, equipment, and corporate office space under operating and capital leases. As of December 31, 2012 and 2011, we leased 71 hotels and 74 hotels, respectively, under operating leases and seven hotels and six hotels, respectively, under capital leases. Two of the capital leases as of December 31, 2012 and 2011 were liabilities of VIEs that we consolidated and were non-recourse to us. Our leases expire at various dates from 2013 through 2191, with varying renewal options, and the majority expire before 2025.
Our operating leases may require minimum rent payments, contingent rent payments based on a percentage of revenue or income, or the payment of rent equal to the greater of a minimum rent or contingent rent. In addition, we may be required to pay some, or all, of the capital costs for property and equipment in the hotel during the term of the lease.
F-32
The future minimum rent payments, under non-cancelable leases, due in each of the next five years and thereafter as of December 31, 2012, were as follows:
Operating
Leases |
Capital
Leases |
Non-Recourse
Capital Leases |
||||||||||
Year | (in millions) | |||||||||||
2013 |
$ | 265 | $ | 8 | $ | 34 | ||||||
2014 |
251 | 9 | 38 | |||||||||
2015 |
241 | 18 | 38 | |||||||||
2016 |
234 | 6 | 39 | |||||||||
2017 |
222 | 7 | 39 | |||||||||
Thereafter |
2,315 | 146 | 405 | |||||||||
|
|
|
|
|
|
|||||||
Total minimum rent payments |
$ | 3,528 | 194 | 593 | ||||||||
|
|
|||||||||||
Less: amount representing interest |
(111) | (220) | ||||||||||
|
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|
|||||||||
Present value of net minimum rent payments |
$ | 83 | $ | 373 | ||||||||
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|
Amortization of assets recorded under capital leases is recorded in depreciation and amortization in our consolidated statements of operations and is recognized over the lease term.
Rent expense for all operating leases for the years ended December 31, 2012, 2011, and 2010 was as follows:
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Minimum rentals |
$ | 286 | $ | 264 | $ | 268 | ||||||
Contingent rentals |
161 | 175 | 152 | |||||||||
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$ | 447 | $ | 439 | $ | 420 | |||||||
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During the year ended December 31, 2012, we acquired the remaining ownership interest in one of our consolidated VIEs located in Japan, as well as restructured the lease agreement for the Hilton Odawara. In conjunction with the lease restructuring, we executed a binding purchase agreement with the owner to purchase the building and surrounding land at the end of the extended lease term. The Hilton Odawara lease, which was previously accounted for as an operating lease, was recorded as a capital lease asset and obligation of $15 million as of December 31, 2012. See Note 3: Acquisitions for discussion regarding the acquisition of the VIE.
During the year ended December 31, 2011, one of our consolidated VIEs located in Japan restructured their lease agreement. See Note 9: Consolidated Variable Interest Entities for discussion of the restructuring.
Note 18: Income Taxes
Our tax provision (benefit) includes federal, state, and foreign income taxes payable. The domestic and foreign components of income before income taxes for the years ended December 31, 2012, 2011, and 2010 were as follows:
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
U.S. income before tax |
$ | 435 | $ | 48 | $ | 281 | ||||||
Foreign income before tax |
138 | 148 | 138 | |||||||||
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|
|||||||
Income before income taxes |
$ | 573 | $ | 196 | $ | 419 | ||||||
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|
F-33
The components of our provision (benefit) for income taxes for the years ended December 31, 2012, 2011, and 2010 were as follows:
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Current: |
||||||||||||
Federal |
$ | 71 | $ | 50 | $ | 194 | ||||||
State |
13 | 8 | 32 | |||||||||
Foreign |
57 | 70 | 64 | |||||||||
|
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|
|
|
|
|||||||
Total current |
141 | 128 | 290 | |||||||||
|
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|
|
|
|
|||||||
Deferred: |
||||||||||||
Federal |
63 | (190) | 111 | |||||||||
State |
2 | (8) | (54) | |||||||||
Foreign |
8 | 11 | (39) | |||||||||
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|
|||||||
Total deferred |
73 | (187) | 18 | |||||||||
|
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|
|
|
|||||||
Total provision (benefit) for income taxes |
$ | 214 | $ | (59) | $ | 308 | ||||||
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During 2011, based on our consideration of all positive and negative evidence available, we believe that it is more likely than not we will be able to realize the benefit of our U.S. federal foreign tax credits. Accordingly, as of December 31, 2011, we released valuation allowances of $182 million against our deferred tax assets related to U.S. foreign tax credits.
Reconciliations of our tax provision at the U.S. statutory rate to the provision (benefit) for income taxes for the years ended December 31, 2012, 2011 and 2010 were as follows:
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Statutory U.S. federal income tax provision |
$ | 201 | $ | 69 | $ | 147 | ||||||
State income taxes, net of U.S. federal tax benefit |
10 | 6 | 26 | |||||||||
Foreign income tax expense (benefit) |
18 | 50 | (8) | |||||||||
Foreign losses not subject to U.S. tax |
(24) | (26) | (19) | |||||||||
Tax credits |
(67) | (58) | (67) | |||||||||
Change in deferred tax asset valuation allowance |
56 | (160 | ) | 10 | ||||||||
Change in basis difference in foreign subsidiaries |
18 | 20 | (7) | |||||||||
Nondeductible settlement of a liability |
| | 26 | |||||||||
Nondeductible portion of debt extinguishment |
| | 27 | |||||||||
Provision for uncertain tax positions |
(2) | 35 | 185 | |||||||||
Other, net |
4 | 5 | (12) | |||||||||
|
|
|
|
|
|
|||||||
Provision (benefit) for income taxes |
$ | 214 | $ | (59) | $ | 308 | ||||||
|
|
|
|
|
|
Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The composition of net deferred tax balances were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Deferred income tax assets - current |
$ | 76 | $ | 74 | ||||
Deferred income tax assets - noncurrent |
104 | 112 | ||||||
Deferred income tax liabilities - current (1) |
(1) | (1) | ||||||
Deferred income tax liabilities - noncurrent |
(4,948) | (5,006) | ||||||
|
|
|
|
|||||
Net deferred taxes |
$ | (4,769) | $ | (4,821) | ||||
|
|
|
|
(1) | Included in the accounts payable, accrued expenses, and other in our consolidated balance sheets. |
F-34
The tax effects of the temporary differences and carryforwards that give rise to our net deferred tax asset (liability) were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Deferred tax assets: |
||||||||
Foreign tax credits |
$ | 227 | $ | 346 | ||||
Net operating loss carryforwards |
570 | 563 | ||||||
Compensation |
245 | 212 | ||||||
Deferred transaction costs |
25 | 37 | ||||||
Other reserves |
198 | 204 | ||||||
Capital lease obligations |
188 | 214 | ||||||
Insurance reserves |
44 | 43 | ||||||
System funds |
23 | 28 | ||||||
Other tax credits |
48 | 73 | ||||||
Other |
72 | | ||||||
|
|
|
|
|||||
Total gross deferred tax assets |
1,640 | 1,720 | ||||||
Less: valuation allowance |
(769) | (694) | ||||||
|
|
|
|
|||||
Deferred tax assets |
$ | 871 | $ | 1,026 | ||||
|
|
|
|
|||||
Deferred tax liabilities: |
||||||||
Property and equipment |
$ | (2,025) | $ | (2,023) | ||||
Brands |
(1,916) | (1,914) | ||||||
Amortizable intangible |
(659) | (742) | ||||||
Unrealized foreign currency gains |
(301) | (380) | ||||||
Investments |
(70) | (109) | ||||||
Investment in foreign subsidiaries |
(93) | (122) | ||||||
Deferred income |
(576) | (548) | ||||||
Other |
| (9) | ||||||
|
|
|
|
|||||
Deferred tax liabilities |
(5,640) | (5,847) | ||||||
|
|
|
|
|||||
Net deferred taxes |
$ | (4,769) | $ | (4,821) | ||||
|
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|
|
As of December 31, 2012, we had state and foreign net operating loss carryforwards of $1.1 billion and $1.9 billion, respectively, which resulted in deferred tax assets of $52 million for state jurisdictions and $519 million for foreign jurisdictions. Approximately $73 million of our deferred tax assets as of December 31, 2012 related to net operating loss carryforwards expiring between 2013 and 2032 with $2 million of that amount expiring in 2013. Approximately $497 million of our deferred tax assets as of December 31, 2012 resulted from net operating loss carryforwards that are not subject to expiration. We believe that it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards will not be realized. In recognition of this assessment, we provided a valuation allowance of $15 million and $422 million as of December 31, 2012 on the deferred tax assets relating to these state and foreign net operating loss carryforwards, respectively. Our valuation allowances increased in total by approximately $75 million during the year ended December 31, 2012. This increase was primarily related to foreign deferred tax assets. As of December 31, 2012, we had foreign tax credits of $192 million recorded as deferred tax assets that expire between 2018 and 2022.
F-35
Reconciliations of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2012, 2011, and 2010 were as follows:
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Balance at beginning of year |
$ | 436 | $ | 405 | $ | 88 | ||||||
Additions for tax positions related to the prior year |
71 | 60 | 131 | |||||||||
Additions for tax positions related to the current year |
5 | 5 | 191 | |||||||||
Reductions for tax positions for prior years |
(23) | (6) | (1) | |||||||||
Settlements |
(14) | (27) | (1) | |||||||||
Lapse of statute of limitations |
(6) | (2) | (1) | |||||||||
Currency translation adjustment |
| 1 | (2) | |||||||||
|
|
|
|
|
|
|||||||
Balance at end of year |
$ | 469 | $ | 436 | $ | 405 | ||||||
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|
|
We classify reserves for tax uncertainties within income taxes payable and other liabilities in our consolidated balance sheets. Our total unrecognized tax benefits as of December 31, 2012, 2011, and 2010 were $469 million, $436 million, and $405 million, respectively. The net increase to unrecognized tax benefits was primarily the result of items identified, resolved, and settled as part of our ongoing U.S. federal audit as well as an uncertain tax position with regard to our debt restructuring. We recognize interest and penalties accrued related to uncertain tax positions in income tax expense. We accrued approximately $8 million and $6 million during 2012 and 2011, respectively. In total, we had accrued balances of approximately $42 million and $40 million for the payment of interest and penalties as of December 31, 2012 and 2011, respectively. Included in the balance of uncertain tax positions as of December 31, 2012 and 2011 were $374 million and $400 million, respectively, associated with positions that if favorably resolved would provide a benefit to our effective tax rate. As a result of the expected resolution of examination issues with federal (primarily), state, and foreign tax authorities, we believe it is reasonably possible that during the next 12 months the amount of unrecognized tax benefits will decrease up to $50 million.
We file income tax returns, including returns for our subsidiaries, with federal, state and foreign jurisdictions. We are under regular and recurring audit by the Internal Revenue Service (IRS) on open tax positions. It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals or litigation in state, local, federal, and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. We are no longer subject to U.S. federal income tax examination for years through 2004. As of December 31, 2012, we remain subject to federal examinations from 2005-2011, state examinations from 1999-2011, and foreign examinations of our income tax returns for the years 1996 through 2011. During 2009, the IRS commenced its audit of our predecessors consolidated U.S. income tax returns for the 2006 through October 2007 tax years. In 2013, we received Notices of Proposed Adjustment from the IRS for such years primarily relating to assertions by the IRS that: (1) certain foreign currency-denominated, intercompany loans from our foreign subsidiaries to certain U.S. subsidiaries should be recharacterized as equity for U.S. federal income tax purposes and constitute deemed dividends from such foreign subsidiaries to our U.S. subsidiaries; (2) in calculating the amount of U.S. taxable income resulting from our HHonors guest loyalty program, we should not reduce gross income by the estimated costs of future redemptions, but rather such costs are deductible at the time the points are redeemed; and (3) certain foreign-currency denominated loans issued by one of our Luxembourg subsidiaries whose functional currency is the U.S. dollar, should instead be treated as issued by one of our Belgian subsidiaries whose functional currency is the Euro, and thus foreign currency gains and losses with respect to such loans should have been measured in Euros, instead of U.S. dollars. In total, the proposed adjustments sought by the IRS would result in additional U.S. federal tax owed of approximately $695 million, excluding interest and penalties and potential state income taxes. The portion of this amount related to our HHonors guest loyalty program would result in a decrease to our future tax liability when the points are redeemed. We disagree with the IRSs position on each of these assertions and intend to vigorously contest them. We plan to pursue all available administrative remedies, and if we are not
F-36
able to resolve these matters administratively, we plan to pursue judicial remedies. Accordingly, as of December 31, 2012, no accrual had been made for these amounts. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution.
State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return; however, the state impact of any federal tax return changes remains subject to examination by various states for a period generally of up to one year after formal notification to the states. The statute of limitations for the foreign jurisdictions generally ranges from three to ten years after filing the respective tax return.
Note 19: Employee Benefit Plans
We sponsor multiple domestic and international employee benefit plans. Benefits are based upon years of service and compensation.
We have a noncontributory retirement plan in the U.S. (the Domestic Plan), which covers certain employees not earning union benefits. This plan was frozen for participant benefit accruals in 1996; therefore, the projected benefit obligation is equal to the accumulated benefit obligation. Plan assets will be used to pay benefits due to employees for service through December 31, 1996. As employees have not accrued additional benefits since that time, we do not utilize salary or pension inflation assumptions in calculating our benefit obligation for the Domestic Plan. The annual measurement date for the Domestic Plan is December 31.
We also have multiple employee benefit plans that cover many of our international employees. These include a plan that covers workers in the United Kingdom (the U.K. Plan) and a number of smaller plans that cover workers in various countries around the world (the International Plans). The annual measurement date for all of these plans is December 31.
We are required to recognize the funded status (the difference between the fair value of plan assets and the projected benefit obligations) of our pension plans in our consolidated balance sheets with a corresponding adjustment to accumulated other comprehensive loss, net of tax.
F-37
The following table presents the projected benefit obligation, fair value of plan assets, the funded status, and the accumulated benefit obligation as of December 31, 2012 and 2011 for the Domestic Plan, the U.K. Plan, and the International Plans:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||
Change in Projected Benefit Obligation |
||||||||||||||||||||||||
Benefit obligation at beginning of year |
$ | 449 | $ | 442 | $ | 312 | $ | 292 | $ | 119 | $ | 124 | ||||||||||||
Service cost |
| | 5 | 4 | 4 | 4 | ||||||||||||||||||
Interest cost |
21 | 23 | 16 | 17 | 5 | 5 | ||||||||||||||||||
Employee contributions |
| | 2 | 2 | | | ||||||||||||||||||
Prior service cost |
| | | | | (4) | ||||||||||||||||||
Actuarial loss (gain) |
43 | 5 | 28 | 11 | 9 | (1) | ||||||||||||||||||
Settlements and curtailments |
| | | | | (3) | ||||||||||||||||||
Effect of foreign exchange rates |
| | 14 | (1) | (2) | 1 | ||||||||||||||||||
Benefits paid |
(22) | (21) | (12) | (13) | (10) | (7) | ||||||||||||||||||
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Benefit obligation at end of year |
$ | 491 | $ | 449 | $ | 365 | $ | 312 | $ | 125 | $ | 119 | ||||||||||||
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Change in Plan Assets |
||||||||||||||||||||||||
Fair value of plan assets at beginning of year |
$ | 249 | $ | 251 | $ | 318 | $ | 305 | $ | 83 | $ | 80 | ||||||||||||
Actual return on plan assets, net of expenses |
31 | 13 | 34 | 10 | 4 | 2 | ||||||||||||||||||
Employer contribution |
15 | 6 | 7 | 15 | 10 | 10 | ||||||||||||||||||
Employee contributions |
| | 2 | 2 | | | ||||||||||||||||||
Effect of foreign exchange rates |
| | 14 | (1) | (2) | 1 | ||||||||||||||||||
Benefits paid |
(22) | (21) | (12) | (13) | (10) | (7) | ||||||||||||||||||
Settlements |
| | | | | (3) | ||||||||||||||||||
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Fair value of plan assets at end of year |
273 | 249 | 363 | 318 | 85 | 83 | ||||||||||||||||||
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Funded status at end of year (overfunded/ (underfunded)) |
(218) | (200) | (2) | 6 | (40) | (36) | ||||||||||||||||||
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|||||||||||||
Accumulated benefit obligation |
$ | 491 | $ | 449 | $ | 365 | $ | 312 | $ | 125 | $ | 119 | ||||||||||||
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Amounts recognized in the consolidated balance sheets as of December 31, 2012 and 2011 consisted of:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||
Non-current asset |
$ | | $ | | $ | | $ | 8 | $ | 3 | $ | 3 | ||||||||||||
Current liability |
| | | | (1) | (1) | ||||||||||||||||||
Non-current liability |
(218) | (200) | (2) | (2) | (42) | (38) | ||||||||||||||||||
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|||||||||||||
Net amount recognized |
$ | (218) | $ | (200) | $ | (2) | $ | 6 | $ | (40) | $ | (36) | ||||||||||||
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Amounts recognized in accumulated other comprehensive loss during the years ended December 31, 2012, 2011, and 2010 consisted of:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Net actuarial loss (gain) |
$ | 29 | $ | 8 | $ | 8 | $ | 17 | $ | 21 | $ | (40) | $ | 9 | $ | 2 | $ | (4) | ||||||||||||||||||
Prior service cost (credit) |
(4) | (4) | 30 | 16 | 3 | (22) | | (4) | | |||||||||||||||||||||||||||
Amortization of net loss (gain) |
1 | (4) | (6) | (3) | (1) | (7) | (1) | (2) | (1) | |||||||||||||||||||||||||||
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Net amount recognized |
$ | 26 | $ | | $ | 32 | $ | 30 | $ | 23 | $ | (69) | $ | 8 | $ | (4) | $ | (5) | ||||||||||||||||||
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F-38
The estimated unrecognized net losses and prior service cost (credit) that will be amortized into net periodic pension cost over the next fiscal year were as follows:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Unrecognized net losses |
$ | 4 | $ | 6 | $ | 4 | $ | 4 | $ | 3 | $ | 1 | $ | 1 | $ | 1 | $ | 1 | ||||||||||||||||||
Unrecognized prior service cost (credit) |
4 | 4 | 4 | (3) | (16) | (3) | | | | |||||||||||||||||||||||||||
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Amount unrecognized |
$ | 8 | $ | 10 | $ | 8 | $ | 1 | $ | (13) | $ | (2) | $ | 1 | $ | 1 | $ | 1 | ||||||||||||||||||
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The net periodic pension cost for the Domestic Plan, the U.K. Plan, and the International Plans for the years ended December 31, 2012, 2011, and 2010 were as follows:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Service cost |
$ | | $ | | $ | | $ | 5 | $ | 4 | $ | 5 | $ | 4 | $ | 4 | $ | 3 | ||||||||||||||||||
Interest cost |
21 | 23 | 22 | 16 | 17 | 19 | 5 | 5 | 6 | |||||||||||||||||||||||||||
Expected return on plan assets |
(17) | (17) | (18) | (21) | (21) | (18) | (4) | (4) | (4) | |||||||||||||||||||||||||||
Amortization of prior service cost (credit) |
4 | 4 | | (16) | (3) | | | | | |||||||||||||||||||||||||||
Amortization of net loss (gain) |
(1) | 4 | 6 | 3 | 1 | 7 | 1 | 1 | 1 | |||||||||||||||||||||||||||
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Net periodic pension cost (credit) |
7 | 14 | 10 | (13) | (2) | 13 | 6 | 6 | 6 | |||||||||||||||||||||||||||
Settlement losses |
| | | | | | | 1 | | |||||||||||||||||||||||||||
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Net pension cost (credit) |
$ | 7 | $ | 14 | $ | 10 | $ | (13) | $ | (2) | $ | 13 | $ | 6 | $ | 7 | $ | 6 | ||||||||||||||||||
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The weighted-average assumptions used to determine benefit obligations as of December 31, 2012 and 2011 were as follows:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Discount rate |
3.9% | 4.9% | 4.7 | % | 5.0 | % | 3.8 | % | 4.6 | % | ||||||||||||||
Salary inflation |
N/A | N/A | 1.9 | % | 1.7 | % | 2.2 | % | 2.8 | % | ||||||||||||||
Pension inflation |
N/A | N/A | 2.8 | % | 2.9 | % | 2.0 | % | 1.8 | % |
The weighted-average assumptions used to determine net periodic pension cost for the years ended December 31, 2012, 2011, and 2010 were as follows:
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
Discount rate |
4.9% | 5.4% | 5.7% | 5.0% | 5.7% | 5.8% | 4.6% | 5.0% | 5.3% | |||||||||||||||||||||||||||
Expected return on plan assets |
6.8% | 6.8% | 6.8% | 6.5% | 6.5% | 6.6% | 6.2% | 6.2% | 6.9% | |||||||||||||||||||||||||||
Salary inflation |
N/A | N/A | N/A | 1.7% | 2.6% | 4.6% | 2.8% | 3.3% | 3.4% | |||||||||||||||||||||||||||
Pension inflation |
N/A | N/A | N/A | 2.9% | 3.0% | 3.4% | 1.8% | 1.8% | 1.9% |
The investment objectives for the various plans are preservation of capital, current income, and long-term growth of capital. All plan assets are managed by outside investment managers and do not include investments in Company stock. Asset allocations are reviewed periodically.
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Expected long-term returns on plan assets are determined using historical performance for debt and equity securities held by our plans, actual performance of plan assets, and current and expected market conditions. Expected returns are formulated based on the target asset allocation. The target asset allocation for the Domestic Plan as a percentage of total plan assets as of December 31, 2012 and 2011 was 50 percent in funds that invest in equity securities, and 50 percent in funds that invest in debt securities. The U.K. Plan and International Plans target asset allocation as a percentage of total plan assets as of December 31, 2012 and 2011 was 36 percent in funds that invest in equity securities, 50 percent in funds that invest in debt securities, and 14 percent in property funds.
The following table presents the fair value hierarchy, as defined in Note 2: Basis of Presentation and Summary of Significant Accounting Policies, of total plan assets measured at fair value as of December 31, 2012 and 2011 by asset category. The fair value of Level 2 assets were based on available market pricing information of similar financial instruments.
December 31, 2012 | ||||||||||||||||||||||||||||||||||||
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | | $ | | $ | | $ | | $ | 11 | $ | | $ | | ||||||||||||||||||
Equity funds |
54 | 98 | | | 138 | | | 9 | | |||||||||||||||||||||||||||
Debt securities |
16 | 103 | | | | | | | | |||||||||||||||||||||||||||
Bond funds |
| | | | 163 | | | 15 | | |||||||||||||||||||||||||||
Real estate funds |
| | | | 58 | | | 1 | | |||||||||||||||||||||||||||
Other |
| 2 | | | 4 | | | 49 | | |||||||||||||||||||||||||||
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Total |
$ | 70 | $ | 203 | $ | | $ | | $ | 363 | $ | | $ | 11 | $ | 74 | $ | | ||||||||||||||||||
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December 31, 2011 | ||||||||||||||||||||||||||||||||||||
Domestic Plan | U.K. Plan | International Plans | ||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | | $ | | $ | | $ | | $ | 10 | $ | | $ | | ||||||||||||||||||
Equity funds |
47 | 85 | | | 111 | | | 6 | | |||||||||||||||||||||||||||
Debt securities |
9 | 105 | | | | | | | | |||||||||||||||||||||||||||
Bond funds |
| | | | 153 | | | 15 | | |||||||||||||||||||||||||||
Real estate funds |
| | | | 44 | | | | | |||||||||||||||||||||||||||
Other |
| 3 | | | 10 | | | 52 | | |||||||||||||||||||||||||||
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Total |
$ | 56 | $ | 193 | $ | | $ | | $ | 318 | $ | | $ | 10 | $ | 73 | $ | | ||||||||||||||||||
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We expect to contribute approximately $47 million, $5 million, and $8 million to the Domestic Plan, the U.K. Plan, and the International Plans, respectively, in 2013.
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As of December 31, 2012, the benefits expected to be paid in the next five years and in the aggregate for the five years thereafter were as follows:
Domestic Plan | U.K. Plan |
International
Plans |
||||||||||
(in millions) | ||||||||||||
Year |
||||||||||||
2013 |
$ | 80 | $ | 13 | $ | 14 | ||||||
2014 |
27 | 13 | 9 | |||||||||
2015 |
26 | 13 | 9 | |||||||||
2016 |
26 | 13 | 9 | |||||||||
2017 |
26 | 13 | 9 | |||||||||
2018 - 2022 |
130 | 70 | 45 | |||||||||
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$ | 315 | $ | 135 | $ | 95 | |||||||
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Domestic Plan
As of January 1, 2007, the frozen Domestic Plan and plans maintained for certain domestic hotels currently or formerly managed by us were merged into a multiple employer plan. As of December 31, 2012, the multiple employer plan had combined assets of $303 million and a projected benefit obligation of $526 million.
A class action lawsuit was filed in 1998 against Hilton and the Domestic Plan claiming that the Domestic Plan did not calculate benefit obligations in accordance with the terms of the plan nor were vesting rules followed in accordance with the plan. In May 2009, the U.S. District Court for the District of Columbia (the District Court) found in favor of the plaintiff in a summary judgment and required that we and the plaintiff enter into mediation to reach agreement on the amounts necessary for recognition of service and benefits for plan participants and in August 2011, the District Court issued a final order with respect to this lawsuit. Both Hilton and the plaintiff appealed various aspects of the final order to the U.S. Court of Appeals.
In December 2012, the U.S. Court of Appeals affirmed the ruling of the District Court, and further appellate rights expired in January 2013. Based on the final order, we believe the best estimate of the minimum additional pension obligation based on the final order as issued by the District Court is approximately $109 million, which is included in the projected benefit obligation as of December 31, 2012. We had accrued in other long-term liabilities $109 million and $104 million as of December 31, 2012 and 2011, respectively. The estimated additional obligation will be recognized as additional pension expense over the average remaining life expectancy of the plan participants as determined by our actuaries, with the remainder of the obligation having been recognized in accumulated other comprehensive loss as an adjustment of the pension liability.
In February 2012, the District Court ordered us to post bond of $76 million under the litigation to support potential future plan contributions. We funded an account, which is classified as restricted cash and cash equivalents, with this amount to support this requirement, and the bond will be released upon the future contributions being made. The Company is currently undertaking a process to clarify certain matters with the District Court to permit the adoption of an amended plan, considering the requirements of the ruling in the final order. As the matters are clarified and a new plan is adopted, the Company will be required to make contributions to allow for the adoption of the amendments. These contribution amounts are estimated to increase 2013 contributions by approximately $39 million and are included in the estimated contributions described above. The value of the bond may be applied toward the required contributions as necessary.
U.K. Plan
In March 2012, we, along with the trustees of the U.K. Plan, adopted an agreement to freeze the defined benefit plan for enrollment to new employees effective immediately, and to freeze the accrual of benefits to existing
F-41
employees on November 30, 2013. A defined contribution plan will be put in place for the affected employees. We recognized an acceleration of prior service credit of $13 million related to the adoption of this agreement during the year ended December 31, 2012.
In May 2011, we, along with the trustees for the U.K. Plan, reached a tentative agreement on the funded status and security for the U.K. Plan. This agreement extended our GBP 15 million guarantee (equivalent to $24 million as of December 31, 2012) to December 2013 and included a one-time voluntary cash contribution of GBP 5 million (equivalent to approximately $8 million) by us to the plan, which was funded during the year ended December 31, 2011.
Other Benefit Plans
We also have plans covering qualifying employees and non-officer directors (the Supplemental Plans). Benefits for the Supplemental Plans are based upon years of service and compensation. Since December 31, 1996, employees and non-officer directors have not accrued additional benefits under the Supplemental Plans. These plans are self-funded by us and, therefore, have no plan assets isolated to pay benefits due to employees. As of December 31, 2012 and 2011, these plans had benefit obligations of $13 million, which were fully accrued in our consolidated balance sheets. Expense incurred under the Supplemental Plans for the years ended December 31, 2012, 2011, and 2010 was not significant.
We have various employee defined contribution investment plans whereby we contribute matching percentages of employee contributions. The aggregate expense under these plans totaled $18 million, $18 million, and $17 million for the years ended December 31, 2012, 2011, and 2010, respectively.
Multi-Employer Pension Plans
Certain employees are covered by union sponsored multi-employer pension plans pursuant to agreements between us and various unions. Our participation in these plans is outlined in the table below:
Pension Fund |
EIN/Pension
Plan Number |
Pension Protection
Act Zone Status |
Contributions | |||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2010 | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund |
13-1764242 | Pending | Yellow | $ | 13 | $ | 13 | $ | 13 | |||||||||||||||
Other plans |
11 | 9 | 9 | |||||||||||||||||||||
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Total contributions |
$ | 24 | $ | 22 | $ | 22 | ||||||||||||||||||
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Eligible employees at our owned hotels in New York City participate in the New York Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund (New York Pension Fund). Our contributions are based on a percentage of all union employee wages as dictated by the collective bargaining agreement that expires on June 30, 2019. Our contributions exceeded 5 percent of the total contributions to the New York Pension Fund in 2011, as indicated in the New York Pension Funds Annual Return/Report of Employee Benefit Plan on IRS Form 5500 for the year ended December 31, 2011. The New York Pension Fund has implemented a funding improvement plan, and we have not paid a surcharge.
Note 20: Share-Based Compensation
Original Promote Plan
In August 2008, BH Hotels established an executive equity compensation plan (the original Promote plan) for members of our senior management team. The original Promote plan provided for the grant of restricted profits
F-42
interest units in the form of B-1 Units and B-2 Units issued by BH Hotels. We recognized the capital contributions from our Ultimate Parent associated with these awards to our employees as additional paid-in capital.
The B-1 Units vested ratably over a five year period based on continued employment, with acceleration of vesting upon certain defined change in control events. The estimated grant date fair value of these B-1 awards was recognized over the requisite service period of these awards using the accelerated attribution method of expense recognition.
The B-2 Units vested solely in the event that the principal owners of BH Hotels achieved specified returns on their investments in BH Hotels and other service conditions. Because the performance condition required to vest in the B-2 Units was not likely to be achieved, the aggregate grant date fair value of these awards of $25.4 million was not recognized.
New Promote Plan
In November 2010, BH Hotels offered certain members of our senior management team the opportunity to participate in an executive compensation plan (the Promote plan). The Promote plan provides for the grant of a Tier I liability award, or an alternative cash payment in lieu thereof, and a Tier II equity award. The Tier I liability awards provide the participants the right to share in 2.75 percent of the equity value of Hilton up to $8.352 billion (or $230 million) based on the achievement of certain service and performance conditions. The awards vest based on continued employment in equal annual installments over five years. Vesting accelerates on the Acceleration Date, defined as the date on which Blackstone and its affiliates cease to own, beneficially or of record, at least 50 percent of BH Hotels Class A Units. The ultimate value of the award is affected by Hiltons equity value on the Acceleration Date. The plan initially allowed for a portion of the Tier I liability awards to be paid in three annual early installments, if an Acceleration Date had not been achieved by April 2013. Each early installment payment is contingent on continued employment with us or one of our affiliates on each applicable early installment payment date. The early installments for the full participant group is a maximum of $50 million annually, less applicable withholding taxes. None of the early installments are subject to recovery by us in the event that the participant terminates employment prior to an Acceleration Date or if the ultimate value of the Tier I liability awards at the Acceleration Date is less than the early installment payments paid. Since the value of the Tier I liability awards is a fixed monetary amount known at inception and settleable with cash, the awards are classified and accounted for as liability awards.
The Tier II equity awards allow participants to share in Hiltons equity growth above $8.352 billion and are also subject to service and performance conditions. Subject to continued employment with us or one of our affiliates, the Tier II equity awards will vest fully on the Acceleration Date. Payments will be made in respect of the Tier II equity awards only after the owners of Class A Units in BH Hotels have received a return of the value at grant date of their capital investment. As the vesting of the Tier II equity awards are subject to the achievement of a performance condition in the form of a liquidity event that is not probable, no expense has been recognized related to Tier II equity awards.
In November 2012, we offered certain members of our senior management team the opportunity to participate in a new cash retention award in exchange for cancellation of their participation in the Promote plan. The cash retention award will be paid in two equal installments with the first installment being paid by December 31, 2012, and the second installment being paid by December 31, 2013.
Those who elected not to accept the new cash retention award will continue to vest in the Promote plan. The vesting period was modified to accelerate the remaining two early installment payments. The original payment dates, assuming no acceleration for a liquidity event, was April 2014 and 2015, which have been accelerated to April 2013 and 2014. The acceleration of the early installment payments resulted in additional compensation cost of $3 million during the year ended December 31, 2012.
F-43
Accounting for the Modification
Because the original Promote plan was modified through the issuance of new awards, incremental compensation was measured as the excess, if any, of the fair value of the modified awards over the fair value of the original awards immediately before their terms were modified. The measured cost of a modified award generally cannot be less than the grant-date fair value of the original award.
The incremental fair value associated with the Tier II equity awards was separated from the Tier I liability awards. This separation was required because a component of the incremental fair value for Tier I liability awards is being recognized beginning on the modification date, while the incremental fair value for Tier II equity awards will not be recognized until the performance condition associated with the Tier II equity awards is probable. The separation of incremental fair values between Tier I liability awards and Tier II equity awards was calculated based on the relative fair values of the Tier I and Tier II awards at the modification date.
As the modification of B-1 Units and B-2 Units and allocation to the Tier I liability awards changed the balance sheet classification of the award, $7 million of previously recognized compensation cost was reclassified from additional paid-in capital to other long-term liabilities. The modification also resulted in $51 million of incremental compensation expense recognized as of December 3, 2010 for the Tier I liability awards.
Payments on Share-Based Compensation Plans
Total payments under the Promote plan and cash retention awards during the year ended December 31, 2012 were $95 million. No payments were made during the years ended December 31, 2011 and 2010.
During the first quarter of 2012, the first installment payments for the Tier I liability awards were accelerated, which resulted in $9 million of additional share-based compensation expense during the year ended December 31, 2012. The amount of the payment was approximately $25 million.
During the fourth quarter of 2012, we paid the first installment to the 13 participants who elected to receive the retention award in exchange for cancellation of their participation in the Promote plan which totaled approximately $9 million. We recognized $9 million of additional share-based compensation expense during the year ended December 31, 2012 for those participants who elected the retention award.
During the fourth quarter of 2012, we made payments totaling $55 million under the Promote plan. A portion of these payments resulted from the acceleration of installment payments for certain executives. The acceleration of the installment payments resulted in additional compensation cost of $10 million during the year ended December 31, 2012.
A number of participants in the Promote plan terminated their employment with us during the year ended December 31, 2012. We made separation payments related to the participants vested portion of the Promote plan totaling $6 million during the year ended December 31, 2012.
We expect future payments under the Promote plan and retention awards to total $18 million and $7 million during the years ending December 31, 2013 and 2014, respectively.
Summary of Share-Based Compensation Expense and Related Activity
Total compensation expense under the original Promote plan totaled $5 million for the year ended December 31, 2010. Total compensation expense related to the new Promote plan and cash retention award, was $50 million, $19 million, and $51 million for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012, there was $286 million of unrecognized compensation expense related to the Promote plan and cash retention award, $7 million of which is expected to be recognized through April 2014 and $279 million of which is subject to the achievement of a performance condition, which is currently not probable of being met.
F-44
The liability awards have been recorded at estimated fair value of $18 million and $69 million as of December 31, 2012 and 2011, respectively, and will be remeasured at each reporting date until settlement. As of December 31, 2012, $13 million was included in accounts payable, accrued expenses, and other in our consolidated balance sheet. There was no amount classified in current liabilities as of December 31, 2011 related to the Promote plan and retention awards. The portion of the liability, if any, in excess of the early installment payments that vests only upon an Acceleration Date will only be recognized if the liquidity event occurs.
In calculating the compensation expense for the Tier I liability awards and Tier II equity awards granted, we have estimated the fair value of these awards as of December 31, 2012 using a lattice-based binomial model. The fair value of the Tier I liability awards and the Tier II equity awards was calculated based on the following assumptions, which were evaluated and revised, as necessary, to reflect market conditions and experience:
2012 | 2011 | 2010 | ||||||||||
Dividend yield |
% | % | % | |||||||||
Expected volatility |
23% | 31% | 31% | |||||||||
Risk-free interest rate |
0.4% | 0.8% | 1.7% | |||||||||
Expected term (in years) |
2.9 | 3.9 | 5.1 |
The dividend yield is based on no current annual dividend being paid. Volatility is based on historical information from us and our competitors with terms consistent with the expected life of our awards. The risk-free rate is based on the quoted treasury yield curve, with terms consistent with the expected life of our awards.
A summary of the activity of the Tier II equity awards was as follows:
Promote Plan | ||||||||
Tier II | ||||||||
Units |
Weighted-
Average Fair Value |
|||||||
Balance as of December 31, 2011 |
283,072,516 | $ | 1.03 | |||||
Granted |
| | ||||||
Forfeited |
(54,025,398) | 1.21 | ||||||
|
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|||||||
Balance as of December 31, 2012 |
229,047,118 | $ | 1.18 | |||||
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Note 21: Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of taxes, were as follows:
December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Foreign currency translation adjustment |
$ | (317) | $ | (441) | $ | (362) | ||||||
Unrealized losses on pension obligations |
(194) | (153) | (140) | |||||||||
Unrealized gains on hedging instruments |
105 | 105 | 104 | |||||||||
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$ | (406) | $ | (489) | $ | (398) | |||||||
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Note 22: Business Segments
We are a diversified hospitality company with operations organized in three distinct operating segments: ownership, management and franchise, and timeshare. Each segment is managed separately because of its distinct economic characteristics.
F-45
The ownership segment includes all hotels that we wholly own or lease, as well as consolidated non-wholly owned entities and consolidated VIEs. As of December 31, 2012, this segment included 123 wholly owned and leased hotels and resorts, three non-wholly owned hotel properties, and three hotels of consolidated VIEs. While we do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment revenues or segment operating income (loss), we manage these investments in our ownership segment. Our unconsolidated affiliates are primarily investments in entities that owned or leased 32 hotels as of December 31, 2012.
The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us under one of our proprietary brand names of our hotel brand portfolio. As of December 31, 2012, this segment included 453 managed hotels and 3,312 franchised hotels. This segment earns fees for managing properties in our ownership segment.
The timeshare segment includes the development of vacation ownership clubs and resorts, marketing and selling of timeshare intervals, providing timeshare customer financing, and licensing fees paid by third parties for the use of our Hilton Grand Vacations brand name. This segment also provides assistance to third-party developers in selling their timeshare inventory. As of December 31, 2012, this segment included 40 timeshare properties.
Corporate and other represents revenues and related operating expenses generated by the incidental support of hotel operations for owned, leased, managed, and franchised hotels and other rental income, as well as corporate assets and related expenditures.
The performance of our operating segments is evaluated primarily on Adjusted EBITDA, which should not be considered an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. We define Adjusted EBITDA as net income attributable to Hilton stockholder before interest expense, income tax expense (benefit), and depreciation and amortization, further adjusted to exclude certain items, including, but not limited to gains, losses, and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment charges; (v) furniture, fixtures and equipment (FF&E) replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based and certain other compensations expenses; (viii) severance, relocation and other expenses; and (ix) other items.
F-46
The following table presents revenues and Adjusted EBITDA for our reportable segments, reconciled to consolidated amounts:
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Revenues: |
||||||||||||
Ownership |
$ | 4,006 | $ | 3,926 | $ | 3,684 | ||||||
Management and franchise |
1,180 | 1,095 | 933 | |||||||||
Timeshare |
1,085 | 944 | 863 | |||||||||
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|
|||||||
Segment revenues |
6,271 | 5,965 | 5,480 | |||||||||
Other revenues from managed and franchised properties |
3,124 | 2,927 | 2,637 | |||||||||
Other revenues |
66 | 58 | 59 | |||||||||
Intersegment fees elimination (1)(2)(3) |
(185) | (167) | (108) | |||||||||
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|
|||||||
Total revenues |
$ | 9,276 | $ | 8,783 | $ | 8,068 | ||||||
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|
|||||||
Adjusted EBITDA |
||||||||||||
Ownership (1)(4) |
$ | 793 | $ | 725 | $ | 688 | ||||||
Management and franchise (2) |
1,180 | 1,095 | 927 | |||||||||
Timeshare |
252 | 207 | 212 | |||||||||
Corporate and other (3) |
(269) | (274) | (263) | |||||||||
|
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|
|
|
|
|||||||
Adjusted EBITDA |
$ | 1,956 | $ | 1,753 | $ | 1,564 | ||||||
|
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(1) | Includes charges to timeshare operations for rental fees and fees for other amenities, which are eliminated in our consolidated financial statements. These charges totaled $24 million, $27 million, and $17 million for the years ended December 31, 2012, 2011, and 2010, respectively. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to ownership Adjusted EBITDA and a cost to the timeshare segment. |
(2) | Includes management, royalty, and intellectual property fees of $96 million, $88 million, and $82 million for the years ended December 31, 2012, 2011, and 2010, respectively. These fees are charged to consolidated owned and leased properties and are eliminated in our consolidated financial statements. Effective January 1, 2011, management and franchise began charging a licensing fee to our timeshare segment, which is also eliminated in our consolidated financial statements. This fee was $52 million and $43 million for the years ended December 31, 2012 and 2011, respectively. While the net impact is zero, our measure of segment Adjusted EBITDA includes these fees as a benefit to management and franchise Adjusted EBITDA and a cost to the ownership and timeshare segments. |
(3) | Includes charges to consolidated owned and leased properties for services provided by our wholly-owned laundry business of $10 million, $9 million, and $9 million for the years ended December 31, 2012, 2011, and 2010, respectively. These charges are eliminated in our consolidated financial statements. |
(4) | Includes unconsolidated affiliate Adjusted EBITDA. |
F-47
The table below provides a reconciliation of Adjusted EBITDA to EBITDA and EBITDA to net income attributable to Hilton stockholder:
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Adjusted EBITDA |
$ | 1,956 | $ | 1,753 | $ | 1,564 | ||||||
Net loss (income) attributable to noncontrolling interests |
(7) | (2) | 17 | |||||||||
Gain (loss) on foreign currency transactions |
23 | (21) | 18 | |||||||||
FF&E replacement reserve |
(68) | (57) | (48) | |||||||||
Share-based compensation expense |
(50) | (19) | (56) | |||||||||
Impairment losses |
(54) | (20) | (24) | |||||||||
Impairment losses included in equity in losses from unconsolidated affiliates |
(19) | (141) | (6) | |||||||||
Gain on debt restructuring |
| | 789 | |||||||||
Other gain, net |
15 | 19 | 8 | |||||||||
Other adjustment items (1) |
(64) | (51) | (242) | |||||||||
|
|
|
|
|
|
|||||||
EBITDA |
1,732 | 1,461 | 2,020 | |||||||||
Interest expense |
(569) | (643) | (946) | |||||||||
Interest expense included in equity in losses from unconsolidated affiliates |
(13) | (12) | (16) | |||||||||
Income tax benefit (expense) |
(214) | 59 | (308) | |||||||||
Depreciation and amortization |
(550) | (564) | (574) | |||||||||
Depreciation and amortization included in equity in losses from unconsolidated affiliates |
(34) | (48) | (48) | |||||||||
|
|
|
|
|
|
|||||||
Net income attributable to Hilton stockholder |
$ | 352 | $ | 253 | $ | 128 | ||||||
|
|
|
|
|
|
(1) | Represents adjustments for legal expenses, severance and certain guarantee payments. Includes $150 million of legal settlement expense, including a cash payment of $75 million for the year ended December 31, 2010. |
The following table presents assets for our reportable segments, reconciled to consolidated amounts:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
Assets: |
||||||||
Ownership |
$ | 12,316 | $ | 12,448 | ||||
Management and franchise |
11,650 | 11,842 | ||||||
Timeshare |
1,839 | 1,807 | ||||||
Corporate and other |
1,261 | 1,215 | ||||||
|
|
|
|
|||||
$ | 27,066 | $ | 27,312 | |||||
|
|
|
|
F-48
The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
Capital expenditures for property and equipment: |
||||||||||||
Ownership (1) |
$ | 396 | $ | 368 | $ | 132 | ||||||
Timeshare |
28 | 12 | 5 | |||||||||
Corporate and other |
9 | 9 | 11 | |||||||||
|
|
|
|
|
|
|||||||
$ | 433 | $ | 389 | $ | 148 | |||||||
|
|
|
|
|
|
(1) | Excludes acquisitions of $12 million and $216 million for the years ended December 31, 2011 and 2010, respectively. |
Revenues by country were as follows:
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
(in millions) | ||||||||||||
U.S. |
$ | 6,743 | $ | 6,293 | $ | 5,754 | ||||||
All other |
2,533 | 2,490 | 2,314 | |||||||||
|
|
|
|
|
|
|||||||
$ | 9,276 | $ | 8,783 | $ | 8,068 | |||||||
|
|
|
|
|
|
Other than the U.S., there were no countries that individually represented more than ten percent of total revenues for the years ended December 31, 2012, 2011, and 2010.
Property and equipment, net by country were as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
(in millions) | ||||||||
U.S. |
$ | 8,252 | $ | 8,186 | ||||
All other |
945 | 931 | ||||||
|
|
|
|
|||||
$ | 9,197 | $ | 9,117 | |||||
|
|
|
|
Other than the U.S., there were no countries which individually comprised over ten percent of total property and equipment, net as of December 31, 2012 and 2011.
Note 23: Commitments and Contingencies
As of December 31, 2012, we had outstanding guarantees of $32 million, with remaining terms ranging from six months to ten years, for debt and other obligations of third parties. We have two letters of credit, which are supported by restricted cash and cash equivalents, for a total of $27 million that have been pledged as collateral for two of these guarantees. Although we believe it is unlikely that material payments will be required under these guarantees or letters of credit, there can be no assurance that this will be the case.
We have also provided performance guarantees to certain owners of hotels that we operate under management contracts. Most of these guarantees allow us to terminate the contract, rather than fund shortfalls, if specified performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of December 31, 2012, we had nine contracts containing performance guarantees, with expirations ranging
F-49
from 2013 to 2030, and possible cash outlays totaling approximately $196 million. Funding under these guarantees in future periods is dependent on the operating performance levels of these hotels over the remaining terms of the performance guarantees. We do not have any letters of credit pledged as collateral against these guarantees. As of December 31, 2012, we recorded current liabilities of approximately $30 million and non-current liabilities of approximately $57 million in our consolidated balance sheet for obligations under our outstanding performance guarantees related to certain VIEs for which we are not the primary beneficiary. As of December 31, 2011, we recorded non-current liabilities of approximately $88 million related to these performance guarantees.
As of December 31, 2012 we had the following commitments:
| Contract acquisition costs of $49 million, the majority of which are expected to be paid over the next two years. |
| In June 2012, we entered into an agreement with a developer in Las Vegas, Nevada, whereby we will purchase residential units from the developer that we will convert to timeshare units to be marketed and sold under our Hilton Grand Vacations brand. Subject to certain conditions, we will be required to purchase approximately $92 million of inventory ratably over a period of four years. As of December 31, 2012, we had not purchased any inventory under this agreement. We plan to purchase approximately $6 million of inventory in the first quarter of 2013, with subsequent purchases of approximately $6 million per quarter over the next 15 quarters. |
In addition to the above, in the normal course of business we enter into purchase commitments for which we are reimbursed by the owners of our managed and franchised hotels. These obligations will not have a material effect on our consolidated results of operations, financial position, or cash flows.
Also, as of December 31, 2012, we had outstanding commitments under construction contracts of approximately $72 million for capital expenditures at certain owned and leased properties, including our consolidated VIEs. Our construction contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.
During 2010, an affiliate of our Ultimate Parent settled a $75 million liability on our behalf in conjunction with a lawsuit settlement by entering into service contracts with the plaintiff. We recorded the portion settled by the affiliate of our Ultimate Parent as a non-cash capital contribution. Additionally, as part of the settlement, we entered into a guarantee with the plaintiff to pay any shortfall that the affiliate of our Ultimate Parent does not fund related to those service contracts up to the value of the settlement amount made by the affiliate of our Ultimate Parent. The remaining potential exposure under this guarantee as of December 31, 2012 was approximately $57 million. We have not accrued a liability for this guarantee as we believe the likelihood of any material funding to be remote. In 2011, we received a payment of $20 million from our insurance carrier in recovery of legal expenses incurred by us as part of the settlement. We recognized these proceeds as a reduction to general, administrative, and other expenses in our consolidated statement of operations for the year ended December 31, 2011.
We are involved in other litigation arising from the normal course of business, some of which includes claims for substantial sums. Although we cannot predict the outcome of litigation with certainty, generally accepted accounting principles require us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made for contingencies where there is at least a reasonable possibility that a loss may have been incurred. We have a thorough process to determine an estimate of the reasonably possible loss or range of loss before we conclude and disclose that an estimate cannot be made. A reasonably possible loss or range of loss associated with any of our material litigation cannot be estimated. While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of December 31, 2012 will not have a material effect on our consolidated results of operations, financial position, or cash flows.
F-50
Note 24: Related Party Transactions
Investment in Affiliates
We hold investments in affiliates that own or lease properties that we manage or franchise. We recognized management and franchise fee revenue of $29 million, $32 million, and $26 million for the years ended December 31, 2012, 2011, and 2010, respectively, related to our agreements for these properties. We recognized reimbursements and reimbursable costs for these hotels, primarily related to payroll and marketing expenses, of $172 million, $148 million, and $137 million in other revenue and expense from managed and franchised properties in our consolidated statements of operations for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012 and 2011, we had accounts receivable due from these properties related to these management and franchise fees and reimbursements of $21 million and $17 million, respectively. Additionally, in certain cases we incur costs to acquire management contracts with our unconsolidated affiliates or provide loans or guarantees on behalf of these entities. We incurred acquisition costs of $18 million and $1 million for the years ended December 31, 2011 and 2010 related to such contracts. There were no acquisition costs for the year ended December 31, 2012 related to such contracts. As of December 31, 2012 and 2011, we had unamortized acquisition costs of $18 million and $19 million, respectively, recorded in management and franchise contracts, net in our consolidated balance sheets. As of December 31, 2012 and 2011, we had other financing receivables, net related to these properties of $17 million and $20 million, respectively. We recorded interest income on these other financing receivables of $3 million, $3 million, and $2 million for the years ended December 31, 2012, 2011 and 2010, respectively. We generally own between 10% and 50% of these equity method investments. See Note 2: Basis of Presentation and Summary of Significant Accounting Policies, for further discussion.
The Blackstone Group
Affiliates of Blackstone directly and indirectly own hotels that we manage or franchise and receive fees in connection with those management and franchise agreements. We recognized management and franchise fee revenue of $29 million, $23 million, and $16 million for the years ended December 31, 2012, 2011, and 2010, respectively, related to our agreements for these hotels. We recognized reimbursements and reimbursable costs for these hotels, primarily related to payroll and marketing expenses, of $135 million, $101 million, and $93 million in other revenue and expense from managed and franchised properties in our consolidated statements of operations for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012 and 2011, we had accounts receivable due from these hotels related to these management and franchise fees and reimbursements of $28 million and $19 million, respectively. Additionally, in certain cases, we incur costs to acquire management and franchise contracts with hotels owned by affiliates of Blackstone. We incurred acquisition costs of $5 million for the year ended December 31, 2011 related to these contracts. There were no acquisition costs for the years ended December 31, 2012 and 2010 related to these contracts. As of December 31, 2012 and 2011, we had unamortized acquisition costs of $6 million recorded in management and franchise contracts, net in our consolidated balance sheets. As of December 31, 2012 and 2011, we had $5 million accrued in accounts payable, accrued expenses, and other in our consolidated balance sheets related to contract acquisition costs for these hotels. Our maximum exposure to loss related to these hotels is limited to the amounts discussed above; therefore, our involvement with these hotels does not expose us to additional variability or risk of loss.
We also purchase products and services from entities affiliated with or owned by Blackstone. The fees paid for these products and services were $26 million, $23 million, and $23 million, during the years ended December 31, 2012, 2011, and 2010, respectively.
Note 25: Supplemental Disclosures of Cash Flow Information
Interest paid during the years ended December 31, 2012, 2011, and 2010, was $486 million, $470 million, and $686 million, respectively.
F-51
Income taxes, net of refunds, paid during the years ended December 31, 2012, 2011, and 2010 were $103 million, $114 million, and $80 million, respectively.
The following non-cash investing and financing activities were excluded from the consolidated statements of cash flows:
| In 2012, we executed a capital lease in conjunction with the acquisition of OHC, for which we recorded a capital lease asset and obligation of $15 million as of December 31, 2012. See Note 3: Acquisitions for further discussion. |
| In 2011, two of our consolidated VIEs restructured their debt resulting in a reduction of our capital lease assets and obligations of $76 million and $73 million, respectively, as of December 31, 2011. See Note 9: Consolidated Variable Interest Entities for further discussion. |
| In 2010, our Parent extinguished on our behalf the two most-junior tranches of our secured mezzanine loans with an aggregate outstanding principal amount of $2.0 billion, as well as the respective outstanding deferred cash interest payments through the date of the Debt Restructuring, totaling $87 million. This resulted in a reduction to our liabilities and an increase to additional paid-in capital of approximately $2.1 billion. See Note 13: Debt for further discussion. |
| Upon our formation, we recognized an equity contribution of $25 million for the transfer of ownership from a former subsidiary of our Ultimate Parent to our Parent. Additionally, in 2010, an affiliate of our Ultimate Parent settled a $75 million liability on our behalf, which we recognized as an equity contribution. |
Note 26: Subsequent Events
The Company has evaluated all subsequent events through September 6, 2013, the date the consolidated financial statements were available to be issued.
Capital Lease Restructuring
In February 2013, Osaka Hilton Co., Ltd., one of our consolidated VIEs, signed a Memorandum of Understanding to restructure the terms of their capital lease. The terms of the restructuring call for a reduction in future rent expense under the lease, as well as a commitment to fund capital improvements to the hotel over the next three years. The effect of the capital lease restructuring resulted in a reduction in property and equipment, net, of $44 million and a reduction in non-recourse debt and capital lease obligations of consolidated variable interest entities of $48 million and was recognized during the first quarter of 2013. In conjunction with the lease restructuring and to fund a portion of the capital improvements, we committed to purchase additional non-voting shares in Osaka Hilton Co., Ltd. Our total share purchase commitment is approximately $15 million, and the purchases are expected to occur through 2015.
Revolving Non-Recourse Timeshare Notes Credit Facility
In May 2013, we entered into a receivables loan agreement that is secured by certain of our timeshare financing receivables. Concurrently, we borrowed $400 million under the agreement, which is secured by $448 million of our timeshare financing receivables. The proceeds from the receivables loan were used to make an unscheduled debt payment of $400 million on our Secured Debt.
Asset-Backed Notes
In August 2013, we issued $250 million in aggregate principal amount of 2.28% notes that are secured by a pledge of certain assets, consisting primarily of a pool of our timeshare financing receivables secured by a first mortgage or first deed of trust on a timeshare interest. Interest on the notes is payable monthly at an annual rate
F-52
of 2.28%. The proceeds from the asset-backed notes were used to reduce the outstanding balance on our revolving non-recourse timeshare notes credit facility we entered into in May 2013.
Repayment of Debt
In 2013, we made unscheduled, contractually obligated debt repayments totaling $27 million. We funded these repayments with proceeds we received from the sale of an owned hotel and proceeds from a debt refinancing and distribution to us by one of our equity investments. Additionally, in 2013, we have made unscheduled, voluntary debt repayments totaling $900 million on our secured mezzanine loans, which includes the $400 million repayment with proceeds from our revolving timeshare notes credit facility discussed above.
F-53
Hilton Worldwide Holdings Inc.
Condensed Consolidated Balance Sheets
(in millions, except share data)
September 30,
2013 |
December 31,
2012 |
|||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 724 | $ | 755 | ||||
Restricted cash and cash equivalents |
502 | 550 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $32 and $39 |
813 | 719 | ||||||
Inventories |
386 | 415 | ||||||
Deferred income tax assets |
75 | 76 | ||||||
Current portion of financing receivables, net |
94 | 119 | ||||||
Current portion of securitized financing receivables, net |
27 | | ||||||
Prepaid expenses |
156 | 153 | ||||||
Other |
40 | 40 | ||||||
|
|
|
|
|||||
Total current assets (variable interest entities - $89 and $49) |
2,817 | 2,827 | ||||||
|
|
|
|
|||||
Property, Investments, and Other Assets: |
||||||||
Property and equipment, net |
9,071 | 9,197 | ||||||
Financing receivables, net |
623 | 815 | ||||||
Securitized financing receivables, net |
202 | | ||||||
Investments in affiliates |
268 | 291 | ||||||
Goodwill |
6,205 | 6,197 | ||||||
Brands |
5,012 | 5,029 | ||||||
Management and franchise contracts, net |
1,467 | 1,600 | ||||||
Other intangible assets, net |
723 | 744 | ||||||
Deferred income tax assets |
103 | 104 | ||||||
Other |
238 | 262 | ||||||
|
|
|
|
|||||
Total property, investments, and other assets (variable interest entities - $316 and $168) |
23,912 | 24,239 | ||||||
|
|
|
|
|||||
TOTAL ASSETS |
$ | 26,729 | $ | 27,066 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable, accrued expenses, and other |
$ | 1,940 | $ | 1,922 | ||||
Current maturities of long-term debt |
356 | 392 | ||||||
Current maturities of non-recourse debt |
53 | 15 | ||||||
Income taxes payable |
61 | 20 | ||||||
|
|
|
|
|||||
Total current liabilities (variable interest entities - $89 and $51) |
2,410 | 2,349 | ||||||
Long-term debt |
13,923 | 15,183 | ||||||
Non-recourse debt |
653 | 405 | ||||||
Deferred income tax liabilities |
5,040 | 4,948 | ||||||
Liability for guest loyalty program |
546 | 503 | ||||||
Other |
1,604 | 1,523 | ||||||
|
|
|
|
|||||
Total liabilities (variable interest entities - $619 and $485) |
24,176 | 24,911 | ||||||
Commitments and contingencies - see Note 16 |
||||||||
Equity: |
||||||||
Common stock, $0.01 par value, September 30, 2013 and December 31, 2012 - 1,000 shares authorized; 100 issued and outstanding |
1 | 1 | ||||||
Additional paid-in capital |
8,452 | 8,452 | ||||||
Accumulated deficit |
(5,357) | (5,746) | ||||||
Accumulated other comprehensive loss |
(417) | (406) | ||||||
|
|
|
|
|||||
Total Hilton stockholders equity |
2,679 | 2,301 | ||||||
Noncontrolling interests |
(126) | (146) | ||||||
|
|
|
|
|||||
Total equity |
2,553 | 2,155 | ||||||
|
|
|
|
|||||
TOTAL LIABILITIES AND EQUITY |
$ | 26,729 | $ | 27,066 | ||||
|
|
|
|
See notes to condensed consolidated financial statements.
F-54
Hilton Worldwide Holdings Inc.
Condensed Consolidated Statements of Operations
(unaudited, in millions)
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
Revenues |
||||||||
Owned and leased hotels |
$ | 2,982 | $ | 2,931 | ||||
Management and franchise fees and other |
868 | 807 | ||||||
Timeshare |
809 | 822 | ||||||
|
|
|
|
|||||
4,659 | 4,560 | |||||||
Other revenues from managed and franchised properties |
2,433 | 2,378 | ||||||
|
|
|
|
|||||
Total revenues |
7,092 | 6,938 | ||||||
Expenses |
||||||||
Owned and leased hotels |
2,327 | 2,401 | ||||||
Timeshare |
545 | 568 | ||||||
Depreciation and amortization |
455 | 394 | ||||||
Impairment losses |
| 33 | ||||||
General, administrative, and other |
319 | 327 | ||||||
|
|
|
|
|||||
3,646 | 3,723 | |||||||
Other expenses from managed and franchised properties |
2,433 | 2,378 | ||||||
|
|
|
|
|||||
Total expenses |
6,079 | 6,101 | ||||||
Operating income |
1,013 | 837 | ||||||
Interest income |
5 | 11 | ||||||
Interest expense |
(401) | (423) | ||||||
Equity in earnings from unconsolidated affiliates |
11 | 1 | ||||||
Gain (loss) on foreign currency transactions |
(43) | 27 | ||||||
Other gain, net |
5 | 8 | ||||||
|
|
|
|
|||||
Income before income taxes |
590 | 461 | ||||||
Income tax expense |
(192) | (166) | ||||||
|
|
|
|
|||||
Net income |
398 | 295 | ||||||
Net income attributable to noncontrolling interests |
(9) | (4) | ||||||
|
|
|
|
|||||
Net income attributable to Hilton stockholder |
$ | 389 | $ | 291 | ||||
|
|
|
|
See notes to condensed consolidated financial statements.
F-55
Hilton Worldwide Holdings Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited, in millions)
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
Net income |
$ | 398 | $ | 295 | ||||
Other comprehensive income (loss), net of tax benefit (expense): |
||||||||
Currency translation adjustment, net of tax of $24 and $ |
(6) | 5 | ||||||
Pension liability adjustment, net of tax of $6 and $(11) |
10 | (19) | ||||||
Net investment hedge adjustment, net of tax of $ and $ |
(1) | | ||||||
|
|
|
|
|||||
Total other comprehensive income (loss) |
3 | (14) | ||||||
|
|
|
|
|||||
Comprehensive income |
401 | 281 | ||||||
Comprehensive income attributable to noncontrolling interests |
(23) | (5) | ||||||
|
|
|
|
|||||
Comprehensive income attributable to Hilton stockholder |
$ | 378 | $ | 276 | ||||
|
|
|
|
See notes to condensed consolidated financial statements.
F-56
Hilton Worldwide Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
Operating Activities: |
||||||||
Net income |
$ | 398 | $ | 295 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Impairment losses |
| 33 | ||||||
Depreciation and amortization |
455 | 394 | ||||||
Equity in earnings from unconsolidated affiliates |
(11) | (1) | ||||||
Loss (gain) on foreign currency transactions |
43 | (27) | ||||||
Other gain, net |
(5) | (8) | ||||||
Share-based compensation |
5 | 20 | ||||||
Distributions from unconsolidated affiliates |
18 | 25 | ||||||
Deferred income taxes |
66 | (4) | ||||||
Change in restricted cash and cash equivalents |
(66) | (70) | ||||||
Working capital changes and other |
121 | 93 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
1,024 | 750 | ||||||
|
|
|
|
|||||
Investing Activities: |
||||||||
Capital expenditures for property and equipment |
(167) | (336) | ||||||
Acquisitions |
(30) | | ||||||
Payments received on other financing receivables |
3 | 7 | ||||||
Issuance of other financing receivables |
(8) | (3) | ||||||
Investments in affiliates |
(4) | (3) | ||||||
Distributions from unconsolidated affiliates |
16 | | ||||||
Proceeds from asset dispositions |
| 8 | ||||||
Contract acquisition costs |
(12) | (11) | ||||||
Software capitalization costs |
(50) | (75) | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(252) | (413) | ||||||
|
|
|
|
|||||
Financing Activities: |
||||||||
Borrowings |
702 | 66 | ||||||
Repayment of debt |
(1,602) | (328) | ||||||
Change in restricted cash and cash equivalents |
114 | 28 | ||||||
Distributions to noncontrolling interests |
(3) | (2) | ||||||
|
|
|
|
|||||
Net cash used in financing activities |
(789) | (236) | ||||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(14) | 1 | ||||||
Net increase (decrease) in cash and cash equivalents |
(31) | 102 | ||||||
Cash and cash equivalents, beginning of period |
755 | 781 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 724 | $ | 883 | ||||
|
|
|
|
|||||
Supplemental Disclosures: |
||||||||
Cash paid during the year: |
||||||||
Interest |
$ | 395 | $ | 359 | ||||
Income taxes, net of refunds |
$ | 84 | $ | 78 |
See notes to condensed consolidated financial statements.
F-57
Hilton Worldwide Holdings Inc.
Condensed Consolidated Statements of Equity
(unaudited, in millions)
Equity Attributable to Hilton Stockholder |
Noncontrolling
Interests |
Total | ||||||||||||||||||||||
Common
Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
|||||||||||||||||||||
Balance as of December 31, 2011 |
$ | 1 | $ | 8,454 | $ | (6,098) | $ | (489) | $ | (166) | $ | 1,702 | ||||||||||||
Net income |
| | 291 | | 4 | 295 | ||||||||||||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||||||
Currency translation adjustment |
| | | 4 | 1 | 5 | ||||||||||||||||||
Pension liability adjustment |
| | | (19) | | (19) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income (loss) |
| | | (15) | 1 | (14) | ||||||||||||||||||
Distributions |
| | | | (2) | (2) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of September 30, 2012 |
$ | 1 | $ | 8,454 | $ | (5,807) | $ | (504) | $ | (163) | $ | 1,981 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to Hilton Stockholder |
Noncontrolling
Interests |
Total | ||||||||||||||||||||||
Common
Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
|||||||||||||||||||||
Balance as of December 31, 2012 |
$ | 1 | $ | 8,452 | $ | (5,746) | $ | (406) | $ | (146) | $ | 2,155 | ||||||||||||
Net income |
| | 389 | | 9 | 398 | ||||||||||||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||||||
Currency translation adjustment |
| | | (20) | 14 | (6) | ||||||||||||||||||
Pension liability adjustment |
| | | 10 | | 10 | ||||||||||||||||||
Net investment hedge adjustment |
| | | (1) | | (1) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income |
| | | (11) | 14 | 3 | ||||||||||||||||||
Distributions |
| | | | (3) | (3) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of September 30, 2013 |
$ | 1 | $ | 8,452 | $ | (5,357) | $ | (417) | $ | (126) | $ | 2,553 | ||||||||||||
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See notes to condensed consolidated financial statements.
F-58
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1: Organization and Basis of Presentation
Organization
Hilton Worldwide Holdings Inc. (Hilton together with its subsidiaries, we, us, our, or the Company) was formed on March 18, 2010 to hold, directly or indirectly, all of the equity of Hilton Worldwide, Inc. (HWI). Hilton is incorporated in the state of Delaware and has no operations other than its ownership of HWI. The accompanying financial statements present the condensed consolidated financial position of Hilton, which includes consolidation of HWI.
Hilton is one of the largest hospitality companies in the world based upon the number of hotel rooms and timeshare units under our ten distinct brands. We are engaged in owning, leasing, managing, developing, and franchising hotels, resorts, and timeshare properties. As of September 30, 2013, we owned, leased, managed, or franchised 4,039 hotel and resort properties, totaling 665,522 rooms in 90 countries and territories, as well as 41 timeshare properties comprised of 6,404 units.
On October 24, 2007, HWI became a wholly owned subsidiary of BH Hotels Holdco, LLC (BH Hotels or our Ultimate Parent), an affiliate of The Blackstone Group (Blackstone), following the completion of a merger (the Merger). BH Hotels and its subsidiaries subsequently formed Hilton Global Holdings LLC, (HGH or our Parent), which has directly owned 100 percent of our stock since our formation.
Basis of Presentation and Use of Estimates
The condensed consolidated financial statements for the nine months ended September 30, 2013 and 2012 have been prepared in accordance with United States of America (U.S.) generally accepted accounting principles (GAAP) and are unaudited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the years ended December 31, 2012, 2011, and 2010.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.
All material intercompany transactions have been eliminated in consolidation. In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods.
Note 2: Recently Issued Accounting Pronouncements
Adopted Accounting Standards
In July 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2012-02 (ASU 2012-02), Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. This ASU was effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years
F-59
beginning after September 14, 2012. We adopted ASU 2012-02 prospectively as of January 1, 2013; however, our annual indefinite-lived intangible impairment tests will not be performed until the fourth quarter of 2013, at which time the provisions of the ASU will be applied. We do not expect the application of ASU 2012-02 to have a material impact on our consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02 (ASU 2013-02), Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU amends existing guidance by requiring companies to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income in the same reporting period. For amounts which are not required to be reclassified in their entirety to net income in the same reporting period, companies will be required to cross reference other disclosures that provide information about those amounts. We adopted ASU 2013-02 prospectively as of January 1, 2013, and our adoption did not have a material impact on our condensed consolidated financial statements. See Note 14: Accumulated Other Comprehensive Loss for the required disclosures.
Accounting Standards Not Yet Adopted
In July 2013, the FASB issued ASU No. 2013-11 (ASU 2013-11), Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists in the applicable jurisdiction to settle any additional income taxes that would result from disallowance of the tax position. We plan to adopt ASU 2013-11 prospectively as of January 1, 2014 and we are currently evaluating the impact, if any, that this ASU will have on our consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05 (ASU 2013-05), Foreign Currency Matters (Topic 830): Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. The ASU clarifies when a cumulative translation adjustment should be released to net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate) within a foreign entity. We plan to adopt ASU 2013-05 prospectively as of January 1, 2014 and we are currently evaluating the impact, if any, that this ASU will have on our consolidated financial statements.
Note 3: Inventories
Inventories were as follows:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Timeshare |
$ | 359 | $ | 389 | ||||
Hotel |
27 | 26 | ||||||
|
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|
|||||
$ | 386 | $ | 415 | |||||
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|
|
F-60
Note 4: Property and Equipment
Property and equipment were as follows:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Land |
$ | 4,121 | $ | 4,090 | ||||
Buildings and leasehold improvements |
5,436 | 5,450 | ||||||
Furniture and equipment |
1,144 | 1,111 | ||||||
Construction-in-progress |
89 | 88 | ||||||
|
|
|
|
|||||
10,790 | 10,739 | |||||||
Accumulated depreciation and amortization |
(1,719) | (1,542) | ||||||
|
|
|
|
|||||
$ | 9,071 | $ | 9,197 | |||||
|
|
|
|
Depreciation and amortization expense on property and equipment, including amortization of assets recorded under capital leases, was $243 million and $214 million during the nine months ended September 30, 2013 and 2012, respectively.
As of September 30, 2013 and December 31, 2012, property and equipment included approximately $105 million and $157 million, respectively, of capital lease assets primarily consisting of buildings and leasehold improvements, net of $48 million and $71 million, respectively, of accumulated depreciation and amortization.
There were no impairment losses on property and equipment during the nine months ended September 30, 2013. We recorded impairment losses on property and equipment of $33 million during the nine months ended September 30, 2012.
During the nine months ended September 30, 2013, we acquired a parcel of land for $28 million, which we previously leased under a long-term ground lease.
Note 5: Financing Receivables
Financing receivables were as follows:
September 30, 2013 | ||||||||||||||||
Securitized
Timeshare |
Unsecuritized
Timeshare |
Other | Total | |||||||||||||
(in millions) | ||||||||||||||||
Financing receivables |
$ | 215 | $ | 645 | $ | 48 | $ | 908 | ||||||||
Less: allowance |
(13) | (68) | (2) | (83) | ||||||||||||
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|
|||||||||
202 | 577 | 46 | 825 | |||||||||||||
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|
|||||||||
Current portion of financing receivables |
29 | 105 | | 134 | ||||||||||||
Less: allowance |
(2) | (11) | | (13) | ||||||||||||
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|||||||||
27 | 94 | | 121 | |||||||||||||
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|
|||||||||
Total financing receivables |
$ | 229 | $ | 671 | $ | 46 | $ | 946 | ||||||||
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|
F-61
December 31, 2012 | ||||||||||||
Unsecuritized
Timeshare |
Other | Total | ||||||||||
(in millions) | ||||||||||||
Financing receivables |
$ | 853 | $ | 44 | $ | 897 | ||||||
Less: allowance |
(81) | (1) | (82) | |||||||||
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|
|||||||
772 | 43 | 815 | ||||||||||
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|||||||
Current portion of financing receivables |
131 | | 131 | |||||||||
Less: allowance |
(12) | | (12) | |||||||||
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|
|||||||
119 | | 119 | ||||||||||
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|||||||
Total financing receivables |
$ | 891 | $ | 43 | $ | 934 | ||||||
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Timeshare financing receivables
In May 2013, we entered into a revolving non-recourse timeshare financing receivables credit facility (Timeshare Facility) that is secured by certain of our timeshare financing receivables. As of September 30, 2013, we had $187 million of gross timeshare financing receivables secured under our Timeshare Facility.
See Note 8: Debt for additional details.
In August 2013, we completed a securitization of approximately $255 million of gross timeshare financing receivables and issued $250 million in aggregate principal amount of 2.28% notes with maturities of January 2026 (Securitized Timeshare Debt). The securitization transaction did not qualify as a sale for accounting purposes and, accordingly, no gain or loss was recognized and the proceeds were presented as debt. See Note 8: Debt for additional details.
During the nine months ended September 30, 2013, the securitized timeshare financing receivables generated interest income of $9 million, which was included in timeshare revenue in our condensed consolidated statements of operations.
As of September 30, 2013, we had 48,972 timeshare notes outstanding, including those which are collateral for our Securitized Timeshare Debt, with interest rates ranging from zero percent to 20.50 percent, an average interest rate of 12.25 percent, a weighted average remaining term of 7.3 years, and maturities through 2025. As of September 30, 2013 and December 31, 2012, we had ceased accruing interest on timeshare notes with aggregate principal balances of $31 million and $30 million, respectively.
The changes in our allowance for uncollectible timeshare financing receivables were as follows:
Nine Months Ended September 30, | ||||||||
2013 | 2012 | |||||||
(in millions) | ||||||||
Beginning balance |
$ | 93 | $ | 97 | ||||
Write-offs |
(19) | (27) | ||||||
Provision for uncollectibles on sales |
20 | 24 | ||||||
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|
|||||
Ending balance |
$ | 94 | $ | 94 | ||||
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|
F-62
Our timeshare financing receivables as of September 30, 2013 mature as follows:
Unsecuritized
Timeshare |
Securitized
Timeshare |
|||||||
Year | (in millions) | |||||||
2013 (remaining) |
$ | 42 | $ | 8 | ||||
2014 |
84 | 29 | ||||||
2015 |
86 | 30 | ||||||
2016 |
89 | 31 | ||||||
2017 |
90 | 31 | ||||||
Thereafter |
359 | 115 | ||||||
|
|
|
|
|||||
750 | 244 | |||||||
Less: allowance |
(79) | (15) | ||||||
|
|
|
|
|||||
$ | 671 | $ | 229 | |||||
|
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|
|
The following table details an aged analysis of our gross timeshare financing receivables balance:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Current |
$ | 951 | $ | 940 | ||||
30 - 89 days past due |
12 | 14 | ||||||
90 - 119 days past due |
2 | 4 | ||||||
120 days and greater past due |
29 | 26 | ||||||
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|
|||||
$ | 994 | $ | 984 | |||||
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Note 6: Investments in Affiliates
Investments in affiliates were as follows:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Equity investments |
$ | 252 | $ | 276 | ||||
Other investments |
16 | 15 | ||||||
|
|
|
|
|||||
$ | 268 | $ | 291 | |||||
|
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|
|
We maintain investments in affiliates accounted for under the equity method, which are primarily investments in entities that owned or leased 31 and 32 hotels as of September 30, 2013 and December 31, 2012, respectively.
The equity investments had total debt of approximately $1.1 billion as of September 30, 2013 and December 31, 2012. Substantially all of the debt is secured solely by the affiliates assets or is guaranteed by other partners without recourse to us. We were the creditor on $18 million and $20 million of total debt from unconsolidated affiliates as of September 30, 2013 and December 31, 2012, respectively, which was included in financing receivables, net in our condensed consolidated balance sheets.
There were no impairment losses on our investments in affiliates during the nine months ended September 30, 2013. We recorded impairment losses of $4 million on two of our equity investments during the nine months ended September 30, 2012, which were included in equity in earnings from unconsolidated affiliates in our condensed consolidated statement of operations.
F-63
Note 7: Consolidated Variable Interest Entities
As of September 30, 2013 and December 31, 2012, we consolidated four and three variable interest entities (VIEs), respectively.
Two of these VIEs lease hotels from unconsolidated affiliates in Japan. We hold a significant ownership interest in these VIEs and have the power to direct the activities that most significantly affect their economic performance. Our condensed consolidated balance sheets included the assets and liabilities of these entities, which primarily comprised $35 million and $29 million of cash and cash equivalents, $20 million and $66 million of property and equipment, net, and $306 million and $408 million of non-recourse debt as of September 30, 2013 and December 31, 2012, respectively. The assets of these entities are only available to settle the obligations of these entities. Interest expense related to the non-recourse debt of these two consolidated VIEs was $20 million and $24 million during the nine months ended September 30, 2013 and 2012, respectively, and was included in interest expense in our condensed consolidated statements of operations.
In February 2013, Osaka Hilton Co., Ltd., one of our consolidated VIEs in Japan, signed a Memorandum of Understanding to restructure the terms of their capital lease. The terms of the restructuring call for a reduction in future rent expense under the lease, as well as a commitment to fund capital improvements to the hotel over the next three years. The effect of the capital lease restructuring was recognized during the nine months ended September 30, 2013, resulting in a reduction in property and equipment, net of $44 million and a reduction in non-recourse debt of $48 million. This transaction was considered a non-cash investing and financing activity and was excluded from our condensed consolidated statement of cash flows.
In August 2013, we formed a special purpose entity to issue our Securitized Timeshare Debt. We consider this entity to be a VIE and we have the power to direct the activities that most significantly affect the VIEs economic performance and have the obligation to absorb its losses and the right to receive its benefits. As of September 30, 2013, our condensed consolidated balance sheet included the assets and liabilities of this entity, which primarily comprised $9 million of restricted cash and cash equivalents, $229 million of securitized timeshare financing receivables, net, and $238 million of non-recourse debt. Our condensed consolidated statement of operations included interest income of $9 million, included in timeshare revenue, and interest expense of $1 million, included in interest expense, for the nine months ended September 30, 2013, related to this VIE. See Note 5: Financing Receivables and Note 8: Debt for additional details of the timeshare securitization transaction.
We have an additional VIE that owns one hotel that was immaterial to our condensed consolidated financial statements.
During the nine months ended September 30, 2013 and 2012, we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.
F-64
Note 8: Debt
Long-term Debt
Long-term debt balances, including obligations for capital leases, and associated interest rates were as follows:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Senior mortgage loans with a rate of 2.48%, due 2015 (1) |
$ | 7,010 | $ | 7,271 | ||||
Secured mezzanine loans with an average rate of 4.09%, due 2015 (1) |
6,699 | 7,697 | ||||||
Secured mezzanine loans with a rate of 4.68%, due 2015 (1) |
206 | 240 | ||||||
Mortgage notes with an average rate of 6.12%, due 2014 to 2016 |
133 | 134 | ||||||
Other unsecured notes with an average rate of 7.82%, due 2017 to 2031 |
149 | 149 | ||||||
Capital lease obligations with an average rate of 5.82%, due 2015 to 2097 |
82 | 83 | ||||||
Contingently convertible notes with a rate of 3.38%, due 2023 (2) |
| 1 | ||||||
|
|
|
|
|||||
14,279 | 15,575 | |||||||
Less: current maturities of long-term debt |
(356) | (392) | ||||||
|
|
|
|
|||||
$ | 13,923 | $ | 15,183 | |||||
|
|
|
|
(1) | Initial due date was November 12, 2010, with up to five additional one-year extensions at our option. We have extended the scheduled maturity date to November 12, 2013 by exercising our first, second, and third extension options. The fourth and fifth extension options are at our sole discretion, and require an extension fee equal to 50 basis points of the then outstanding principal balance. Combined, the extensions effectively extend the maturity of our senior mortgage and senior mezzanine debt to November 12, 2015. In October 2013, we provided notice of our intent to repay these loans using proceeds from our debt refinancing, see Note 17: Subsequent Events for additional information. |
(2) | The balance was less than $1 million as of September 30, 2013. |
Secured Debt
Our senior mortgage loans and secured mezzanine loans (collectively, the Secured Debt) totaled $13.9 billion and $15.2 billion as of September 30, 2013 and December 31, 2012, respectively. Interest under the Secured Debt is payable monthly and includes both variable and fixed components. The Secured Debt is secured by substantially all of our consolidated assets in which we hold an ownership interest and contains significant restrictions on the incurrence of any additional indebtedness by us, including the prohibition of any additional indebtedness for borrowed money evidenced by bonds, debentures, notes, or other similar instruments, except for permission to borrow up to $400 million against our timeshare financing receivables pursuant to the Timeshare Facility; see further discussion below. Additionally, under the terms of our Secured Debt, we are restricted from declaring dividends.
We are required to deposit with the lender certain cash reserves that may, upon our request, be used for, among other things, debt service, capital expenditures, and general corporate purposes. As of September 30, 2013, we did not have cash reserves on deposit with the lender, as we used the balance previously deposited to repay a portion of our Secured Debt, as permitted by the lender. As of December 31, 2012, the cash reserves on deposit with the lender totaled $147 million and were included in restricted cash and cash equivalents in our condensed consolidated balance sheet as a current asset because we had the ability to access the cash within the 12 months following that date, subject to necessary lender notification.
As a condition to permitting certain events under the Secured Debt, such as a release of certain assets as collateral for the loan or change of control of the Company, we must satisfy certain debt yield tests. We were able to satisfy all of the debt yield tests as of our most recent testing date.
F-65
During the nine months ended September 30, 2013 and 2012, we made scheduled debt repayments on our Secured Debt of $245 million and $233 million, respectively. In addition, during the nine months ended September 30, 2013, we made unscheduled, contractually obligated debt repayments of $17 million due to distributions from certain equity method investments that occurred during the period and $17 million primarily from the proceeds of the disposal of one of our owned hotel properties during the period. Further, during the nine months ended September 30, 2013, we made unscheduled, voluntary debt repayments of $1 billion on our secured mezzanine loans. We did not make any unscheduled debt repayments on our Secured Debt during the nine months ended September 30, 2012. In October 2013, we made an additional unscheduled, voluntary debt repayment of $450 million on our secured mezzanine loans.
Non-recourse Debt
Non-recourse debt, including obligations for capital leases, and associated interest rates were as follows:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Capital lease obligations of consolidated VIEs with a rate of 6.34%, due 2018 to 2026 |
$ | 274 | $ | 373 | ||||
Non-recourse debt of consolidated VIEs with an average rate of 3.35%, due 2015 to 2018 |
44 | 47 | ||||||
Timeshare Facility with a rate of 1.43%, due 2016 |
150 | | ||||||
Securitized Timeshare Debt with a rate of 2.28%, due 2026 |
238 | | ||||||
|
|
|
|
|||||
706 | 420 | |||||||
Less: current maturities of non-recourse debt |
(53) | (15) | ||||||
|
|
|
|
|||||
$ | 653 | $ | 405 | |||||
|
|
|
|
Timeshare Facility
In May 2013, we entered into a receivables loan agreement that is secured by certain of our timeshare financing receivables. See Note 5: Financing Receivables for further discussion. Currently, under the terms of the loan agreement we may borrow up to a maximum amount of approximately $400 million based on the amount and credit quality characteristics of the timeshare financing receivables securing the loan. The Timeshare Facility is a non-recourse obligation and is payable solely from the timeshare financing receivables securing the loan and any deposit payments received from customers on the pledged receivables. The loan agreement allows for us to borrow up to the maximum amount until May 2015, and all amounts borrowed must be repaid by May 2016. Interest on the loan, at a variable rate, is payable monthly.
We are required to deposit payments received from customers on the pledged timeshare financing receivables into a depository account maintained by a third party. On a monthly basis, the depository account will first be utilized to make required interest and other payments due under the receivables loan agreement. After payment of all amounts due under the receivables loan agreement, any remaining amounts will be remitted to us for use in our operations. The balance in the depository account, totaling $5 million as of September 30, 2013, was included in restricted cash and cash equivalents in our condensed consolidated balance sheet.
Securitized Timeshare Debt
In August 2013, we completed a securitization of approximately $255 million of gross timeshare financing receivables and issued notes with an aggregate principal amount of $250 million. The Securitized Timeshare Debt is backed by a pledge of assets, consisting primarily of a pool of timeshare financing receivables secured by first mortgages or deeds of trust on timeshare interests. See Note 5: Financing Receivables for further
F-66
discussion. The Securitized Timeshare Debt bears interest at a fixed rate of 2.28% per annum and has a stated maturity of January 2026. The Securitized Timeshare Debt is a non-recourse obligation and is payable solely from the pool of timeshare financing receivables pledged as collateral to the Securitized Timeshare Debt and related assets. The net proceeds from the Securitized Timeshare Debt were used to repay a portion of the Timeshare Facility.
We are required to deposit payments received from customers on the securitized timeshare financing receivables into a depository account maintained by a third party. On a monthly basis, the depository account will first be utilized to make required principal, interest, and other payments due with respect to the Securitized Timeshare Debt. After payment of all amounts due with respect to the Securitized Timeshare Debt, any remaining amounts will be remitted to us for use in our operations. The balance in the depository account, totaling $9 million as of September 30, 2013, was included in restricted cash and cash equivalents in our condensed consolidated balance sheet.
Debt Maturities
The contractual maturities of our long-term debt and non-recourse debt as of September 30, 2013 were as follows:
Year | (in millions) | |||
2013 (remaining) |
$ | 106 | ||
2014 |
407 | |||
2015 (1) |
13,543 | |||
2016 |
323 | |||
2017 |
97 | |||
Thereafter |
509 | |||
|
|
|||
$ | 14,985 | |||
|
|
(1) | The Secured Debt has five one-year extensions solely at our option that effectively extend maturity to November 12, 2015. We have assumed all extensions for purposes of calculating maturity dates. |
Note 9: Derivative Instruments and Hedging Activities
Under the terms of our Secured Debt, we are required to hedge interest rate risk using derivative instruments with an aggregate notional amount equal to the principal amount of the Secured Debt. As such, during the nine months ended September 30, 2013 and 2012, derivatives were used to hedge the variable cash flows associated with this existing variable rate debt.
As of September 30, 2013, we held ten interest rate caps with an aggregate notional amount of $15.2 billion. The caps were executed in August 2012 to replace the previous portfolio of interest rate caps that expired in November 2012. These interest rate caps expire in November 2013. We have elected not to designate any of these ten interest rate caps as effective hedging instruments. No gain or loss related to these ten undesignated interest rate caps was recorded during the nine months ended September 30, 2013. During the nine months ended September 30, 2012, we recorded a loss of $1 million in other gain, net in our condensed consolidated statements of operations, which represented the premiums paid on these interest rate caps.
During the nine months ended September 30, 2012, we also held ten interest rate caps with an aggregate notional amount of $15.9 billion which were executed in October 2011 and expired in November 2012. We elected not to designate any of these ten interest rate caps as effective hedges for accounting purposes. No gain or loss related to these ten undesignated interest rate caps was recorded during the nine months ended September 30, 2012.
The fair value of our interest rate caps was immaterial to our condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012.
F-67
Note 10: Fair Value Measurements
The carrying amounts and estimated fair values of our financial assets and liabilities, which included related current portions, were as follows:
September 30, 2013 | December 31, 2012 | |||||||||||||||
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
|||||||||||||
(in millions) | ||||||||||||||||
Assets: |
||||||||||||||||
Cash equivalents (2) |
$ | 533 | $ | 533 | $ | 561 | $ | 561 | ||||||||
Restricted cash equivalents (2) |
177 | 177 | 322 | 322 | ||||||||||||
Unsecuritized timeshare financing receivables (3) |
750 | 738 | 984 | 987 | ||||||||||||
Securitized timeshare financing receivables (3) |
244 | 242 | | | ||||||||||||
Liabilities: |
||||||||||||||||
Secured Debt (3) |
13,915 | 13,868 | 15,208 | 15,571 | ||||||||||||
Other unsecured notes (1) |
149 | 152 | 149 | 152 | ||||||||||||
Other long-term debt (3)(4) |
133 | 137 | 135 | 145 | ||||||||||||
Timeshare Facility (2) |
150 | 150 | | | ||||||||||||
Securitized Timeshare Debt (3) |
238 | 238 | | |
(1) | Classified as Level 1 under the fair value hierarchy. |
(2) | Classified as Level 2 under the fair value hierarchy. |
(3) | Classified as Level 3 under the fair value hierarchy. |
(4) | Excludes capital lease obligations with a carrying value of $82 million and $83 million as of September 30, 2013 and December 31, 2012, respectively. |
We believe the carrying amounts of our current financial assets and liabilities and other financing receivables approximated fair value as of September 30, 2013 and December 31, 2012. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair value. Proper classification of fair value measurements within the valuation hierarchy is considered each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.
Cash equivalents and restricted cash equivalents are primarily comprised of short-term interest-bearing money market funds with maturities of less than 90 days, time deposits, and commercial paper. The estimated fair values were based on available market pricing information of similar financial instruments.
The estimated fair values of securitized and unsecuritized timeshare financing receivables and other long-term debt were calculated based on the expected future cash flows discounted at risk-adjusted rates. The primary sensitivity in these calculations is based on the selection of appropriate discount rates. Fluctuations in these assumptions will result in different estimates of fair value. An increase in the discount rate would result in a decrease in the fair value.
The estimated fair value of our other unsecured notes was based on bid prices in active debt markets. The carrying amount of debt outstanding pursuant to the Timeshare Facility approximated fair value as the interest rate under the loan agreement approximated current market rates. The estimated fair value of our Securitized Timeshare Debt was primarily based on indicative quotes received for similar issuances.
The estimated fair value of our Secured Debt was based on estimates of market spreads when quoted market values did not exist, on the current rates offered to us for debt of the same maturities, or quoted market prices for the same or similar issues. In determining the current market rate for the fixed rate debt, a market spread was added to the quoted yields on federal government treasury securities with similar maturity dates. The primary sensitivity in these calculations is based on the selection of appropriate market spreads. Fluctuations in these assumptions will result in different estimates of fair value. An increase in the market spread would result in a decrease in the fair value.
F-68
There were no assets measured at fair value on a nonrecurring basis as a result of impairment losses during the nine months ended September 30, 2013.
The estimated fair values of our financial and nonfinancial assets that were measured at fair value on a nonrecurring basis as a result of impairment losses during the nine months ended September 30, 2012 were as follows:
Nine Months Ended
September 30, 2012 |
||||||||
Fair Value (1) |
Impairment
Losses |
|||||||
(in millions) | ||||||||
Property and equipment, net |
$ | 9 | $ | 33 | ||||
Investments in affiliates |
27 | 4 |
(1) | Fair value measurements using significant unobservable inputs (Level 3). |
During the nine months ended September 30, 2012, property and equipment, net with a carrying value of $42 million before impairment was reduced to its estimated fair value, resulting in impairment losses of $33 million. We estimated the fair value of the assets using discounted cash flow analyses, with estimated stabilized growth rates ranging from 2.0 percent to 3.0 percent, a discounted cash flow term ranging from 10 years to 13 years, capitalization rates ranging from 8.0 percent to 9.0 percent, and discount rates ranging from 10.0 percent to 11.5 percent. The discount and capitalization rates used for the fair value of the assets reflect the risk profile of the individual markets where the assets are located, and are not necessarily indicative of our hotel portfolio as a whole.
During the nine months ended September 30, 2012, investments in affiliates with a carrying value of $31 million before impairment were reduced to their estimated fair value, resulting in impairment losses of $4 million, related to our investments in entities that own hotels. We estimated the fair value of the investments using discounted cash flow analyses, with estimated stabilized growth rates ranging from 4.4 percent to 7.5 percent, a discounted cash flow term of 10 years, capitalization rates ranging from 8.0 percent to 10.5 percent, and discount rates ranging from 12.0 percent to 22.0 percent. The discount and capitalization rates used for the fair value of our investments reflect the risk profile of the individual markets where the assets subject to our investment are located, and are not necessarily indicative of our investment portfolio as a whole.
Note 11: Income Taxes
At the end of each interim period, we estimate the effective tax rate expected to be applied for the full fiscal year. The effective income tax rate is determined by the level and composition of pre-tax income or loss, which is subject to federal, foreign, state, and local income taxes and reflects income tax expense or benefit resulting from our significant operations outside of the U.S., which are generally subject to both local country and U.S. tax due to the terms of our debt agreements. Our effective tax rate during the nine months ended September 30, 2013 was lower than our statutory tax rate largely due to decreases in unrecognized tax benefits.
Our total unrecognized tax benefits as of September 30, 2013 and December 31, 2012 were $434 million and $469 million, respectively. As a result of the expected resolution of examination issues with federal, state, and foreign tax authorities, we believe it is reasonably possible that during the next 12 months the amount of unrecognized tax benefits will decrease up to $15 million. Included in the balance of unrecognized tax benefits as of September 30, 2013 and December 31, 2012 were $339 million and $374 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective tax rate. The decrease in unrecognized tax benefits for the quarter is primarily the result of effectively settling Internal Revenue Service (IRS) audit items relating to the utilization of foreign tax credits.
F-69
We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. We have accrued balances of approximately $44 million and $42 million for the payment of interest and penalties as of September 30, 2013 and December 31, 2012, respectively.
We file income tax returns, including returns for our subsidiaries, with federal, state, and foreign jurisdictions. We are under regular and recurring audit by the IRS on open tax positions. It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals, or litigation in state, local, federal, and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. During 2009, the IRS commenced its audit of our consolidated U.S. income tax returns for the 2006 through October 2007 tax years. As of September 30, 2013, we remain subject to federal examinations from 2005-2012, state examinations from 1999-2012, and foreign examinations of our income tax returns for the years 1996 through 2012.
State income tax returns are generally subject to examination for a period of three to five years after their respective filings; however, the state impact of any federal tax return changes remains subject to examination by various states for a period generally of up to one year after formal notification to the states. The statute of limitations for the foreign jurisdictions generally ranges from three to ten years after their respective filings.
Note 12: Employee Benefit Plans
We sponsor multiple domestic and international employee benefit plans. Benefits are based upon years of service and compensation.
We have a noncontributory retirement plan in the U.S. (the Domestic Plan), which covers certain employees not earning union benefits. This plan was frozen for participant benefit accruals in 1996. We also have multiple employee benefit plans that cover many of our international employees. These include a plan that covers workers in the United Kingdom (the U.K. Plan) and a number of smaller plans that cover workers in various other countries around the world (the International Plans).
The components of net periodic pension cost (credit) for the Domestic Plan, U.K. Plan, and International Plans were as follows:
Nine Months Ended September 30, | ||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
Domestic
Plan |
U.K.
Plan |
International
Plans |
Domestic
Plan |
U.K.
Plan |
International
Plans |
|||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Service cost |
$ | 3 | $ | 4 | $ | 2 | $ | | $ | 4 | $ | 3 | ||||||||||||
Interest cost |
13 | 12 | 3 | 16 | 12 | 3 | ||||||||||||||||||
Expected return on plan assets |
(14) | (17) | (3) | (13) | (16) | (3) | ||||||||||||||||||
Amortization of prior service cost (credit) |
3 | (2) | | 3 | (15) | | ||||||||||||||||||
Amortization of net loss (income) |
2 | 3 | 1 | (2) | 2 | 1 | ||||||||||||||||||
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|
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|
|
|||||||||||||
Net periodic pension cost (credit) |
7 | | 3 | 4 | (13) | 4 | ||||||||||||||||||
Settlement losses |
| | 2 | | | | ||||||||||||||||||
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|
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Net pension cost (credit) |
$ | 7 | $ | | $ | 5 | $ | 4 | $ | (13) | $ | 4 | ||||||||||||
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In March 2012, we, along with the trustees of the U.K. Plan, adopted an agreement to freeze the defined benefit plan for enrollment to new employees effective immediately and to freeze the accrual of benefits to existing employees on November 30, 2013. A defined contribution plan will be put in place for the affected employees. We recognized an acceleration of prior service credit of $13 million during the nine months ended September 30, 2012.
F-70
In May 2011, we, along with the trustees of the U.K. Plan, reached a tentative agreement on the funded status and security for the U.K. Plan. This agreement extended our British Pound Sterling (GBP) 15 million guarantee (equivalent to $24 million as of September 30, 2013) to December 2013.
A class action lawsuit was filed in 1998 against Hilton and the Domestic Plan claiming that the Domestic Plan did not calculate benefit obligations in accordance with the terms of the plan nor were vesting rules followed in accordance with the plan. In May 2009, the U.S. District Court for the District of Columbia (the District Court) found in favor of the plaintiff in a summary judgment, and this judgment was upheld by the U.S. Court of Appeals in December 2012. Based on the final order, we believe the best estimate of the minimum additional pension obligation to be approximately $109 million, which was included in the projected benefit obligation and accrued in other long-term liabilities as of September 30, 2013 and December 31, 2012 in our condensed consolidated balance sheets. The estimated additional obligation will be recognized as additional pension expense over the average remaining life expectancy of the plan participants as determined by our actuaries, with the remainder of the obligation having been recognized in accumulated other comprehensive loss as an adjustment of the pension liability.
We were ordered by the District Court to post a bond of $76 million under the litigation to support potential future plan contributions. The bond, which is included in restricted cash and cash equivalents, will be released when the future contributions are made. We are currently undertaking a process to clarify certain matters with the District Court to permit the adoption of an amended plan, considering the requirements of the ruling in the final order. As the matters are clarified and a new plan is adopted, we will be required to make contributions to allow for the adoption of the amendments. If resolved and adopted during 2013, these contribution amounts are estimated to increase 2013 contributions by approximately $39 million. The value of the bond may be applied toward the required contributions as necessary.
Note 13: Share-Based Compensation
Certain members of our senior management team participate in an executive compensation plan (the Promote plan), which provides for the grant of Tier I liability awards, or an alternative cash payment in lieu thereof and Tier II equity awards. The Tier I liability awards provide the participants the right to share in 2.75 percent of the equity value of Hilton up to $8.352 billion (or $230 million) based on the achievement of certain service and performance conditions. The majority of these payments are to be made in three installments for most plan participants. The Tier II equity awards allow participants to share in Hiltons equity growth above $8.352 billion and are also subject to service and performance conditions.
During the nine months ended September 30, 2012, the first of the installment payments for certain Tier I liability awards was accelerated for certain participants, which resulted in $9 million of additional share-based compensation expense. The amount of the payment was approximately $25 million. We made payments to certain participants in the Promote plan of approximately $9 million during the nine months ended September 30, 2013, respectively; approximately $7 million of those payments were the second installment payment for certain Tier I liability awards.
We recorded compensation expense related to share-based compensation plans of $5 million and $20 million for the nine months ended September 30, 2013 and 2012, respectively. No expense was recognized for the portion of the awards that are subject to the achievement of a performance condition in the form of a liquidity event, since such an event was not probable as of September 30, 2013.
As of September 30, 2013, the liability for the Promote plan and cash retention award was recorded at an estimated fair value of $14 million and included in accounts payable, accrued expenses, and other in our condensed consolidated balance sheet as we expect to pay all amounts accrued no later than March 2014. As of December 31, 2012, the Promote plan liability was recorded at an estimated fair value of $18 million, of which $13 million was included in accounts payable, accrued expenses, and other and $5 million was included in other long-term liabilities in our condensed consolidated balance sheet. The liability awards will be remeasured at each reporting date until settlement.
F-71
Note 14: Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of taxes, were as follows:
Currency
Translation Adjustment |
Pension
Liability Adjustment |
Net
Investment Hedge Adjustment |
Total | |||||||||||||
(in millions) | ||||||||||||||||
Balance as of December 31, 2012 |
$ | (317) | $ | (194) | $ | 105 | $ | (406) | ||||||||
Other comprehensive income (loss) before reclassifications |
(21) | 6 | | (15) | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss |
1 | 4 | (1) | 4 | ||||||||||||
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Net current period other comprehensive income (loss) |
(20) | 10 | (1) | (11) | ||||||||||||
|
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|
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|
|
|
|||||||||
Balance as of September 30, 2013 |
$ | (337) | $ | (184) | $ | 104 | $ | (417) | ||||||||
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The following table presents additional information about reclassifications out of accumulated other comprehensive loss:
Nine Months Ended
September 30, 2013 |
||||
(in millions) | ||||
Currency translation adjustment: |
||||
Sale and liquidation of foreign assets (1) |
$ | (1) | ||
Tax benefit (2)(5) |
| |||
|
|
|||
Total currency translation adjustment reclassifications for the period, net of taxes |
(1) | |||
|
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Pension liability adjustment: |
||||
Amortization of prior service cost (2) |
(1) | |||
Amortization of net loss (2) |
(6) | |||
Tax benefit (4) |
3 | |||
|
|
|||
Total pension liability adjustment reclassifications for the period, net of taxes |
(4) | |||
|
|
|||
Net investment hedge adjustment: |
||||
Sale of a hedged asset (3) |
1 | |||
Tax expense (4)(5) |
| |||
|
|
|||
Total net investment hedge adjustment reclassifications for the period, net of taxes |
1 | |||
|
|
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Total reclassifications for the period, net of tax |
$ | (4) | ||
|
|
(1) | Reclassified out of accumulated other comprehensive loss to other gain, net in the condensed consolidated statements of operations. Amounts in parentheses indicate a loss in our condensed consolidated statements of operations. |
(2) | Reclassified out of accumulated other comprehensive loss to general, administrative, and other in the condensed consolidated statements of operations. These amounts were included in the computation of net periodic pension cost. See Note 12: Employee Benefit Plans for additional information. Amounts in parentheses indicate a loss in our condensed consolidated statements of operations. |
(3) | Reclassified out of accumulated other comprehensive loss to gain (loss) on foreign currency transactions in our condensed consolidated statements of operations. |
(4) | Reclassified out of accumulated other comprehensive loss to income tax expense in our condensed consolidated statements of operations. |
(5) | The respective tax benefit (expense) was less than $1 million for the nine months ended September 30, 2013. |
F-72
Note 15: Business Segments
We are a diversified hospitality company with operations organized in three distinct operating segments: ownership, management and franchise, and timeshare. Each segment is managed separately because of its distinct economic characteristics.
The ownership segment includes all hotels that we wholly own or lease, as well as consolidated non-wholly owned entities and consolidated VIEs. As of September 30, 2013, this segment included 118 wholly owned and leased hotels and resorts, three non-wholly owned hotel properties, and three hotels of consolidated VIEs. While we do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment revenues, we manage these investments in our ownership segment. Our unconsolidated affiliates are primarily investments in entities that owned or leased 31 hotels as of September 30, 2013.
The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us under one of our proprietary brand names of our hotel brand portfolio. As of September 30, 2013, this segment included 489 managed hotels and 3,394 franchised hotels. This segment also earns fees for managing properties in our ownership segment.
The timeshare segment includes the development of vacation ownership clubs and resorts, marketing and selling of timeshare intervals, providing timeshare customer financing, resort operations, and licensing fees paid by third parties for the use of our Hilton Grand Vacations brand name. This segment also provides assistance to third-party developers in selling their timeshare inventory. As of September 30, 2013, this segment included 41 timeshare properties.
Corporate and other represents revenues and related operating expenses generated by the incidental support of hotel operations for owned, leased, managed, and franchised hotels and other rental income, as well as corporate assets and related expenditures.
The performance of our operating segments is evaluated primarily on earnings before interest expense, taxes, depreciation and amortization (EBITDA) adjusted for certain items, which should not be considered an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. EBITDA, presented herein, is a non-GAAP financial measure that reflects net income attributable to Hilton stockholder, excluding interest expense, a provision for income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA, further adjusted to exclude certain items, including, but not limited to gains, losses, and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment charges; (v) furniture, fixtures, and equipment (FF&E) replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based and certain other compensation expenses; (viii) severance, relocation, and other expenses; and (ix) other items.
F-73
The following table presents revenues and Adjusted EBITDA for our reportable segments, reconciled to consolidated amounts:
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
(in millions) | ||||||||
Revenues: |
||||||||
Ownership (1) |
$ | 3,003 | $ | 2,951 | ||||
Management and franchise (2) |
938 | 877 | ||||||
Timeshare |
809 | 822 | ||||||
|
|
|
|
|||||
Segment revenues |
4,750 | 4,650 | ||||||
Other revenues from managed and franchised properties |
2,433 | 2,378 | ||||||
Other revenues (3) |
48 | 46 | ||||||
Intersegment fees elimination (1)(2)(3) |
(139) | (136) | ||||||
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Total revenues |
$ | 7,092 | $ | 6,938 | ||||
|
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|
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Adjusted EBITDA |
||||||||
Ownership (1)(2)(3)(4) |
$ | 672 | $ | 566 | ||||
Management and franchise (2) |
938 | 877 | ||||||
Timeshare (1)(2) |
205 | 198 | ||||||
Corporate and other (3) |
(208) | (207) | ||||||
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Adjusted EBITDA |
$ | 1,607 | $ | 1,434 | ||||
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(1) | Includes charges to timeshare operations for rental fees and fees for other amenities, which are eliminated in our condensed consolidated financial statements. These charges totaled $19 million and $17 million for the nine months ended September 30, 2013 and 2012, respectively. While the net effect is zero, our measures of segment revenues and Adjusted EBITDA include these fees as a benefit to the ownership segment and a cost to timeshare Adjusted EBITDA. |
(2) | Includes management, royalty, and intellectual property fees of $71 million and $70 million for the nine months ended September 30, 2013 and 2012, respectively. These fees are charged to consolidated owned and leased properties and are eliminated in our condensed consolidated financial statements. Also includes a licensing fee of $40 million and $39 million for the nine months ended September 30, 2013 and 2012, respectively, which is charged to our timeshare segment by our management and franchise segment and is eliminated in our condensed consolidated financial statements. While the net effect is zero, our measures of segment revenues and Adjusted EBITDA include these fees as a benefit to the management and franchise segment and a cost to ownership Adjusted EBITDA and timeshare Adjusted EBITDA. |
(3) | Includes charges to consolidated owned and leased properties for services provided by our wholly owned laundry business of $7 million for the nine months ended September 30, 2013 and 2012. These charges are eliminated in our condensed consolidated financial statements. |
(4) | Includes unconsolidated affiliate Adjusted EBITDA. |
F-74
The table below provides a reconciliation of Adjusted EBITDA to EBITDA and EBITDA to net income attributable to Hilton stockholder:
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
(in millions) | ||||||||
Adjusted EBITDA |
$ | 1,607 | $ | 1,434 | ||||
Net income attributable to noncontrolling interests |
(9) | (4) | ||||||
Gain (loss) on foreign currency transactions |
(43) | 27 | ||||||
FF&E replacement reserve |
(29) | (52) | ||||||
Share-based compensation expense |
(5) | (20) | ||||||
Impairment losses |
| (33) | ||||||
Impairment losses included in equity in earnings from unconsolidated affiliates |
| (4) | ||||||
Other gain, net |
5 | 8 | ||||||
Other adjustment items |
(56) | (46) | ||||||
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|
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EBITDA |
1,470 | 1,310 | ||||||
Interest expense |
(401) | (423) | ||||||
Interest expense included in equity in earnings from unconsolidated affiliates |
(10) | (8) | ||||||
Income tax expense |
(192) | (166) | ||||||
Depreciation and amortization |
(455) | (394) | ||||||
Depreciation and amortization included in equity in earnings from unconsolidated affiliates |
(23) | (28) | ||||||
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|
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Net income attributable to Hilton stockholder |
$ | 389 | $ | 291 | ||||
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The following table presents assets for our reportable segments, reconciled to consolidated amounts:
September 30,
2013 |
December 31,
2012 |
|||||||
(in millions) | ||||||||
Assets: |
||||||||
Ownership |
$ | 11,774 | $ | 12,316 | ||||
Management and franchise |
10,834 | 11,650 | ||||||
Timeshare |
1,841 | 1,839 | ||||||
Corporate and other |
2,280 | 1,261 | ||||||
|
|
|
|
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$ | 26,729 | $ | 27,066 | |||||
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|
The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
(in millions) | ||||||||
Capital expenditures for property and equipment: |
||||||||
Ownership |
$ | 158 | $ | 306 | ||||
Timeshare |
4 | 22 | ||||||
Corporate and other |
5 | 8 | ||||||
|
|
|
|
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$ | 167 | $ | 336 | |||||
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|
F-75
Note 16: Commitments and Contingencies
As of September 30, 2013, we had outstanding guarantees of $27 million, with remaining terms ranging from one month to nine years, for debt and other obligations of third parties. We have two letters of credit, which are supported by restricted cash and cash equivalents, for a total of $27 million that have been pledged as collateral for two of these guarantees. Although we believe it is unlikely that material payments will be required under these guarantees or letters of credit, there can be no assurance that this will be the case.
We have also provided performance guarantees to certain owners of hotels that we operate under management contracts. Most of these guarantees allow us to terminate the contract, rather than fund shortfalls, if specified performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of September 30, 2013, we had seven contracts containing performance guarantees, with expirations ranging from 2018 to 2030, and possible cash outlays totaling approximately $189 million. Our obligations under these guarantees in future periods is dependent on the operating performance levels of these hotels over the remaining terms of the performance guarantees. We do not have any letters of credit pledged as collateral against these guarantees. As of September 30, 2013 and December 31, 2012, we recorded current liabilities of approximately $9 million and $30 million, respectively, and non-current liabilities of approximately $52 million and $57 million, respectively, in our condensed consolidated balance sheets for obligations under our outstanding performance guarantees that are related to certain VIEs for which we are not the primary beneficiary.
As of September 30, 2013, we had outstanding commitments under third party contracts of approximately $65 million for capital expenditures at certain owned and leased properties, including our consolidated VIEs. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.
We have entered into an agreement with a developer in Las Vegas, Nevada, whereby we have agreed to purchase residential units from the developer that we will convert to timeshare units to be marketed and sold under our Hilton Grand Vacations brand. Subject to certain conditions, we are required to purchase approximately $92 million of inventory ratably over a maximum period of four years, which is equivalent to purchases of approximately $6 million per quarter. We began purchasing inventory during the quarter ended March 31, 2013, and as of September 30, 2013, we had purchased $23 million of inventory under this agreement.
We have committed to purchase additional non-voting shares in one of our consolidated VIEs to fund a master renovation plan of the underlying hotel. Our total share purchase commitment is Japanese Yen 1.4 billion (equivalent to $14 million as of September 30, 2013), and the purchases are expected to occur through 2015. As of September 30, 2013, we had not purchased any shares under this commitment.
During 2010, an affiliate of our Ultimate Parent settled a $75 million liability on our behalf in conjunction with a lawsuit settlement by entering into service contracts with the plaintiff. We recorded the portion settled by the affiliate of our Ultimate Parent as a capital contribution. Additionally, as part of the settlement, we entered into a guarantee with the plaintiff to pay any shortfall that the affiliate of our Ultimate Parent does not fund related to those service contracts up to the value of the settlement amount made by the affiliate of our Ultimate Parent. The remaining potential exposure under this guarantee as of September 30, 2013 was approximately $50 million. We have not accrued a liability for this guarantee as we believe the likelihood of any material funding to be remote.
We are involved in other litigation arising from the normal course of business, some of which includes claims for substantial sums. Accruals are recorded when the outcome is probable and can be reasonably estimated in accordance with applicable accounting requirements regarding accounting for contingencies. While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of September 30, 2013 will not have a material effect on our condensed consolidated results of operations, financial position, or cash flows.
F-76
Note 17: Subsequent Events
The Company has evaluated all subsequent events through November 6, 2013, the date the condensed consolidated financial statements were available to be issued.
Debt Refinancing
In October 2013, we completed a refinancing of our existing indebtedness, which consisted of the issuance of the following:
| $1.0 billion senior secured revolving credit facility (with no amounts drawn at closing); |
| $7.6 billion senior secured term loan facility, of which $100 million was voluntarily prepaid in November 2013; |
| $1.5 billion of 5.625% senior notes due in 2021; |
| $3.5 billion commercial mortgage-backed securities loan secured by 23 of our U.S. owned real estate assets; and |
| $525 million mortgage loan secured by our Waldorf Astoria New York property. |
We also entered into four interest rate swaps totaling $1.45 billion which swap floating three-month LIBOR to a fixed rate of 1.87 percent. We used the net proceeds of these transactions, additional borrowings of $300 million under our Timeshare Facility, cash proceeds from the Hilton HHonors point sales (discussed below), and available cash to repay our outstanding Secured Debt and plan to redeem our other unsecured notes due 2031 at a price equal to 100 percent of the principal amount of $96 million plus accrued interest. As of September 30, 2013, after giving pro forma effect to the debt refinancing, our long-term debt, including current maturities, would have been $13,255 million and our non-recourse debt, including current maturities would have been $1,006 million. Additionally, the contractual maturities of our long-term debt and non-recourse debt as of September 30, 2013 would have been as follows:
Year | (in millions) | |||
2013 (remaining) |
$ | 40 | ||
2014 |
126 | |||
2015 |
149 | |||
2016 |
698 | |||
2017 |
171 | |||
Thereafter |
13,115 | |||
|
|
|||
14,299 | ||||
Less: Discount |
(38) | |||
|
|
|||
Total long-term debt and non-recourse debt |
$ | 14,261 | ||
|
|
Hilton HHonors Point Sales
In October 2013, we sold Hilton HHonors points to American Express Travel Related Services Company, Inc. (Amex) and Citibank, N.A. (Citi), for $400 million and $250 million, respectively, in cash. We used the net proceeds of the Hilton HHonors points sales to reduce outstanding indebtedness. Amex and Citi and their respective designees may use the points in connection with Hilton HHonors co-branded credit cards and for promotions, rewards and incentive programs, or other certain activities as they may establish or engage in from time to time. Upon completion of these transactions, we recorded deferred revenue of $650 million.
F-77
Shares
Hilton Worldwide Holdings Inc.
Common Stock
PROSPECTUS
Deutsche Bank Securities
Goldman, Sachs & Co.
BofA Merrill Lynch
Morgan Stanley
,
Through and including the 25th day after the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligations to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. | OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. |
The following table sets forth the expenses payable by the Registrant expected to be incurred in connection with the issuance and distribution of the shares of common stock being registered hereby (other than underwriting discounts and commissions). All of such expenses are estimates, other than the filing and listing fees payable to the Securities and Exchange Commission, the Financial Industry Regulatory Authority, Inc. and .
Filing FeeSecurities and Exchange Commission |
$ | 170,500 | ||
FeeFinancial Industry Regulatory Authority, Inc. |
188,000 | |||
Listing Fee |
* | |||
Fees and Expenses of Counsel |
* | |||
Printing Expenses |
* | |||
Fees and Expenses of Accountants |
* | |||
Transfer Agent and Registrars Fees |
* | |||
Miscellaneous Expenses |
* | |||
|
|
|||
Total |
* | |||
|
|
* | To be provided by amendment. |
ITEM 14. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, allows a corporation to provide in its certificate of incorporation that a director of the corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation will provide for this limitation of liability.
Section 145 of the DGCL, or Section 145, provides, among other things, that a Delaware corporation may indemnify any person who was, is or is threatened to be made, party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporations best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were or are a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporations best interests, provided further that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred.
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Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such, whether or not the corporation would otherwise have the power to indemnify him or her under Section 145.
Our amended and restated bylaws will provide that we must indemnify our directors and officers to the fullest extent authorized by the DGCL and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking, by or on behalf of an indemnified person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under our amended and restated bylaws or otherwise.
The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter acquire under any statute, provision of our amended and restated certificate of incorporation, our amended and restated bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
We expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that we may make to such directors and officers.
The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement provides for indemnification to our directors and officers by the underwriters against certain liabilities.
We are currently party to or intend to enter into indemnification agreements with our directors and executive officers. These agreements require or will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors or executive officers, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and is therefore unenforceable.
ITEM 15. | RECENT SALES OF UNREGISTERED SECURITIES. |
None.
ITEM 16. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
(a) Exhibit Index
1.1 | Form of Underwriting Agreement * | |
3.1 | Certificate of Incorporation of Hilton Worldwide Holdings Inc. | |
3.2 | Bylaws of Hilton Worldwide Holdings Inc. | |
3.3 | Form of Amended and Restated Certificate of Incorporation of Hilton Worldwide Holdings Inc. * | |
3.4 | Form of Amended and Restated Bylaws of Hilton Worldwide Holdings Inc. * | |
4.1 | Indenture, dated as of October 4, 2013, among Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. as issuers, Hilton Worldwide Holdings Inc., as guarantor and Wilmington Trust, National Association, as trustee. ** | |
4.2 | First Supplemental Indenture, dated as of October 25, 2013, among the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee. |
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4.3 | Form of 5.625% Senior Note due 2021 (included in Exhibit 4.1)** | |
5.1 | Opinion of Simpson Thacher & Bartlett LLP regarding validity of the shares of common stock registered * | |
10.1 | Credit Agreement, dated as of October 25, 2013, among Hilton Worldwide Holdings Inc., as parent, Hilton Worldwide Finance LLC, as borrower, the other guarantors from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, collateral agent, swing line lender and L/C issuer, and the other lenders from time to time party thereto. | |
10.2 | Security Agreement, dated as of October 25, 2013, among the grantors identified therein and Deutsche Bank AG New York Branch, as collateral agent. | |
10.3 | Loan Agreement, dated as of October 25, 2013, among the subsidiaries party thereto, collectively, as borrower and JPMorgan Chase Bank, National Association, German American Capital Corporation, Bank of America, N.A., GS Commercial Real Estate LP and Morgan Stanley Mortgage Capital Holdings LLC, collectively, as lender. | |
10.4 | Guaranty Agreement, dated as of October 25, 2013, among the guarantors named therein and JPMorgan Chase Bank, National Association, German American Capital Corporation, Bank of America, N.A., GS Commercial Real Estate LP and Morgan Stanley Mortgage Capital Holdings LLC, collectively, as lender . | |
10.5 | Loan Agreement, dated as of October 25, 2013, among HLT NY Waldorf LLC, as borrower, HSBC Bank USA, National Association, as agent, the lenders named therein, HSBC Bank USA, National Association and DekaBank Deutsche Girozentrale, as lead arrangers and HSBC Bank USA, National Association, as syndication agent. | |
10.6 | Guaranty of Recourse Carveouts, dated as of October 25, 2013, among the guarantors named therein and HSBC Bank USA, National Association, as agent and lender and any other co-lenders from time to time party thereto. | |
10.7 | Receivables Loan Agreement, dated as of May 9, 2013, among Hilton Grand Vacations Trust I LLC, as borrower, Wells Fargo Bank, National Association, as paying agent and securities intermediary, the persons from time to time party thereto as conduit lenders, the financial institutions from time to time party thereto as committed lenders, the financial institutions from time to time party thereto as managing agents, and Deutsche Bank Securities, Inc., as administrative agent and structuring agent. ** | |
10.8 | Amendment No. 1 to Receivables Loan Agreement, effective as of July 25, 2013, among Hilton Grand Vacations Trust I LLC, as borrower, Wells Fargo Bank, National Association, as paying agent and securities intermediary, Deutsche Bank AG, New York Branch, as a committed lender and a managing agent, Montage Funding, LLC, as a conduit lender, Deutsche Bank Securities, Inc., as administrative agent, and Bank of America, N.A., as assignee. | |
10.9 | Omnibus Amendment No. 2 to Receivables Loan Agreement, Amendment No. 1 to Sale and Contribution Agreement and Consent to Custody Agreement, effective as of October 25, 2013, among Hilton Grand Vacations Trust I LLC, as borrower, Grand Vacations Services, LLC, as servicer, Hilton Resorts Corporation, as seller, Wells Fargo Bank, National Association, as custodian, the financial institutions signatory thereto, as managing agents, and Deutsche Bank Securities, Inc., as administrative agent. | |
10.10 | Registration Rights Agreement, dated as of October 4, 2013, among Hilton Worldwide Finance LLC, Hilton Worldwide Finance Corp., Hilton Worldwide Holdings Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as representative of the several initial purchasers (previously filed as Exhibit 4.4 to Amendment No. 1 to this Registration Statement on October 18, 2013). ** | |
10.11 | Joinder Agreement, dated as of October 25, 2013, among the subsidiary guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as representative of the several initial purchasers. |
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10.12 | Form of Stockholders Agreement * | |
10.13 | Form of Registration Rights Agreement among Hilton Worldwide Holdings Inc. and certain of its stockholders * | |
10.14 | Form of Registration Rights Agreement among Hilton Worldwide Holdings Inc. and certain former members of Hilton Global Holdings LLC* | |
10.15 | Form of Omnibus Incentive Plan | |
10.16 | Form of Restricted Stock Grant and Acknowledgment* | |
10.17 | Form of Director Restricted Stock Unit Award Agreement* | |
10.18 | Form of Severance Plan* | |
10.19 | Form of Director and Officer Indemnification Agreement* | |
10.20 | Employment Agreement, dated January 4, 2011, between Hilton Worldwide, Inc. and Christopher J. Nassetta. | |
10.21 | Employment Agreement, dated September 15, 2008, between Hilton Hotels Corporation and Thomas C. Kennedy. | |
10.22 | Employment Agreement, dated January 1, 2010, between Hilton Worldwide, Inc. and Ian R. Carter. | |
10.23 | Employment Agreement, dated November 13, 2008, between Hilton Worldwide, Inc. and Paul J. Brown. | |
10.24 | Separation Agreement and Release dated as of September 24, 2013, between Hilton Worldwide, Inc. and Thomas C. Kennedy | |
10.25 | Separation Agreement and Release dated as of October 31, 2012, between Hilton Worldwide, Inc. and Paul J. Brown | |
21.1 | Subsidiaries of the Registrant * | |
23.1 | Consent of Ernst & Young LLP | |
23.2 | Consent of Simpson Thacher & Bartlett LLP (included as part of Exhibit 5.1) * | |
24.1 | Power of Attorney (included on signature pages to this Registration Statement) | |
99.1 | Section 13(r) Disclosure* |
* | To be filed by amendment. |
** | Previously filed. |
(b) Financial Statement Schedule
All schedules are omitted because the required information is either not present, not present in material amounts or presented within the consolidated financial statements included in the prospectus and are incorporated herein by reference.
ITEM 17. | UNDERTAKINGS |
(1) |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling |
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person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
(2) | The undersigned Registrant hereby undertakes that: |
(A) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(B) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in McLean, Virginia, on the 8th day of November, 2013.
HILTON WORLDWIDE HOLDINGS INC. | ||||
By: |
/s/ Christopher J. Nassetta |
|||
Name: | Christopher J. Nassetta | |||
Title: | President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on the 8th day of November, 2013.
*By: | /s/ Christopher J. Nassetta | |||
Name: | Christopher J. Nassetta | |||
Title: | Attorney-in-Fact |
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Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
HILTON WORLDWIDE HOLDINGS INC.
The undersigned, in order to form a corporation for the purposes hereinafter stated, under and pursuant to the provisions of the General Corporation Law of the State of Delaware, hereby certifies that:
FIRST: The name of the corporation is Hilton Worldwide Holdings Inc. (the Corporation ).
SECOND: The registered office and registered agent of the Corporation is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.
FOURTH: The total number of shares of stock that the Corporation is authorized to issue is 1000 shares of common stock, par value $0.01 per share.
FIFTH: The name of the sole incorporator is Chase DAgostino, Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017-3954.
SIXTH: The Board of Directors of the Corporation may adopt, amend or repeal the By-laws of the Corporation.
SEVENTH: Except as otherwise provided by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this Article SEVENTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of Incorporation on March 18, 2010.
By: | /s/ Chase DAgostino | |
Chase DAgostino | ||
Sole Incorporator |
Exhibit 3.2
HILTON WORLDWIDE HOLDINGS INC.
BYLAWS
ADOPTED MARCH 18, 2010
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting and Notice . Meetings of the stockholders of the Corporation shall be held at such place either within or without the State of Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings . Annual meetings of stockholders shall be held, at a date, time and place fixed by the Board of Directors and stated in the notice of meeting, to elect a Board of Directors and to transact such other business as may properly come before the meeting. Special meetings of the stockholders may be called by the Chairman of the Board or the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Special meetings may be held on such date, time and place as the Chairman of the Board or the Board of Director shall direct.
Section 3. Notice . Except as otherwise provided by law, at least 10 and not more than 60 days before each meeting of stockholders, written notice of the time, date and place of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder.
Section 4. Quorum . At any meeting of stockholders, the holders of record, present in person or by proxy, of a majority of the Corporations issued and outstanding capital stock shall constitute a quorum for the transaction of business, except as otherwise provided by law. In the absence of a quorum, any officer entitled to preside at or to act as secretary of the meeting shall have power to adjourn the meeting from time to time until a quorum is present.
Section 5. Voting . Except as otherwise provided by law, all matters submitted to a meeting of stockholders shall be decided by affirmative vote of a majority of the Corporations issued and outstanding capital stock present in person or by proxy.
Section 6. Action By Written Consent of Stockholders . Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, be given to
those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.
ARTICLE II
DIRECTORS
Section 1. Number, Election and Removal of Directors . The number of Directors that shall constitute the Board of Directors shall not be less than one or more than fifteen as determined by the Board of Directors or the stockholders. Each Director shall hold office for a term of one year or until his or her successor is duly elected and qualified, subject to such Directors earlier death, resignation or removal. Vacancies and newly created directorships resulting from any increase in the number of Directors may be filled by a majority of the Directors then in office, although less than a quorum, or by the sole remaining Director or by the stockholders. A Director may be removed with or without cause by the stockholders.
Section 2. Meetings . Regular meetings of the Board of Directors shall be held at such times and places as may from time to time be fixed by the Board of Directors or as may be specified in a notice of meeting. Special meetings of the Board of Directors may be held at such times and places whenever called by the Chairman of the Board, the President or by two or more members of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting.
Section 3. Quorum . A majority of the total number of Directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board of Directors, the Directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until such a quorum is present. Except as otherwise provided by law, the Certificate of Incorporation of the Corporation or these By-laws, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.
Section 4. Committees . The Board of Directors may, by resolution adopted by a majority of the whole Board, designate one or more committees, including, without limitation, an Executive Committee, to have and exercise such power and authority as the Board of Directors shall specify. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another Director to act as the absent or disqualified member.
Section 5. Telephonic Meetings Permitted . Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.
2
Section 6. Organization . Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 7. Action by Unanimous Consent of Directors . Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee entitled to vote thereon, as the case may be, consent thereto in accordance with applicable law.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of such officers with such titles as the Board of Directors shall determine, all of which shall be chosen by and shall serve at the pleasure of the Board of Directors. Such officers shall have the usual powers and shall perform all the usual duties incident to their respective offices. All officers shall be subject to the supervision and direction of the Board of Directors. The authority, duties or responsibilities of any officer of the Corporation may be suspended by the Board of Directors with or without cause. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors with or without cause.
ARTICLE IV
SEAL
The corporate seal shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.
ARTICLE V
SHARE CERTIFICATES
Each stockholder shall be entitled to, upon request to the Secretary, a certificate or certificates which shall represent and certify the number and class of capital stock owned by such stockholder in the Corporation. In all other cases certificates will not be issued. Each certificate shall be signed by the Chairman of the Board or the President or a Vice President and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
The signatures on any certificates may be either manual or facsimile signatures and the Seal may be either facsimile or any other form of Seal. In the case any officer who has signed
3
any certificate ceases to be an officer of the Corporation before the certificate is issued, the certificate may nevertheless be issued by the Corporation with the same effect as if the officer had not ceased to be such officer as of the date of its issue. Each share certificate shall include on its face the name of the Corporation, the name of the stockholder and the class of shares and number of shares represented by the certificate.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such persons testator or intestate is or was a director or officer of the Corporation or serves or served, at the request of the Corporation, any other enterprise as a director or officer. Expenses, including attorneys fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly after a request therefor and upon receipt by the Corporation of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this Section shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director or officer as provided above. No amendment of this Section shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this Section, the term other enterprise shall include any corporation, partnership, limited liability company, joint venture, trust, association or other unincorporated organization or other entity or employee benefit plan; service at the request of the Corporation shall include service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation.
The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall not be deemed exclusive of, and shall not affect, any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, charter provision, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in such persons official capacity and as to action in another capacity while holding such office, and shall continue as to a person who ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Notices . Whenever any statute, the Certificate of Incorporation or these By-laws require notice to be given to any Director or stockholder, such notice may be given in writing by mail, addressed to such Director or stockholder at his address as it appears in the records of the Corporation, with postage thereon prepaid. Such notice shall be deemed to have been given when it is deposited in the United States mail. Notice to Directors may also be given by telecopier, telephone or other means of electronic transmission.
Section 2. Fiscal Year . The fiscal year of the Corporation shall begin the first day of January in each year.
Section 3. Waiver of Notice of Meetings of Stockholders . Directors and Committees. Any waiver of notice, given by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in a waiver of notice.
Section 4. Form of Records . Any records maintained by the corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.
Section 5. Amendment of By-Laws . These By-laws may be altered, amended or repealed, and new by-laws made, by the Board of Directors, but the stockholders may make additional by-laws and may alter, amend and repeal any by-laws whether adopted by them or otherwise.
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Exhibit 4.2
EXECUTION VERSION
FIRST SUPPLEMENTAL INDENTURE
Supplemental Indenture (this Supplemental Indenture ), dated as of October 25, 2013, among each of the entities listed in Schedule I hereto (the Guaranteeing Subsidiaries ), each a subsidiary of Hilton Worldwide Finance LLC, a Delaware limited liability company (the Issuer ), and Wilmington Trust, National Association, a national banking association, as trustee (the Trustee ).
W I T N E S S E T H
WHEREAS, the Issuer, Hilton Worldwide Finance Corp., a Delaware corporation (together with the Issuer, the Issuers ), and Hilton Worldwide Holdings Inc., a Delaware corporation, have heretofore executed and delivered to the Trustee an Indenture (the Indenture ), dated as of October 4, 2013, providing for the issuance of an unlimited aggregate principal amount of 5.625% Senior Notes due 2021 (the Notes );
WHEREAS, the Indenture provides that under certain circumstances each Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the Guarantee ); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:
(1) Capitalized Terms . Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
(2) Agreement to Guarantee . Each Guaranteeing Subsidiary acknowledges that it has received and reviewed a copy of the Indenture and all other documents it deems necessary to review in order to enter into this Supplemental Indenture, and acknowledges and agrees to (i) join and become a party to the Indenture as indicated by its signature below; (ii) be bound by the Indenture, as of the date hereof, as if made by, and with respect to, such Guaranteeing Subsidiary; and (iii) perform all obligations and duties required of a Guarantor pursuant to the Indenture. Each Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Indenture, including, but not limited to, Article 10 thereof.
(3) Execution and Delivery . Each Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
(4) No Recourse Against Others . No past, present or future director, officer, employee, incorporator, member, partner or stockholder of the Issuers or any Guaranteeing Subsidiary shall have any liability for any obligations of the Issuers or the Guarantors (including such Guaranteeing Subsidiary) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
(5) Governing Law . THIS SUPPLEMENTAL INDENTURE, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS SUPPLEMENTAL INDENTURE, WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(6) Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. This Supplemental Indenture may be executed in multiple counterparts which, when taken together, shall constitute one instrument. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmissions shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.
(7) Effect of Headings . The Section headings herein are for convenience only and shall not affect the construction hereof.
(8) The Trustee . The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary.
(9) Benefits Acknowledged . Each Guaranteeing Subsidiarys Guarantee is subject to the terms and conditions set forth in the Indenture. Each Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.
(10) Successors . All agreements of each Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.
[ Remainder of Page Left Intentionally Blank ]
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
90210 BILTMORE MANAGEMENT, LLC |
||||
90210 DESERT RESORTS MANAGEMENT CO., LLC |
||||
90210 GRAND WAILEA MANAGEMENT CO., LLC |
||||
90210 LLC |
||||
90210 MANAGEMENT COMPANY, LLC |
||||
ANDIAMOS OHARE, LLC |
||||
BALLYS GRAND PROPERTY SUB I, INC. |
||||
BLUE BONNET SECURITY, LLC |
||||
CHESTERFIELD VILLAGE HOTEL, LLC |
||||
COMPRIS HOTEL LLC |
||||
CONRAD FRANCHISE LLC |
||||
CONRAD INTERNATIONAL (BELGIUM) LLC |
||||
CONRAD INTERNATIONAL (EGYPT) RESORTS CORPORATION |
||||
CONRAD INTERNATIONAL (INDONESIA) CORPORATION |
||||
CONRAD INTERNATIONAL INVESTMENT (JAKARTA) CORPORATION |
||||
CONRAD INTERNATIONAL MANAGE (CIS) LLC |
||||
CONRAD MANAGEMENT LLC |
||||
DESTINATION RESORTS LLC |
||||
DOUBLETREE DTWC LLC |
||||
DOUBLETREE FRANCHISE LLC |
||||
DOUBLETREE HOTEL SYSTEMS LLC |
||||
DOUBLETREE HOTELS LLC |
||||
DOUBLETREE LLC |
||||
DOUBLETREE MANAGEMENT LLC |
||||
DT MANAGEMENT LLC |
||||
DT REAL ESTATE, INC. |
||||
DTM ATLANTA/LEGACY, INC. |
||||
DTM CAMBRIDGE, INC. |
||||
DTM COCONUT GROVE, INC. |
||||
DTM LARGO, INC. |
||||
DTM MARYLAND, INC. |
||||
DTM SANTA CLARA LLC |
||||
DTM WALNUT CREEK, INC. |
||||
DTR FCH HOLDINGS, INC. |
||||
DTR PAH HOLDING, INC., |
||||
each as a Guaranteeing Subsidiary |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Supplemental Indenture ]
DTR SAN ANTONIO, INC. |
||||
DTR TM HOLDINGS, INC. |
||||
DTWC SPOKANE CITY CENTER SPE, LLC |
||||
EJP CORPORATION |
||||
EMBASSY DEVELOPMENT CORPORATION |
||||
EMBASSY EQUITY DEVELOPMENT LLC |
||||
EMBASSY MEMPHIS CORPORATION |
||||
EMBASSY SUITES (ISLA VERDE), INC. |
||||
EMBASSY SUITES CLUB NO. 1, INC. |
||||
EMBASSY SUITES CLUB NO. THREE, INC. |
||||
EMBASSY SUITES CLUB NO. TWO, INC. |
||||
EMBASSY SUITES FRANCHISE LLC |
||||
EMBASSY SYRACUSE DEVELOPMENT LLC |
||||
EPAM CORPORATION |
||||
FLORIDA CONRAD INTERNATIONAL CORP. |
||||
GRAND VACATIONS REALTY, LLC |
||||
GRAND VACATIONS SERVICES LLC |
||||
GRAND VACATIONS TITLE, LLC |
||||
HAMPTON INNS FRANCHISE LLC |
||||
HAMPTON INNS LLC |
||||
HAMPTON INNS MANAGEMENT LLC |
||||
HAPEVILLE INVESTORS, LLC |
||||
HHC BC ORLANDO, LLC |
||||
HHC ONE PARK BOULEVARD, LLC |
||||
HIC FIRST CORPORATION |
||||
HIC GAMING CALIFORNIA, INC |
||||
HIC HOLDINGS CORPORATION |
||||
HIC HOTELS U.S.A. CORPORATION |
||||
HIC RACING CORPORATION |
||||
HIC SAN PABLO LIMITED, INC |
||||
HIC SAN PABLO, L.P. |
||||
HIC SECOND CORPORATION |
||||
HILTON BEVERAGE LLC |
||||
HILTON CHICAGO BEVERAGE I LLC |
||||
HILTON CHICAGO BEVERAGE II LLC |
||||
HILTON CHICAGO BEVERAGE III LLC |
||||
HILTON CHICAGO BEVERAGE IV LLC |
||||
HILTON CORPORATE DIRECTOR LLC |
||||
HILTON CP OPERATOR LLC |
||||
HILTON EL CON MANAGEMENT LLC, |
||||
each as a Guaranteeing Subsidiary |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Supplemental Indenture ]
HILTON EL CON OPERATOR LLC |
||||
HILTON ELECTRONIC DISTRIBUTION SYSTEMS, LLC |
||||
HILTON ENERGY INVESTMENTS, LLC |
||||
HILTON ESJ OPERATOR LLC |
||||
HILTON FRANCHISE HOLDING LLC |
||||
HILTON FRANCHISE LLC |
||||
HILTON GARDEN INNS FRANCHISE LLC |
||||
HILTON GARDEN INNS MANAGEMENT LLC |
||||
HILTON GRAND VACATIONS CLUB, LLC |
||||
HILTON GRAND VACATIONS COMPANY, LLC |
||||
HILTON GRAND VACATIONS FINANCING, LLC |
||||
HILTON GRAND VACATIONS MANAGEMENT, LLC |
||||
HILTON HAWAII CORPORATION |
||||
HILTON HHONORS WORLDWIDE, L.L.C. |
||||
HILTON HOLDINGS, LLC |
||||
HILTON HOSPITALITY, LLC |
||||
HILTON ILLINOIS CORP. |
||||
HILTON ILLINOIS HOLDINGS LLC |
||||
HILTON INNS LLC |
||||
HILTON INTERNATIONAL CO. |
||||
HILTON KINGSLAND 1, LLC |
||||
HILTON MANAGEMENT LLC |
||||
HILTON NEW JERSEY SERVICE CORP. |
||||
HILTON OPB, LLC |
||||
HILTON ORLANDO PARTNERS II, LLC |
||||
HILTON ORLANDO PARTNERS III, LLC |
||||
HILTON RECREATION LLC |
||||
HILTON RESORTS CORPORATION |
||||
HILTON RESORTS MARKETING CORP. |
||||
HILTON SAN DIEGO CORPORATION |
||||
HILTON SPRING CORPORATION |
||||
HILTON SUPPLY MANAGEMENT LLC |
||||
HILTON SYSTEMS SOLUTIONS, LLC |
||||
HILTON SYSTEMS, LLC |
||||
HILTON WORLDWIDE, INC. |
||||
HILTON-OCCC HOTEL, LLC, |
||||
each as a Guaranteeing Subsidiary |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Supplemental Indenture ]
HILTON-OCCC MEZZ LENDER, LLC |
||||
HLT AUDUBON LLC |
||||
HLT CA HILTON LLC |
||||
HLT CONRAD DOMESTIC LLC |
||||
HLT CONRAD GP LLC |
||||
HLT DOMESTIC JV HOLDINGS LLC |
||||
HLT DOMESTIC OWNER LLC |
||||
HLT ESP FRANCHISE LLC |
||||
HLT ESP INTERNATIONAL FRANCHISE LLC |
||||
HLT ESP INTERNATIONAL FRANCHISOR CORPORATION |
||||
HLT ESP INTERNATIONAL MANAGE LLC |
||||
HLT ESP INTERNATIONAL MANAGEMENT CORPORATION |
||||
HLT ESP MANAGE LLC |
||||
HLT FRANCHISE II BORROWER LLC |
||||
HLT HQ SPE LLC |
||||
HLT HSM HOLDING LLC |
||||
HLT HSS HOLDING LLC |
||||
HLT JV ACQUISITION LLC |
||||
HLT JV I BORROWER LLC |
||||
HLT LIFESTYLE FRANCHISE LLC |
||||
HLT LIFESTYLE INTERNATIONAL FRANCHISE LLC |
||||
HLT LIFESTYLE INTERNATIONAL FRANCHISOR CORPORATION |
||||
HLT LIFESTYLE INTERNATIONAL MANAGE LLC |
||||
HLT LIFESTYLE INTERNATIONAL MANAGEMENT CORPORATION |
||||
HLT LIFESTYLE MANAGE LLC |
||||
HLT MEMPHIS DATA LLC |
||||
HLT OHARE LLC |
||||
HLT OPERATE DTWC LLC |
||||
HLT OWNED II HOLDING LLC |
||||
HLT OWNED II-A BORROWER LLC |
||||
HLT PALMER LLC |
||||
HLT TIMESHARE BORROWER I LLC |
||||
HLT TIMESHARE BORROWER II LLC |
||||
HOMEWOOD SUITES FRANCHISE LLC |
||||
HOMEWOOD SUITES MANAGEMENT LLC, |
||||
each as a Guaranteeing Subsidiary |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Supplemental Indenture ]
HOTEL CLUBS OF CORPORATE WOODS, INC. |
||
HOTELS STATLER COMPANY, INC. |
||
HPP HOTELS USA, INC. |
||
HPP INTERNATIONAL CORPORATION |
||
HRC ISLANDER LLC |
||
HTGV, LLC |
||
INNVISION, LLC |
||
INTERNATIONAL RIVERCENTER LESSEE, L.L.C. |
||
LOCKWOOD PALMER HOUSE, LLC |
||
MERITEX, LLC |
||
PEACOCK ALLEY SERVICE COMPANY, LLC |
||
POTTERS BAR PALMER HOUSE, LLC |
||
PROMUS HOTEL SERVICES, INC. |
||
PROMUS HOTELS FLORIDA LLC |
||
PROMUS HOTELS LLC |
||
PROMUS HOTELS MINNEAPOLIS, INC. |
||
PROMUS HOTELS PARENT LLC |
||
PROMUS OPERATING LLC |
||
PROMUS/KINGSTON DEVELOPMENT CORPORATION |
||
SALC, INC. |
||
SAMANTHA HOTEL LLC |
||
SUITE LIFE, INC. |
||
TEX HOLDINGS, INC. |
||
WA COLLECTION INTERNATIONAL, LLC |
||
WALDORF ASTORIA FRANCHISE LLC |
||
WALDORF=ASTORIA MANAGEMENT LLC |
||
WASHINGTON HILTON, L.L.C., |
||
each as a Guaranteeing Subsidiary | ||
By: |
/s/ W. Steven Standefer |
|
Name: | W. Steven Standefer | |
Title: | Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Supplemental Indenture ]
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee | ||||
By: |
/s/ W. Thomas Morris, II |
|||
Name: | W. Thomas Morris, II | |||
Title: | Vice President |
[ Subsidiary Guarantors Signature Page to the Supplemental Indenture ]
SCHEDULE I
Subsidiary Guarantors
Entity Name | Jurisdiction | |
90210 Biltmore Management, LLC | Delaware | |
90210 Desert Resorts Management Co., LLC | Delaware | |
90210 Grand Wailea Management Co., LLC | Delaware | |
90210 LLC | Delaware | |
90210 Management Company, LLC | Delaware | |
Andiamos OHare, LLC | Delaware | |
Ballys Grand Property Sub I, Inc. | Nevada | |
Blue Bonnet Security, LLC | Delaware | |
Chesterfield Village Hotel, L.L.C. | Missouri | |
Compris Hotel LLC | Delaware | |
Conrad Franchise LLC | Delaware | |
Conrad International (Belgium) LLC | Nevada | |
Conrad International (Egypt) Resorts Corporation | Nevada | |
Conrad International (Indonesia) Corporation | Nevada | |
Conrad International Investment (Jakarta) Corporation | Nevada | |
Conrad International Manage (CIS) LLC | Delaware | |
Conrad Management LLC | Delaware | |
Destination Resorts LLC | Arizona | |
Doubletree DTWC LLC | Delaware | |
Doubletree Franchise LLC | Delaware | |
Doubletree Hotel Systems LLC | Arizona | |
Doubletree Hotels LLC | Arizona | |
Doubletree LLC | Delaware | |
Doubletree Management LLC | Delaware | |
DT Management LLC | Arizona | |
DT Real Estate, Inc. | Arizona | |
DTM Atlanta/Legacy, Inc. | Arizona | |
DTM Cambridge, Inc. | Massachusetts | |
DTM Coconut Grove, Inc. | Arizona | |
DTM Largo, Inc. | Arizona | |
DTM Maryland, Inc. | Arizona | |
DTM Santa Clara LLC | Arizona | |
DTM Walnut Creek, Inc. | Arizona | |
DTR FCH Holdings, Inc. | Arizona | |
DTR PAH Holding, Inc. | Arizona | |
DTR San Antonio, Inc. | Arizona | |
DTR TM Holdings, Inc. | Arizona | |
DTWC Spokane City Center SPE, LLC | Delaware |
Entity Name | Jurisdiction | |
EJP Corporation | Delaware | |
Embassy Development Corporation | Delaware | |
Embassy Equity Development LLC | Delaware | |
Embassy Memphis Corporation | Tennessee | |
Embassy Suites (Isla Verde), Inc. | Delaware | |
Embassy Suites Club No. 1, Inc. | Kansas | |
Embassy Suites Club No. Three, Inc. | Louisiana | |
Embassy Suites Club No. Two, Inc. | Texas | |
Embassy Suites Franchise LLC | Delaware | |
Embassy Syracuse Development LLC | Delaware | |
EPAM Corporation | Delaware | |
Florida Conrad International Corp. | Florida | |
Grand Vacations Realty, LLC | Delaware | |
Grand Vacations Services LLC | Delaware | |
Grand Vacations Title, LLC | Delaware | |
Hampton Inns Franchise LLC | Delaware | |
Hampton Inns LLC | Delaware | |
Hampton Inns Management LLC | Delaware | |
Hapeville Investors, LLC | Delaware | |
HHC BC Orlando, LLC | Delaware | |
HHC One Park Boulevard, LLC | Delaware | |
HIC First Corporation | Delaware | |
HIC Gaming California, Inc | California | |
HIC Holdings Corporation | Delaware | |
HIC Hotels U.S.A. Corporation | Delaware | |
HIC Racing Corporation | Delaware | |
HIC San Pablo Limited, Inc | California | |
HIC San Pablo, L.P. | California | |
HIC Second Corporation | Delaware | |
Hilton Beverage LLC | Delaware | |
Hilton Chicago Beverage I LLC | Delaware | |
Hilton Chicago Beverage II LLC | Delaware | |
Hilton Chicago Beverage III LLC | Delaware | |
Hilton Chicago Beverage IV LLC | Delaware | |
Hilton Corporate Director LLC | Delaware | |
Hilton CP Operator LLC | Delaware | |
Hilton El Con Management LLC | Delaware | |
Hilton El Con Operator LLC | Delaware | |
Hilton Electronic Distribution Systems, LLC | Delaware | |
Hilton Energy Investments, LLC | Delaware | |
Hilton ESJ Operator LLC | Delaware |
Entity Name | Jurisdiction | |
Hilton Franchise Holding LLC | Delaware | |
Hilton Franchise LLC | Delaware | |
Hilton Garden Inns Franchise LLC | Delaware | |
Hilton Garden Inns Management LLC | Delaware | |
Hilton Grand Vacations Club, LLC | Delaware | |
Hilton Grand Vacations Company, LLC | Delaware | |
Hilton Grand Vacations Financing, LLC | Delaware | |
Hilton Grand Vacations Management, LLC | Nevada | |
Hilton Hawaii Corporation | Delaware | |
Hilton HHonors Worldwide, L.L.C. | Delaware | |
Hilton Holdings LLC | Nevada | |
Hilton Hospitality LLC | Nevada | |
Hilton Illinois Corp. | Nevada | |
Hilton Illinois Holdings LLC | Delaware | |
Hilton Inns LLC | Delaware | |
Hilton International Co. | Delaware | |
Hilton Kingsland 1, LLC | Delaware | |
Hilton Management LLC | Delaware | |
Hilton New Jersey Service Corp. | Delaware | |
Hilton OPB, LLC | Delaware | |
Hilton Orlando Partners II, LLC | Delaware | |
Hilton Orlando Partners III, LLC | Delaware | |
Hilton Recreation LLC | Delaware | |
Hilton Resorts Corporation | Delaware | |
Hilton Resorts Marketing Corp. | Delaware | |
Hilton San Diego Corporation | California | |
Hilton Spring Corporation | Delaware | |
Hilton Supply Management LLC | Delaware | |
Hilton Systems Solutions, LLC | Delaware | |
Hilton Systems, LLC | Delaware | |
Hilton Worldwide, Inc. | Delaware | |
Hilton-OCCC Hotel, LLC | Florida | |
Hilton-OCCC Mezz Lender, LLC | Florida | |
HLT Audubon LLC | Delaware | |
HLT CA Hilton LLC | Delaware | |
HLT Conrad Domestic LLC | Delaware | |
HLT Conrad GP LLC | Delaware | |
HLT Domestic JV Holdings LLC | Delaware | |
HLT Domestic Owner LLC | Delaware | |
HLT ESP Franchise LLC | Delaware | |
HLT ESP International Franchise LLC | Delaware |
Entity Name | Jurisdiction | |
HLT ESP International Franchisor Corporation | Delaware | |
HLT ESP International Manage LLC | Delaware | |
HLT ESP International Management Corporation | Delaware | |
HLT ESP Manage LLC | Delaware | |
HLT Franchise II Borrower LLC | Delaware | |
HLT HQ SPE LLC | Delaware | |
HLT HSM Holding LLC | Delaware | |
HLT HSS Holding LLC | Delaware | |
HLT JV Acquisition LLC | Delaware | |
HLT JV I Borrower LLC | Delaware | |
HLT Lifestyle Franchise LLC | Delaware | |
HLT Lifestyle International Franchise LLC | Delaware | |
HLT Lifestyle International Franchisor Corporation | Delaware | |
HLT Lifestyle International Manage LLC | Delaware | |
HLT Lifestyle International Management Corporation | Delaware | |
HLT Lifestyle Manage LLC | Delaware | |
HLT Memphis Data LLC | Delaware | |
HLT OHare LLC | Delaware | |
HLT Operate DTWC LLC | Delaware | |
HLT Owned II Holding LLC | Delaware | |
HLT Owned II-A Borrower LLC | Delaware | |
HLT Palmer LLC | Delaware | |
Homewood Suites Franchise LLC | Delaware | |
HLT Timeshare Borrower I LLC | Delaware | |
HLT Timeshare Borrower II LLC | Delaware | |
Homewood Suites Management LLC | Delaware | |
Hotel Clubs of Corporate Woods, Inc. | Kansas | |
Hotels Statler Company, Inc. | Delaware | |
HPP Hotels USA, Inc. | Delaware | |
HPP International Corporation | Nevada | |
HRC Islander LLC | Delaware | |
HTGV, LLC | Delaware | |
Innvision, LLC | Delaware | |
International Rivercenter Lessee, L.L.C. | Louisiana | |
Lockwood Palmer House, LLC | Delaware | |
Meritex, LLC | Delaware | |
Peacock Alley Service Company, LLC | New York | |
Potters Bar Palmer House, LLC | Delaware | |
Promus Hotel Services, Inc. | Delaware | |
Promus Hotels Florida LLC | Delaware | |
Promus Hotels LLC | Delaware |
Entity Name | Jurisdiction | |
Promus Hotels Minneapolis, Inc. | Delaware | |
Promus Hotels Parent LLC | Delaware | |
Promus Operating LLC | Delaware | |
Promus/Kingston Development Corporation | Delaware | |
SALC, Inc. | Texas | |
Samantha Hotel LLC | Delaware | |
Suite Life, Inc. | Delaware | |
Tex Holdings, Inc. | Delaware | |
WA Collection International, LLC | Delaware | |
Waldorf Astoria Franchise LLC | Delaware | |
Waldorf=Astoria Management LLC | Delaware | |
Washington Hilton, L.L.C. | New York |
Exhibit 10.1
EXECUTION VERSION
CREDIT AGREEMENT
Dated as of October 25, 2013,
Among
HILTON WORLDWIDE HOLDINGS INC.,
as Parent,
HILTON WORLDWIDE FINANCE LLC,
as the Borrower,
THE OTHER GUARANTORS PARTY HERETO FROM TIME TO TIME
DEUTSCHE BANK AG NEW YORK BRANCH,
as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer,
and
THE OTHER LENDERS PARTY HERETO FROM TIME TO TIME
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
and
GOLDMAN SACHS LENDING PARTNERS LLC,
as Co-Syndication Agents,
J.P. MORGAN SECURITIES LLC,
MORGAN STANLEY SENIOR FUNDING, INC.,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
CREDIT SUISSE SECURITIES (USA) LLC,
CITIGROUP GLOBAL MARKETS INC.,
BARCLAYS BANK PLC,
MACQUARIE CAPITAL (USA) INC.
HSBC SECURITIES (USA) INC.,
THE ROYAL BANK OF SCOTLAND PLC,
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
and
SUMITOMO MITSUI BANKING CORPORATION,
as Co-Documentation Agents
DEUTSCHE BANK SECURITIES, INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
J.P. MORGAN SECURITIES LLC,
MORGAN STANLEY SENIOR FUNDING, INC., and
GOLDMAN SACHS LENDING PARTNERS LLC,
as Joint Lead Arrangers and Joint Bookrunners
and
WELLS FARGO SECURITIES, LLC
as Joint Bookrunner
TABLE OF CONTENTS
Page | ||||||||
ARTICLE I |
||||||||
DEFINITIONS AND ACCOUNTING TERMS |
1 | |||||||
SECTION 1.01 |
Defined Terms |
1 | ||||||
SECTION 1.02 |
Other Interpretive Provisions |
67 | ||||||
SECTION 1.03 |
Accounting Terms |
67 | ||||||
SECTION 1.04 |
Rounding |
68 | ||||||
SECTION 1.05 |
References to Agreements, Laws, Etc. |
68 | ||||||
SECTION 1.06 |
Times of Day |
68 | ||||||
SECTION 1.07 |
Timing of Payment or Performance |
68 | ||||||
SECTION 1.08 |
Cumulative Credit Transactions |
68 | ||||||
ARTICLE II |
||||||||
THE COMMITMENTS AND CREDIT EXTENSIONS |
68 | |||||||
SECTION 2.01 |
The Loans |
68 | ||||||
SECTION 2.02 |
Borrowings, Conversions and Continuations of Loans |
69 | ||||||
SECTION 2.03 |
Letters of Credit |
71 | ||||||
SECTION 2.04 |
Swing Line Loans |
81 | ||||||
SECTION 2.05 |
Prepayments |
84 | ||||||
SECTION 2.06 |
Termination or Reduction of Commitments |
96 | ||||||
SECTION 2.07 |
Repayment of Loans |
96 | ||||||
SECTION 2.08 |
Interest |
97 | ||||||
SECTION 2.09 |
Fees |
97 | ||||||
SECTION 2.10 |
Computation of Interest and Fees |
98 | ||||||
SECTION 2.11 |
Evidence of Indebtedness |
98 | ||||||
SECTION 2.12 |
Payments Generally |
99 | ||||||
SECTION 2.13 |
Sharing of Payments |
101 | ||||||
SECTION 2.14 |
Incremental Credit Extensions |
102 | ||||||
SECTION 2.15 |
Refinancing Amendments |
107 | ||||||
SECTION 2.16 |
Extension of Term Loans; Extension of Revolving Credit Loans |
108 | ||||||
SECTION 2.17 |
Defaulting Lenders |
112 | ||||||
ARTICLE III |
||||||||
TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY |
114 | |||||||
SECTION 3.01 |
Taxes |
114 | ||||||
SECTION 3.02 |
Illegality |
116 | ||||||
SECTION 3.03 |
Inability to Determine Rates |
117 | ||||||
SECTION 3.04 |
Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans |
117 | ||||||
SECTION 3.05 |
Funding Losses |
119 | ||||||
SECTION 3.06 |
Matters Applicable to All Requests for Compensation |
119 | ||||||
SECTION 3.07 |
Replacement of Lenders under Certain Circumstances |
120 | ||||||
SECTION 3.08 |
Survival |
122 |
i
ARTICLE IV |
||||||||
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS |
122 | |||||||
SECTION 4.01 |
Conditions to Initial Credit Extension |
122 | ||||||
SECTION 4.02 |
Conditions to All Credit Extensions |
124 | ||||||
ARTICLE V |
||||||||
REPRESENTATIONS AND WARRANTIES |
125 | |||||||
SECTION 5.01 |
Existence, Qualification and Power; Compliance with Laws |
125 | ||||||
SECTION 5.02 |
Authorization; No Contravention |
125 | ||||||
SECTION 5.03 |
Governmental Authorization; Other Consents |
125 | ||||||
SECTION 5.04 |
Binding Effect |
126 | ||||||
SECTION 5.05 |
Financial Statements; No Material Adverse Effect |
126 | ||||||
SECTION 5.06 |
Litigation |
127 | ||||||
SECTION 5.07 |
[Reserved] |
127 | ||||||
SECTION 5.08 |
Ownership of Property; Liens; Real Property; Management Agreements and Franchise Agreements |
127 | ||||||
SECTION 5.09 |
Environmental Matters |
127 | ||||||
SECTION 5.10 |
Taxes |
128 | ||||||
SECTION 5.11 |
ERISA Compliance |
128 | ||||||
SECTION 5.12 |
Subsidiaries; Equity Interests |
129 | ||||||
SECTION 5.13 |
Margin Regulations; Investment Company Act |
129 | ||||||
SECTION 5.14 |
Disclosure |
129 | ||||||
SECTION 5.15 |
Labor Matters |
130 | ||||||
SECTION 5.16 |
[Reserved] |
130 | ||||||
SECTION 5.17 |
Intellectual Property; Licenses, Etc. |
130 | ||||||
SECTION 5.18 |
Solvency |
130 | ||||||
SECTION 5.19 |
Subordination of Junior Financing; First Lien Obligations |
131 | ||||||
SECTION 5.20 |
OFAC; USA PATRIOT Act; FCPA |
131 | ||||||
SECTION 5.21 |
Security Documents |
131 | ||||||
ARTICLE VI |
||||||||
AFFIRMATIVE COVENANTS |
132 | |||||||
SECTION 6.01 |
Financial Statements |
132 | ||||||
SECTION 6.02 |
Certificates; Other Information |
134 | ||||||
SECTION 6.03 |
Notices |
135 | ||||||
SECTION 6.04 |
Payment of Obligations |
136 | ||||||
SECTION 6.05 |
Preservation of Existence, Etc. |
136 | ||||||
SECTION 6.06 |
Maintenance of Properties |
136 | ||||||
SECTION 6.07 |
Maintenance of Insurance |
136 | ||||||
SECTION 6.08 |
Compliance with Laws |
137 | ||||||
SECTION 6.09 |
Books and Records |
137 | ||||||
SECTION 6.10 |
Inspection Rights |
138 | ||||||
SECTION 6.11 |
Additional Collateral; Additional Guarantors |
138 | ||||||
SECTION 6.12 |
Compliance with Environmental Laws |
140 | ||||||
SECTION 6.13 |
Further Assurances |
140 | ||||||
SECTION 6.14 |
Designation of Subsidiaries |
140 |
ii
SECTION 6.15 |
Maintenance of Ratings |
141 | ||||||
SECTION 6.16 |
Post-Closing Covenants |
141 | ||||||
ARTICLE VII |
||||||||
NEGATIVE COVENANTS |
141 | |||||||
SECTION 7.01 |
Liens |
141 | ||||||
SECTION 7.02 |
Investments |
145 | ||||||
SECTION 7.03 |
Indebtedness |
149 | ||||||
SECTION 7.04 |
Fundamental Changes |
153 | ||||||
SECTION 7.05 |
Dispositions |
154 | ||||||
SECTION 7.06 |
Restricted Payments |
156 | ||||||
SECTION 7.07 |
Change in Nature of Business |
160 | ||||||
SECTION 7.08 |
Transactions with Affiliates |
160 | ||||||
SECTION 7.09 |
Burdensome Agreements |
161 | ||||||
SECTION 7.10 |
Use of Proceeds |
162 | ||||||
SECTION 7.11 |
Financial Covenant |
162 | ||||||
SECTION 7.12 |
Accounting Changes |
162 | ||||||
SECTION 7.13 |
Prepayments, Etc. of Indebtedness |
162 | ||||||
SECTION 7.14 |
Permitted Activities |
163 | ||||||
ARTICLE VIII |
||||||||
EVENTS OF DEFAULT AND REMEDIES |
164 | |||||||
SECTION 8.01 |
Events of Default |
164 | ||||||
SECTION 8.02 |
Remedies Upon Event of Default |
167 | ||||||
SECTION 8.03 |
Exclusion of Immaterial Subsidiaries |
167 | ||||||
SECTION 8.04 |
Application of Funds |
167 | ||||||
SECTION 8.05 |
Borrowers Right to Cure |
168 | ||||||
ARTICLE IX |
||||||||
ADMINISTRATIVE AGENT AND OTHER AGENTS |
169 | |||||||
SECTION 9.01 |
Appointment and Authorization of Agents |
169 | ||||||
SECTION 9.02 |
Delegation of Duties |
170 | ||||||
SECTION 9.03 |
Liability of Agents |
171 | ||||||
SECTION 9.04 |
Reliance by Agents |
171 | ||||||
SECTION 9.05 |
Notice of Default |
172 | ||||||
SECTION 9.06 |
Credit Decision; Disclosure of Information by Agents |
172 | ||||||
SECTION 9.07 |
Indemnification of Agents |
172 | ||||||
SECTION 9.08 |
Agents in Their Individual Capacities |
173 | ||||||
SECTION 9.09 |
Successor Agents |
173 | ||||||
SECTION 9.10 |
Administrative Agent May File Proofs of Claim |
174 | ||||||
SECTION 9.11 |
Collateral and Guaranty Matters |
175 | ||||||
SECTION 9.12 |
Other Agents; Lead Arrangers and Managers |
176 | ||||||
SECTION 9.13 |
Withholding Tax Indemnity |
176 | ||||||
SECTION 9.14 |
Appointment of Supplemental Agents |
177 |
iii
ARTICLE X |
||||||||
MISCELLANEOUS | 178 | |||||||
SECTION 10.01 |
Amendments, Etc. |
178 | ||||||
SECTION 10.02 |
Notices and Other Communications; Facsimile Copies |
181 | ||||||
SECTION 10.03 |
No Waiver; Cumulative Remedies |
182 | ||||||
SECTION 10.04 |
Attorney Costs and Expenses |
182 | ||||||
SECTION 10.05 |
Indemnification by the Borrower |
183 | ||||||
SECTION 10.06 |
Payments Set Aside |
184 | ||||||
SECTION 10.07 |
Successors and Assigns |
184 | ||||||
SECTION 10.08 |
Confidentiality |
192 | ||||||
SECTION 10.09 |
Setoff |
194 | ||||||
SECTION 10.10 |
Interest Rate Limitation |
194 | ||||||
SECTION 10.11 |
Counterparts |
195 | ||||||
SECTION 10.12 |
Integration; Termination |
195 | ||||||
SECTION 10.13 |
Survival of Representations and Warranties |
195 | ||||||
SECTION 10.14 |
Severability |
195 | ||||||
SECTION 10.15 |
GOVERNING LAW |
196 | ||||||
SECTION 10.16 |
WAIVER OF RIGHT TO TRIAL BY JURY |
196 | ||||||
SECTION 10.17 |
Binding Effect |
197 | ||||||
SECTION 10.18 |
USA PATRIOT Act |
197 | ||||||
SECTION 10.19 |
No Advisory or Fiduciary Responsibility |
197 | ||||||
SECTION 10.20 |
Electronic Execution of Assignments |
198 | ||||||
SECTION 10.21 |
Effect of Certain Inaccuracies |
198 | ||||||
SECTION 10.22 |
Judgment Currency |
199 | ||||||
ARTICLE XI |
||||||||
GUARANTY |
199 | |||||||
SECTION 11.01 |
The Guaranty |
199 | ||||||
SECTION 11.02 |
Obligations Unconditional |
200 | ||||||
SECTION 11.03 |
Reinstatement |
201 | ||||||
SECTION 11.04 |
Subrogation; Subordination |
201 | ||||||
SECTION 11.05 |
Remedies |
201 | ||||||
SECTION 11.06 |
Instrument for the Payment of Money |
201 | ||||||
SECTION 11.07 |
Continuing Guaranty |
202 | ||||||
SECTION 11.08 |
General Limitation on Guarantee Obligations |
202 | ||||||
SECTION 11.09 |
Information |
202 | ||||||
SECTION 11.10 |
Release of Guarantors |
202 | ||||||
SECTION 11.11 |
Right of Contribution |
203 | ||||||
SECTION 11.12 |
Cross-Guaranty |
203 |
iv
SCHEDULES
1.01A | Commitments | |||
1.01B | Disqualified Lenders | |||
1.01C | Collateral Documents | |||
1.01D | Excluded Subsidiaries | |||
1.01E | Securitization Subsidiaries | |||
1.01F | Unrestricted Subsidiaries | |||
1.01G | Approved Counterparties | |||
5.05 | Certain Liabilities | |||
5.06 | Litigation | |||
5.08 | Ownership of Property | |||
5.09(a) | Environmental Matters | |||
5.10 | Taxes | |||
5.11(a) | ERISA Compliance | |||
5.12 | Subsidiaries and Other Equity Investments | |||
6.16 | Post-Closing Covenants | |||
7.01(b) | Existing Liens | |||
7.02(f) | Existing Investments | |||
7.03(b) | Existing Indebtedness | |||
7.08 | Transactions with Affiliates | |||
7.09 | Certain Contractual Obligations | |||
10.02 | Administrative Agents Office, Certain Addresses for Notices |
EXHIBITS
Form of
A | Committed Loan Notice | |||
B | Letter of Credit Issuance Request | |||
C | Swing Line Loan Notice | |||
D-1 | Term Note | |||
D-2 | Revolving Credit Note | |||
D-3 | Swing Line Note | |||
E-1 | Compliance Certificate | |||
E-2 | Solvency Certificate | |||
F | Assignment and Assumption | |||
G | Security Agreement | |||
H | Perfection Certificate | |||
I | Intercompany Note | |||
J-1 | First Lien Intercreditor Agreement | |||
J-2 | Junior Lien Intercreditor Agreement | |||
K-1 | United States Tax Compliance Certificate (Foreign Non-Partnership Lenders) | |||
K-2 | United States Tax Compliance Certificate (Foreign Non-Partnership Participants) | |||
K-3 | United States Tax Compliance Certificate (Foreign Partnership Lenders) | |||
K-4 | United States Tax Compliance Certificate (Foreign Partnership Participants) | |||
L | Administrative Questionnaire | |||
M-1 | Affiliated Lender Assignment and Assumption | |||
M-2 | Affiliated Lender Notice |
v
M-3 | Acceptance and Prepayment Notice | |||
M-4 | Discount Range Prepayment Notice | |||
M-5 | Discount Range Prepayment Offer | |||
M-6 | Solicited Discounted Prepayment Notice | |||
M-7 | Solicited Discounted Prepayment Offer | |||
M-8 | Specified Discount Prepayment Notice | |||
M-9 | Specified Discount Prepayment Response |
vi
CREDIT AGREEMENT
This CREDIT AGREEMENT (as the same may be amended, modified, refinanced and/or restated from time to time, this Agreement ) is entered into as of October 25, 2013, among HILTON WORLDWIDE HOLDINGS INC., a Delaware corporation ( Parent ), HILTON WORLDWIDE FINANCE LLC, a Delaware limited liability company (the Borrower ), the Guarantors party hereto from time to time, DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer, and each lender from time to time party hereto (collectively, the Lenders and individually, a Lender ).
PRELIMINARY STATEMENTS
The Borrower has requested that the Lenders extend credit to the Borrower in the form of (i) the Initial Term Loans on the Closing Date in an initial aggregate principal amount of $7,600,000,000 and (ii) a Revolving Credit Facility in an initial aggregate principal amount of $1,000,000,000.
The proceeds of the Initial Term Loans and Revolving Credit Loans will be used by the Borrower to directly or indirectly consummate the Transaction and pay the Transaction Expenses.
The applicable Lenders have indicated their willingness to lend and the L/C Issuers have indicated their willingness to issue Letters of Credit, in each case, on the terms and subject to the conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
Definitions and Accounting Terms
SECTION 1.01 Defined Terms.
As used in this Agreement, the following terms shall have the meanings set forth below:
5 5/8% Senior Notes means $1,500,000,000 in aggregate principal amount of the Borrowers 5 5/8% senior unsecured notes due 2021 issued pursuant to the Senior Notes Indenture.
Acceptable Discount has the meaning set forth in Section 2.05(a)(v)(D)(2).
Acceptable Prepayment Amount has the meaning set forth in Section 2.05(a)(v)(D)(3).
Acceptance and Prepayment Notice means a notice of the Borrowers acceptance of the Acceptable Discount in substantially the form of Exhibit M-3 .
Acceptance Date has the meaning set forth in Section 2.05(a)(v)(D)(2).
Acquired EBITDA means, with respect to any Acquired Entity or Business or any Converted Restricted Subsidiary for any period, the amount for such period of Consolidated EBITDA of such Acquired Entity or Business or Converted Restricted Subsidiary (determined as if references to the Borrower and the Restricted Subsidiaries in the definition of Consolidated EBITDA
1
were references to such Acquired Entity or Business and its Subsidiaries or to such Converted Restricted Subsidiary and its Subsidiaries), as applicable, all as determined on a consolidated basis for such Acquired Entity or Business or Converted Restricted Subsidiary, as applicable.
Acquired Entity or Business has the meaning set forth in the definition of the term Consolidated EBITDA.
Additional Lender has the meaning set forth in Section 2.14(c).
Additional Refinancing Lender has the meaning set forth in Section 2.15(a).
Administrative Agent means Deutsche Bank AG New York Branch, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
Administrative Agents Office means the Administrative Agents address and account as set forth on Schedule 10.02 , or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.
Administrative Questionnaire means an Administrative Questionnaire in the form of Exhibit L or such other form as may be supplied from time to time by the Administrative Agent.
Affiliate means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
Affiliated Lender means, at any time, any Lender that is an Investor (including portfolio companies of the Investors notwithstanding the exclusion in the definition of Investors) (other than Holdings, the Borrower or any of its Subsidiaries and other than any Debt Fund Affiliate) or a Non-Debt Fund Affiliate of an Investor at such time.
Affiliated Lender Assignment and Assumption has the meaning set forth in Section 10.07(l)(i).
Affiliated Lender Cap has the meaning set forth in Section 10.07(l)(iii).
Agent-Related Persons means the Agents, together with their respective Affiliates, and the officers, directors, employees, partners, agents, advisors, attorneys-in-fact and other representatives of such Persons and Affiliates.
Agents means, collectively, the Administrative Agent, the Collateral Agent, the Co-Syndication Agents, the Co-Documentation Agent and the Supplemental Agents (if any).
Aggregate Commitments means the Commitments of all the Lenders.
Agreement means this Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time.
2
All-In Yield means, as to any Indebtedness, the yield thereof, whether in the form of interest rate, margin, OID, upfront fees or Eurocurrency Rate or Base Rate floor; provided that OID and upfront fees shall be equated to interest rate assuming a 4-year life to maturity (or, if less, the stated life to maturity at the time of its incurrence of the applicable Indebtedness); and provided, further , that All-In Yield shall not include arrangement fees, structuring fees, commitment fees, underwriting fees or other fees payable to any lead arranger (or its affiliates) in connection with the commitment or syndication of such Indebtedness.
Applicable Discount has the meaning set forth in Section 2.05(a)(v)(C)(2).
Applicable ECF Percentage means, for any fiscal year, (a) 50.0% if the Consolidated First Lien Net Leverage Ratio as of the last day of such fiscal year is greater than 4.60 to 1.00, (b) 25.0% if the Consolidated First Lien Net Leverage Ratio as of the last day of such fiscal year is less than or equal to 4.60 to 1.00 and greater than 3.85 to 1.00 and (c) 0.0% if the Consolidated First Lien Net Leverage Ratio as of the last day of such fiscal year is less than or equal to 3.85 to 1.00.
Applicable Period has the meaning set forth in Section 10.21.
Applicable Rate means (a) until delivery of financial statements for the first full fiscal quarter ending after the Closing Date pursuant to Section 6.01, a percentage per annum equal to:
(i) with respect to Initial Term Loans, (A) for Eurocurrency Rate Loans, 3.00% and (B) for Base Rate Loans, 2.00%;
(ii) with respect to Revolving Credit Loans, (A) for Eurocurrency Rate Loans and Letter of Credit fees, 2.50%, (B) for Base Rate Loans, 1.50% and (C) for commitment fees on the unused Revolving Credit Commitments, 0.50%; and
(b) thereafter, the following percentages per annum, based upon the Consolidated First Lien Net Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a):
Applicable Rate | ||||||||
Pricing
|
Consolidated First Lien Net Leverage Ratio |
Eurocurrency
Rate for Revolving Credit Loans and Letter of Credit Fees |
Base Rate for
Revolving Credit Loans |
Unused
Commitment Fee Rate |
||||
1 | £ 3.25:1.00 | 2.00% | 1.00% | 0.375% | ||||
2 | > 3.25:1.00 and £ 3.85:1.00 | 2.25% | 1.25% | 0.375% | ||||
3 | > 3.85:1.00 | 2.50% | 1.50% | 0.50% |
3
Applicable Rate | ||||||||
Pricing
|
Consolidated First Lien Net Leverage Ratio |
Eurocurrency
Rate for Initial Term Loans |
Base Rate for
Initial Term Loans |
|||||
1 | £ 3.85:1.00 | 2.75% | 1.75% | |||||
2 | > 3.85:1.00 | 3.00% | 2.00% |
Additionally, after a Qualified IPO, the percentages per annum set forth in clauses (a) and (b) above shall be further reduced by 25 basis points. Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated First Lien Net Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a); provided that at the option of the Administrative Agent or the Required Lenders, the highest pricing level ( i.e. , Pricing Level 2 for Initial Term Loans or Pricing Level 3 for Revolving Credit Loans, Letter of Credit fees and commitment fees) shall apply (x) as of the first Business Day after the date on which a Compliance Certificate was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such Compliance Certificate is so delivered (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (y) as of the first Business Day after an Event of Default under Section 8.01(a) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply).
Approved Counterparty means (a) each counterparty listed on Schedule 1.01G , (b) any Agent, Lender or any Affiliate of an Agent or Lender at the time it entered into a Secured Hedge Agreement or a Treasury Services Agreement, as applicable, in its capacity as a party thereto, (c) any other Person whose long term senior unsecured debt rating is A/A2 by S&P or Moodys (or their equivalent) or higher or (d) any other Person from time to time approved in writing by the Administrative Agent.
Appropriate Lender means, at any time, (a) with respect to Loans of any Class, the Lenders of such Class, (b) with respect to Letters of Credit, (i) the relevant L/C Issuer and (ii) the Revolving Credit Lenders and (c) with respect to the Swing Line Facility, (i) the Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.04(a), the Revolving Credit Lenders.
Approved Currency means each of (i) Dollars, (ii) euros, (iii) Sterling, (iv) Yen and (v) Australian Dollars.
Approved Foreign Currency means any Approved Currency other than Dollars.
Approved Fund means, with respect to any Lender, any Fund that is administered, advised or managed by (a) such Lender, (b) an Affiliate of such Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages such Lender.
Assignees has the meaning set forth in Section 10.07(b).
4
Assignment and Assumption means an Assignment and Assumption substantially in the form of Exhibit F .
Assignment Taxes has the meaning specified in Section 3.01(b).
Attorney Costs means and includes all reasonable and documented fees, expenses and disbursements of any law firm or other external legal counsel.
Attributable Indebtedness means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
Auction Agent means (a) the Administrative Agent or (b) any other financial institution or advisor employed by the Borrower (whether or not an Affiliate of the Administrative Agent) to act as an arranger in connection with any Discounted Term Loan Prepayment pursuant to Section 2.05(a)(v); provided that the Borrower shall not designate the Administrative Agent as the Auction Agent without the written consent of the Administrative Agent (it being understood that the Administrative Agent shall be under no obligation to agree to act as the Auction Agent); provided , further , that neither the Borrower nor any of its Affiliates may act as the Auction Agent.
Audited Financial Statements means the audited consolidated balance sheets of Holdings and its Subsidiaries as of each of December 31, 2012 and 2011 and related consolidated statements of income, stockholders equity and cash flows of Holdings and its Subsidiaries for the fiscal years ended December 31, 2012 and 2011.
Australian Dollars and A$ mean lawful money of the Commonwealth of Australia.
Auto-Extension Letter of Credit has the meaning set forth in Section 2.03(b)(iii).
Base Rate means, for any day, a rate per annum equal to the greatest of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1%, (b) the Prime Rate in effect for such day and (c) the Eurocurrency Rate for deposits in Dollars for a one-month Interest Period plus 1.00%; provided that for the avoidance of doubt, the Eurocurrency Rate for any day shall be LIBOR, at approximately 11:00 a.m. (London time) two Business Days prior to such day for deposits in Dollars with a term of one month commencing on such day; it being understood that, for the avoidance of doubt, solely with respect to the Initial Term Loans, the Base Rate shall be deemed to be not less than 2.00% per annum. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Base Rate shall be determined without regard to clause (a) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the Eurocurrency Rate shall be effective on the effective date of such change in the Prime Rate, the Federal Funds Rate or the Eurocurrency Rate, as the case may be.
Base Rate Loan means a Loan denominated in Dollars that bears interest based on the Base Rate.
Borrower has the meaning set forth in the introductory paragraph to this Agreement.
5
Borrower Materials has the meaning set forth in Section 6.02.
Borrower Offer of Specified Discount Prepayment means the offer by any Company Party to make a voluntary prepayment of Term Loans at a Specified Discount to par pursuant to Section 2.05(a)(v)(B).
Borrower Solicitation of Discount Range Prepayment Offers means the solicitation by any Company Party of offers for, and the corresponding acceptance by a Lender of, a voluntary prepayment of Term Loans at a specified range of discounts to par pursuant to Section 2.05(a)(v)(C).
Borrower Solicitation of Discounted Prepayment Offers means the solicitation by any Company Party of offers for, and the subsequent acceptance, if any, by a Lender of, a voluntary prepayment of Term Loans at a discount to par pursuant to Section 2.05(a)(v)(D).
Borrowing means a Revolving Credit Borrowing, a Swing Line Borrowing or a Term Borrowing of a particular Class, as the context may require.
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agents Office is located and if such day relates to any interest rate settings as to a Eurocurrency Rate Loan, any fundings, disbursements, settlements and payments in respect of any such Eurocurrency Rate Loan, or any other dealings to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means a day (a) on which dealings in deposits in the applicable Approved Currency are conducted by and between banks in the applicable London interbank market, (b) if such Eurocurrency Rate Loan is denominated in euros, on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open, (c) if such Eurocurrency Rate Loan is denominated in Yen, on which banks are open for foreign exchange business in Tokyo, Japan and (d) if such Eurocurrency Rate Loan is denominated in Australian Dollars, on which banks are open for foreign exchange business in Melbourne, Australia.
Capital Expenditures means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including in all events all amounts expended or capitalized under Capitalized Leases) by the Borrower and its Restricted Subsidiaries during such period that, in conformity with GAAP, are or are required to be included as capital expenditures on the consolidated statement of cash flows of the Borrower and its Restricted Subsidiaries.
Capitalized Leases means all leases that have been or are required to be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability on a balance sheet in accordance with GAAP; provided, further, that for purposes of calculations made pursuant to the terms of this Agreement, GAAP will be deemed to treat leases in a manner consistent with its current treatment under generally accepted accounting principles as of the Closing Date, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a Capitalized Lease; provided that any obligations of the Borrower or its Restricted Subsidiaries either existing on the Closing Date or created prior to any recharacterization described below (i) that were not included on the consolidated balance sheet of Holdings as capital lease obligations and (ii) that are subsequently recharacterized as capital lease
6
obligations or indebtedness due to a change in accounting treatment or otherwise, shall for all purposes under this Agreement (including, without limitation, the calculation of Consolidated Net Income and Consolidated EBITDA) not be treated as capital lease obligations, Capitalized Lease Obligations or Indebtedness.
Capitalized Software Expenditures means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by the Borrower and the Restricted Subsidiaries during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of Holdings and the Restricted Subsidiaries.
Cash Collateral has the meaning set forth in Section 2.03(g).
Cash Collateral Account means a blocked account at a commercial bank specified by the Administrative Agent in the name of the Administrative Agent and under the sole dominion and control of the Administrative Agent, and otherwise established in a manner reasonably satisfactory to the Administrative Agent.
Cash Collateralize has the meaning set forth in Section 2.03(g).
Cash Equivalents means any of the following types of Investments, to the extent owned by the Borrower or any Restricted Subsidiary:
(1) Dollars;
(2) (a) Canadian dollars, Sterling, Yen, euros or any national currency of any participating member state of the EMU; or
(b) in such local currencies held by the Borrower or any Restricted Subsidiary from time to time in the ordinary course of business;
(3) securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition;
(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of 24 months or less from the date of acquisition, demand deposits, bankers acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic or foreign commercial bank having capital and surplus of not less than $250.0 million in the case of U.S. banks and $100.0 million (or the Dollar Equivalent as of the date of determination) in the case of non-U.S. banks;
(5) repurchase obligations for underlying securities of the types described in clauses (3), (4), (7) and (8) entered into with any financial institution or recognized securities dealer meeting the qualifications specified in clause (4) above;
(6) commercial paper and variable or fixed rate notes rated at least P-2 by Moodys or at least A-2 by S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) and in each case maturing within 24 months after the date of creation thereof;
7
(7) marketable short-term money market and similar funds having a rating of at least P-2 or A-2 from either Moodys or S&P, respectively (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency);
(8) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an investment grade rating from either Moodys or S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) with maturities of 24 months or less from the date of acquisition;
(9) readily marketable direct obligations issued by any foreign government or any political subdivision or public instrumentality thereof, in each case having an investment grade rating from either Moodys or S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) with maturities of 24 months or less from the date of acquisition;
(10) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moodys (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency);
(11) securities with maturities of 12 months or less from the date of acquisition backed by standby letters of credit issued by any financial institution or recognized securities dealer meeting the qualifications specified in clause (4) above;
(12) Indebtedness or preferred stock issued by Persons with a rating of A or higher from S&P or A2 or higher from Moodys with maturities of 24 months or less from the date of acquisition; and
(13) investment funds investing at least 90% of their assets in securities of the types described in clauses (1) through (12) above.
In the case of Investments by any Foreign Subsidiary that is a Restricted Subsidiary or Investments made in a country outside the United States of America, Cash Equivalents shall also include (a) investments of the type and maturity described in clauses (1) through (8) and clauses (10), (11), (12) and (13) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies and (b) other short-term investments utilized by Foreign Subsidiaries that are Restricted Subsidiaries in accordance with normal investment practices for cash management in investments analogous to the foregoing investments in clauses (1) through (13) and in this paragraph.
Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) and (2) above; provided that such amounts are converted into any currency listed in clauses (1) and (2) as promptly as practicable and in any event within ten (10) Business Days following the receipt of such amounts.
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For the avoidance of doubt, any items identified as Cash Equivalents under this definition will be deemed to be Cash Equivalents for all purposes regardless of the treatment of such items under GAAP.
Casualty Event means any event that gives rise to the receipt by the Borrower or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.
CERCLA means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as subsequently amended, and the regulations promulgated thereunder.
Change of Control shall be deemed to occur if:
(a) at any time prior to a Qualified IPO, any combination of Permitted Holders shall fail to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings;
(b) at any time after a Qualified IPO, any person or group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date), other than any combination of the Investors or any group including any Permitted Holders, shall have acquired beneficial ownership of 35% or more on a fully diluted basis of the voting interest in Holdings Equity Interests and the Permitted Holders shall own, directly or indirectly, less than such person or group on a fully diluted basis of the voting interest in Holdings Equity Interests;
(c) a change of control (or similar event) shall occur under any Indebtedness for borrowed money permitted under Section 7.03 with an aggregate outstanding principal amount in excess of the Threshold Amount or any Permitted Refinancing Indebtedness in respect of any of the foregoing with an aggregate outstanding principal amount in excess of the Threshold Amount; or
(d) Holdings shall cease to own directly 100% of the Equity Interests of the Borrower.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred, if after giving effect to the transaction that would otherwise result in a Change of Control (x) the Consolidated Total Net Leverage Ratio is equal to or less than 5.00:1.00 or (y) a Ratings Improvement has occurred by the closing date of such transaction.
Class (a) when used with respect to any Lender, refers to whether such Lender has a Loan or Commitment with respect to a particular Class of Loans or Commitments, (b) when used with respect to Commitments, refers to whether such Commitments are Revolving Credit Commitments, Extended Revolving Credit Commitments of a given Extension Series, Revolving Commitment Increases, Other Revolving Credit Commitments, Initial Term Commitments, Incremental Term Commitments or Refinancing Term Commitments of a given Refinancing Series and (c) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such
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Borrowing, are Revolving Credit Loans, Revolving Credit Loans under Extended Revolving Credit Commitments of a given Extension Series, Revolving Credit Loans under Other Revolving Credit Commitments, Initial Term Loans, Incremental Term Loans, Refinancing Term Loans of a given Refinancing Series or Extended Term Loans of a given Extension Series. Revolving Credit Commitments, Incremental Revolving Credit Commitments, Extended Revolving Credit Commitments, Other Revolving Credit Commitments, Initial Term Commitments, Incremental Term Commitments or Refinancing Term Commitments (and in each case, the Loans made pursuant to such Commitments) that have different terms and conditions shall be construed to be in different Classes. Commitments (and, in each case, the Loans made pursuant to such Commitments) that have the same terms and conditions shall be construed to be in the same Class. There shall be no more than an aggregate of three Classes of revolving credit facilities and five Classes of term loan facilities under this Agreement.
Closing Date means October 25, 2013, the first date on which all conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01.
Closing Fees means those fees required to be paid on the Closing Date pursuant to (i) the Engagement Letter, (ii) that Bank Fee Letter, dated as of October 24, 2013, among Credit Suisse Securities (USA) LLC, Citibank, N.A., Barclays Bank PLC, Macquarie Capital (USA) Inc., MIHI LLC, HSBC Securities (USA) Inc., The Royal Bank of Scotland plc, RBS Securities Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd. and the Borrower and (iii) that Sumitomo Fee Letter, dated as of October 24, 2013, among Sumitomo Mitsui Banking Corporation and the Borrower.
Code means the U.S. Internal Revenue Code of 1986, as amended from time to time.
Collateral means (i) the Collateral as defined in the Security Agreement, (ii) all the Collateral or Pledged Assets as defined in any other Collateral Document and (iii) any other assets pledged or in which a Lien is granted, in each case, pursuant to any Collateral Document.
Collateral Agent means Deutsche Bank AG New York Branch, in its capacity as collateral agent or pledgee in its own name under any of the Loan Documents, or any successor collateral agent.
Collateral and Guarantee Requirement means, at any time, the requirement that:
(a) the Administrative Agent shall have received each Collateral Document required to be delivered on the Closing Date pursuant to Section 4.01(a) or from time to time pursuant to Section 6.11 or Section 6.13, subject to the limitations and exceptions of this Agreement, duly executed by each Loan Party party thereto;
(b) the Obligations and the Guaranty shall have been secured by a first-priority security interest in (i) all the Equity Interests of the Borrower, (ii) all Equity Interests of each Restricted Subsidiary (that is not an Excluded Subsidiary) directly owned by any Loan Party and (iii) 65% of the Equity Interests in each Restricted Subsidiary (that is not an Excluded Subsidiary (other than any Restricted Subsidiary that is an Excluded Subsidiary solely pursuant to clause (f) or (j) of the definition thereof)) directly owned by any Loan Party, which Restricted Subsidiary (x) is a Foreign Subsidiary or (y) substantially all of the assets of which consist of the Equity Interests and/or Indebtedness of one or more Foreign Subsidiaries that are controlled foreign corporations within the meaning of Section 957 of the Code, in each case, subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents (to the extent appropriate in the applicable jurisdiction);
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(c) the Obligations and the Guaranty shall have been secured by a perfected security interest in, and Mortgages on, substantially all now owned or, in the case of real property, fee owned, or at any time hereafter acquired tangible and intangible assets of each Loan Party (including Equity Interests, intercompany debt, accounts, inventory, equipment, investment property, contract rights, intellectual property in the United States of America, other general intangibles, Material Real Property and proceeds of the foregoing), in each case, subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents (to the extent appropriate in the applicable jurisdiction);
(d) subject to limitations and exceptions of this Agreement and the Collateral Documents, to the extent a security interest in and Mortgages on any Material Real Property are required pursuant to clause (c) above or under Sections 6.11 or 6.13 (each, a Mortgaged Property ), the Administrative Agent shall have received (i) counterparts of a Mortgage with respect to such Mortgaged Property duly executed and delivered by the record owner of such property, together with evidence such Mortgage has been duly executed, acknowledged and delivered by a duly authorized officer of each party thereto, in form suitable for filing or recording in all filing or recording offices that the Administrative Agent may reasonably deem necessary or desirable in order to create a valid and subsisting perfected Lien (subject only to Liens described in clause (ii) below) on the property and/or rights described therein in favor of the Collateral Agent for the benefit of the Secured Parties, and evidence that all filing and recording taxes and fees have been paid or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent (it being understood that if a mortgage tax will be owed on the entire amount of the indebtedness evidenced hereby, then the amount secured by the Mortgage shall be limited to 100% of the fair market value of the property at the time the Mortgage is entered into if such limitation results in such mortgage tax being calculated based upon such fair market value), (ii) fully paid American Land Title Association Lenders policies of title insurance (or marked-up title insurance commitments having the effect of policies of title insurance) on the Mortgaged Property naming the Collateral Agent as the insured for its benefit and that of the Secured Parties and their respective successors and assigns (the Mortgage Policies ) issued by a nationally recognized title insurance company reasonably acceptable to the Administrative Agent in form and substance and in an amount reasonably acceptable to the Administrative Agent (not to exceed 100% of the fair market value of the real properties covered thereby), insuring the Mortgages to be valid subsisting first priority Liens on the property described therein, free and clear of all Liens other than Liens permitted pursuant to Section 7.01 and other Liens reasonably acceptable to the Administrative Agent, each of which shall (A) to the extent reasonably necessary, include such coinsurance and reinsurance arrangements (with provisions for direct access, if reasonably necessary) as shall be reasonably acceptable to the Collateral Agent, (B) contain a tie-in or cluster endorsement, if available under applicable law ( i.e. , policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), and (C) have been supplemented by such endorsements as shall be reasonably requested by the Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, doing business, non-imputation, public road access, variable rate, environmental lien, subdivision, mortgage recording tax, separate tax lot, revolving credit and so-called comprehensive coverage over covenants and restrictions, to the extent such endorsements are
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available in the applicable jurisdiction at commercially reasonable rates), (iii) opinions of local counsel to the Loan Parties in states in which the Mortgaged Properties are located, with respect to the enforceability and perfection of the Mortgages and any related fixture filings, in form and substance reasonably satisfactory to the Administrative Agent, and (iv) no later than three Business Days prior to the date on which a Mortgage is executed and delivered pursuant to this Agreement, a completed life of the loan Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each Mortgaged Property on which any building (as defined in the Flood Insurance Laws) is located, duly executed and acknowledged by the appropriate Loan Parties, together with evidence of flood insurance as and to the extent required under Section 6.07(c) hereof; and
(e) after the Closing Date, each Restricted Subsidiary of the Borrower that is not then a Guarantor and not an Excluded Subsidiary shall become a Guarantor and signatory to this Agreement pursuant to a joinder agreement in accordance with Sections 6.11 or 6.13 and a party to the Collateral Documents in accordance with Section 6.11; provided that notwithstanding the foregoing provisions, any Subsidiary of the Borrower that Guarantees the 5 5/8% Senior Notes or any Junior Financing or any Permitted Refinancing of any of the foregoing shall be a Guarantor hereunder for so long as it Guarantees such Indebtedness.
Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary:
(A) the foregoing definition shall not require, unless otherwise stated in this clause (A), the creation or perfection of pledges of, security interests in, Mortgages on, or the obtaining of title insurance or taking other actions with respect to, (i) in excess of 65% of the Equity Interests of any direct Foreign Subsidiary of a Loan Party or a Domestic Subsidiary substantially all of whose assets consist of Equity Interests and/or Indebtedness of one or more Foreign Subsidiaries that are treated as controlled foreign corporations within the meaning of Section 957 of the Code, (ii) any property or assets owned by any Foreign Subsidiary or an Unrestricted Subsidiary, (iii) any lease, license or agreement or any property subject to a purchase money security interest or similar arrangement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or purchase money arrangement or create a right of termination in favor of any other party thereto after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable Law, other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code or other applicable Law notwithstanding such prohibition, (iv) any interest in fee-owned real property (other than Material Real Properties), (v) Excluded Contracts, Excluded Equipment and any interest in leased real property (including any requirement to deliver landlord waivers, estoppels and collateral access letters), (vi) motor vehicles and other assets subject to certificates of title except to the extent perfection of a security interest therein may be accomplished by filing of financing statements in appropriate form in the applicable jurisdiction under the Uniform Commercial Code, (vii) Margin Stock and Equity Interests of any Person other than wholly-owned Subsidiaries that are Restricted Subsidiaries, (viii) any trademark application filed in the United States Patent and Trademark Office on the basis of the Borrowers or any Guarantors intent to use such mark and for which a form evidencing use of the mark has not yet been filed with the United States Patent and Trademark Office, to the extent that granting a security interest in such trademark application prior to such filing would impair the enforceability or validity of such trademark application
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or any registration that issues therefrom under applicable federal Law, (ix) the creation or perfection of pledges of, or security interests in, any property or assets that would result in material adverse tax consequences to Holdings, the Borrower or any of its Subsidiaries, as determined in the reasonable judgment of the Borrower and communicated in writing delivered to the Collateral Agent, (x) any governmental licenses or state or local franchises, charters and authorizations, to the extent a security in any such license, franchise, charter or authorization is prohibited or restricted thereby after giving effect to the Uniform Commercial Code and other applicable Law, (xi) pledges and security interests prohibited or restricted by applicable Law (including any requirement to obtain the consent of any governmental authority or third party), (xii) all commercial tort claims in an amount less than $10.0 million, (xiii) accounts, property and other assets pledged pursuant to a Qualified Securitization Financing, (xiv) letter of credit rights, except to the extent constituting a support obligation for other Collateral as to which perfection of the security interest in such other Collateral is accomplished solely by the filing of a Uniform Commercial Code financing statement (it being understood that no actions shall be required to perfect a security interest in letter of credit rights, other than the filing of a Uniform Commercial Code financing statement), (xv) any particular assets if, in the reasonable judgment of the Administrative Agent and the Borrower, the burden, cost or consequences of creating or perfecting such pledges or security interests in such assets or obtaining title insurance is excessive in relation to the benefits to be obtained therefrom by the Lenders under the Loan Documents, (xvi) proceeds from any and all of the foregoing assets described in clauses (i) through (xv) above to the extent such proceeds would otherwise be excluded pursuant to clauses (i) through (xv) above and (xvii) so long as the Corporate Realignment shall have occurred on or prior to the date that is 12-months after the Closing Date, any assets, property, Equity Interests or other collateral which would not constitute Collateral under this Agreement or the other Loan Documents after giving effect to the Corporate Realignment, except to the extent perfection can be achieved by filing a Uniform Commercial Code financing statement;
(B) (i) the foregoing definition shall not require control agreements with respect to any cash, deposit accounts or securities accounts; (ii) no actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction shall be required in order to create any security interests in assets located or titled outside of the U.S., including any intellectual property registered in any non-U.S. jurisdiction, or to perfect such security interests (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any non-U.S. jurisdiction) and (iii) except to the extent that perfection and priority may be achieved by the filing of a financing statement under the Uniform Commercial Code with respect to the Borrower or a Guarantor, the Loan Documents shall not contain any requirements as to perfection or priority with respect to any assets or property described in this clause (B);
(C) the Administrative Agent in its discretion may grant extensions of time for the creation or perfection of security interests in, and Mortgages on, or obtaining of title insurance or taking other actions with respect to, particular assets (including extensions beyond the Closing Date) or any other compliance with the requirements of this definition where it reasonably determines in writing, in consultation with the Borrower, that the creation or perfection of security interests and Mortgages on, or obtaining of title insurance or taking other actions, or any other compliance with the requirements of this definition cannot be accomplished without undue delay, burden or expense by the time or times at
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which it would otherwise be required by this Agreement or the Collateral Documents; provided that the Collateral Agent shall have received on or prior to the Closing Date (i) Uniform Commercial Code financing statements in appropriate form for filing under the Uniform Commercial Code in the jurisdiction of incorporation or organization of each Loan Party, and (ii) any certificates or instruments representing or evidencing Equity Interests of the Borrower and its Domestic Subsidiaries (other than any Excluded Subsidiary) accompanied by instruments of transfer and stock powers undated and endorsed in blank (or confirmation in lieu thereof that such certificates, powers and instruments have been sent for overnight delivery to the Collateral Agent or its counsel); and
(D) Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in this Agreement and the Collateral Documents.
Collateral Documents means, collectively, the Security Agreement, the Intellectual Property Security Agreements, each of the Mortgages, collateral assignments, security agreements, pledge agreements, intellectual property security agreements or other similar agreements delivered to the Administrative Agent or the Collateral Agent pursuant to Section 4.01, Section 6.11 or Section 6.13, and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Administrative Agent or the Collateral Agent for the benefit of the Secured Parties.
Commitment means a Revolving Credit Commitment, Incremental Revolving Credit Commitment, Extended Revolving Credit Commitment of a given Extension Series, Other Revolving Credit Commitment of a given Refinancing Series, Initial Term Commitment, Incremental Term Commitment or Refinancing Term Commitment of a given Refinancing Series as the context may require.
Committed Loan Notice means a notice of (a) a Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A .
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq. ).
Company Parties means the collective reference to Holdings and its Restricted Subsidiaries, including the Borrower, and Company Party means any one of them.
Compensation Period has the meaning set forth in Section 2.12(c)(ii).
Compliance Certificate means a certificate substantially in the form of Exhibit E-1 .
Consolidated EBITDA means, for any period, the Consolidated Net Income for such period:
(1) increased (without duplication) by the following, in each case (other than with respect to clauses (h) and (k)) to the extent deducted (and not added back) in determining Consolidated Net Income for such period:
(a) provision for taxes based on income, profits or capital gains of the Borrower and the Restricted Subsidiaries, including, without limitation, federal,
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state, franchise and similar taxes (such as the Delaware franchise tax, the Pennsylvania capital tax, Texas margin tax and provincial capital taxes paid in Canada) and foreign withholding taxes (including any future taxes or other levies which replace or are intended to be in lieu of such taxes and any penalties and interest related to such taxes or arising from tax examinations) and the net tax expense associated with any adjustments made pursuant to clauses (1) through (15) of the definition of Consolidated Net Income; plus
(b) Fixed Charges for such period (including (x) net losses on Swap Obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, (y) bank fees and other financing fees and (z) costs of surety bonds in connection with financing activities, plus amounts excluded from Consolidated Interest Expense as set forth in clauses (1)(q) through (y) in the definition thereof); plus
(c) the total amount of depreciation and amortization expense and capitalized fees related to any Qualified Securitization Financing of the Borrower or any of its Subsidiaries, including the amortization of intangible assets, deferred financing costs, debt issuance costs, commissions, fees and expenses and Capitalized Software Expenditures of the Borrower and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP; plus
(d) the amount of any restructuring charges or reserves, equity-based or non-cash compensation charges or expenses including any such charges or expenses arising from grants of stock appreciation or similar rights, stock options, restricted stock or other rights, retention charges (including charges or expenses in respect of incentive plans), start-up or initial costs for any project or new production line, division or new line of business or other business optimization expenses or reserves including, without limitation, costs or reserves associated with improvements to IT and accounting functions, integration and facilities opening costs or any one-time costs incurred in connection with acquisitions and investments and costs related to the closure and/or consolidation of facilities; plus
(e) any other non-cash charges, including any write-offs or write-downs reducing Consolidated Net Income for such period ( provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, (A) the Borrower may elect not to add back such non-cash charge in the current period and (B) to the extent the Borrower elects to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus
(f) the amount of any non-controlling interest or minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-wholly owned Subsidiary; plus
(g) the amount of management, monitoring, consulting, advisory fees and other fees (including termination fees) and indemnities and expenses paid or accrued in such period under the Investor Management Agreement (and related agreements or arrangements) or otherwise to the Investors to the extent otherwise permitted under Section 7.08; plus
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(h) the amount of run-rate cost savings, operating expense reductions and synergies projected by the Borrower in good faith to result from actions taken, committed to be taken or expected in good faith to be taken no later than twenty four (24) months after the end of such period (calculated on a pro forma basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of such period for which Consolidated EBITDA is being determined and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided , that such cost savings and synergies are reasonably identifiable and factually supportable (it is understood and agreed that run-rate means the full recurring benefit for a period that is associated with any action taken, committed to be taken or expected to be taken, net of the amount of actual benefits realized during such period from such actions); plus
(i) the amount of loss or discount on sale of receivables, Securitization Assets and related assets to any Securitization Subsidiary in connection with a Qualified Securitization Financing; plus
(j) any costs or expense incurred by the Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Equity Interest of the Borrower (other than Disqualified Equity Interest) solely to the extent that such net cash proceeds are excluded from the calculation of Cumulative Credit; plus
(k) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to clause (2) below for any previous period and not added back; plus
(l) any net loss from disposed, abandoned or discontinued operations;
(2) decreased (without duplication) by the following, in each case to the extent included in determining Consolidated Net Income for such period:
(a) non-cash gains increasing Consolidated Net Income of the Borrower for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period and any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase Consolidated EBITDA in such prior period; plus
(b) any net income from disposed, abandoned or discontinued operations;
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There shall be included in determining Consolidated EBITDA for any period, without duplication, (A) the Acquired EBITDA of any Person, property, business or asset acquired by the Borrower or any Restricted Subsidiary during such period (but not the Acquired EBITDA of any related Person, property, business or assets to the extent not so acquired), to the extent not subsequently sold, transferred or otherwise disposed by the Borrower or such Restricted Subsidiary during such period (each such Person, property, business or asset acquired and not subsequently so disposed of, an Acquired Entity or Business ) and the Acquired EBITDA of any Unrestricted Subsidiary that is converted into a Restricted Subsidiary during such period (each, a Converted Restricted Subsidiary ), based on the actual Acquired EBITDA of such Acquired Entity or Business or Converted Restricted Subsidiary for such period (including the portion thereof occurring prior to such acquisition) and (B) for the purposes of the definition of the term Permitted Acquisition, compliance with the covenant set forth in Section 7.11 and the calculation of Consolidated First Lien Net Leverage Ratio and Consolidated Total Net Leverage Ratio, an adjustment in respect of each Acquired Entity or Business equal to the amount of the Pro Forma Adjustment with respect to such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) as specified in a certificate executed by a Responsible Officer and delivered to the Lenders and the Administrative Agent. There shall be excluded in determining Consolidated EBITDA for any period the Disposed EBITDA of any Person, property, business or asset (other than an Unrestricted Subsidiary) sold, transferred or otherwise disposed of or, closed or classified as discontinued operations (but if such operations are classified as discontinued due to the fact that they are subject to an agreement to dispose of such operations, only when and to the extent such operations are actually disposed of) by the Borrower or any Restricted Subsidiary during such period (each such Person, property, business or asset so sold or disposed of, a Sold Entity or Business ) and the Disposed EBITDA of any Restricted Subsidiary that is converted into an Unrestricted Subsidiary during such period (each a Converted Unrestricted Subsidiary ), based on the actual Disposed EBITDA of such Sold Entity or Business or Converted Unrestricted Subsidiary for such period (including the portion thereof occurring prior to such sale, transfer or disposition.
Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated EBITDA under this Agreement for any period that includes any of the fiscal quarters ended September 30, 2012, December 31, 2012, March 31, 2013 and June 30, 2013, Consolidated EBITDA for such fiscal quarters shall be $418 million, $364 million, $325 million and $405 million, respectively, in each case, as may be subject to any adjustment set forth in the immediately preceding paragraph for the applicable Test Period with respect to any acquisitions, dispositions or conversions occurring after the Closing Date.
Consolidated First Lien Net Debt means Consolidated Total Net Debt minus the sum of (i) the portion of Indebtedness of the Borrower or any Restricted Subsidiary included in Consolidated Total Net Debt that is not secured by any Lien on property or assets of the Borrower or any Restricted Subsidiary and (ii) the portion of Indebtedness of the Borrower or any Restricted Subsidiary included in Consolidated Total Net Debt that is secured by Liens on property or assets of the Borrower or any Restricted Subsidiary, which Liens are expressly subordinated or junior to the Liens securing the Obligations.
Consolidated First Lien Net Leverage Ratio means, with respect to any Test Period, the ratio of (a) Consolidated First Lien Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.
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Consolidated Interest Expense means, for any period, the sum, without duplication, of (1) consolidated interest expense of the Borrower and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Swap Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net payments, if any made (less net payments, if any, received), pursuant to interest rate Swap Obligations with respect to Indebtedness, and excluding (q) any additional interest owing pursuant to the registration rights agreement with respect to the 5 5/8% Senior Notes or other securities, (r) costs associated with obtaining Swap Obligations, (s) any expense resulting from the discounting of any Indebtedness in connection with the application of recapitalization accounting or, if applicable, purchase accounting in connection with the Transactions or any acquisition, (t) penalties and interest relating to taxes, (u) any additional interest or liquidated damages with respect to other securities for failure to timely comply with registration rights obligations, (v) amortization or expensing of deferred financing fees, amendment and consent fees, debt issuance costs, commissions, fees and expenses and discounted liabilities, (w) any expensing of bridge, commitment and other financing fees and any other fees related to the Transactions or any acquisitions after the Closing Date, (x) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Qualified Securitization Financing and (y) any accretion of accrued interest on discounted liabilities and any prepayment premium or penalty); plus
(2) consolidated capitalized interest of the Borrower and its Restricted Subsidiaries for such period, whether paid or accrued; less
(3) interest income of the Borrower and its Restricted Subsidiaries for such period.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Borrower to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Consolidated Net Income means, for any period, the net income (loss) of the Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided , however , that, without duplication,
(1) any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto), charges or expenses (including relating to any multi-year strategic initiatives), Transaction Expenses, restructuring and duplicative running costs, relocation costs, integration costs, facility consolidation and closing costs, severance costs and expenses, one-time compensation charges, costs relating to pre-opening and opening costs for facilities, signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, costs incurred in connection with acquisitions and non-recurring product and intellectual property development, other business optimization expenses (including costs and expenses relating to business optimization programs and new systems design, retention charges, system establishment costs and implementation costs) and operating expenses attributable to the implementation of cost-savings initiatives, and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded;
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(2) the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period shall be excluded;
(3) any net after-tax effect of gains or losses on disposal, abandonment or discontinuance of disposed, abandoned or discontinued operations, as applicable, shall be excluded;
(4) any net after-tax effect of gains or losses (less all fees, expenses and charges relating thereto) attributable to asset dispositions (including, for the avoidance of doubt, bulk subscriber contract sales) or abandonments or the sale or other disposition of any Equity Interests of any Person other than in the ordinary course of business shall be excluded;
(5) the net income for such period of any Person that is not a Subsidiary of the Borrower, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting shall be excluded; provided that Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions or other payments (other than Excluded Contributions) that are actually paid in cash (or to the extent converted into cash) to the Borrower or a Restricted Subsidiary thereof in respect of such period;
(6) the net income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its net income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders (other than restrictions in this Agreement), unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that the Consolidated Net Income of the Borrower and its Restricted Subsidiaries will be increased by the amount of dividends or other distributions or other payments actually paid in Cash Equivalents (or to the extent converted into Cash Equivalents) to the Borrower or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein;
(7) effects of adjustments (including the effects of such adjustments pushed down to the Borrower and its Restricted Subsidiaries) in the Borrowers consolidated financial statements pursuant to GAAP (including in the inventory (including any impact of changes to inventory valuation policy methods, including changes in capitalization of variances), property and equipment, software, goodwill, intangible assets, in-process research and development, deferred revenue and debt line items thereof) resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to the Transactions or any consummated acquisition or joint venture investment or the amortization or write-off or write-down of any amounts thereof, net of taxes, shall be excluded;
(8) any after-tax effect of income (loss) from the early extinguishment or conversion of (i) Indebtedness, (ii) Swap Obligations or (iii) other derivative instruments shall be excluded;
(9) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities and investments recorded using the equity method or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded;
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(10) any equity-based or non-cash compensation charge or expense including any such charge or expense arising from grants of stock appreciation or similar rights, stock options, restricted stock, profits interests or other rights or equity or equity-based incentive programs (equity incentives), any one-time cash charges associated with the equity incentives or other long-term incentive compensation plans (including under the Borrowers Tier I Equity Sharing Award Agreements and/or deferred compensation arrangements), roll-over, acceleration, or payout of Equity Interests by management, other employees or business partners of the Borrower or any of its direct or indirect parent companies, shall be excluded;
(11) any fees, expenses or charges incurred during such period, or any amortization thereof for such period, in connection with any acquisition, recapitalization, investment, disposition, incurrence or repayment of Indebtedness (including such fees, expenses or charges related to the offering and issuance of the 5 5/8% Senior Notes and other securities and the syndication and incurrence of any Facility), issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of the 5 5/8% Senior Notes and other securities and any Facility) and including, in each case, any such transaction consummated on or prior to the Closing Date and any such transaction undertaken but not completed, and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful or consummated (including, for the avoidance of doubt the effects of expensing all transaction related expenses in accordance with Financial Accounting Standards Board Accounting Standards Codification 805), shall be excluded;
(12) accruals and reserves that are established or adjusted within twelve months after the Closing Date that are so required to be established or adjusted as a result of the Transactions (or within twenty four months after the closing of any acquisition that are so required to be established as a result of such acquisition) in accordance with GAAP or changes as a result of modifications of accounting policies shall be excluded;
(13) any expenses, charges or losses to the extent covered by insurance or indemnity and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer or indemnifying party and only to the extent that such amount is in fact reimbursed within 365 days of the date of the insurable or indemnifiable event (net of any amount so added back in any prior period to the extent not so reimbursed within the applicable 365-day period), shall be excluded;
(14) any non-cash compensation expense resulting from the application of Accounting Standards Codification Topic No. 718, Compensation Stock Compensation , shall be excluded;
(15) the following items shall be excluded:
(a) any net unrealized gain or loss (after any offset) resulting in such period from Swap Obligations and the application of Accounting Standards Codification Topic No. 815, Derivatives and Hedging ,
(b) any net unrealized gain or loss (after any offset) resulting in such period from currency translation gains or losses including those related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Swap Obligations for currency exchange risk) and any other foreign currency translation gains and losses, to the extent such gain or losses are non-cash items,
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(c) any adjustments resulting for the application of Accounting Standards Codification Topic No. 460, Guarantees , or any comparable regulation,
(d) effects of adjustments to accruals and reserves during a prior period relating to any change in the methodology of calculating reserves for returns, rebates and other chargebacks, and
(e) earn-out and contingent consideration obligations (including to the extent accounted for as bonuses or otherwise) and adjustments thereof and purchase price adjustments; and
(16) reserves established for the benefit of landlords of leased hotel properties for the acquisition of capitalized assets and equipment at such properties shall be excluded; and
(17) if such Person is treated as a disregarded entity or partnership for U.S. federal, state and/or local income tax purposes for such period or any portion thereof, the amount of distributions actually made to any direct or indirect parent company of such Person in respect of such period in accordance with Section 7.06(i)(iii) shall be included in calculating Consolidated Net Income as though such amounts had been paid as taxes directly by such Person for such period.
In addition, to the extent not already included in the Consolidated Net Income of the Borrower and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any acquisition, investment or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement.
Consolidated Total Net Debt means, as of any date of determination, the aggregate principal amount of Indebtedness of the Borrower and its Restricted Subsidiaries outstanding on such date, in an amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Transactions or any Permitted Acquisition), consisting of Indebtedness for borrowed money, Attributable Indebtedness, and debt obligations evidenced by promissory notes or similar instruments, minus the aggregate amount of all cash and Cash Equivalents on the balance sheet of the Borrower and its Restricted Subsidiaries as of such date; provided that Consolidated Total Net Debt shall not include Indebtedness (i) in respect of letters of credit, except to the extent of unreimbursed amounts thereunder; provided that any unreimbursed amount under commercial letters of credit shall not be counted as Consolidated Total Net Debt until three Business Days after such amount is drawn, (ii) in respect of Qualified Securitization Financings and (iii) of Unrestricted Subsidiaries; it being understood, for the avoidance of doubt, that obligations under Swap Contracts do not constitute Consolidated Total Net Debt.
Consolidated Total Net Leverage Ratio means, with respect to any Test Period, the ratio of (a) Consolidated Total Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.
Consolidated Working Capital means, with respect to the Borrower and its Restricted Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided that increases or decreases in Consolidated Working Capital shall be calculated without regard to any changes in
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Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting.
Contract Consideration has the meaning set forth in the definition of Excess Cash Flow .
Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
Control has the meaning set forth in the definition of Affiliate.
Converted Restricted Subsidiary has the meaning set forth in the definition of Consolidated EBITDA.
Converted Unrestricted Subsidiary has the meaning set forth in the definition of Consolidated EBITDA.
Corporate Realignment means a series of intercompany transactions entered into for the purpose of causing substantially all of the Borrowers foreign assets (including its foreign intellectual property, foreign management and franchise contracts, foreign owned and leased hotels) and foreign operations to be owned and operated by non-U.S. Subsidiaries, as described in the offering memorandum for the 5 5/8% Senior Notes including, but not limited to, transfers of certain assets and liabilities relating to non-U.S. operations, including certain Equity Interests, to Unrestricted Subsidiaries and non-U.S. Subsidiaries of the Borrower which are not Subsidiary Guarantors and certain related intercompany transactions involving assets and liabilities relating to non-U.S. operations; provided that the Corporate Realignment will not result in (a) the disposal of any assets of the Borrower or any of its Subsidiaries to third parties, (b) any Investment in third parties, (c) any acquisition of assets from third parties or (d) incurrence of Indebtedness or other obligations owing to third parties.
Covenant Suspension Event has the meaning set forth in Article VII.
Credit Agreement Refinancing Indebtedness means (a) Permitted First Priority Refinancing Debt, (b) Permitted Second Priority Refinancing Debt, (c) Permitted Unsecured Refinancing Debt or (d) other Indebtedness incurred pursuant to a Refinancing Amendment, in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace, repurchase, retire or refinance, in whole or part, existing Term Loans and Revolving Credit Loans (or Revolving Credit Commitments), or any then-existing Credit Agreement Refinancing Indebtedness ( Refinanced Debt ); provided that (i) such Indebtedness has a maturity no earlier, and, in the case of Refinancing Term Loans, a Weighted Average Life to Maturity equal to or greater, than the Refinanced Debt, (ii) such Indebtedness shall not have a greater principal amount than the principal amount of the Refinanced Debt plus accrued interest, fees, premiums (if any) and penalties thereon and reasonable fees and expenses associated with the refinancing, (iii) the terms and conditions of such Indebtedness (except as otherwise provided in clause (ii) above and with respect to pricing, premiums, fees, rate floors and optional prepayment or redemption terms) are substantially identical to, or (taken as a whole) are no more favorable to the lenders or holders providing such Indebtedness, than those
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applicable to the Refinanced Debt being refinanced (except for covenants or other provisions applicable only to periods after the Latest Maturity Date at the time of incurrence of such Indebtedness) ( provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five (5) Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the requirement of this clause (iii) shall be conclusive evidence that such terms and conditions satisfy such requirement unless the Administrative Agent notifies the Borrower within such five (5) Business Day period that it disagrees with such determination (including a description of the basis upon which it disagrees)), and (iv) such Refinanced Debt shall be repaid, repurchased, retired, defeased or satisfied and discharged, all accrued interest, fees, premiums (if any) and penalties in connection therewith shall be paid, and all commitments thereunder terminated, on the date such Credit Agreement Refinancing Indebtedness is issued, incurred or obtained.
Credit Extension means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.
Cumulative Credit means, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to, without duplication:
(a) the greater of (x) 50% of Consolidated Net Income for the period from the first day of the fiscal quarter of the Borrower during which the Closing Date occurred to and including the last day of the most recently ended fiscal quarter of the Borrower or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit and (y) the Cumulative Retained Excess Cash Flow Amount at such time, plus
(b) the cumulative amount of the cash and Cash Equivalent proceeds (other than Excluded Contributions) from (i) the sale of Equity Interests (other than any Disqualified Equity Interests and other than any Designated Equity Contribution) of the Borrower or any direct or indirect parent of the Borrower after the Closing Date and on or prior to such time (including upon exercise of warrants or options) which proceeds have been contributed as common equity to the capital of the Borrower, (ii) the common Equity Interests of the Borrower (or Holdings or any direct or indirect parent of Holdings) (other than Disqualified Equity Interests of the Borrower and other than any Designated Equity Contribution) issued upon conversion of Indebtedness (other than Indebtedness that is contractually subordinated to the Obligations) of the Borrower or any Restricted Subsidiary of the Borrower owed to a Person other than a Loan Party or a Restricted Subsidiary of a Loan Party, in each case, not previously applied for a purpose other than use in the Cumulative Credit (including, for the avoidance of doubt, for the purposes of Section 7.03(m)(y)); plus
(c) 100% of the aggregate amount of contributions to the common capital (other than from a Restricted Subsidiary and other than any Designated Equity Contribution) of the Borrower received in cash and Cash Equivalents after the Closing Date (other than Excluded Contributions), excluding any such amount that has been applied in accordance with Section 7.03(m)(y); plus
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(d) 100% of the aggregate amount received by the Borrower or any Restricted Subsidiary of the Borrower in cash and Cash Equivalents from:
(A) the sale (other than to the Borrower or any Restricted Subsidiary) of the Equity Interests of an Unrestricted Subsidiary or any minority investments, or
(B) any dividend or other distribution by an Unrestricted Subsidiary or received in respect of any minority investment (except to the extent increasing Consolidated Net Income and excluding Excluded Contributions), or
(C) any interest, returns of principal payments and similar payments by an Unrestricted Subsidiary or received in respect of any minority investments (except to the extent increasing Consolidated Net Income), plus
(e) in the event any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Borrower or a Restricted Subsidiary, the fair market value of the Investments of the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) so long as such Investments were originally made pursuant to Sections 7.02(i)(iv)(2) or 7.02(n)(y), plus
(f) to the extent not already included in Consolidated Net Income or Cumulative Retained Excess Cash Flow Amount, as applicable, an amount equal to any returns in cash and Cash Equivalents (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received by the Borrower or any Restricted Subsidiary in respect of any Investments made pursuant to Sections 7.02(i)(iv)(2) or 7.02(n)(y), minus
(g) any amount of the Cumulative Credit used to make Investments pursuant to Sections 7.02(i)(iv)(2) or 7.02(n)(y) after the Closing Date and prior to such time, minus
(h) any amount of the Cumulative Credit used to pay dividends or make distributions pursuant to Section 7.06(h)(y) after the Closing Date and prior to such time, minus
(i) any amount of the Cumulative Credit used to make payments or distributions in respect of Junior Financings pursuant to Section 7.13(a)(iv)(y) after the Closing Date and prior to such time.
Cumulative Retained Excess Cash Flow Amount means, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to the aggregate cumulative sum of the Retained Percentage of Excess Cash Flow, less the amount of Excess Cash Flow of Foreign Subsidiaries to the extent and for so long as such Excess Cash Flow is excluded from Excess Cash Flow prepayments pursuant to Section 2.05(b)(xi), for all Excess Cash Flow Periods ending after the Closing Date and prior to such date.
Current Assets means, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Cash Equivalents) of the Borrower and the Restricted Subsidiaries that would, in accordance with GAAP, be classified on a consolidated balance sheet of Holdings and its Restricted Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits (but excluding assets held for sale, loans (permitted) to third parties, pension assets, deferred bank fees and derivative financial instruments).
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Current Liabilities means, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis at any date of determination, all liabilities of the Borrower and the Restricted Subsidiaries that would, in accordance with GAAP, be classified on a consolidated balance sheet of Holdings and its Restricted Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of any Indebtedness, (b) accruals of Consolidated Interest Expense (excluding Consolidated Interest Expense that is past due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals of any costs or expenses related to restructuring reserves, and (e) any Revolving Credit Exposure or Revolving Credit Loans.
Debt Fund Affiliate means any fund managed by, or under common management with GSO Capital Partners LP, Blackstone Tactical Opportunities Fund L.P. or Blackstone Real Estate Debt Strategies L.P. and (ii) any fund managed by GSO Debt Funds Management LLC, Blackstone Debt Advisors L.P., Blackstone Distressed Securities Advisors L.P., Blackstone Mezzanine Advisors L.P. or Blackstone Mezzanine Advisors II L.P., and (iii) any other Affiliate of Holdings that is a bona fide debt fund or an investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course.
Debtor Relief Laws means the Bankruptcy Code of the United States and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Default means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
Default Rate means an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate, if any, applicable to Revolving Loans that are Base Rate Loans plus (c) 2.0% per annum; provided that with respect to the overdue principal or interest in respect of a Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan, plus 2.0% per annum, in each case to the fullest extent permitted by applicable Laws.
Defaulting Lender means any Lender whose acts or failure to act, whether directly or indirectly, cause it to meet any part of the definition of Lender Default.
Designated Equity Contribution has the meaning set forth in Section 8.05(a).
Discount Prepayment Accepting Lender has the meaning set forth in Section 2.05(a)(v)(B)(2).
Discount Range has the meaning set forth in Section 2.05(a)(v)(C)(1).
Discount Range Prepayment Amount has the meaning set forth in Section 2.05(a)(v)(C)(1).
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Discount Range Prepayment Notice means a written notice of a Borrower Solicitation of Discount Range Prepayment Offers made pursuant to Section 2.05(a)(v)(C) substantially in the form of Exhibit M-4 .
Discount Range Prepayment Offer means the irrevocable written offer by a Lender, substantially in the form of Exhibit M-5 , submitted in response to an invitation to submit offers following the Auction Agents receipt of a Discount Range Prepayment Notice.
Discount Range Prepayment Response Date has the meaning set forth in Section 2.05(a)(v)(C)(1).
Discount Range Proration has the meaning set forth in Section 2.05(a)(v)(C)(3).
Discounted Prepayment Determination Date has the meaning set forth in Section 2.05(a)(v)(D)(3).
Discounted Prepayment Effective Date means in the case of a Borrower Offer of Specified Discount Prepayment, Borrower Solicitation of Discount Range Prepayment Offer or Borrower Solicitation of Discounted Prepayment Offer, five (5) Business Days following the Specified Discount Prepayment Response Date, the Discount Range Prepayment Response Date or the Solicited Discounted Prepayment Response Date, as applicable, in accordance with Section 2.05(a)(v)(B)(1), Section 2.05(a)(v)(C)(1) or Section 2.05(a)(v)(D)(1), respectively, unless a shorter period is agreed to between the Borrower and the Auction Agent.
Discounted Term Loan Prepayment has the meaning set forth in Section 2.05(a)(v)(A).
Disposed EBITDA means, with respect to any Sold Entity or Business or any Converted Unrestricted Subsidiary for any period, the amount for such period of Consolidated EBITDA of such Sold Entity or Business (determined as if references to the Borrower and the Restricted Subsidiaries in the definition of Consolidated EBITDA (and in the component definitions used therein) were references to such Sold Entity or Business and its Subsidiaries or such Converted Unrestricted Subsidiary and its Subsidiaries) or such Converted Unrestricted Subsidiary, all as determined on a consolidated basis for such Sold Entity or Business or such Converted Unrestricted Subsidiary.
Disposition or Dispose means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale or issuance of Equity Interests in a Restricted Subsidiary) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith; provided that Disposition and Dispose shall not be deemed to include any issuance by Holdings of any of its Equity Interests to another Person.
Disqualified Equity Interests means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments and the termination or expiration of all outstanding Letters of Credit (unless the
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Outstanding Amount of the L/C Obligations related thereto has been Cash Collateralized, backstopped by a letter of credit reasonably satisfactory to the applicable L/C Issuer or deemed reissued under another agreement reasonably acceptable to the applicable L/C Issuer)), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests and other than as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments and the expiration or termination of all outstanding Letters of Credit (unless the Outstanding Amount of the L/C Obligations related thereto has been Cash Collateralized, backstopped by a letter of credit reasonably satisfactory to the applicable L/C Issuer or deemed reissued under another agreement reasonably acceptable to the applicable L/C Issuer)), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the Latest Maturity Date at the time of issuance of such Equity Interests; provided that if such Equity Interests are issued pursuant to a plan for the benefit of employees of Holdings (or any direct or indirect parent thereof), the Borrower or the Restricted Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because it may be required to be repurchased by the Borrower or its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations.
Disqualified Lenders means the Persons listed on Schedule 1.01B .
Distressed Person has the meaning set forth in the definition of Lender-Related Distress Event.
Dollar and $ mean lawful money of the United States.
Dollar Denominated Loan means any Loan incurred in Dollars.
Dollar Denominated Letter of Credit means any Letter of Credit incurred in Dollars.
Dollar Equivalent means, with respect to an amount of an Approved Currency other than Dollars, the amount of Dollars which could be purchased with the amount of the applicable Approved Currency involved in such computation at (x) the spot exchange rate as shown in the Wall Street Journal on the Business Day of any such determination (or on such other basis as is satisfactory to the Administrative Agent) or (y) if the provisions of the foregoing clause (x) is not applicable, the official exchange rate (if applicable) or the spot exchange rate for the applicable Approved Currency in question calculated by the Administrative Agent (each such exchange rate, the Spot Exchange Rate ); provided that (i) for purposes of (x) determining compliance with Sections 2.01(b) and 2.03(a) and (y) calculating fees pursuant to Section 2.09(a), the Dollar Equivalent of any amounts denominated in a currency other than Dollars shall be calculated on the Closing Date and revalued on the first Business Day of each Interest Period using the Spot Exchange Rate, (ii) at any time during a calendar month, if the Revolving Credit Exposure (for the purposes of the determination thereof, using the Dollar Equivalent as recalculated based on the Spot Exchange Rate therefor on the respective date of determination pursuant to this exception) would exceed 90.0% of the aggregate Revolving Credit Commitments of all Lenders, then in the sole discretion of the Administrative Agent or at the request of the Required Lenders, the Dollar Equivalent shall be reset based upon the Spot Exchange Rates on such date, which rates shall remain in effect until the last
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Business Day of such calendar month or such earlier date, if any, as the rate is reset pursuant to this proviso and (iii) notwithstanding anything to the contrary contained in this definition, at any time that a Default or an Event of Default then exists, the Administrative Agent may revalue the Dollar Equivalent of any amounts outstanding under the Loan Documents in a currency other than Dollars in its reasonable discretion using the Spot Exchange Rates therefor.
Domestic Subsidiary means any Subsidiary that is organized under the Laws of the United States, any state thereof or the District of Columbia.
Effective Yield means, as to any Loans of any Class, the effective yield on such Loans, taking into account the applicable interest rate margins, any interest rate floors or similar devices and all fees, including upfront or similar fees or OID (amortized over the shorter of (x) the original stated life of such Loans and (y) the four years following the date of incurrence thereof) payable generally to Lenders making such Loans, but excluding arrangement fees, structuring fees, commitment fees, underwriting fees or other fees payable to any lead arranger (or its affiliates) in connection with the commitment or syndication of such Indebtedness.
Eligible Assignee has the meaning set forth in Section 10.07(a).
Engagement Letter means that certain Second Amended and Restated Engagement Letter dated October 24, 2013, among the Borrower, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs Lending Partners LLC, Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC, as amended, supplemented, modified or restated from time to time.
Environment means indoor air, ambient air, surface water, groundwater, drinking water, land surface, subsurface strata and natural resources such as wetlands, flora and fauna.
Environmental Laws means any applicable Law relating to pollution, protection of the Environment and natural resources, pollutants, contaminants, or chemicals or any toxic or otherwise hazardous substances, wastes or materials, or the protection of human health and safety as it relates to any of the foregoing, including any applicable provisions of CERCLA.
Environmental Liability means any liability, contingent or otherwise (including any liability for damages, costs of investigation and remediation, fines, penalties or indemnities), of or relating to the Loan Parties or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of, or liability under or relating to any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the actual or alleged presence, Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Environmental Permit means any permit, approval, identification number, license or other authorization required under any Environmental Law.
Equity Interests means, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).
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ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.
ERISA Affiliate means any trade or business (whether or not incorporated) that, together with a Loan Party or any Restricted Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by a Loan Party, any Restricted Subsidiary or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by a Loan Party, any Restricted Subsidiary or any ERISA Affiliate from a Multiemployer Plan or a notification or determination that a Multiemployer Plan is in reorganization; (d) the filing by the PBGC of a notice of intent to terminate any Pension Plan, the treatment of a Pension Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA, respectively, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) appointment of a trustee to administer any Pension Plan or Multiemployer Plan; (f) with respect to a Pension Plan, the failure to satisfy the minimum funding standard of Section 412 of the Code or Section 302, 303 or 304 of ERISA, whether or not waived; (g) any Foreign Benefit Event; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan Party, any Restricted Subsidiary or any ERISA Affiliate.
Eurocurrency Rate means, (a) for any Interest Period with respect to any Eurocurrency Rate Loan denominated in any Approved Currency other than euros or Australian Dollars, the rate per annum equal to the London Interbank Offered Rate ( LIBOR ) or such comparable or successor rate which is approved by the Administrative Agent, as published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of such Interest Period for deposits in such Approved Currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period; provided that to the extent that an interest rate is not ascertainable pursuant to the foregoing provision of this definition, the Eurocurrency Rate with respect to Eurocurrency Rate Loans denominated in an Approved Currency other than euros shall be the interest rate per annum, determined by the Administrative Agent to be the average of the rates per annum at which deposits in such Approved Currency are offered for such relevant Interest Period to major banks in the London interbank market in London, England at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of such Interest Period, (b) for any Interest Period with respect to any Eurocurrency Rate Loan denominated in euros, the rate per annum appearing on Reuters Page EURIBOR-01 (or any successor page) at approximately 11:00 a.m. (Brussels time) on the date which is two Business Days prior to the beginning of such Interest Period for a period equal to such Interest Period, as determined by the Administrative Agent; provided that if such rate is not shown on Reuters Page EURIBOR-01 (or any successor page), the Eurocurrency Rate applicable to Eurocurrency Rate Loans denominated in euros shall be interest rate per annum, determined by the
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Administrative Agent to be the average of the rates per annum at which deposits in euros are offered for such relevant Interest Period to prime banks in the Eurozone interbank market at approximately 11:00 a.m. (Brussels time) on the date which is two Business Days prior to the beginning of such Interest Period and (c) for any Interest Period with respect to any Eurocurrency Rate Loan denominated in Australian Dollars, the rate per annum equal to the Bank Bill Swap Reference Rate Bid Rate ( BBSY ) or a comparable or successor rate, which rate is approved by the Administrative Agent, as published by Reuters (or such other commercially available source providing BBSY quotations as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m. (Melbourne, Australia time) on the date which is two Business Days prior to the beginning of such Interest Period for a period equal to such Interest Period; provided that solely with respect to the Initial Term Loans, the Eurocurrency Rate shall be deemed to not be less than 1.00% per annum in all cases.
Eurocurrency Rate Loan means a Loan that bears interest at a rate based on the Eurocurrency Rate.
euro means the single currency of participating member states of the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.
Event of Default has the meaning set forth in Section 8.01.
Excess Cash Flow means, for any period, an amount equal to (a) the sum, without duplication, of (i) Consolidated Net Income for such period, (ii) an amount equal to the amount of all non-cash charges to the extent deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working Capital and long-term accounts receivable of the Borrower and its Restricted Subsidiaries for such period (other than any such decreases arising from acquisitions or dispositions by the Borrower and its Restricted Subsidiaries completed during such period or the application of purchase accounting), and (iv) an amount equal to the aggregate net non-cash loss on Dispositions by the Borrower and its Restricted Subsidiaries during such period (other than sales in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income, minus (b) the sum, without duplication, of (i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income and cash charges included in clauses (1) through (17) of the definition of Consolidated Net Income, (ii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Capital Expenditures or acquisitions of intellectual property to the extent not expensed and Capitalized Software Expenditures accrued or made in cash or accrued during such period, to the extent that such Capital Expenditures or acquisitions were financed with internally generated cash or borrowings under the Revolving Credit Facility and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount, (iii) the aggregate amount of all principal payments of Indebtedness of the Borrower or its Restricted Subsidiaries during such period (including (A) the principal component of payments in respect of Capitalized Leases, (B) the amount of any scheduled repayment of Term Loans pursuant to Section 2.07, and (C) any mandatory prepayment of Term Loans pursuant to Section 2.05(b)(ii) to the extent required due to a Disposition that resulted in an increase to Consolidated Net Income and not in excess of the amount of such increase but excluding (X) all other voluntary and mandatory prepayments of Term Loans and all prepayments and repayments of Revolving Credit Loans and Swing Line Loans and (Y) all prepayments in respect of any other revolving credit facility, except in the case of clause (Y) to the extent there is an equivalent permanent reduction in commitments thereunder), to the extent financed with internally generated cash, (iv) an amount equal to the
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aggregate net non-cash gain on Dispositions by the Borrower and its Restricted Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income, (v) increases in Consolidated Working Capital and long-term accounts receivable of the Borrower and its Restricted Subsidiaries for such period (other than any such increases arising from acquisitions or dispositions by the Borrower and its Restricted Subsidiaries during such period or the application of purchase accounting), (vi) cash payments by the Borrower and its Restricted Subsidiaries during such period in respect of long-term liabilities of the Borrower and its Restricted Subsidiaries other than Indebtedness, (vii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Investments and acquisitions made by the Borrower and its Restricted Subsidiaries during such period pursuant to Section 7.02 (other than Section 7.02(a) or (c)) to the extent that such Investments and acquisitions were financed with internally generated cash or the proceeds of Revolving Credit Loans and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount, (viii) the amount of Restricted Payments paid during such period pursuant to Section 7.06(i) (clauses (i), (ii) or (iii) only) or Section 7.06(g) to the extent such Restricted Payments were financed with internally generated cash or the proceeds of Revolving Credit Loans, (ix) the aggregate amount of expenditures actually made by the Borrower and its Restricted Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period, (x) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and its Restricted Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness, (xi) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower and its Restricted Subsidiaries pursuant to binding contracts (the Contract Consideration ) entered into prior to or during such period relating to acquisitions that constitute Investments permitted under this Agreement or Capital Expenditures or acquisitions of intellectual property to the extent not expected to be consummated or made, plus any restructuring cash expenses, pension payments or tax contingency payments that have been added to Excess Cash Flow pursuant to clause (a)(ii) above required to be made, in each case during the period of four consecutive fiscal quarters of the Borrower following the end of such period; provided that to the extent the aggregate amount of internally generated cash not utilizing the Cumulative Retained Excess Cash Flow Amount actually utilized to finance such Permitted Acquisitions, Capital Expenditures or acquisitions of intellectual property during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters, (xii) the amount of cash taxes paid in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period, (xiii) cash expenditures in respect of Swap Contracts during such fiscal year to the extent not deducted in arriving at such Consolidated Net Income, and (xiv) any payment of cash to be amortized or expensed over a future period and recorded as a long-term asset. Notwithstanding anything in the definition of any term used in the definition of Excess Cash Flow to the contrary, all components of Excess Cash Flow shall be computed for the Borrower and its Restricted Subsidiaries on a consolidated basis.
Excess Cash Flow Period means each fiscal year of the Borrower commencing with the fiscal year ending December 31, 2014, but in all cases for purposes of calculating the Cumulative Retained Excess Cash Flow Amount shall only include such fiscal years for which financial statements and a Compliance Certificate have been delivered in accordance with Sections 6.01(a) and 6.02(a) and for which any prepayments required by Section 2.05(b)(i) (if any) have been made (it being understood that the Retained Percentage of Excess Cash Flow for any Excess Cash Flow Period shall be included in the Cumulative Retained Excess Cash Flow Amount regardless of whether a prepayment is required by Section 2.05(b)(i)).
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Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Contract means, at any date, any rights or interest of the Borrower or any Guarantor under any agreement, contract, license, instrument, document or other general intangible (referred to solely for purposes of this definition as a Contract ) to the extent that such Contract by the terms of a restriction in favor of a Person who is not the Borrower or any Guarantor, or any requirement of law, prohibits, or requires any consent or establishes any other condition for or would terminate because of an assignment thereof or a grant of a security interest therein by the Borrower or a Guarantor; provided that (i) rights under any such Contract otherwise constituting an Excluded Contract by virtue of this definition shall be included in the Collateral to the extent permitted thereby or by Section 9-406 or Section 9-408 of the Uniform Commercial Code and (ii) all proceeds paid or payable to any of the Borrower or any Guarantor from any sale, transfer or assignment of such Contract and all rights to receive such proceeds shall be included in the Collateral.
Excluded Contribution means net cash proceeds, marketable securities or Qualified Proceeds received by the Borrower from:
(1) contributions to its common equity capital;
(2) dividends, distributions, fees and other payments (A) from Unrestricted Subsidiaries and any of their Subsidiaries, (B) received in respect of any minority investments and (C) from any joint ventures that are not Restricted Subsidiaries; and
(3) the sale (other than to a Subsidiary of the Borrower or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Borrower) of Equity Interest (other than Disqualified Equity Interests and preferred stock) of the Borrower;
in each case to the extent designated as Excluded Contributions by the Borrower within 180 days of the date such capital contributions are made, such dividends, distributions, fees or other payments are paid, or the date such Equity Interests are sold, as the case may be.
Excluded Equipment means, at any date, any equipment or other assets of the Borrower or any Guarantor which is subject to, or secured by, a Capitalized Lease Obligation or a purchase money obligation if and to the extent that (i) a restriction in favor of a Person who is not the Parent, the Borrower or a Subsidiary contained in the agreements or documents granting or governing such Capitalized Lease Obligation or purchase money obligation prohibits, or requires any consent or establishes any other conditions for or would result in the termination of such agreement or document because of an assignment thereof, or a grant of a security interest therein, by the Borrower or any Guarantor and (ii) such restriction relates only to the asset or assets acquired by the Borrower or any Guarantor with the proceeds of such Capitalized Lease Obligation or purchase money obligation and attachments thereto, improvements thereof or substitutions therefor; provided that all proceeds paid or payable to any of the Borrower or any Guarantor from any sale, transfer or assignment or other voluntary or involuntary disposition of such assets and all rights to receive such proceeds shall be included in the Collateral to the extent not otherwise required to be paid to the holder of any Capitalized Lease Obligations or purchase money obligations secured by such assets.
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Excluded Subsidiary means (a) any Subsidiary that is not a wholly owned Subsidiary of the Borrower or a Guarantor, (b) any Subsidiary of a Guarantor that does not have total assets in excess of 1.0% of Total Assets, individually or in the aggregate with all other Subsidiaries excluded via this clause (b), (c) [reserved], (d) any Subsidiary that is prohibited by applicable Law or Contractual Obligations existing on the Closing Date (or, in the case of any newly acquired Subsidiary, in existence at the time of acquisition but not entered into in contemplation thereof) from guaranteeing the Obligations or if guaranteeing the Obligation would require governmental (including regulatory) consent, approval, license or authorization (unless such consent, approval, license or authorization has been obtained), (e) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent, in consultation with the Borrower, the burden or cost or other consequences (including any material adverse tax consequences) of providing a Guarantee shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (f) any direct or indirect Foreign Subsidiary of the Borrower, (g) any not-for-profit Subsidiaries, (h) any Unrestricted Subsidiaries, (i) any Securitization Subsidiary or Subsidiary of a Securitization Subsidiary, (j) any direct or indirect Domestic Subsidiary substantially all of the assets of which consist of the Equity Interests of one or more Foreign Subsidiaries that are controlled foreign corporations within the meaning of Section 957 of the Code, (k) any Domestic Subsidiary that is a direct or indirect Subsidiary of a Foreign Subsidiary, (l) any captive insurance subsidiaries and (m) so long as the Corporate Realignment shall have occurred on or prior to the date that is 12 months after the Closing Date, any Subsidiary of the Borrower or a Guarantor which would otherwise not be a Subsidiary Guarantor under this Agreement or any other Loan Document after giving effect to the Corporate Realignment (such Subsidiaries are listed on Schedule 1.01D) .
Excluded Swap Obligation means, with respect to any Guarantor, (a) any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) (i) by virtue of such Guarantors failure to constitute an eligible contract participant, as defined in the Commodity Exchange Act and the regulations thereunder (determined after giving effect to Section 11.12 and any other applicable agreement for the benefit of such Guarantor and any and all applicable guarantees of such Guarantors Swap Obligations by other Loan Parties), at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap Obligation or (ii) in the case of a Swap Obligation that is subject to a clearing requirement pursuant to section 2(h) of the Commodity Exchange Act, because such Guarantor is a financial entity, as defined in section 2(h)(7)(C) of the Commodity Exchange Act, at the time the guarantee of (or grant of such security interest by, as applicable) such Guarantor becomes or would become effective with respect to such Swap Obligation or (b) any other Swap Obligation designated as an Excluded Swap Obligation of such Guarantor as specified in any agreement between the relevant Loan Parties and the Approved Counterparty applicable to such Swap Obligations. If a Swap Obligation arises under a master agreement governing more than one Swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to the Swap for which such guarantee or security interest is or becomes excluded in accordance with the first sentence of this definition.
Existing Revolver Tranche has the meaning set forth in Section 2.16(b).
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Existing Term Loan Tranche has the meaning set forth in Section 2.16(a).
Expiring Credit Commitment has the meaning set forth in Section 2.04(g).
Extended Revolving Credit Commitments has the meaning set forth in Section 2.16(b).
Extended Term Loans has the meaning set forth in Section 2.16(a).
Extending Revolving Credit Lender has the meaning set forth in Section 2.16(c).
Extending Term Lender has the meaning set forth in Section 2.16(c).
Extension means the establishment of an Extension Series by amending a Loan pursuant to Section 2.16 and the applicable Extension Amendment.
Extension Amendment has the meaning set forth in Section 2.16(d).
Extension Election has the meaning set forth in Section 2.16(c).
Extension Request means any Term Loan Extension Request or a Revolver Extension Request, as the case may be.
Extension Series means any Term Loan Extension Series or a Revolver Extension Series, as the case may be.
Facility means the Initial Term Loans, a given Class of Incremental Term Loans, a given Refinancing Series of Refinancing Term Loans, a given Extension Series of Extended Term Loans, the Revolving Credit Facility, a given Class of Incremental Revolving Credit Commitments, a given Refinancing Series of Other Revolving Credit Commitments, a given Extension Series of Extended Revolving Credit Commitments, as the context may require.
FATCA means Sections 1471 through 1474 of the Code (including, for the avoidance of doubt, any agreements entered into pursuant to Section 1471(b)(1) of the Code), as of the Closing Date (and any amended or successor version thereof that is substantively comparable and not materially more onerous to comply with), any current or future Treasury Regulations or other official administrative guidance promulgated thereunder and any intergovernmental agreements entered into in connection with the implementation thereof.
Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published on the next succeeding Business Day by the Federal Reserve Bank of New York; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.
Financial Covenant Event of Default has the meaning provided in Section 8.01(b).
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FIRREA means the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended.
First Lien Intercreditor Agreement means an intercreditor agreement substantially in the form of Exhibit J-1 (which agreement in such form or with immaterial changes thereto the Collateral Agent is authorized to enter into) among Holdings, the Borrower, the subsidiaries of the Borrower from time to time party thereto, the Collateral Agent and one or more collateral agents or representatives for the holders of Indebtedness that is permitted under Section 7.03 to be, and intended to be, secured on a pari passu basis with the Obligations.
Fixed Charge Coverage Ratio means, with respect to the Borrower and its Restricted Subsidiaries for any period, the ratio of Consolidated EBITDA for such period to the Fixed Charges for such period. In the event that the Borrower or any Restricted Subsidiary incurs, assumes, guarantees, redeems, repays, retires or extinguishes any Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) or issues or redeems Disqualified Equity Interests or preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the Fixed Charge Coverage Ratio Calculation Date ), then the Fixed Charge Coverage Ratio shall be calculated giving Pro Forma Effect to such incurrence, assumption, guarantee, redemption, repayment, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Equity Interests or preferred stock, as if the same had occurred at the beginning of the applicable four-quarter period; provided , however , that the pro forma calculation of Fixed Charges shall not give effect to any Indebtedness being incurred on such date (or expected to be incurred thereafter) pursuant to Section 7.03.
For purposes of making the computation referred to above, Investments, acquisitions, Dispositions, mergers, amalgamations, consolidations and discontinued operations (as determined in accordance with GAAP) that have been made by the Borrower or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date shall be calculated on a Pro Forma Basis assuming that all such Investments, acquisitions, Dispositions, mergers, amalgamations, consolidations and discontinued operations (and the change in any associated fixed charge obligations and the change in Consolidated EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Borrower or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, Disposition, merger, amalgamation, consolidation or discontinued operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving Pro Forma Effect thereto for such period as if such Investment, acquisition, Disposition, merger, amalgamation, consolidation or discontinued operation had occurred at the beginning of the applicable four-quarter period.
Fixed Charges means, with respect to the Borrower and its Restricted Subsidiaries for any period, the sum of, without duplication:
(1) Consolidated Interest Expense for such period;
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(2) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of preferred stock during such period; and
(3) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Disqualified Equity Interests during such period.
Flood Insurance Laws means, collectively, (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statue thereto, (iii) the National Flood Insurance Reform Act of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto.
Foreign Benefit Event means, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law or in excess of the amount that would be permitted absent a waiver from applicable governmental authority or (b) the failure to make the required contributions or payments, under any applicable law, on or before the due date for such contributions or payments.
Foreign Currency Denominated Loan means any Loan incurred in any Approved Foreign Currency.
Foreign Currency Denominated Letter of Credit means any Letter of Credit denominated in an Approved Foreign Currency.
Foreign Disposition has the meaning set forth in Section 2.05(b)(xi).
Foreign Pension Plan means any benefit plan that under applicable Law is required to be funded through a trust or other funding vehicle other than a trust or funding vehicle maintained exclusively by a Governmental Authority.
Foreign Subsidiary means any direct or indirect Restricted Subsidiary of the Borrower that is not a Domestic Subsidiary.
Foreign Subsidiary Total Assets means the total assets of the Foreign Subsidiaries, as determined on a consolidated basis in accordance with GAAP in good faith by a Responsible Officer.
FRB means the Board of Governors of the Federal Reserve System of the United States.
Fronting Exposure means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lenders Pro Rata Share of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lenders Pro Rata Share of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
Fund means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.
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GAAP means generally accepted accounting principles in the United States of America, as in effect from time to time; provided , however , that (i) if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith, (ii) GAAP shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under FASB ASC Topic 825 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any of its Subsidiaries at fair value, as defined therein, and Indebtedness shall be measured at the aggregate principal amount thereof, and (iii) the accounting for operating leases and capital leases under GAAP as in effect on the date hereof (including, without limitation, Accounting Standards Codification 840) shall apply for the purposes of determining compliance with the provisions of this Agreement, including the definition of Capitalized Leases and obligations in respect thereof.
Governmental Authority means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
Granting Lender has the meaning set forth in Section 10.07(i).
Guarantee means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
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Guaranteed Obligations has the meaning set forth in Section 11.01.
Guarantors means, collectively, (i) Holdings, (ii) Hilton Worldwide Finance Corp., (iii) the wholly owned Domestic Subsidiaries of the Borrower (other than any Excluded Subsidiary), (iv) those wholly owned Domestic Subsidiaries that issue a Guaranty of the Obligations after the Closing Date pursuant to Section 6.11 or otherwise, at the option of the Borrower, issues a Guaranty of the Obligations after the Closing Date and (v) solely in respect of any Secured Hedge Agreement or Treasury Services Agreement to which the Borrower is not a party, the Borrower, in each case, until the Guaranty thereof is released in accordance with this Agreement.
Guaranty means, collectively, the guaranty of the Obligations by the Guarantors pursuant to this Agreement.
Hazardous Materials means all materials, pollutants, contaminants, chemicals, compounds, constituents, substances or wastes, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, lead, radon gas, pesticides, fungicides, fertilizers, or toxic mold that are regulated pursuant to, or which could give rise to liability under, applicable Environmental Law.
Holdings means Parent, if it is the direct parent of the Borrower, or, if not, any Domestic Subsidiary of Parent that directly owns 100% of the issued and outstanding Equity Interests in the Borrower and issues a Guarantee of the Obligations and agrees to assume the obligations of Holdings pursuant to this Agreement and the other Loan Documents pursuant to one or more instruments in form and substance reasonably satisfactory to the Administrative Agent.
Honor Date has the meaning set forth in Section 2.03(c)(i).
Identified Participating Lenders has the meaning set forth in Section 2.05(a)(v)(C)(3).
Identified Qualifying Lenders has the meaning set forth in Section 2.05(a)(v)(D)(3).
Immaterial Subsidiary has the meaning set forth in Section 8.03.
Incremental Amendment has the meaning set forth in Section 2.14(f).
Incremental Commitments has the meaning set forth in Section 2.14(a).
Incremental Facility Closing Date has the meaning set forth in Section 2.14(d).
Incremental Lenders has the meaning set forth in Section 2.14(c).
Incremental Loan has the meaning set forth in Section 2.14(b).
Incremental Loan Request has the meaning set forth in Section 2.14(a).
Incremental Revolving Credit Commitments has the meaning set forth in Section 2.14(a).
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Incremental Revolving Credit Lender has the meaning set forth in Section 2.14(c).
Incremental Revolving Credit Loan has the meaning set forth in Section 2.14(b).
Incremental Term Commitments has the meaning set forth in Section 2.14(a).
Incremental Term Lender has the meaning set forth in Section 2.14(c).
Incremental Term Loan has the meaning set forth in Section 2.14(b).
Indebtedness means, as to any Person at a particular time, without duplication, all of the following:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all outstanding letters of credit (including standby and commercial), bankers acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts and accrued expenses payable in the ordinary course of business and (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iii) accruals for payroll and other liabilities accrued in the ordinary course);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness;
(g) all obligations of such Person in respect of Disqualified Equity Interests;
if and to the extent that the foregoing would constitute indebtedness or a liability in accordance with GAAP; provided that Indebtedness of any direct or indirect parent of the Borrower appearing upon the balance sheet of the Borrower solely by reason of push-down accounting under GAAP shall be excluded; and
(h) to the extent not otherwise included above, all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall (A) include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, except to the extent
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such Persons liability for such Indebtedness is otherwise expressly limited and only to the extent such Indebtedness would be included in the calculation of Consolidated Total Net Debt, (B) in the case of the Borrower and its Restricted Subsidiaries, exclude all intercompany Indebtedness having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and made in the ordinary course of business and (C) exclude obligations under or in respect of Qualified Securitization Financing, operating leases or sale lease-back transactions (except any resulting Capitalized Lease Obligations). The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of Indebtedness of any Person for purposes of clause (e) shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith. Notwithstanding anything in this definition to the contrary, Indebtedness shall be calculated without giving effect to the effects of Financial Accounting Standards Board Accounting Standards Codification 815 and related interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose hereunder as a result of accounting for any embedded derivatives created by the terms of such Indebtedness.
Indemnified Liabilities has the meaning set forth in Section 10.05.
Indemnified Taxes means, with respect to any Agent or any Lender, all Taxes other than (i) Taxes imposed on or measured by its net income, however denominated, and franchise (and similar) Taxes imposed in lieu of net income Taxes by a jurisdiction (A) as a result of such recipient being organized in or having its principal office (or, in the case of any Lender, its applicable Lending Office) in such jurisdiction (or any political subdivision thereof), or (B) as a result of any other connection between such Lender or Agent and such jurisdiction other than any connections arising from executing, delivering, being a party to, engaging in any transactions pursuant to, performing its obligations under, receiving payments under, or enforcing, any Loan Document, (ii) Taxes attributable to the failure by any Agent or Lender to deliver the documentation required to be delivered pursuant to Section 3.01(d), (iii) any branch profits Taxes imposed by the United States or any similar Tax, imposed by any jurisdiction described in clause (i) above, (iv) in the case of any Lender (other than an assignee pursuant to a request by the Borrower under Section 3.07), any U.S. federal withholding Tax that is in effect on the date such Lender becomes a party to this Agreement, or designates a new Lending Office, except to the extent such Lender (or its assignor, if any) was entitled immediately prior to the time of designation of a new Lending Office (or assignment) to receive additional amounts with respect to such withholding Tax pursuant to Section 3.01, (v) any withholding Taxes imposed under FATCA, and (vi) any U.S. federal backup withholding imposed as a result of a failure by a Lender that is a United States person as defined in Section 7701(a)(30) of the Code to deliver the form described in Section 3.01(d)(i). For the avoidance of doubt, the term Lender for purposes of this definition shall include each L/C Issuer and Swing Line Lender.
Indemnitees has the meaning set forth in Section 10.05.
Information has the meaning set forth in Section 10.08.
Initial Revolving Borrowing means one or more borrowings of Revolving Credit Loans on the Closing Date; provided that, without limitation, Letters of Credit may be issued on the Closing Date to backstop or replace letters of credit, guarantees and performance or similar bonds outstanding on the Closing Date (including deemed issuances of Letters of Credit under this Agreement resulting from existing issuers of letters of credit outstanding on the Closing Date agreeing to become L/C Issuers under this Agreement).
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Initial Term Commitment means, as to each Term Lender, its obligation to make an Initial Term Loan to the Borrower pursuant to Section 2.01(a) in an aggregate amount not to exceed the amount set forth opposite such Term Lenders name in Schedule 1.01A under the caption Initial Term Commitment or in the Assignment and Assumption pursuant to which such Term Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement (including Section 2.14). The initial aggregate amount of the Initial Term Commitments is $7,600,000,000.
Initial Term Loans means the term loans made by the Lenders on the Closing Date to the Borrower pursuant to Section 2.01(a).
Intellectual Property Security Agreements has the meaning set forth in the Security Agreement.
Intercompany Note means a promissory note substantially in the form of Exhibit I .
Intercreditor Agreements means the First Lien Intercreditor Agreement and the Junior Lien Intercreditor Agreement, collectively, in each case to the extent in effect.
Interest Payment Date means, (a) as to any Eurocurrency Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date of the Facility under which such Loan was made; provided that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date of the Facility under which such Loan was made.
Interest Period means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one, two, three or six months thereafter or, to the extent agreed by each Lender of such Eurocurrency Rate Loan, twelve months or, to the extent agreed by the Administrative Agent, less than one month thereafter, as selected by the Borrower in its Committed Loan Notice; provided that:
(i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;
(ii) any Interest Period (other than an Interest Period having a duration of less than one month) that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Maturity Date of the Facility under which such Loan was made.
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Investment means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person excluding, in the case of the Borrower and its Restricted Subsidiaries, intercompany loans, advances, or Indebtedness having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and made in the ordinary course of business consistent with past practice) or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant compliance, the amount of any Investment at any time shall be the amount actually invested (measured at the time made), without adjustment for subsequent increases or decreases in the value of such Investment.
Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB- (or the equivalent) by S&P, or if the applicable securities or loans are not then rated by Moodys or S&P, an equivalent rating by any other nationally recognized statistical rating agency.
Investor Management Agreement means an agreement among the Borrower and/or Holdings (or any direct or indirect parent entity of Holdings) and Affiliates of (or management entities associated with) one or more of the Investors, as in effect from time to time and as the same may be amended, supplemented or otherwise modified in a manner not materially adverse to the Lenders; provided that any management, monitoring, consulting and advisory fees payable in arrears by the Borrower and/or Holdings and its Subsidiaries shall not exceed an amount equal to (x) with respect to the period from the Closing Date to December 31, 2013, 2.0% of Consolidated EBITDA for such period and (y) with respect to any fiscal year thereafter, 2.0% of Consolidated EBITDA for such fiscal year.
Investors means one or more investment funds, investment partnerships or managed accounts controlled or managed by The Blackstone Group L.P. or one of its Affiliates (other than any portfolio operating companies).
IP Rights has the meaning set forth in Section 5.17.
ISP means, with respect to any Letter of Credit, the International Standby Practices 1998 published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
Joint Bookrunners means Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc. and Goldman Sachs Lending Partners LLC, in their respective capacities as joint bookrunners under this Agreement.
Junior Financing has the meaning set forth in Section 7.13(a).
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Junior Financing Documentation means any documentation governing any Junior Financing.
Junior Lien Intercreditor Agreement means an intercreditor agreement substantially in the form of Exhibit J-2 hereto (which agreement in such form or with immaterial changes thereto the Collateral Agent is authorized to enter into) between the Collateral Agent and one or more collateral agents or representatives for the holders of Permitted Ratio Debt issued or incurred pursuant to Sections 7.03 (q) or (s) that are intended to be secured on a basis junior to the Obligations. Wherever in this Agreement, an Other Debt Representative is required to become party to the Junior Lien Intercreditor Agreement, if the related Indebtedness is the initial Indebtedness incurred by the Borrower or any Restricted Subsidiary to be secured by a Lien on a basis junior to the Liens securing the Obligations, then the Borrower, Holdings, the Subsidiary Guarantors, the Administrative Agent and the Other Debt Representative for such Indebtedness shall execute and deliver the Junior Lien Intercreditor Agreement.
Latest Maturity Date means, at any date of determination, the latest Maturity Date applicable to any Loan or Commitment hereunder at such time, including the latest maturity date of any Refinancing Term Loan, any Refinancing Term Commitment, any Extended Term Loan, any Extended Revolving Credit Commitment, any Incremental Term Loans, any Incremental Revolving Credit Commitments or any Other Revolving Credit Commitments, in each case as extended in accordance with this Agreement from time to time.
Laws means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents, orders, decrees, injunctions or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.
L/C Advance means, with respect to each Revolving Credit Lender, such Lenders funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share or other applicable share provided for under this Agreement. All L/C Advances shall be denominated in Dollars.
L/C Borrowing means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the applicable Honor Date or refinanced as a Revolving Credit Borrowing. All L/C Borrowings shall be denominated in Dollars.
L/C Credit Extension means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.
L/C Disbursement means any payment made by an L/C Issuer pursuant to a Letter of Credit.
L/C Issuer means Deutsche Bank AG New York Branch and any other Lender that becomes an L/C Issuer in accordance with Sections 2.03(k) or 10.07(k), in each case, in its capacity as an issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder. If there is more than one L/C Issuer at any given time, the term L/C Issuer shall refer to the relevant L/C Issuer(s).
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L/C Obligations means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 2.03(l). For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be outstanding in the amount so remaining available to be drawn.
Lead Arrangers means Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc. and Goldman Sachs Lending Partners LLC, in their respective capacities as joint lead arrangers under this Agreement.
Lender has the meaning set forth in the introductory paragraph to this Agreement and, as the context requires, includes an L/C Issuer and the Swing Line Lender, and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender.
Lender Default means (i) the refusal (which may be given verbally or in writing and has not been retracted) or failure of any Lender to make available its portion of any incurrence of revolving loans or reimbursement obligations required to be made by it, which refusal or failure is not cured within two Business Days after the date of such refusal or failure; (ii) the failure of any Lender to pay over to the Administrative Agent, any L/C Issuer or any other Lender any other amount required to be paid by it hereunder within two business days of the date when due, unless subject to a good faith dispute; (iii) a Lender has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations, or has made a public statement to that effect with respect to its funding obligations, under the Revolving Credit Facility or under other agreements generally in which it commits to extend credit; (iv) a Lender has failed, within three Business Days after request by the Administrative Agent, to confirm that it will comply with its funding obligations under the Revolving Credit Facility; or (v) a Lender has admitted in writing that it is insolvent or such Lender becomes subject to a Lender-Related Distress Event. Any determination by the Administrative Agent that a Lender Default has occurred under any one or more of clauses (i) through (v) above shall be conclusive and binding absent manifest error, and the applicable Lender shall be deemed to be a Defaulting Lender (subject to Section 2.17(b)) upon delivery of written notice of such determination to the Borrower, each L/C Issuer, each Swing Line Lender and each Lender.
Lender-Related Distress Event means, with respect to any Lender or any person that directly or indirectly controls such Lender (each, a Distressed Person ), as the case may be, a voluntary or involuntary case with respect to such Distressed Person under any Debtor Relief Law, or a custodian, conservator, receiver or similar official is appointed for such Distressed Person or any substantial part of such Distressed Persons assets, or such Distressed Person or any person that directly or indirectly controls such Distressed Person is subject to a forced liquidation, or such Distressed Person makes a general assignment for the benefit of creditors or is otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such Distressed Person or its assets to be, insolvent or bankrupt; provided that a Lender-Related Distress Event shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any equity interests in any Lender or any person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof, so long as such ownership interest does not
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result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
Lending Office means, as to any Lender, the office or offices of such Lender described as such in such Lenders Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.
Letter of Credit means any letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit and may be issued in any Approved Currency.
Letter of Credit Expiration Date means the day that is five (5) Business Days prior to the scheduled Maturity Date then in effect for the applicable Revolving Credit Facility (or, if such day is not a Business Day, the next preceding Business Day).
Letter of Credit Issuance Request means a letter of credit request substantially in the form of Exhibit B .
Letter of Credit Sublimit means an amount equal to the lesser of (a) $150,000,000 and (b) the aggregate amount of the Revolving Credit Commitments. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Facility.
LIBOR has the meaning set forth in the definition of Eurocurrency Rate.
Lien means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing).
Loan means an extension of credit by a Lender to the Borrower under Article II in the form of a Term Loan, a Revolving Credit Loan or a Swing Line Loan (including any Incremental Term Loan and any extensions of credit under any Revolving Commitment Increase).
Loan Documents means, collectively, (i) this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each Intercreditor Agreement to the extent then in effect, (v) each Letter of Credit Issuance Request and (vi) any Refinancing Amendment, Incremental Amendment or Extension Amendment.
Loan Parties means, collectively, the Borrower and each Guarantor.
Management Stockholders means the members of management of Holdings, the Borrower or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof.
Margin Stock has the meaning set forth in Regulation U issued by the FRB.
Market Capitalization means an amount equal to (i) the total number of issued and outstanding shares of common Equity Interests of Holdings on the date of the declaration of a
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Restricted Payment multiplied by (ii) the arithmetic mean of the closing prices per share of such common Equity Interests on the principal securities exchange on which such common Equity Interests are traded for the 30 consecutive trading days immediately preceding the date of declaration of such Restricted Payment.
Master Agreement has the meaning set forth in the definition of Swap Contract.
Material Adverse Effect means a (a) material adverse effect on the business, operations, assets, liabilities (actual or contingent) or financial condition of the Borrower and its Restricted Subsidiaries, taken as a whole; (b) material adverse effect on the ability of the Loan Parties (taken as a whole) to fully and timely perform any of their payment obligations under any Loan Document to which the Borrower or any of the Loan Parties is a party; or (c) material adverse effect on the rights and remedies available to the Lenders or any Agent under any Loan Document.
Material Real Property means any fee owned real property located in the United States that is owned by any Loan Party where the greater of (x) the cost and (y) the net book value for such real property is in excess of $25,000,000 (at the Closing Date or, with respect to real property acquired after the Closing Date, at the time of acquisition, in each case, as reasonably estimated by the Borrower in good faith, but excluding for the avoidance of doubt any real property owned in connection with the timeshare business of the Borrower and its Restricted Subsidiaries).
Maturity Date means (i) with respect to the Initial Term Loans, the date that is seven years after the Closing Date, (ii) with respect to the Revolving Credit Commitments, the date that is five years after the Closing Date, (iii) with respect to any tranche of Extended Term Loans or Extended Revolving Credit Commitments, the final maturity date applicable thereto as specified in the applicable Extension Request accepted by the respective Lender or Lenders, (iv) with respect to any Refinancing Term Loans or Other Revolving Credit Commitments, the final maturity date applicable thereto as specified in the applicable Refinancing Amendment and (v) with respect to any Incremental Term Loans or Incremental Revolving Credit Commitments, the final maturity date applicable thereto as specified in the applicable Incremental Amendment; provided , in each case, that if such date is not a Business Day, then the applicable Maturity Date shall be the next succeeding Business Day.
Maximum Rate has the meaning set forth in Section 10.10.
Moodys means Moodys Investors Service, Inc. and any successor thereto.
Mortgage Policies has the meaning set forth in the definition of Collateral and Guarantee Requirement.
Mortgaged Property has the meaning set forth in the definition of Collateral and Guarantee Requirement.
Mortgages means collectively, the deeds of trust, trust deeds, deeds to secure debt, hypothecs and mortgages made by the Loan Parties in favor or for the benefit of the Collateral Agent on behalf of the Secured Parties creating and evidencing a Lien on a Mortgaged Property in form and substance reasonably satisfactory to the Collateral Agent with such terms and provisions as may be required by the applicable Laws of the relevant jurisdiction, and any other mortgages executed and delivered pursuant to Sections 6.11 and 6.13, in each case, as the same may from time to time be amended, restated, supplemented, or otherwise modified.
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Multiemployer Plan means any employee benefit plan of the type described in Sections 3(37) or 4001(a)(3) of ERISA, to which the Borrower, any Restricted Subsidiary or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding six years, has made or been obligated to make contributions.
Net Proceeds means:
(a) 100% of the cash proceeds actually received by the Borrower or any of the Restricted Subsidiaries (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but in each case only as and when received) from any Disposition or Casualty Event, net of (i) attorneys fees, accountants fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith, (ii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by a Lien (other than a Lien that ranks pari passu with or subordinated to the Liens securing the Obligations) on the asset subject to such Disposition or Casualty Event and that is required to be repaid (and is timely repaid) in connection with such Disposition or Casualty Event (other than Indebtedness under the Loan Documents), (iii) in the case of any Disposition or Casualty Event by a non-wholly owned Restricted Subsidiary, the pro rata portion of the Net Proceeds thereof (calculated without regard to this clause (iii)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Restricted Subsidiary as a result thereof, (iv) taxes paid or reasonably estimated to be payable as a result thereof, and (v) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities (other than any taxes deducted pursuant to clause (i) above) (x) related to any of the applicable assets and (y) retained by the Borrower or any of the Restricted Subsidiaries including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations (however, the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be Net Proceeds of such Disposition or Casualty Event occurring on the date of such reduction); provided that if no Default exists, the Borrower may reinvest any portion of such proceeds in assets useful for its business (which shall include any Investment permitted by this Agreement) within 12 months of such receipt and such portion of such proceeds shall not constitute Net Proceeds except to the extent not, within 12 months of such receipt, so reinvested or contractually committed to be so reinvested (it being understood that if any portion of such proceeds are not so used within such 12-month period but within such 12-month period are contractually committed to be used, then upon the termination of such contract or if such Net Proceeds are not so used within 18 months of initial receipt, such remaining portion shall constitute Net Proceeds as of the date of such termination or expiry without giving effect to this proviso; it being further understood that such proceeds shall constitute Net Proceeds notwithstanding any investment notice if there is a Specified Default at the time of a proposed reinvestment unless such proposed reinvestment is made pursuant to a binding commitment entered into at a time when no Specified Default was continuing); provided , further , that no proceeds realized in a single transaction or series of related transactions shall constitute Net Proceeds (x) unless such proceeds shall exceed $100,000,000 and (y) the aggregate net proceeds excluded under clause (x) exceeds $275,000,000 in any fiscal year (and thereafter only net cash proceeds in excess of such amount shall constitute Net Proceeds under this clause (a)), and
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(b) 100% of the cash proceeds from the incurrence, issuance or sale by the Borrower or any of the Restricted Subsidiaries of any Indebtedness, net of all taxes paid or reasonably estimated to be payable as a result thereof and fees (including investment banking fees and discounts), commissions, costs and other expenses, in each case incurred in connection with such incurrence, issuance or sale.
For purposes of calculating the amount of Net Proceeds, fees, commissions and other costs and expenses payable to the Borrower or any Restricted Subsidiary shall be disregarded.
Non-Consenting Lender has the meaning set forth in Section 3.07(d).
Non-Debt Fund Affiliate means any Affiliate of the Investors other than (a) Holdings or any Subsidiary of Holdings, (b) any Debt Fund Affiliates and (c) any natural person.
Non-Defaulting Lender means, at any time, a Lender that is not a Defaulting Lender.
Non-Expiring Credit Commitment has the meaning set forth in Section 2.04(g).
Non-Extension Notice Date has the meaning set forth in Section 2.03(b)(iii).
Not Otherwise Applied means, with reference to any amount of Net Proceeds of any transaction or event, that such amount (a) was not required to be applied to prepay the Loans pursuant to Section 2.05(b), (b) was not previously (and is not concurrently being) applied in determining the permissibility of a transaction under the Loan Documents where such permissibility was or is (or may have been) contingent on receipt of such amount or utilization of such amount for a specified purpose and (c) was not utilized pursuant to Section 8.05. The Borrower shall promptly notify the Administrative Agent of any application of such amount as contemplated by (b) above.
Note means a Term Note, a Revolving Credit Note or a Swing Line Note, as the context may require.
Obligations means all (x) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party and its Restricted Subsidiaries arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or Restricted Subsidiary of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding and (y) obligations of any Loan Party arising under any Secured Hedge Agreement or any Treasury Services Agreement. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Restricted Subsidiaries to the extent they have obligations under the Loan Documents) include (a) the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit fees, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on
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behalf of such Loan Party. Notwithstanding the foregoing, the obligations of the Borrower or any Restricted Subsidiary under any Secured Hedge Agreement or any Treasury Services Agreement shall be secured and guaranteed pursuant to the Collateral Documents and the Guaranty only to the extent that, and for so long as, the other Obligations are so secured and guaranteed. Notwithstanding the foregoing, Obligations of any Guarantor shall in no event include any Excluded Swap Obligations of such Guarantor.
OFAC means the Office of Foreign Assets Control of the United States Department of the Treasury.
Offered Amount has the meaning set forth in Section 2.05(a)(v)(D)(1).
Offered Discount has the meaning set forth in Section 2.05(a)(v)(D)(1).
OID means original issue discount.
Organization Documents means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
Other Applicable Indebtedness has the meaning set forth in Section 2.05(b)(ii).
Other Debt Representative means, with respect to any series of Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt, the trustee, administrative agent, collateral agent, security agent or similar agent under the indenture or agreement pursuant to which such Indebtedness is issued, incurred or otherwise obtained, as the case may be, and each of their successors in such capacities.
Other Revolving Credit Commitments means one or more Classes of revolving credit commitments hereunder that result from a Refinancing Amendment.
Other Revolving Credit Loans means one or more Classes of Revolving Credit Loans that result from a Refinancing Amendment.
Other Taxes has the meaning set forth in Section 3.01(b).
Outstanding Amount means (a) with respect to the Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the aggregate outstanding Principal Amount thereof after giving effect to any borrowings and prepayments or repayments of Term Loans, Revolving Credit Loans (including any refinancing of outstanding unpaid drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the aggregate outstanding Principal Amount thereof on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes thereto as of such date, including as a result of any reimbursements
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of outstanding unpaid drawings under any Letters of Credit (including any refinancing of outstanding unpaid drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.
Overnight Rate means, for any day, (a) with respect to any amount denominated in Dollars, the Federal Funds Rate and (b) with respect to any amount denominated in an Approved Foreign Currency, the rate of interest per annum at which overnight deposits in such currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by a branch or Affiliate of the Administrative Agent in the applicable offshore interbank market for such currency to major banks in such interbank market.
Parent has the meaning set forth in the introductory paragraph to this Agreement.
Participant has the meaning set forth in Section 10.07(f).
Participant Register has the meaning set forth in Section 10.07(f).
Participating Lender has the meaning set forth in Section 2.05(a)(v)(C)(2).
PBGC means the Pension Benefit Guaranty Corporation.
Pension Plan means any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding six years.
Perfection Certificate means a certificate in the form of Exhibit H hereto or any other form reasonably approved by the Collateral Agent, as the same shall be supplemented from time to time.
Permitted Acquisition has the meaning set forth in Section 7.02(i).
Permitted First Priority Refinancing Debt means any Permitted First Priority Refinancing Notes and any Permitted First Priority Refinancing Loans.
Permitted First Priority Refinancing Loans means any Credit Agreement Refinancing Indebtedness in the form of secured loans incurred by the Borrower in the form of one or more tranches of loans under this Agreement; provided that (i) such Indebtedness is secured by the Collateral on a pari passu basis (but without regard to the control of remedies) with the Obligations and is not secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness is not at any time guaranteed by any Subsidiaries other than Subsidiaries that are Loan Parties or (iii) such Indebtedness does not mature or have scheduled amortization or payments of principal (other than customary offers to repurchase upon a change of control, asset sale or event of loss and a customary acceleration right after an event of default) on or prior to the date that is the Latest Maturity Date at the time such Indebtedness is incurred or issued.
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Permitted First Priority Refinancing Notes means any Credit Agreement Refinancing Indebtedness in the form of secured Indebtedness (including any Registered Equivalent Notes) incurred by the Borrower in the form of one or more series of senior secured notes; provided that (i) such Indebtedness is secured by the Collateral on a pari passu basis (but without regard to the control of remedies) with the Obligations and is not secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness is not at any time guaranteed by any Subsidiaries other than Subsidiaries that are Loan Parties, (iii) such Indebtedness does not mature or have scheduled amortization or payments of principal (other than customary offers to repurchase upon a change of control, asset sale or event of loss and a customary acceleration right after an event of default) on or prior to the date that is the Latest Maturity Date at the time such Indebtedness is incurred or issued, (iv) the security agreements relating to such Indebtedness are substantially the same as or more favorable to the Loan Parties than the Collateral Documents (with such differences as are reasonably satisfactory to the Administrative Agent) and (v) an Other Debt Representative acting on behalf of the holders of such Indebtedness shall have become party to each Intercreditor Agreement. Permitted First Priority Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.
Permitted Holders means each of (x) the Investors and (y) the Management Stockholders ( provided that if the Management Stockholders own beneficially or of record more than fifteen percent (15%) of the outstanding voting stock of Holdings in the aggregate, they shall be treated as Permitted Holders of only fifteen percent (15%) of the outstanding voting stock of Holdings at such time).
Permitted Intercompany Activities means any transactions between or among the Borrower and its Subsidiaries (for the avoidance of doubt, including Unrestricted Subsidiaries) that are entered into in the ordinary course of business of the Borrower and its Subsidiaries and, in the good faith judgment of the Borrower are necessary or advisable in connection with the ownership or operation of the business of the Borrower and its Subsidiaries, including, but not limited to, (i) payroll, cash management, purchasing, insurance and hedging arrangements; (ii) management, technology and licensing arrangements; and (iii) HHonors and similar customer loyalty and rewards programs.
Permitted Other Debt Conditions means that such applicable debt (i) does not mature or have scheduled amortization payments of principal or payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligations (except customary asset sale or change of control provisions that provide for the prior repayment in full of the Loans and all other Obligations), in each case on or prior to the Latest Maturity Date at the time such Indebtedness is incurred, (ii) is not at any time guaranteed by any Subsidiaries other than Subsidiaries that are Guarantors, and (iii) to the extent secured, the security agreements relating to such Indebtedness are substantially the same as or more favorable to the Loan Parties than the Collateral Documents (with such differences as are reasonably satisfactory to the Administrative Agent).
Permitted Ratio Debt means Indebtedness of the Borrower or any Restricted Subsidiary so long as immediately after giving Pro Forma Effect thereto and to the use of the proceeds thereof (but without netting the proceeds thereof) (i) no Event of Default shall be continuing or result therefrom and (ii) (x) if such Indebtedness is secured on a pari passu basis with the Facilities, the Consolidated First Lien Net Leverage Ratio is no greater than 5.20 to 1.00 and (y) if such Indebtedness is secured on a junior basis to the Facilities, the Consolidated Total Net Leverage Ratio is no greater than 6.15 to 1.00; provided that, such Indebtedness shall (A) in the case of clause (x)
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above, have a maturity date that is after the Latest Maturity Date at the time such Indebtedness is incurred, and in the case of clause (y) above, have a maturity date that is at least ninety-one (91) days after the Latest Maturity Date at the time such Indebtedness is incurred, (B) in the case of clause (x) above, have a Weighted Average Life to Maturity not shorter than the longest remaining Weighted Average Life to Maturity of the Facilities and, in the case of clause (y) above, shall not be subject to scheduled amortization prior to maturity, (C) if such Indebtedness is incurred or guaranteed on a secured basis by a Loan Party, be subject to the Junior Lien Intercreditor Agreement and, if the Indebtedness is secured on a pari passu basis with the Facilities, be (x) in the form of debt securities and (y) subject to the First Lien Intercreditor Agreement and (D) have terms and conditions (other than pricing, rate floors, discounts, fees, premiums and optional prepayment or redemption provisions) that in the good faith determination of the Borrower are not materially less favorable (when taken as a whole) to the Borrower than the terms and conditions of the Loan Documents (when taken as a whole) ( provided that a certificate of the Borrower as to the satisfaction of the conditions described in this clause (D) delivered at least five (5) Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirements of this clause (D), shall be conclusive unless the Administrative Agent notifies the Borrower within such five (5) Business Day period that it disagrees with such determination (including a description of the basis upon which it disagrees)); provided , further , that any such Indebtedness incurred pursuant to clauses (x) or (y) above by a Restricted Subsidiary that is not a Loan Party, together with any Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party pursuant to Sections 7.03(g), 7.03(q) or 7.03(w), does not exceed in the aggregate at any time outstanding 4.25% of Total Assets, in each case determined at the time of incurrence.
Permitted Refinancing means, with respect to any Person, any modification, refinancing, refunding, renewal, replacement or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed, replaced or extended except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable amounts paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal, replacement or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), such modification, refinancing, refunding, renewal, replacement or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), at the time thereof, no Event of Default shall have occurred and be continuing and (d) if such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is Junior Financing, (i) to the extent such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal, replacement or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, (ii) such modification, refinancing, refunding, renewal, replacement or extension is incurred by the Person who is the obligor of the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended and (iii) if the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended was subject to an Intercreditor
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Agreement, the holders of such modified, refinanced, refunded, renewed, replaced or extended Indebtedness (if such Indebtedness is secured) or their representative on their behalf shall become party to such Intercreditor Agreement.
Permitted Second Priority Refinancing Debt means Credit Agreement Refinancing Indebtedness constituting secured Indebtedness (including any Registered Equivalent Notes) incurred by the Borrower in the form of one or more series of second lien (or other junior lien) secured notes or second lien (or other junior lien) secured loans; provided that (i) such Indebtedness is secured by the Collateral on a second priority (or other junior priority) basis to the liens securing the Obligations and the obligations in respect of any Permitted First Priority Refinancing Debt and is not secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness may be secured by a Lien on the Collateral that is junior to the Liens securing the Obligations and the obligations in respect of any Permitted First Priority Refinancing Debt, notwithstanding any provision to the contrary contained in the definition of Credit Agreement Refinancing Indebtedness, (iii) an Other Debt Representative acting on behalf of the holders of such Indebtedness shall have become party to the Junior Lien Intercreditor Agreement as a Second Priority Representative thereunder, and (iv) such Indebtedness meets the Permitted Other Debt Conditions. Permitted Second Priority Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.
Permitted Unsecured Refinancing Debt means Credit Agreement Refinancing Indebtedness in the form of unsecured Indebtedness (including any Registered Equivalent Notes) incurred by the Borrower in the form of one or more series of senior unsecured notes or loans; provided that (i) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness and (ii) meets the Permitted Other Debt Conditions.
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
Plan means any employee benefit plan (as such term is defined in Section 3(3) of ERISA) sponsored, maintained or contributed to by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.
Platform has the meaning set forth in Section 6.02.
Pledged Debt has the meaning set forth in the Security Agreement.
Pledged Equity has the meaning set forth in the Security Agreement.
Post-Acquisition Period means, with respect to any Permitted Acquisition or the conversion of any Unrestricted Subsidiary into a Restricted Subsidiary, the period beginning on the date such Permitted Acquisition or conversion is consummated and ending on the first anniversary of the date on which such Permitted Acquisition or conversion is consummated.
Prime Rate means the rate of interest per annum determined from time to time by Deutsche Bank AG New York Branch as its prime rate in effect at its principal office in New York City and notified to the Borrower.
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Principal Amount means (i) the stated or principal amount of each Dollar Denominated Loan or Dollar Denominated Letter of Credit or L/C Obligation with respect thereto, as applicable, and (ii) the Dollar Equivalent of the stated or principal amount of each Foreign Currency Denominated Loan and Foreign Currency Denominated Letter of Credit or L/C Obligation with respect thereto, as the context may require.
Pro Forma Adjustment means, for any Test Period that includes all or any part of a fiscal quarter included in any Post-Acquisition Period, with respect to the Acquired EBITDA of the applicable Acquired Entity or Business or Converted Restricted Subsidiary or the Consolidated EBITDA of the Borrower, the pro forma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, projected by the Borrower in good faith as a result of (a) actions taken during such Post-Acquisition Period for the purposes of realizing reasonably identifiable and factually supportable cost savings or (b) any additional costs incurred during such Post-Acquisition Period, in each case in connection with the combination of the operations of such Acquired Entity or Business or Converted Restricted Subsidiary with the operations of the Borrower and the Restricted Subsidiaries; provided that (i) at the election of the Borrower, such Pro Forma Adjustment shall not be required to be determined for any Acquired Entity or Business or Converted Restricted Subsidiary to the extent the aggregate consideration paid in connection with such acquisition was less than $25,000,000, and (ii) so long as such actions are taken during such Post-Acquisition Period or such costs are incurred during such Post-Acquisition Period, as applicable, for purposes of projecting such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, it may be assumed that such cost savings will be realizable during the entirety of such Test Period, or such additional costs, as applicable, will be incurred during the entirety of such Test Period; provided, further, that any such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, shall be without duplication for cost savings or additional costs already included in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, for such Test Period.
Pro Forma Basis , Pro Forma Compliance and Pro Forma Effect mean, with respect to compliance with any test hereunder, that (A) to the extent applicable, the Pro Forma Adjustment shall have been made and (B) all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of the first day of the applicable period of measurement in such test: (a) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, (i) in the case of a Disposition of all or substantially all Equity Interests in any Subsidiary of the Borrower or any division, product line, or facility used for operations of the Borrower or any of its Subsidiaries, shall be excluded, and (ii) in the case of a Permitted Acquisition or Investment described in the definition of Specified Transaction, shall be included, (b) any retirement of Indebtedness, and (c) any Indebtedness incurred or assumed by the Borrower or any of the Restricted Subsidiaries in connection therewith and if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination; provided that, without limiting the application of the Pro Forma Adjustment pursuant to (A) above, the foregoing pro forma adjustments may be applied to any such test solely to the extent that such adjustments are consistent with the definition of Consolidated EBITDA and give effect to events (including operating expense reductions) that are (as determined by the Borrower in good faith) (i) (x) directly attributable to such transaction, (y) expected to have a continuing impact on the Borrower and the Restricted Subsidiaries and (z) factually supportable or (ii) otherwise consistent with the definition of Pro Forma Adjustment; provided, further , that when calculating the Consolidated First Lien Net
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Leverage Ratio for purposes of (i) the definition of Applicable Rate, (ii) the Applicable ECF Percentage and (iii) determining actual compliance (and not Pro Forma Compliance or compliance on a Pro Forma Basis) with Section 7.11, the events that occurred subsequent to the end of the applicable Test Period shall not be given pro forma effect.
Pro Rata Share means, with respect to each Lender, at any time a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitments and, if applicable and without duplication, Term Loans of such Lender under the applicable Facility or Facilities at such time and the denominator of which is the amount of the Aggregate Commitments under the applicable Facility or Facilities and, if applicable and without duplication, Term Loans under the applicable Facility or Facilities at such time; provided that, in the case of the Revolving Credit Facility, if such Commitments have been terminated, then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.
Projections has the meaning set forth in Section 6.01(c).
Public Lender has the meaning set forth in Section 6.02.
Qualified ECP Guarantor means, in respect of any Swap Obligation, each Guarantor that, at the time the relevant Guaranty (or grant of the relevant security interest, as applicable) becomes or would become effective with respect to such Swap Obligation, has total assets exceeding $10,000,000 or otherwise constitutes an eligible contract participant under the Commodity Exchange Act and which may cause another person to qualify as an eligible contract participant with respect to such Swap Obligation at such time by entering into an agreement pursuant to the Commodity Exchange Act.
Qualified Equity Interests means any Equity Interests that are not Disqualified Equity Interests.
Qualified IPO means the issuance by Holdings or any direct or indirect parent of Holdings of its common Equity Interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the U.S. Securities and Exchange Commission in accordance with the Securities Act (whether alone or in connection with a secondary public offering).
Qualified Proceeds means the fair market value of assets that are used or useful in, or Equity Interests of any Person engaged in, a Similar Business.
Qualified Securitization Financing means (a) any timeshare loan backed notes (such as Hilton Grand Vacations Trust 2013-A) and similar facilities, (b) any revolving non-recourse timeshare notes credit facility (such as the receivables loan agreement, dated May 9, 2013, among Hilton Grand Vacations Trust I LLC, Wells Fargo Bank, National Association, as paying agent, a commercial paper conduit lender, Deutsche Bank AG New York Branch and Bank of America, N.A., as committed lenders and Deutsche Bank AG New York Branch, as administrative agent) and similar facilities and (c) any other Securitization Financing of a Securitization Subsidiary that meets the following conditions: (x) the board of directors of the Borrower shall have determined in good faith that such Qualified Securitization Financing (including financing terms, covenants, termination
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events and other provisions) is in the aggregate economically fair and reasonable to the Borrower and the Securitization Subsidiary and (y) all sales and/or contributions of Securitization Assets and related assets to the Securitization Subsidiary are made at fair market value (as determined in good faith by the Borrower). The grant of a security interest in any Securitization Assets of the Borrower or any of its Restricted Subsidiaries (other than a Securitization Subsidiary) to secure Indebtedness under this Agreement prior to engaging in any Securitization Financing shall not be deemed a Qualified Securitization Financing.
Qualifying Lender has the meaning set forth in Section 2.05(a)(v)(D)(3).
Rating Agencies means Moodys and S&P.
Rating Categories means:
(1) | with respect to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); and |
(2) | with respect to Moodys, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories). |
Ratings Improvement means, with respect to a Change of Control, the obtaining of a rating of the Loans, taking into account the applicable transaction, representing an increase in the rating of the Loans by either Moodys or S&P by one or more gradations (including gradations within Rating Categories as well as between Rating Categories, but not including ratings outlook changes) from the applicable rating in effect as of the Closing Date. In determining whether the rating of the Loans has increased by one or more gradations, gradations within Ratings Categories, namely + or - for S&P, and 1, 2, and 3 for Moodys, will be taken into account; for example, in the case of S&P, a rating change either from BB to BB+ or from B+ to BB- will constitute an increase of one gradation.
Real Property means, collectively, all right, title and interest (including any leasehold, mineral or other estate) in and to any and all parcels of or interests in real property owned or leased by any Person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof.
Refinanced Debt has the meaning set forth in the definition of Credit Agreement Refinancing Indebtedness.
Refinancing means the repayment in full of all third party Indebtedness of the Borrower and its Subsidiaries existing prior to the consummation of the Transactions (other than existing capital leases and letters of credit and any Indebtedness of the Borrower and its Subsidiaries set forth on Schedule 7.03(b) ) with the proceeds of the Initial Term Loans, the Revolving Credit Loans, the 5 5/8% Senior Notes and the termination and release of all commitments, security interests and guarantees in connection therewith.
Refinancing Amendment means an amendment to this Agreement executed by each of (a) the Borrower, (b) the Administrative Agent, (c) each Additional Refinancing Lender and (d) each Lender that agrees to provide any portion of Refinancing Term Loans, Other Revolving Credit Commitments or Other Revolving Credit Loans incurred pursuant thereto, in accordance with Section 2.15.
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Refinancing Series means all Refinancing Term Loans, Refinancing Term Commitments, Other Revolving Credit Commitments or Other Revolving Credit Loans that are established pursuant to the same Refinancing Amendment (or any subsequent Refinancing Amendment to the extent such Refinancing Amendment expressly provides that the Refinancing Term Loans, Refinancing Term Commitments, Other Revolving Credit Commitments or Other Revolving Credit Loans provided for therein are intended to be a part of any previously established Refinancing Series) and that provide for the same Effective Yield and, in the case of Refinancing Term Loans or Refinancing Term Commitments, amortization schedule.
Refinancing Term Commitments means one or more Classes of Term Commitments hereunder that are established to fund Refinancing Term Loans of the applicable Refinancing Series hereunder pursuant to a Refinancing Amendment.
Refinancing Term Loans means one or more Classes of Term Loans hereunder that result from a Refinancing Amendment.
Register has the meaning set forth in Section 10.07(d).
Registered Equivalent Notes means, with respect to any notes originally issued in an offering pursuant to Rule 144A under the Securities Act or other private placement transaction under the Securities Act of 1933, substantially identical notes (having the same guarantees) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.
Release means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migrating in into, onto or through the Environment.
Reportable Event means any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder, other than events for which the thirty (30) day notice period has been waived.
Repricing Transaction means the prepayment, refinancing, substitution or replacement of all or a portion of the Initial Term Loans with the incurrence by the Borrower or any Restricted Subsidiary of any debt financing having an effective interest cost or weighted average yield (with the comparative determinations to be made by the Administrative Agent consistent with generally accepted financial practices, after giving effect to, among other factors, margin, interest rate floors, upfront or similar fees or original issue discount, but excluding the effect of any arrangement, structuring, syndication or other fees payable to any lead arranger (or its affiliates) in connection with the commitment or syndication of such debt financing, and without taking into account any fluctuations in the Eurocurrency Rate) that is less than the effective interest cost or weighted average yield (as determined by the Administrative Agent on the same basis) of such Initial Term Loans so repaid, refinanced, substituted or replaced, including without limitation, as may be effected through any amendment to this Agreement relating to the interest rate for, or weighted average yield of, such Term Loans or the incurrence of any Replacement Term Loans, in each case other than in connection with a Change of Control.
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Request for Credit Extension means (a) with respect to a Borrowing, continuation or conversion of Term Loans or Revolving Credit Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Issuance Request, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.
Required Class Lenders means, with respect to any Class on any date of determination, Lenders having more than 50% of the sum of (i) the outstanding Loans under such Class and (ii) the aggregate unused Commitments under such Facility; provided that, to the same extent set forth in Section 10.07(n) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Class Lenders.
Required Facility Lenders mean, as of any date of determination, with respect to any Facility, Lenders having more than 50% of the sum of (a) the Total Outstandings under such Facility (with the aggregate amount of each Lenders risk participation and funded participation in L/C Obligations and Swing Line Loans, as applicable, under such Facility being deemed held by such Lender for purposes of this definition) and (b) the aggregate unused Commitments under such Facility; provided that the unused Commitments of, and the portion of the Total Outstandings under such Facility held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of the Required Facility Lenders; provided , further , that, to the same extent set forth in Section 10.07(n) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Facility Lenders.
Required Lenders means, as of any date of determination, Lenders having more than 50% of the sum of the (a) Total Outstandings (with the aggregate amount of each Lenders risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed held by such Lender for purposes of this definition), (b) aggregate unused Term Commitments and (c) aggregate unused Revolving Credit Commitments; provided that the unused Term Commitment and unused Revolving Credit Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders; provided , further , that, to the same extent set forth in Section 10.07(n) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Lenders.
Required Revolving Credit Lenders means, as of any date of determination, Revolving Credit Lenders having more than 50% of the sum of the (a) Outstanding Amount of all Revolving Credit Loans, Swing Line Loans and all L/C Obligations (with the aggregate amount of each Lenders risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed held by such Lender for purposes of this definition) and (b) aggregate unused Revolving Credit Commitments; provided that unused Revolving Credit Commitment of, and the portion of the Outstanding Amount of all Revolving Credit Loans, Swing Line Loans and all L/C Obligations held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Credit Lenders.
Responsible Officer means the chief executive officer, president, vice president, chief financial officer, treasurer or assistant treasurer or other similar officer of a Loan Party and, as to any document delivered on the Closing Date, any secretary or assistant secretary of such Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be
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conclusively presumed to have been authorized by all necessary corporate, limited liability company, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrowers or a Restricted Subsidiarys stockholders, partners or members (or the equivalent Persons thereof).
Restricted Subsidiary means any Subsidiary of the Borrower other than an Unrestricted Subsidiary.
Retained Percentage means, with respect to any Excess Cash Flow Period (a) 100% minus (b) the Applicable ECF Percentage with respect to such Excess Cash Flow Period.
Reversion Date has the meaning set forth in Article VII.
Revolver Extension Request has the meaning set forth in Section 2.16(b).
Revolver Extension Series has the meaning set forth in Section 2.16(b).
Revolving Commitment Increase has the meaning set forth in Section 2.14(a).
Revolving Credit Borrowing means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type, in the same Approved Currency, and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Revolving Credit Lenders pursuant to Section 2.01(b).
Revolving Credit Commitment means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Borrower pursuant to Section 2.01(b), (b) purchase participations in L/C Obligations in respect of Letters of Credit and (c) purchase participations in Swing Line Loans, in an aggregate Principal Amount at any one time outstanding not to exceed the amount set forth opposite such Lenders name on Schedule 1.01A under the caption Revolving Credit Commitments or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement (including Section 2.14). The aggregate Revolving Credit Commitments of all Revolving Credit Lenders shall be $1,000,000,000 on the Closing Date, as such amount may be adjusted from time to time in accordance with the terms of this Agreement.
Revolving Credit Exposure means, as to each Revolving Credit Lender, the sum of the amount of the outstanding Principal Amount of such Revolving Credit Lenders Revolving Credit Loans and its Pro Rata Share or other applicable share provided for under this Agreement of the amount of the L/C Obligations and the Swing Line Obligations at such time.
Revolving Credit Facility means, at any time, the aggregate amount of the Revolving Credit Commitments at such time.
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Revolving Credit Lender means, at any time, any Lender that has a Revolving Credit Commitment at such time or, if the Revolving Credit Commitments have terminated, Revolving Credit Exposure.
Revolving Credit Loans means any Revolving Credit Loan made pursuant to Section 2.01(b), Incremental Revolving Credit Loans, Other Revolving Credit Loans or Extended Revolving Credit Loans, as the context may require.
Revolving Credit Note means a promissory note of the Borrower payable to any Revolving Credit Lender or its registered assigns, in substantially the form of Exhibit D-2 hereto, evidencing the aggregate Indebtedness of the Borrower to such Revolving Credit Lender resulting from the Revolving Credit Loans made by such Revolving Credit Lender to the Borrower.
S&P means Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.
Same Day Funds means immediately available funds.
Sanction(s) means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majestys Treasury.
SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Secured Hedge Agreement means any Swap Contract permitted under Article VII that is entered into by and between the Borrower or any Restricted Subsidiary and any Approved Counterparty.
Secured Parties means, collectively, the Administrative Agent, the Collateral Agent, the Lenders, any Approved Counterparty party to a Secured Hedge Agreement or Treasury Services Agreement, the Supplemental Agents and each co-agent or sub-agent appointed by the Administrative Agent or Collateral Agent from time to time pursuant to Section 9.02.
Securities Act means the Securities Act of 1933, as amended.
Securitization Assets means the accounts receivable, royalty or other revenue streams and other rights to payment and any other assets related thereto subject to a Qualified Securitization Financing and the proceeds thereof.
Securitization Fees means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Securitization Subsidiary in connection with any Qualified Securitization Financing.
Securitization Financing means any of one or more receivables or securitization financing facilities as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, the obligations of which are non-recourse (except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to the Borrower or any of its Restricted Subsidiaries (other than a Securitization Subsidiary) pursuant to which the Borrower or
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any of its Restricted Subsidiaries sells or grants a security interest in its accounts receivable or Securitization Assets or assets related thereto to either (a) a Person that is not a Restricted Subsidiary or (b) a Securitization Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.
Securitization Subsidiary means (i) each Subsidiary of the Borrower listed on Schedule 1.01E and (ii) any Subsidiary formed for the purpose of, and that solely engages only in one or more Qualified Securitization Financing and other activities reasonably related thereto.
Security Agreement means the Security Agreement substantially in the form of Exhibit G , dated as of the Closing Date, among Holdings, the Borrower, certain subsidiaries of the Borrower and the Collateral Agent.
Security Agreement Supplement has the meaning set forth in the Security Agreement.
Senior Notes Documents means the Senior Notes Indenture and the other transaction documents referred to therein (including the related guarantee, the notes, the notes purchase agreement and the registration rights agreements).
Senior Notes Indenture means the Indenture for the 5 5/8% Senior Notes, dated as of October 4, 2013, among Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. as the issuers, the guarantors listed therein and Wilmington Trust, National Association, as trustee, as amended or supplemented from time to time.
Similar Business means (1) any business conducted or proposed to be conducted by the Borrower or any of its Restricted Subsidiaries on the Closing Date, and any reasonable extension thereof, or (2) any business or other activities that are reasonably similar, ancillary, incidental, complementary or related to, or a reasonable extension, development or expansion of, the businesses in which the Borrower and its Restricted Subsidiaries are engaged or propose to be engaged on the Closing Date.
Sold Entity or Business has the meaning set forth in the definition of the term Consolidated EBITDA.
Solicited Discount Proration has the meaning set forth in Section 2.05(a)(v)(D)(3).
Solicited Discounted Prepayment Amount has the meaning set forth in Section 2.05(a)(v)(D)(1).
Solicited Discounted Prepayment Notice means a written notice of the Borrower of Solicited Discounted Prepayment Offers made pursuant to Section 2.05(a)(v)(D) substantially in the form of Exhibit M-6 .
Solicited Discounted Prepayment Offer means the irrevocable written offer by each Lender, substantially in the form of Exhibit M-7 , submitted following the Administrative Agents receipt of a Solicited Discounted Prepayment Notice.
Solicited Discounted Prepayment Response Date has the meaning set forth in Section 2.05(a)(v)(D)(1).
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Solvent and Solvency mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the assets of such Person and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of such Person and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) such Person and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured and (d) such Person and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. The amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.
SPC has the meaning set forth in Section 10.07(i).
Specified Default means a Default under Section 8.01(a), (f) or (g).
Specified Discount has the meaning set forth in Section 2.05(a)(v)(B)(1).
Specified Discount Prepayment Amount has the meaning set forth in Section 2.05(a)(v)(B)(1).
Specified Discount Prepayment Notice means a written notice of the Borrower Offer of Specified Discount Prepayment made pursuant to Section 2.05(a)(v)(B) substantially in the form of Exhibit M-8 .
Specified Discount Prepayment Response means the irrevocable written response by each Lender, substantially in the form of Exhibit M-9 , to a Specified Discount Prepayment Notice.
Specified Discount Prepayment Response Date has the meaning set forth in Section 2.05(a)(v)(B)(1).
Specified Discount Proration has the meaning set forth in Section 2.05(a)(v)(B)(3).
Specified Equity Contribution means any cash contribution to the common equity of Holdings and/or any purchase or investment in an Equity Interest of Holdings other than Disqualified Equity Interests.
Specified Guarantor means any Guarantor that is not an eligible contract participant under the Commodity Exchange Act (determined prior to giving effect to Section 11.12).
Specified Representations means those representations and warranties made by the Borrower in Sections 5.01(b)(ii), 5.02(a), 5.02(b)(i), 5.02(b)(iii) (to the extent such conflict has not resulted in a Material Adverse Effect (as such term or similar definition is defined in the main transaction agreement governing the applicable Permitted Acquisition), 5.04, 5.13, 5.18, 5.20 and 5.21).
Specified Transaction means any Investment, Disposition, incurrence or repayment of Indebtedness, Restricted Payment, Subsidiary designation, Incremental Term Loan or Revolving Commitment Increase in respect of which the terms of this Agreement require any test to be
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calculated on a Pro Forma Basis or after giving Pro Forma Effect; provided that a Revolving Commitment Increase, for purposes of this Specified Transaction definition, shall be deemed to be fully drawn.
Spot Exchange Rate shall have the meaning provided in the definition of Dollar Equivalent.
Sterling and £ mean freely transferable lawful money of the United Kingdom (expressed in pounds sterling).
Submitted Amount has the meaning set forth in Section 2.05(a)(v)(C)(1).
Submitted Discount has the meaning set forth in Section 2.05(a)(v)(C)(1).
Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which (i) a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, (ii) more than half of the issued share capital is at the time beneficially owned or (iii) the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of the Borrower. For the avoidance of doubt, any entity that is owned at a 50.0% or less level (as described above) shall not be a Subsidiary for any purpose under this Agreement, regardless of whether such entity is consolidated on Holdings or any Restricted Subsidiarys financial statements.
Subsidiary Guarantor means any Guarantor other than Holdings.
Successor Company has the meaning set forth in Section 7.04(d).
Supplemental Agent has the meaning set forth in Section 9.14(a) and Supplemental Agents shall have the corresponding meaning.
Suspended Covenants has the meaning set forth in Article VII.
Suspension Period has the meaning set forth in Article VII.
Swap means, any agreement, contract, or transaction that constitutes a swap within the meaning of Section 1a(47) of the Commodity Exchange Act.
Swap Contract means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of
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master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a Master Agreement ), including any such obligations or liabilities under any Master Agreement.
Swap Obligation means, with respect to any Person, any obligation to pay or perform under any Swap.
Swap Termination Value means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
Swing Line Borrowing means a borrowing of a Swing Line Loan pursuant to Section 2.04.
Swing Line Facility means the swing line loan facility made available by the Swing Line Lenders pursuant to Section 2.04.
Swing Line Lender means Deutsche Bank AG New York Branch, in its capacity as provider of Swing Line Loans or any successor swing line lender hereunder.
Swing Line Loan has the meaning set forth in Section 2.04(a).
Swing Line Loan Notice means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit C .
Swing Line Note means a promissory note of the Borrower payable to the Swing Line Lender or its registered assigns, in substantially the form of Exhibit D-3 hereto, evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting from the Swing Line Loans.
Swing Line Obligations means, as at any date of determination, the aggregate principal amount of all Swing Line Loans outstanding.
Swing Line Sublimit means an amount equal to the lesser of (a) $50,000,000 and (b) the aggregate amount of the Revolving Credit Commitments. The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Commitments.
Tax Group has the meaning set forth in Section 7.06(i).
Taxes has the meaning set forth in Section 3.01(a).
Term Borrowing means a borrowing consisting of simultaneous Term Loans of the same Class and Type and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01.
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Term Commitment means, as to each Term Lender, its obligation to make a Term Loan to the Borrower hereunder, expressed as an amount representing the maximum principal amount of the Term Loan to be made by such Term Lender under this Agreement, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Term Lender pursuant to an Assignment and Assumption, (ii) an Incremental Amendment, (iii) a Refinancing Amendment or (iv) an Extension.
Term Lender means, at any time, any Lender that has an Initial Term Commitment, a Term Commitment or a Term Loan at such time.
Term Loans means any Initial Term Loan or any Incremental Term Loan, Refinancing Term Loan or Extended Term Loan designated as a Term Loan, as the context may require.
Term Loan Extension Request has the meaning set forth in Section 2.16(a).
Term Loan Extension Series has the meaning set forth in Section 2.16(a).
Term Loan Increase has the meaning set forth in Section 2.14(a).
Term Loan Standstill Period has the meaning provided in Section 8.01(b).
Term Note means a promissory note of the Borrower payable to any Term Lender or its registered assigns, in substantially the form of Exhibit D-1 hereto, evidencing the aggregate Indebtedness of the Borrower to such Term Lender resulting from the Term Loans of each Class made by such Term Lender.
Test Period means, for any date of determination under this Agreement, the latest four consecutive fiscal quarters of the Borrower for which financial statements have been delivered to the Administrative Agent on or prior to the Closing Date and/or for which financial statements are required to be delivered pursuant to Section 6.01, as applicable.
Threshold Amount means $225,000,000.
Timeshare Disposition means any future direct or indirect sale, transfer or other disposition of all or a portion of the timeshare business of the Borrower and its Restricted Subsidiaries, all or substantially all of the assets thereof (for the avoidance of doubt, including a sale, transfer or other disposition of Equity Interests of any Person owning such assets, so long as substantially all of the assets of such Person consists of such assets).
Total Assets means the total assets of the Borrower and the Restricted Subsidiaries on a consolidated basis in accordance with GAAP, as shown on the most recent balance sheet of Holdings delivered pursuant to Sections 6.01(a) or (b).
Total Outstandings means the aggregate Outstanding Amount of all Loans and all L/C Obligations.
Transaction Expenses means any fees or expenses incurred or paid by the Investors, Parent, the Borrower or any of its (or their) Subsidiaries in connection with the Transactions (including expenses in connection with hedging transactions related to the Facilities and any original issue discount or upfront fees), the Investor Management Agreement (to the extent accrued on or prior to the Closing Date), this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby.
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Transactions means, collectively, (a) the funding of the Initial Term Loans and any Initial Revolving Borrowing on the Closing Date and the execution and delivery of Loan Documents entered into on the Closing Date, (b) the Refinancing, (c) the issuance of the 5 5/8% Senior Notes and (d) the payment of Transaction Expenses.
Transferred Guarantor has the meaning set forth in Section 11.10.
Treasury Services Agreement means any agreement between the Borrower or any Subsidiary and any Approved Counterparty relating to treasury, depository, credit card, debit card, stored value cards, purchasing or procurement cards and cash management services or automated clearinghouse transfer of funds or any similar services.
Type means, with respect to a Loan, its character as a Base Rate Loan or a Eurocurrency Rate Loan.
Unaudited Financial Statements means the unaudited consolidated balance sheets of Holdings and its Subsidiaries as of March 31, 2013 and June 30, 2013 and related consolidated statements of income, stockholders equity and cash flows of Holdings and its Subsidiaries for the year to date period ended March 31, 2013 and June 30, 2013.
Uniform Commercial Code or UCC means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
United States and U.S. mean the United States of America.
United States Tax Compliance Certificate means a certificate substantially in the form of Exhibits K-1, K-2, K-3 and K-4 hereto, as applicable.
Unreimbursed Amount has the meaning set forth in Section 2.03(c)(i).
Unrestricted Subsidiary means (i) each Subsidiary of the Borrower listed on Schedule 1.01F , (ii) any Subsidiary of the Borrower designated by the board of managers of the Borrower as an Unrestricted Subsidiary pursuant to Section 6.14 subsequent to the Closing Date and (iii) any Subsidiary of an Unrestricted Subsidiary.
USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 10756, as amended or modified from time to time.
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.
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wholly owned means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) directors qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person.
Yen and ¥ mean lawful money of Japan.
Yield Differential has the meaning set forth in Section 2.14(e)(iii).
SECTION 1.02 Other Interpretive Provisions.
With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) The words herein, hereto, hereof and hereunder and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.
(c) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.
(d) The term including is by way of example and not limitation.
(e) The term documents includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.
(f) In the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding; and the word through means to and including.
(g) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
SECTION 1.03 Accounting Terms.
(a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.
(b) Notwithstanding anything to the contrary herein, for purposes of determining compliance with any test or covenant contained in this Agreement with respect to any period during which any Specified Transaction occurs, the Consolidated First Lien Net Leverage Ratio and Consolidated Total Net Leverage Ratio shall be calculated with respect to such period and such Specified Transaction on a Pro Forma Basis.
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SECTION 1.04 Rounding.
Any financial ratios required to be maintained by the Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding up if there is no nearest number).
SECTION 1.05 References to Agreements, Laws, Etc.
Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted by the Loan Documents; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.
SECTION 1.06 Times of Day.
Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
SECTION 1.07 Timing of Payment or Performance.
When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day.
SECTION 1.08 Cumulative Credit Transactions.
If more than one action occurs on any given date the permissibility of the taking of which is determined hereunder by reference to the amount of the Cumulative Credit immediately prior to the taking of such action, the permissibility of the taking of each such action shall be determined independently and in no event may any two or more such actions be treated as occurring simultaneously.
ARTICLE II
The Commitments and Credit Extensions
SECTION 2.01 The Loans.
(a) The Term Borrowings . Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make to the Borrower on the Closing Date loans denominated in
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Dollars in an aggregate amount not to exceed the amount of such Term Lenders Initial Term Commitment. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. Term Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.
(b) The Revolving Credit Borrowings. Subject to the terms and conditions set forth herein each Revolving Credit Lender severally agrees to make revolving credit loans denominated in an Approved Currency to the Borrower from its applicable Lending Office (each such loan, a Revolving Credit Loan ) from time to time as elected by the Borrower pursuant to Section 2.02, on any Business Day during the period from the Closing Date until the Maturity Date with respect to such Revolving Credit Lenders applicable Revolving Credit Commitment, in an aggregate Principal Amount not to exceed at any time outstanding the amount of such Lenders Revolving Credit Commitment at such time; provided that after giving effect to any Revolving Credit Borrowing, the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lenders Pro Rata Share or other applicable share provided for under this Agreement of the Outstanding Amount of all L/C Obligations, plus such Lenders Pro Rata Share or other applicable share provided for under this Agreement of the Outstanding Amount of all Swing Line Loans shall not exceed such Lenders Revolving Credit Commitment. Within the limits of each Lenders Revolving Credit Commitments, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b). Revolving Credit Loans denominated in Dollars may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.
SECTION 2.02 Borrowings, Conversions and Continuations of Loans.
(a) Each Term Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Borrowers irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 1:00 p.m. New York City time (i) three Business Days prior to the requested date of any Borrowing or continuation of Eurocurrency Rate Loans or any conversion of Base Rate Loans to Eurocurrency Rate Loans, and (ii) one (1) Business Day before the requested date of any Borrowing of Base Rate Loans; provided that the notice referred to in subclause (i) above may be delivered no later than one (1) Business Day prior to the Closing Date in the case of initial Credit Extensions denominated in Dollars. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Except as provided in Section 2.14(a), each Borrowing of, conversion to or continuation of Eurocurrency Rate Loans shall be in a minimum principal amount of (A) if such Eurocurrency Rate Loan is denominated in Dollars, $2,000,000, or a whole multiple of $1,000,000 in excess thereof, (B) if such Eurocurrency Rate Loan is denominated in Sterling, £1,000,000, or a whole multiple of £500,000 in excess thereof, (C) if such Eurocurrency Rate Loan is denominated in euros, 2,000,000, or a whole multiple of 1,000,000 in excess thereof, (D) if such Eurocurrency Rate Loan is denominated in Australian Dollars, A$2,000,000, or a whole multiple of A$1,000,000 in excess thereof and (E) if such Eurocurrency Rate Loan is denominated in Yen, ¥2,000,000,000, or a whole multiple of ¥1,000,000,000 in excess thereof. Except as provided in Sections 2.03(c), 2.04(c), 2.14(a) or the last sentence of this paragraph, each Borrowing of or conversion to Base Rate Loans shall be in a minimum principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is
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requesting a Term Borrowing of a particular Class, a Revolving Credit Borrowing, a conversion of Term Loans of any Class or Revolving Credit Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Term Loans of a Class or Revolving Credit Loans are to be converted, (v) in the case of a Revolving Credit Borrowing, the relevant Approved Currency in which such Revolving Credit Borrowing is to be denominated and (vi) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify an Approved Currency of a Loan in a Committed Loan Notice, such Loan shall be made in Dollars. If the Borrower fails to specify a Type of Loan in a Committed Loan Notice or fails to give a timely notice requesting a conversion or continuation, then the applicable Term Loans or Revolving Credit Loans shall be made as or converted to (x) in the case of any Loan denominated in Dollars, Base Rate Loans or (y) in the case of any Loan denominated in an Approved Foreign Currency, Eurocurrency Rate Loans in the Approved Currency having an Interest Period of one month, as applicable. Any such automatic conversion to Base Rate Loans or one-month Eurocurrency Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one (1) month. No Loan may be converted into or continued as a Loan denominated in another Approved Currency, but instead must be prepaid in the original Approved Currency or reborrowed in another Approved Currency.
(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount (and Approved Currency) of its Pro Rata Share or other applicable share provided for under this Agreement of the applicable Class of Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion or continuation described in Section 2.02(a). In the case of each Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in Same Day Funds at the Administrative Agents Office not later than 1:00 p.m. (New York City time) on the Business Day specified in the applicable Committed Loan Notice. The Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent by wire transfer of such funds in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.
(c) Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Rate Loan unless the Borrower pays the amount due, if any, under Section 3.05 in connection therewith. During the existence of an Event of Default, the Administrative Agent or the Required Lenders may require that no Loans in any Approved Currency may be converted to or continued as Eurocurrency Rate Loans and the Required Lenders may demand that any or all of the then outstanding Eurocurrency Rate Loans denominated in an Approved Foreign Currency be prepaid, or redenominated into Dollars in the amount of the Dollar Equivalent thereof, on the last day of the then current Interest Period with respect thereto.
(d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such interest rate. The determination of the Eurocurrency Rate by the Administrative Agent shall be
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conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in the Prime Rate used in determining the Base Rate promptly following the announcement of such change.
(e) After giving effect to all Term Borrowings, all Revolving Credit Borrowings, all conversions of Term Loans or Revolving Credit Loans from one Type to the other, and all continuations of Term Loans or Revolving Credit Loans as the same Type, there shall not be more than fifteen (15) Interest Periods in effect.
(f) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.
SECTION 2.03 Letters of Credit.
(a) The Letter of Credit Commitment. (i) Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the other Revolving Credit Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date to issue Letters of Credit at sight denominated in any Approved Currency for the account of the Borrower or any Subsidiary of the Borrower and to amend or renew Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (2) to honor drafts under the Letters of Credit and (B) the Revolving Credit Lenders severally agree to participate in Letters of Credit issued pursuant to this Section 2.03; provided that no L/C Issuer shall be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit if as of the date of such L/C Credit Extension, (x) the Revolving Credit Exposure of any Revolving Credit Lender would exceed such Lenders Revolving Credit Commitment or (y) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.
(ii) An L/C Issuer shall be under no obligation to issue any Letter of Credit if:
(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing such Letter of Credit, or any Law applicable to such L/C Issuer or any directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or direct that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date (for which such L/C Issuer is not otherwise compensated hereunder);
(B) subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last
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renewal, unless (1) each Appropriate Lender has approved of such expiration date or (2) the L/C Issuer thereof has approved of such expiration date and the Outstanding Amount of L/C Obligations in respect of such requested Letter of Credit has been cash collateralized or backstopped pursuant to arrangements reasonably satisfactory to such L/C Issuer;
(C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Credit Lenders have approved such expiry date;
(D) the issuance of such Letter of Credit would violate any Laws binding upon such L/C Issuer;
(E) the L/C Issuer does not as of the issuance date of the requested Letter of Credit issue Letters of Credit in the requested currency; or
(F) any Revolving Credit Lender is at that time a Defaulting Lender, unless such L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to such L/C Issuer (in its sole discretion) with the Borrower or such Lender to eliminate such L/C Issuers actual or potential Fronting Exposure (after giving effect to Section 2.17(a)(iv)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other L/C Obligations as to which such L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.
(iii) An L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) such L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(iv) Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and any Letter of Credit Issuance Request (and any other document, agreement or instrument entered into by such L/C Issuer and the Borrower or in favor of such L/C Issuer) pertaining to such Letters of Credit as fully as if the term Administrative Agent as used in Article IX included such L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to each L/C Issuer.
(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit. (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to an L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Issuance Request, appropriately completed and signed by a Responsible Officer of the Borrower or his/her delegate or designee. Such Letter of Credit Issuance Request must be received by the relevant L/C Issuer and the Administrative Agent not later than 1:00 p.m. (New York City time) at least two Business Days prior to the proposed issuance date or date of amendment, as the case may be; or, in each case, such other date and time as the relevant L/C Issuer may agree in a
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particular instance in its sole discretion. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Issuance Request shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer: (a) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (b) the amount thereof; (c) the relevant Approved Currency in which such Letter of Credit is to be denominated; (d) the expiry date thereof; (e) the name and address of the beneficiary thereof; (f) the documents to be presented by such beneficiary in case of any drawing thereunder; (g) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (h) such other matters as the relevant L/C Issuer may reasonably request. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Issuance Request shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer (1) the Letter of Credit to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as the relevant L/C Issuer may reasonably request.
(ii) Promptly after receipt of any Letter of Credit Issuance Request, the relevant L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Issuance Request from the Borrower and, if not, such L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the relevant L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be. Immediately upon the issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the relevant L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lenders Pro Rata Share or other applicable share provided for under this Agreement times the amount of such Letter of Credit.
(iii) If the Borrower so requests in any applicable Letter of Credit Issuance Request, the relevant L/C Issuer shall agree to issue a Letter of Credit that has automatic extension provisions (each, an Auto-Extension Letter of Credit ); provided that any such Auto-Extension Letter of Credit must permit the relevant L/C Issuer to prevent any such extension at least once in each twelve month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a number of days (the Non-Extension Notice Date ) prior to the last day of such twelve month period to be agreed upon by the relevant L/C Issuer and the Borrower at the time such Letter of Credit is issued. Unless otherwise directed by the relevant L/C Issuer, the Borrower shall not be required to make a specific request to the relevant L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the applicable Lenders shall be deemed to have authorized (but may not require) the relevant L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided that the relevant L/C Issuer shall not permit any such extension if (A) the relevant L/C Issuer has determined that it would have no obligation at such time to issue such Letter of Credit in its extended form under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Non-Extension Notice Date from the Administrative Agent, any Revolving Credit Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied.
(iv) Promptly after issuance of any Letter of Credit or any amendment to a Letter of Credit, the relevant L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.
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(c) Drawings and Reimbursements; Funding of Participations. (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the relevant L/C Issuer shall notify promptly the Borrower and the Administrative Agent thereof. In the case of a Letter of Credit denominated in an Approved Foreign Currency, the Borrower shall reimburse the L/C Issuer in such Approved Currency, unless the L/C Issuer (at its option) shall have specified in such notice that it will require reimbursement in Dollars. In the case of any such reimbursement in Dollars of a drawing under a Letter of Credit denominated in an Approved Foreign Currency, the L/C Issuer shall notify the Company of the Dollar Equivalent of the amount of the drawing promptly following the determination thereof. Not later than 1:00 p.m. (New York City time), in the case of a drawing in Dollars, or 2:00 p.m. (London time) (or, if earlier, 9:00 a.m. New York city time), in the case of a drawing in an Approved Foreign Currency, on (1) the next Business Day immediately following any payment by an L/C Issuer under a Letter of Credit that the Borrower receives notice thereof (each such date, an Honor Date ), the Borrower shall reimburse such L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing in the relevant Approved Currency; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with a Revolving Credit Borrowing under the Revolving Credit Facility or a Swing Line Borrowing under the Swing Line Facility in an equivalent amount and, to the extent so financed, the Borrowers obligation to make such payment shall be discharged and replaced by the resulting Revolving Credit Borrowing or Swing Line Borrowing, as applicable. In the event that (x) a drawing denominated in an Approved Foreign Currency is to be reimbursed in Dollars pursuant to the first sentence of this Section 2.03(c)(i) and (y) the Dollar amount paid by the Borrower, whether on or after the Honor Date, shall not be adequate on the date of that payment to purchase in accordance with normal banking procedures a sum denominated in the applicable Approved Foreign Currency equal to the drawing, the Borrower agrees, as a separate and independent obligation, to indemnify the L/C Issuer for the loss resulting from its inability on that date to purchase the Approved Currency in the full amount of the drawing. If the Borrower fails to so reimburse such L/C Issuer by such time, the Administrative Agent shall promptly notify each Appropriate Lender of the Honor Date, the amount of the unreimbursed drawing (expressed in Dollars in the amount of the Dollar Equivalent thereof) (the Unreimbursed Amount ), and the amount of such Appropriate Lenders Pro Rata Share or other applicable share provided for under this Agreement thereof. In such event, the Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans or Eurocurrency Rate Loans, as applicable, but subject to the amount of the unutilized portion of the Revolving Credit Commitments of the Appropriate Lenders and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by an L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
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(ii) Each Appropriate Lender (including any Lender acting as an L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the relevant L/C Issuer in Dollars at the Administrative Agents Office for Dollar-denominated payments in an amount equal to its Pro Rata Share or other applicable share provided for under this Agreement of the Unreimbursed Amount not later than 2:00 p.m. (New York City time) on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Appropriate Lender that so makes funds available shall be deemed to have made a Revolving Credit Loan that is a Base Rate Loan or Eurocurrency Rate Loan, as applicable, to the Borrower in such amount. The Administrative Agent shall promptly remit the funds so received to the relevant L/C Issuer in Dollars.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans or Eurocurrency Rate Loans, as applicable, because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the relevant L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest (which begins to accrue upon funding by the L/C Issuer) at the Default Rate for Revolving Credit Loans. In such event, each Appropriate Lenders payment to the Administrative Agent for the account of the relevant L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.
(iv) Until each Appropriate Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the relevant L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lenders Pro Rata Share or other applicable share provided for under this Agreement of such amount shall be solely for the account of the relevant L/C Issuer.
(v) Each Revolving Credit Lenders obligation to make Revolving Credit Loans or L/C Advances to reimburse an L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the relevant L/C Issuer, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lenders obligation to make Revolving Credit Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the relevant L/C Issuer for the amount of any payment made by such L/C Issuer under any Letter of Credit, together with interest as provided herein.
(vi) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the relevant L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such L/C Issuer shall be entitled to recover from such Lender (acting
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through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such L/C Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect, plus any reasonable administrative, processing or similar fees customarily charged by such L/C Issuer in connection with the foregoing. A certificate of the relevant L/C Issuer submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall be conclusive absent manifest error.
(d) Repayment of Participations. (i) If, at any time after an L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Lenders L/C Advance in respect of such payment in accordance with Section 2.03(c), the Administrative Agent receives for the account of such L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Pro Rata Share or other applicable share provided for under this Agreement hereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lenders L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.
(ii) If any payment received by the Administrative Agent for the account of an L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), each Appropriate Lender shall pay to the Administrative Agent for the account of such L/C Issuer its Pro Rata Share or other applicable share provided for under this Agreement thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the applicable Overnight Rate, plus any reasonable administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing.
(e) Obligations Absolute. The obligation of the Borrower to reimburse the relevant L/C Issuer for each drawing under each Letter of Credit issued by it and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;
(ii) the existence of any claim, counterclaim, setoff, defense or other right that any Loan Party may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the relevant L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
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(iv) any payment by the relevant L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the relevant L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;
(v) any exchange, release or non-perfection of any Collateral, or any release or amendment or waiver of or consent to departure from the Guaranty or any other guarantee, for all or any of the Obligations of any Loan Party in respect of such Letter of Credit;
(vi) any adverse change in the relevant exchange rates or in the availability of the relevant Approved Foreign Currency to the Borrower or any Subsidiary or in the relevant currency markets generally; and
(vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Loan Party;
provided that the foregoing shall not excuse any L/C Issuer from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are waived by the Borrower to the extent permitted by applicable Law) suffered by the Borrower that are caused by such L/C Issuers gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.
(f) Role of L/C Issuers. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the relevant L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuers, any Agent-Related Person nor any of the respective correspondents, participants or assignees of any L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Lenders holding a majority of the Revolving Credit Commitments, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Issuance Request. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrowers pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuers, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of any L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (vi) of Section 2.03(e); provided that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against
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an L/C Issuer, and such L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such L/C Issuers willful misconduct or gross negligence or such L/C Issuers willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit, in each case as determined in a final and non-appealable judgment by a court of competent jurisdiction. In furtherance and not in limitation of the foregoing, each L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and no L/C Issuer shall be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(g) Cash Collateral. If (i) as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, (ii) any Event of Default occurs and is continuing and the Administrative Agent or the Lenders holding a majority of the Revolving Credit Commitments, as applicable, require the Borrower to Cash Collateralize the L/C Obligations pursuant to Section 8.02 or (iii) an Event of Default set forth under Section 8.01(f) occurs and is continuing, the Borrower shall Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount determined as of the date of such Event of Default or the Letter of Credit Expiration Date, as the case may be), and shall do so not later than 2:00 p.m., New York City time on (x) in the case of the immediately preceding clauses (i) and (ii), (1) the Business Day that the Borrower receives notice thereof, if such notice is received on such day prior to 12:00 noon, New York City time or (2) if clause (1) above does not apply, the Business Day immediately following the day that the Borrower receives such notice and (y) in the case of the immediately preceding clause (iii), the Business Day on which an Event of Default set forth under Section 8.01(f) occurs or, if such day is not a Business Day, the Business Day immediately succeeding such day. At any time that there shall exist a Defaulting Lender, immediately upon the request of the Administrative Agent, the L/C Issuer or the Swing Line Lender, the Borrower shall deliver to the Administrative Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving effect to Section 2.17(a)(iv) and any Cash Collateral provided by the Defaulting Lender). For purposes hereof, Cash Collateralize means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the relevant L/C Issuer and the Appropriate Lenders, as collateral for the L/C Obligations, cash or deposit account balances ( Cash Collateral ) pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the relevant L/C Issuer (which documents are hereby consented to by the Appropriate Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuers and the Revolving Credit Lenders of the applicable Facility, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in a Cash Collateral Account and may be invested in readily available Cash Equivalents as directed by the Borrower. If at any time the Administrative Agent determines that any funds held as Cash Collateral are expressly subject to any right or claim of any Person other than the Administrative Agent (on behalf of the Secured Parties) or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the Cash Collateral Account, an amount equal to the excess of (a) such aggregate Outstanding Amount over (b) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent reasonably determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds
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are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Law, to reimburse the relevant L/C Issuer. To the extent the amount of any Cash Collateral exceeds the then Outstanding Amount of such L/C Obligations and so long as no Event of Default has occurred and is continuing, the excess shall be refunded to the Borrower. To the extent any Event of Default giving rise to the requirement to Cash Collateralize any Letter of Credit pursuant to this Section 2.03(g) is cured or otherwise waived by the Required Lenders, then so long as no other Event of Default has occurred and is continuing, all Cash Collateral pledged to Cash Collateralize such Letter of Credit shall be refunded to the Borrower.
(h) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of the Revolving Credit Lenders for the applicable Revolving Credit Facility (in accordance with their Pro Rata Share or other applicable share provided for under this Agreement) a Letter of Credit fee in Dollars for each Letter of Credit issued pursuant to this Agreement equal to the Applicable Rate for Revolving Credit Loans times the Dollar Equivalent of the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit); provided , however , any Letter of Credit fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the L/C Issuer pursuant to this Section 2.03 shall be payable, to the maximum extent permitted by applicable Law, to the other Lenders in accordance with the upward adjustments in their respective Pro Rata Shares allocable to such Letter of Credit pursuant to Section 2.17(a)(iv), with the balance of such fee, if any, payable to the L/C Issuer for its own account. Such Letter of Credit fees shall be computed on a quarterly basis in arrears. Such Letter of Credit fees shall be due and payable in Dollars on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in any Applicable Rate for Revolving Credit Loans during any quarter, the daily maximum amount of each Letter of Credit shall be computed and multiplied by such Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(i) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuers. The Borrower shall pay directly to each L/C Issuer for its own account, in Dollars, a fronting fee with respect to each Letter of Credit issued by it equal to 0.125% per annum of the Dollar Equivalent of the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit). Such fronting fees shall be computed on a quarterly basis in arrears. Such fronting fees shall be due and payable in Dollars on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. In addition, the Borrower shall pay directly to each L/C Issuer for its own account, in Dollars, with respect to each Letter of Credit issued by it the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable within ten (10) Business Days of demand and are nonrefundable.
(j) Conflict with Letter of Credit Issuance Request. Notwithstanding anything else to the contrary in this Agreement or any Letter of Credit Issuance Request, in the event of any conflict between the terms hereof and the terms of any Letter of Credit Issuance Request, the terms hereof shall control.
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(k) Addition of an L/C Issuer. A Revolving Credit Lender may become an additional L/C Issuer hereunder pursuant to a written agreement among the Borrower, the Administrative Agent and such Revolving Credit Lender. The Administrative Agent shall notify the Revolving Credit Lenders of any such additional L/C Issuer.
(l) Letter of Credit Amounts . Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the Dollar Equivalent of the stated amount of such Letter of Credit in effect at such time; provided , however , that with respect to any Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the Dollar Equivalent of the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
(m) Reporting . Each L/C Issuer will report in writing to the Administrative Agent (i) on the first Business Day of each calendar month, the aggregate face amount of Letters of Credit issued by it and outstanding as of the last Business Day of the preceding calendar month (and on such other dates as the Administrative Agent may request), (ii) on or prior to each Business Day on which such L/C Issuer expects to issue, amend, renew or extend any Letter of Credit, the date of such issuance or amendment, and the aggregate face amount of Letters of Credit to be issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension (and such L/C Issuer shall advise the Administrative Agent on such Business Day whether such issuance, amendment, renewal or extension occurred and whether the amount thereof changed), (iii) on each Business Day on which such L/C Issuer makes any L/C Disbursement, the date and amount of such L/C Disbursement and (iv) on any Business Day on which the Borrower fails to reimburse an L/C Disbursement required to be reimbursed to such L/C Issuer on such day, the date and amount of such failure.
(n) Provisions Related to Letters of Credit in respect of Extended Revolving Credit Commitments . If the Letter of Credit Expiration Date in respect of any tranche of Revolving Credit Commitments occurs prior to the expiry date of any Letter of Credit, then (i) if consented to by the L/C Issuer which issued such Letter of Credit, if one or more other tranches of Revolving Credit Commitments in respect of which the Letter of Credit Expiration Date shall not have so occurred are then in effect, such Letters of Credit for which consent has been obtained shall automatically be deemed to have been issued (including for purposes of the obligations of the Revolving Credit Lenders to purchase participations therein and to make Revolving Credit Loans and payments in respect thereof pursuant to Section 2.03(c) and (d)) under (and ratably participated in by Lenders pursuant to) the Revolving Credit Commitments in respect of such non-terminating tranches up to an aggregate amount not to exceed the aggregate amount of the unutilized Revolving Credit Commitments thereunder at such time (it being understood that no partial face amount of any Letter of Credit may be so reallocated) and (ii) to the extent not reallocated pursuant to immediately preceding clause (i), the Borrower shall Cash Collateralize any such Letter of Credit in accordance with Section 2.03(g). Upon the maturity date of any tranche of Revolving Credit Commitments, the sublimit for Letters of Credit may be reduced as agreed between the L/C Issuers and the Borrower, without the consent of any other Person.
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(o) Letters of Credit Issued for Subsidiaries . Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Restricted Subsidiary, the Borrower shall be obligated to reimburse the applicable L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Restricted Subsidiaries inures to the benefit of the Borrower, and that the Borrowers business derives substantial benefits from the businesses of such Restricted Subsidiaries.
SECTION 2.04 Swing Line Loans.
(a) The Swing Line. Subject to the terms and conditions set forth herein, Deutsche Bank AG New York Branch, in its capacity as Swing Line Lender, agrees to make loans in Dollars to the Borrower (each such loan, a Swing Line Loan ), from time to time on any Business Day during the period beginning on the Business Day after the Closing Date and until the Maturity Date of the Revolving Credit Facility in an aggregate principal amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Pro Rata Share or other applicable share provided for under this Agreement of the Outstanding Amount of Revolving Credit Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Swing Line Lenders Revolving Credit Commitment; provided that, after giving effect to any Swing Line Loan, (i) the Revolving Credit Exposure shall not exceed the aggregate Revolving Credit Commitments and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lenders Pro Rata Share or other applicable share provided for under this Agreement of the Outstanding Amount of all L/C Obligations, plus such Lenders Pro Rata Share or other applicable share provided for under this Agreement of the Outstanding Amount of all Swing Line Loans shall not exceed such Lenders Revolving Credit Commitment then in effect; provided, further, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lenders Pro Rata Share or other applicable share provided for under this Agreement times the amount of such Swing Line Loan.
(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrowers irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. New York City time on the requested borrowing date and shall specify (i) the principal amount to be borrowed, which principal amount shall be a minimum of $500,000 (and any amount in excess of $500,000 shall be in integral multiples of $100,000) and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any Swing Line Loan Notice (by telephone or in writing), the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has
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received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Revolving Credit Lender) prior to 2:00 p.m. New York City time on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. New York City time on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower. Notwithstanding anything to the contrary contained in this Section 2.04 or elsewhere in this Agreement, the Swing Line Lender shall not be obligated to make any Swing Line Loan at a time when a Revolving Credit Lender is a Defaulting Lender unless the Swing Line Lender has entered into arrangements reasonably satisfactory to it and the Borrower to eliminate the Swing Line Lenders Fronting Exposure (after giving effect to Section 2.17(a)(iv)) with respect to the Defaulting Lenders or Defaulting Lenders participation in such Swing Line Loans, including by Cash Collateralizing, or obtaining a backstop letter of credit from an issuer reasonably satisfactory to the Swing Line Lender to support, such Defaulting Lenders or Defaulting Lenders Pro Rata Share of the outstanding Swing Line Loans.
(c) Refinancing of Swing Line Loans. (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes such Swing Line Lender to so request on its behalf), that each Revolving Credit Lender make a Base Rate Loan in an amount equal to such Lenders Pro Rata Share or other applicable share provided for under this Agreement of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the aggregate Revolving Credit Commitments and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share or other applicable share provided for under this Agreement of the amount specified in such Committed Loan Notice available to the Administrative Agent in Same Day Funds for the account of the Swing Line Lender at the Administrative Agents Office for Dollar-denominated payments not later than 1:00 p.m. New York City time on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.
(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Credit Lenders payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.
(iii) If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by the Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender
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(acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the applicable Overnight Rate from time to time in effect, plus any reasonable administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.
(iv) Each Revolving Credit Lenders obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lenders obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) (but not to purchase and fund risk participations in Swing Line Loans) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.
(d) Repayment of Participations. (i) At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Pro Rata Share or other applicable share provided for under this Agreement of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lenders risk participation was funded) in the same funds as those received by the Swing Line Lender.
(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Pro Rata Share or other applicable share provided for under this Agreement thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the applicable Overnight Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender.
(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Credit Lender funds its Base Rate Loan, Eurocurrency Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lenders Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.
(f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
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(g) Provisions Related to Extended Revolving Credit Commitments . If the maturity date shall have occurred in respect of any tranche of Revolving Credit Commitments (the Expiring Credit Commitment ) at a time when another tranche or tranches of Revolving Credit Commitments is or are in effect with a longer maturity date (each a Non-Expiring Credit Commitment and collectively, the Non-Expiring Credit Commitments ), then with respect to each outstanding Swing Line Loan, if consented to by the applicable Swing Line Lender, on the earliest occurring maturity date such Swing Line Loan shall be deemed reallocated to the tranche or tranches of the Non-Expiring Credit Commitments on a pro rata basis; provided that (x) to the extent that the amount of such reallocation would cause the aggregate credit exposure to exceed the aggregate amount of such Non-Expiring Credit Commitments, immediately prior to such reallocation the amount of Swing Line Loans to be reallocated equal to such excess shall be repaid or Cash Collateralized and (y) notwithstanding the foregoing, if a Default or Event of Default has occurred and is continuing, the Borrower shall still be obligated to pay Swing Line Loans allocated to the Revolving Credit Lenders holding the Expiring Credit Commitments at the maturity date of the Expiring Credit Commitment or if the Loans have been accelerated prior to the maturity date of the Expiring Credit Commitment. Upon the maturity date of any tranche of Revolving Credit Commitments, the sublimit for Swing Line Loans may be reduced as agreed between the Swing Line Lender and the Borrower, without the consent of any other Person.
SECTION 2.05 Prepayments.
(a) Optional. (i) The Borrower may, upon, subject to clause (iii) below, written notice to the Administrative Agent by the Borrower, at any time or from time to time voluntarily prepay Term Loans of any Class and Revolving Credit Loans in whole or in part without premium or penalty (subject to Section 2.05(a)(iv); provided that (1) such notice must be received by the Administrative Agent not later than 1:00 p.m. New York City time (A) three Business Days prior to any date of prepayment of Eurocurrency Rate Loans and (B) one (1) Business Day prior to any prepayment of Base Rate Loans; (2) any prepayment of Eurocurrency Rate Loans shall be in a minimum Principal Amount of $2,000,000, or a whole multiple of $1,000,000 in excess thereof; and (3) any prepayment of Base Rate Loans shall be in a minimum Principal Amount of $1,000,000 or a whole multiple of $500,000 in excess thereof or, in each case, if less, the entire Principal Amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Class(es) and Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Appropriate Lender of its receipt of each such notice, and of the amount of such Lenders Pro Rata Share or other applicable share provided for under this Agreement of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest thereon to such date, together with any additional amounts required pursuant to Section 3.05. In the case of each prepayment of the Loans pursuant to this Section 2.05(a), the Borrower may in its sole discretion select the Borrowing or Borrowings (and the order of maturity of principal payments) to be repaid, and such payment shall be paid to the Appropriate Lenders in accordance with their respective Pro Rata Shares or other applicable share as provided for under this Agreement.
(ii) The Borrower may, upon, subject to clause (iii) below, written notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. noon New York City time on the date of the
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prepayment, and (2) any such prepayment shall be in a minimum Principal Amount of $500,000 or a whole multiple of $100,000 in excess thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.
(iii) Notwithstanding anything to the contrary contained in this Agreement, subject to the payment of any amounts owing pursuant to Section 3.05, the Borrower may rescind any notice of prepayment under Sections 2.05(a)(i) or 2.05(a)(ii) if such prepayment would have resulted from a refinancing of all or a portion of the applicable Facility, which refinancing shall not be consummated or shall otherwise be delayed. Each prepayment of any Class of Term Loans pursuant to this Section 2.05(a) shall be applied in an order of priority to repayments thereof required pursuant to Section 2.07(a) as directed by the Borrower and, absent such direction, shall be applied in direct order of maturity to repayments thereof required pursuant to Section 2.07(a).
(iv) In the event that, on or prior to the six-month anniversary of the Closing Date, the Borrower (x) prepays, refinances, substitutes or replaces any Initial Term Loans pursuant to a Repricing Transaction (including, for avoidance of doubt, any prepayment made pursuant to Section 2.05(b)(iv) that constitutes a Repricing Transaction), or (y) effects any amendment, amendment and restatement or other modification of this Agreement resulting in a Repricing Transaction, the Borrower shall pay to the Administrative Agent, for the ratable account of each of the applicable Term Lenders, (I) in the case of clause (x), a prepayment premium of 1.00% of the aggregate principal amount of the Initial Term Loans so prepaid, refinanced, substituted or replaced and (II) in the case of clause (y), a fee equal to 1.00% of the aggregate principal amount of the applicable Initial Term Loans outstanding immediately prior to such amendment. If, on or prior to the first anniversary of the Closing Date, any Term Lender that is a Non-Consenting Lender and is replaced pursuant to Section 3.07(a) in connection with any amendment, amendment and restatement or other modification of this Agreement resulting in a Repricing Transaction, such Term Lender (and not any Person who replaces such Term Lender pursuant to Section 3.07(a)) shall receive its pro rata portion (as determined immediately prior to it being so replaced) of the prepayment premium or fee described in the preceding sentence. Such amounts shall be due and payable on the date of effectiveness of such Repricing Transaction.
(v) Notwithstanding anything in any Loan Document to the contrary, so long as no Default or Event of Default has occurred and is continuing and no proceeds of Revolving Credit Borrowings are applied to fund any such repayment, any Company Party may prepay the outstanding Term Loans (which shall, for the avoidance of doubt, be automatically and permanently canceled immediately upon such prepayment) (or Holdings or any of its Subsidiaries may purchase such outstanding Loans and immediately cancel them) on the following basis:
(A) Any Company Party shall have the right to make a voluntary prepayment of Term Loans at a discount to par pursuant to a Borrower Offer of Specified Discount Prepayment, Borrower Solicitation of Discount Range Prepayment Offers or Borrower Solicitation of Discounted Prepayment Offers (any such prepayment, the Discounted Term Loan Prepayment ), in each case made
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in accordance with this Section 2.05(a)(v); provided that no Company Party shall initiate any action under this Section 2.05(a)(v) in order to make a Discounted Term Loan Prepayment unless (I) at least ten (10) Business Days shall have passed since the consummation of the most recent Discounted Term Loan Prepayment as a result of a prepayment made by a Company Party on the applicable Discounted Prepayment Effective Date; or (II) at least three Business Days shall have passed since the date the Company Party was notified that no Term Lender was willing to accept any prepayment of any Term Loan at the Specified Discount, within the Discount Range or at any discount to par value, as applicable, or in the case of Borrower Solicitation of Discounted Prepayment Offers, the date of any Company Partys election not to accept any Solicited Discounted Prepayment Offers.
(B) (1) Subject to the proviso to subsection (A) above, any Company Party may from time to time offer to make a Discounted Term Loan Prepayment by providing the Auction Agent with five (5) Business Days notice in the form of a Specified Discount Prepayment Notice; provided that (I) any such offer shall be made available, at the sole discretion of the Company Party, to (x) each Term Lender and/or (y) each Term Lender with respect to any Class of Term Loans on an individual tranche basis, (II) any such offer shall specify the aggregate principal amount offered to be prepaid (the Specified Discount Prepayment Amount ) with respect to each applicable tranche, the tranche or tranches of Term Loans subject to such offer and the specific percentage discount to par (the Specified Discount ) of such Term Loans to be prepaid (it being understood that different Specified Discounts and/or Specified Discount Prepayment Amounts may be offered with respect to different tranches of Term Loans and, in such event, each such offer will be treated as a separate offer pursuant to the terms of this Section 2.05(a)(v)(B)), (III) the Specified Discount Prepayment Amount shall be in an aggregate amount not less than $10,000,000 and whole increments of $1,000,000 in excess thereof and (IV) each such offer shall remain outstanding through the Specified Discount Prepayment Response Date. The Auction Agent will promptly provide each Appropriate Lender with a copy of such Specified Discount Prepayment Notice and a form of the Specified Discount Prepayment Response to be completed and returned by each such Term Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., on the third Business Day after the date of delivery of such notice to such Lenders (the Specified Discount Prepayment Response Date ).
(2) Each Term Lender receiving such offer shall notify the Auction Agent (or its delegate) by the Specified Discount Prepayment Response Date whether or not it agrees to accept a prepayment of any of its applicable then outstanding Term Loans at the Specified Discount and, if so (such accepting Lender, a Discount Prepayment Accepting Lender ), the amount and the tranches of such Lenders Term Loans to be prepaid at such offered discount. Each acceptance of a Discounted Term Loan Prepayment by a Discount Prepayment Accepting Lender shall be irrevocable. Any Term Lender whose Specified Discount Prepayment Response is not received by the Auction Agent by the Specified Discount Prepayment Response Date shall be deemed to have declined to accept the applicable Borrower Offer of Specified Discount Prepayment.
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(3) If there is at least one Discount Prepayment Accepting Lender, the relevant Company Party will make a prepayment of outstanding Term Loans pursuant to this paragraph (B) to each Discount Prepayment Accepting Lender in accordance with the respective outstanding amount and tranches of Term Loans specified in such Lenders Specified Discount Prepayment Response given pursuant to subsection (2) above; provided that if the aggregate principal amount of Term Loans accepted for prepayment by all Discount Prepayment Accepting Lenders exceeds the Specified Discount Prepayment Amount, such prepayment shall be made pro rata among the Discount Prepayment Accepting Lenders in accordance with the respective principal amounts accepted to be prepaid by each such Discount Prepayment Accepting Lender and the Auction Agent (in consultation with such Company Party and subject to rounding requirements of the Auction Agent made in its reasonable discretion) will calculate such proration (the Specified Discount Proration ). The Auction Agent shall promptly, and in any case within three Business Days following the Specified Discount Prepayment Response Date, notify (I) the relevant Company Party of the respective Term Lenders responses to such offer, the Discounted Prepayment Effective Date and the aggregate principal amount of the Discounted Term Loan Prepayment and the tranches to be prepaid, (II) each Term Lender of the Discounted Prepayment Effective Date, and the aggregate principal amount and the tranches of Term Loans to be prepaid at the Specified Discount on such date and (III) each Discount Prepayment Accepting Lender of the Specified Discount Proration, if any, and confirmation of the principal amount, tranche and Type of Term Loans of such Lender to be prepaid at the Specified Discount on such date. Each determination by the Auction Agent of the amounts stated in the foregoing notices to the Company Party and such Term Lenders shall be conclusive and binding for all purposes absent manifest error. The payment amount specified in such notice to the Company Party shall be due and payable by such Company Party on the Discounted Prepayment Effective Date in accordance with subsection (F) below (subject to subsection (J) below).
(C) (1) Subject to the proviso to subsection (A) above, any Company Party may from time to time solicit Discount Range Prepayment Offers by providing the Auction Agent with five (5) Business Days notice in the form of a Discount Range Prepayment Notice; provided that (I) any such solicitation shall be extended, at the sole discretion of such Company Party, to (x) each Term Lender and/or (y) each Term Lender with respect to any Class of Term Loans on an individual tranche basis, (II) any such notice shall specify the maximum aggregate principal amount of the relevant Term Loans (the Discount Range Prepayment Amount ), the tranche or tranches of Term Loans subject to such offer and the maximum and minimum percentage discounts to par (the Discount Range ) of the principal amount of such Term Loans with respect to each relevant tranche of Term Loans willing to be prepaid by such Company Party (it being understood that different Discount Ranges and/or Discount Range Prepayment Amounts may be offered with respect to different tranches of Term Loans and, in such event, each such offer will be treated as a separate offer pursuant to the terms of this Section 2.05(a)(v)(C)), (III) the Discount Range Prepayment Amount shall be in an aggregate amount not less than $10,000,000 and whole increments of $1,000,000 in excess thereof and (IV) each such solicitation by a Company Party shall remain outstanding through the Discount Range Prepayment Response Date. The Auction Agent will promptly provide each
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Appropriate Lender with a copy of such Discount Range Prepayment Notice and a form of the Discount Range Prepayment Offer to be submitted by a responding Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., on the third Business Day after the date of delivery of such notice to such Lenders (the Discount Range Prepayment Response Date ). Each Term Lenders Discount Range Prepayment Offer shall be irrevocable and shall specify a discount to par within the Discount Range (the Submitted Discount ) at which such Lender is willing to allow prepayment of any or all of its then outstanding Term Loans of the applicable tranche or tranches and the maximum aggregate principal amount and tranches of such Lenders Term Loans (the Submitted Amount ) such Term Lender is willing to have prepaid at the Submitted Discount. Any Term Lender whose Discount Range Prepayment Offer is not received by the Auction Agent by the Discount Range Prepayment Response Date shall be deemed to have declined to accept a Discounted Term Loan Prepayment of any of its Term Loans at any discount to their par value within the Discount Range.
(2) The Auction Agent shall review all Discount Range Prepayment Offers received on or before the applicable Discount Range Prepayment Response Date and shall determine (in consultation with such Company Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) the Applicable Discount and Term Loans to be prepaid at such Applicable Discount in accordance with this subsection (C). The relevant Company Party agrees to accept on the Discount Range Prepayment Response Date all Discount Range Prepayment Offers received by Auction Agent by the Discount Range Prepayment Response Date, in the order from the Submitted Discount that is the largest discount to par to the Submitted Discount that is the smallest discount to par, up to and including the Submitted Discount that is the smallest discount to par within the Discount Range (such Submitted Discount that is the smallest discount to par within the Discount Range being referred to as the Applicable Discount ) which yields a Discounted Term Loan Prepayment in an aggregate principal amount equal to the lower of (I) the Discount Range Prepayment Amount and (II) the sum of all Submitted Amounts. Each Term Lender that has submitted a Discount Range Prepayment Offer to accept prepayment at a discount to par that is larger than or equal to the Applicable Discount shall be deemed to have irrevocably consented to prepayment of Term Loans equal to its Submitted Amount (subject to any required proration pursuant to the following subsection (3)) at the Applicable Discount (each such Term Lender, a Participating Lender ).
(3) If there is at least one Participating Lender, the relevant Company Party will prepay the respective outstanding Term Loans of each Participating Lender in the aggregate principal amount and of the tranches specified in such Lenders Discount Range Prepayment Offer at the Applicable Discount; provided that if the Submitted Amount by all Participating Lenders offered at a discount to par greater than the Applicable Discount exceeds the Discount Range Prepayment Amount, prepayment of the principal amount of the relevant Term Loans for those Participating Lenders whose Submitted Discount is a discount to par greater than or equal to the Applicable Discount (the Identified Participating Lenders ) shall be made pro rata among the Identified Participating Lenders in accordance with the Submitted Amount of each such Identified Participating Lender and the Auction
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Agent (in consultation with such Company Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) will calculate such proration (the Discount Range Proration ). The Auction Agent shall promptly, and in any case within five (5) Business Days following the Discount Range Prepayment Response Date, notify (I) the relevant Company Party of the respective Term Lenders responses to such solicitation, the Discounted Prepayment Effective Date, the Applicable Discount, and the aggregate principal amount of the Discounted Term Loan Prepayment and the tranches to be prepaid, (II) each Term Lender of the Discounted Prepayment Effective Date, the Applicable Discount, and the aggregate principal amount and tranches of Term Loans to be prepaid at the Applicable Discount on such date, (III) each Participating Lender of the aggregate principal amount and tranches of such Term Lender to be prepaid at the Applicable Discount on such date, and (IV) if applicable, each Identified Participating Lender of the Discount Range Proration. Each determination by the Auction Agent of the amounts stated in the foregoing notices to the relevant Company Party and Term Lenders shall be conclusive and binding for all purposes absent manifest error. The payment amount specified in such notice to the Company Party shall be due and payable by such Company Party on the Discounted Prepayment Effective Date in accordance with subsection (F) below (subject to subsection (J) below).
(D) (1) Subject to the proviso to subsection (A) above, any Company Party may from time to time solicit Solicited Discounted Prepayment Offers by providing the Auction Agent with five (5) Business Days notice in the form of a Solicited Discounted Prepayment Notice; provided that (I) any such solicitation shall be extended, at the sole discretion of such Company Party, to (x) each Term Lender and/or (y) each Lender with respect to any Class of Loans on an individual tranche basis, (II) any such notice shall specify the maximum aggregate amount of the Term Loans (the Solicited Discounted Prepayment Amount ) and the tranche or tranches of Term Loans the Borrower is willing to prepay at a discount (it being understood that different Solicited Discounted Prepayment Amounts may be offered with respect to different tranches of Term Loans and, in such event, each such offer will be treated as a separate offer pursuant to the terms of this Section 2.05(a)(v)(D)), (III) the Solicited Discounted Prepayment Amount shall be in an aggregate amount not less than $10,000,000 and whole increments of $1,000,000 in excess thereof and (IV) each such solicitation by a Company Party shall remain outstanding through the Solicited Discounted Prepayment Response Date. The Auction Agent will promptly provide each Appropriate Lender with a copy of such Solicited Discounted Prepayment Notice and a form of the Solicited Discounted Prepayment Offer to be submitted by a responding Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., on the third Business Day after the date of delivery of such notice to such Term Lenders (the Solicited Discounted Prepayment Response Date ). Each Term Lenders Solicited Discounted Prepayment Offer shall (x) be irrevocable, (y) remain outstanding until the Acceptance Date, and (z) specify both a discount to par (the Offered Discount ) at which such Term Lender is willing to allow prepayment of its then outstanding Term Loan and the maximum aggregate principal amount and tranches of such Term Loans (the Offered Amount ) such Term Lender is willing to have prepaid at the Offered Discount. Any Term Lender whose Solicited Discounted Prepayment Offer is not received by the Auction Agent by the Solicited Discounted Prepayment Response Date shall be deemed to have declined prepayment of any of its Term Loans at any discount.
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(2) The Auction Agent shall promptly provide the relevant Company Party with a copy of all Solicited Discounted Prepayment Offers received on or before the Solicited Discounted Prepayment Response Date. Such Company Party shall review all such Solicited Discounted Prepayment Offers and select the largest of the Offered Discounts specified by the relevant responding Term Lenders in the Solicited Discounted Prepayment Offers that is acceptable to the Company Party (the Acceptable Discount ), if any. If the Company Party elects to accept any Offered Discount as the Acceptable Discount, then as soon as practicable after the determination of the Acceptable Discount, but in no event later than by the third Business Day after the date of receipt by such Company Party from the Auction Agent of a copy of all Solicited Discounted Prepayment Offers pursuant to the first sentence of this subsection (2) (the Acceptance Date ), the Company Party shall submit an Acceptance and Prepayment Notice to the Auction Agent setting forth the Acceptable Discount. If the Auction Agent shall fail to receive an Acceptance and Prepayment Notice from the Company Party by the Acceptance Date, such Company Party shall be deemed to have rejected all Solicited Discounted Prepayment Offers.
(3) Based upon the Acceptable Discount and the Solicited Discounted Prepayment Offers received by Auction Agent by the Solicited Discounted Prepayment Response Date, within three Business Days after receipt of an Acceptance and Prepayment Notice (the Discounted Prepayment Determination Date ), the Auction Agent will determine (in consultation with such Company Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) the aggregate principal amount and the tranches of Term Loans (the Acceptable Prepayment Amount ) to be prepaid by the relevant Company Party at the Acceptable Discount in accordance with this Section 2.05(a)(v)(D). If the Company Party elects to accept any Acceptable Discount, then the Company Party agrees to accept all Solicited Discounted Prepayment Offers received by Auction Agent by the Solicited Discounted Prepayment Response Date, in the order from largest Offered Discount to smallest Offered Discount, up to and including the Acceptable Discount. Each Term Lender that has submitted a Solicited Discounted Prepayment Offer with an Offered Discount that is greater than or equal to the Acceptable Discount shall be deemed to have irrevocably consented to prepayment of Term Loans equal to its Offered Amount (subject to any required pro rata reduction pursuant to the following sentence) at the Acceptable Discount (each such Lender, a Qualifying Lender ). The Company Party will prepay outstanding Term Loans pursuant to this subsection (D) to each Qualifying Lender in the aggregate principal amount and of the tranches specified in such Lenders Solicited Discounted Prepayment Offer at the Acceptable Discount; provided that if the aggregate Offered Amount by all Qualifying Lenders whose Offered Discount is greater than or equal to the Acceptable Discount exceeds the Solicited Discounted Prepayment Amount, prepayment of the principal amount of the Term Loans for those Qualifying Lenders whose Offered Discount is greater than or equal to the Acceptable Discount (the Identified Qualifying Lenders ) shall be made pro rata among the Identified Qualifying Lenders in accordance with the Offered Amount of each such Identified Qualifying Lender and the Auction Agent (in consultation with such Company Party
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and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) will calculate such proration (the Solicited Discount Proration ). On or prior to the Discounted Prepayment Determination Date, the Auction Agent shall promptly notify (I) the relevant Company Party of the Discounted Prepayment Effective Date and Acceptable Prepayment Amount comprising the Discounted Term Loan Prepayment and the tranches to be prepaid, (II) each Term Lender of the Discounted Prepayment Effective Date, the Acceptable Discount, and the Acceptable Prepayment Amount of all Term Loans and the tranches to be prepaid to be prepaid at the Applicable Discount on such date, (III) each Qualifying Lender of the aggregate principal amount and the tranches of such Term Lender to be prepaid at the Acceptable Discount on such date, and (IV) if applicable, each Identified Qualifying Lender of the Solicited Discount Proration. Each determination by the Auction Agent of the amounts stated in the foregoing notices to such Company Party and Term Lenders shall be conclusive and binding for all purposes absent manifest error. The payment amount specified in such notice to such Company Party shall be due and payable by such Company Party on the Discounted Prepayment Effective Date in accordance with subsection (F) below (subject to subsection (J) below).
(E) In connection with any Discounted Term Loan Prepayment, the Company Parties and the Term Lenders acknowledge and agree that the Auction Agent may require as a condition to any Discounted Term Loan Prepayment, the payment of customary fees and expenses from a Company Party in connection therewith.
(F) If any Term Loan is prepaid in accordance with paragraphs (B) through (D) above, a Company Party shall prepay such Term Loans on the Discounted Prepayment Effective Date. The relevant Company Party shall make such prepayment to the Administrative Agent, for the account of the Discount Prepayment Accepting Lenders, Participating Lenders, or Qualifying Lenders, as applicable, at the Administrative Agents Office in immediately available funds not later than 11:00 a.m. on the Discounted Prepayment Effective Date and all such prepayments shall be applied to the remaining principal installments of the relevant tranche of Loans on a pro rata basis across such installments. The Term Loans so prepaid shall be accompanied by all accrued and unpaid interest on the par principal amount so prepaid up to, but not including, the Discounted Prepayment Effective Date. Each prepayment of the outstanding Term Loans pursuant to this Section 2.05(a)(v) shall be paid to the Discount Prepayment Accepting Lenders, Participating Lenders, or Qualifying Lenders, as applicable, and shall be applied to the relevant Loans of such Lenders in accordance with their respective Pro Rata Share. The aggregate principal amount of the tranches and installments of the relevant Term Loans outstanding shall be deemed reduced by the full par value of the aggregate principal amount of the tranches of Term Loans prepaid on the Discounted Prepayment Effective Date in any Discounted Term Loan Prepayment. In connection with each prepayment pursuant to this Section 2.05(a)(v), the relevant Company Party shall waive any right to bring any action against the Administrative Agent, in its capacity as such, in connection with any such Discounted Term Loan Prepayment.
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(G) To the extent not expressly provided for herein, each Discounted Term Loan Prepayment shall be consummated pursuant to procedures consistent with the provisions in this Section 2.05(a)(v), established by the Auction Agent acting in its reasonable discretion and as reasonably agreed by the Borrower.
(H) Notwithstanding anything in any Loan Document to the contrary, for purposes of this Section 2.05(a)(v), each notice or other communication required to be delivered or otherwise provided to the Auction Agent (or its delegate) shall be deemed to have been given upon Auction Agents (or its delegates) actual receipt during normal business hours of such notice or communication; provided that any notice or communication actually received outside of normal business hours shall be deemed to have been given as of the opening of business on the next Business Day.
(I) Each of the Company Parties and the Term Lenders acknowledge and agree that the Auction Agent may perform any and all of its duties under this Section 2.05(a)(v) by itself or through any Affiliate of the Auction Agent and expressly consents to any such delegation of duties by the Auction Agent to such Affiliate and the performance of such delegated duties by such Affiliate. The exculpatory provisions pursuant to this Agreement shall apply to each Affiliate of the Auction Agent and its respective activities in connection with any Discounted Term Loan Prepayment provided for in this Section 2.05(a)(v) as well as activities of the Auction Agent.
(J) Each Company Party shall have the right, by written notice to the Auction Agent, to revoke in full (but not in part) its offer to make a Discounted Term Loan Prepayment and rescind the applicable Specified Discount Prepayment Notice, Discount Range Prepayment Notice or Solicited Discounted Prepayment Notice therefor at its discretion at any time on or prior to the applicable Specified Discount Prepayment Response Date (and if such offer is revoked pursuant to the preceding clauses, any failure by such Company Party to make any prepayment to a Lender, as applicable, pursuant to this Section 2.05(a)(v) shall not constitute a Default or Event of Default under Section 8.01 or otherwise).
(b) Mandatory. (i) Within five (5) Business Days after financial statements have been delivered pursuant to Section 6.01(a) (commencing with the fiscal year ending December 31, 2014) and the related Compliance Certificate has been delivered pursuant to Section 6.02(a), the Borrower shall cause to be offered to be prepaid in accordance with clause (b)(ix) below, an aggregate principal amount of Term Loans in an amount equal to (A) the Applicable ECF Percentage of Excess Cash Flow, if any, for the fiscal year covered by such financial statements minus (B) the sum of (1) all voluntary prepayments of Term Loans made during such fiscal year or after year-end and prior to when such Excess Cash Flow prepayment is due (including the aggregate principal amount of Term Loans prepaid pursuant to Section 2.05(a)(v) during such time) and (2) all voluntary prepayments of Revolving Credit Loans during such fiscal year or after year-end and prior to when such Excess Cash Flow prepayment is due to the extent the Revolving Credit Commitments are permanently reduced by the amount of such payments, in the case of each of the immediately preceding clauses (1) and (2), to the extent such prepayments are funded with the internally generated cash and, without duplication of any deduction from Excess Cash Flow in any prior period.
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(ii) If (x) the Borrower or any Restricted Subsidiary of the Borrower Disposes of any property or assets (other than any Disposition of any property or assets permitted by Sections 7.05 (a), (b), (c), (d), (e), (g), (h), (i), (k), (l), (m) (except to the extent such property is subject to a Mortgage), (o), (p), (q), (s) or (t)), or (y) any Casualty Event occurs, which results in the realization or receipt by the Borrower or Restricted Subsidiary of Net Proceeds, the Borrower shall cause to be offered to be prepaid in accordance with clause (b)(ix) below, on or prior to the date which is ten (10) Business Days after the date of the realization or receipt by the Borrower or any Restricted Subsidiary of such Net Proceeds, subject to clause (b)(xi) below, an aggregate principal amount of Term Loans in an amount equal to 100% of all Net Proceeds received; provided that if at the time that any such prepayment would be required, the Borrower is required to offer to repurchase any Permitted First Priority Refinancing Debt (or any Permitted Refinancing thereof that is secured on a pari passu basis with the Obligations) pursuant to the terms of the documentation governing such Indebtedness with the Net Proceeds of such Disposition or Casualty Event (such Indebtedness required to be offered to be so repurchased, Other Applicable Indebtedness ), then the Borrower may apply such Net Proceeds on a pro rata basis (determined on the basis of the aggregate outstanding principal amount of the Term Loans and Other Applicable Indebtedness at such time); provided, further, that (A) the portion of such Net Proceeds allocated to the Other Applicable Indebtedness shall not exceed the amount of such Net Proceeds required to be allocated to the Other Applicable Indebtedness pursuant to the terms thereof, and the remaining amount, if any, of such Net Proceeds shall be allocated to the Term Loans in accordance with the terms hereof to the prepayment of the Term Loans and to the repurchase or prepayment of Other Applicable Indebtedness, and the amount of prepayment of the Term Loans that would have otherwise been required pursuant to this Section 2.05(b)(ii) shall be reduced accordingly and (B) to the extent the holders of Other Applicable Indebtedness decline to have such indebtedness repurchased or prepaid, the declined amount shall promptly (and in any event within ten (10) Business Days after the date of such rejection) be applied to prepay the Term Loans in accordance with the terms hereof.
(iii) [Reserved].
(iv) If the Borrower or any Restricted Subsidiary incurs or issues any Indebtedness after the Closing Date (other than Indebtedness not prohibited under Section 7.03 (excluding Section 7.03(t)), the Borrower shall cause to be offered to be prepaid in accordance with clause (b)(ix) below an aggregate principal amount of Term Loans in an amount equal to 100% of all Net Proceeds received therefrom on or prior to the date which is five (5) Business Days after the receipt by the Borrower or such Restricted Subsidiary of such Net Proceeds.
(v) If for any reason the aggregate Revolving Credit Exposures at any time exceeds the aggregate Revolving Credit Commitments then in effect (including, for the avoidance of doubt, as a result of the termination of any Class of Revolving Credit Commitments on the Maturity Date with respect thereto), the Borrower shall promptly prepay or cause to be promptly prepaid Revolving Credit Loans and Swing Line Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(b)(v) unless after the prepayment in full of the Revolving Credit Loans and Swing Line Loans such aggregate Outstanding Amount exceeds the aggregate Revolving Credit Commitments then in effect.
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(vi) Except with respect to Loans incurred in connection with any Refinancing Amendment, Term Loan Extension Request, Revolver Extension Request or any Incremental Amendment (which may be prepaid on a less than pro rata basis in accordance with its terms), (A) each prepayment of Term Loans pursuant to this Section 2.05(b) shall be applied ratably to each Class of Term Loans then outstanding ( provided that (i) any prepayment of Term Loans with the Net Proceeds of Credit Agreement Refinancing Indebtedness shall be applied solely to each applicable Class of Refinanced Debt, and (ii) any Class of Incremental Term Loans may specify that one or more other Classes of Term Loans and Incremental Term Loans may be prepaid prior to such Class of Incremental Term Loans); (B) with respect to each Class of Term Loans, each prepayment pursuant to clauses (i) through (iv) of this Section 2.05(b) shall be applied to the scheduled installments of principal thereof following the date of prepayment pursuant to Section 2.07(a) in direct order of maturity; and (C) each such prepayment shall be paid to the Lenders in accordance with their respective Pro Rata Shares of such prepayment.
(vii) The Borrower shall notify the Administrative Agent in writing of any mandatory prepayment of Term Loans required to be made pursuant to clauses (i) through (iv) of this Section 2.05(b) at least four (4) Business Days prior to the date of such prepayment. Each such notice shall specify the date of such prepayment and provide a reasonably detailed calculation of the amount of such prepayment. The Administrative Agent will promptly notify each Appropriate Lender of the contents of the Borrowers prepayment notice and of such Appropriate Lenders Pro Rata Share of the prepayment.
(viii) Funding Losses, Etc. All prepayments under this Section 2.05 shall be made together with, in the case of any such prepayment of a Eurocurrency Rate Loan on a date other than the last day of an Interest Period therefor, any amounts owing in respect of such Eurocurrency Rate Loan pursuant to Section 3.05. Notwithstanding any of the other provisions of Section 2.05(b), so long as no Event of Default shall have occurred and be continuing, if any prepayment of Eurocurrency Rate Loans is required to be made under this Section 2.05(b), prior to the last day of the Interest Period therefor, the Borrower may, in its sole discretion, deposit the amount of any such prepayment otherwise required to be made thereunder into a Cash Collateral Account until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of such Loans in accordance with this Section 2.05(b). Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall also be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of the outstanding Loans in accordance with this Section 2.05(b).
(ix) Term Opt-out of Prepayment . With respect to each prepayment of Term Loans required pursuant to Section 2.05(b), (A) each Lender of Term Loans will have the right to refuse such offer of prepayment by giving written notice of such refusal to the Administrative Agent within one (1) Business Day after such Lenders receipt of notice from the Administrative Agent of such offer of prepayment (and the Borrower shall not prepay any Term Loans of such Lender on the date that is specified in clause (B) below), (B) the
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Borrower will make all such prepayments not so refused upon the fourth Business Day after delivery of notice by the Borrower pursuant to Section 2.05(b)(vii) and (C) any prepayment refused by Lenders of Term Loans may be retained by the Borrower.
(x) In connection with any mandatory prepayments by the Borrower of the Term Loans pursuant to this Section 2.05(b), such prepayments shall be applied on a pro rata basis to the then outstanding Term Loans of the applicable Class or Classes being prepaid irrespective of whether such outstanding Term Loans are Base Rate Loans or Eurocurrency Rate Loans; provided that if no Lenders exercise the right to waive a given mandatory prepayment of the Term Loans pursuant to Section 2.05(b)(ix), then, with respect to such mandatory prepayment, the amount of such mandatory prepayment within any tranche of Term Loans shall be applied first to Term Loans of such tranche that are Base Rate Loans to the full extent thereof before application to Term Loans of such tranche that are Eurocurrency Rate Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 3.05.
(xi) Foreign Dispositions . Notwithstanding any other provisions of this Section 2.05, (i) to the extent that any of or all the Net Proceeds of any Disposition by a Foreign Subsidiary ( Foreign Disposition ) or Excess Cash Flow attributable to Foreign Subsidiaries are prohibited or delayed by applicable local law from being repatriated to the United States, the portion of such Net Proceeds or Excess Cash Flow so affected will not be required to be applied to repay Term Loans at the times provided in this Section 2.05 but may be retained by the applicable Foreign Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Borrower hereby agreeing to cause the applicable Foreign Subsidiary to promptly take all actions reasonably required by the applicable local law to permit such repatriation), and once such repatriation of any of such affected Net Proceeds or Excess Cash Flow that, in each case, would otherwise be required to be used to make an offer of prepayment pursuant to Sections 2.05(b)(i) or 2.05(b)(ii), is permitted under the applicable local law, such repatriation will be immediately effected and such repatriated Net Proceeds or Excess Cash Flow will be promptly (and in any event not later than two Business Days after such repatriation) applied (net of additional taxes payable or reserved against as a result thereof) to the repayment of the Term Loans pursuant to this Section 2.05 and (ii) to the extent that the Borrower has determined in good faith that repatriation of any of or all the Net Proceeds of any Foreign Disposition or Foreign Subsidiary Excess Cash Flow would have material adverse tax cost consequences with respect to such Net Proceeds or Excess Cash Flow, such Net Proceeds or Excess Cash Flow so affected may be retained by the applicable Foreign Subsidiary; provided that in the case of this clause (ii), on or before the date on which any such Net Proceeds so retained would otherwise have been required to be applied to reinvestments or prepayments pursuant to Section 2.05(b) or any such Excess Cash Flow would have been required to be applied to prepayments pursuant to Section 2.05(b), the Borrower applies an amount equal to such Net Proceeds or Excess Cash Flow to such reinvestments or prepayments, as applicable, as if such Net Proceeds or Excess Cash Flow had been received by the Borrower rather than such Foreign Subsidiary, less the amount of additional taxes that would have been payable or reserved against if such Net Proceeds or Excess Cash Flow had been repatriated (or, if less, the Net Proceeds or Excess Cash Flow that would be calculated if received by such Foreign Subsidiary).
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SECTION 2.06 Termination or Reduction of Commitments.
(a) Optional. The Borrower may, upon written notice to the Administrative Agent, terminate the unused Commitments of any Class, or from time to time permanently reduce the unused Commitments of any Class, in each case without premium or penalty; provided that (i) any such notice shall be received by the Administrative Agent three Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in a minimum aggregate amount of $5,000,000, or any whole multiple of $1,000,000, in excess thereof or, if less, the entire amount thereof and (iii) if, after giving effect to any reduction of the Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Revolving Credit Facility, such sublimit shall be automatically reduced by the amount of such excess. The amount of any such Commitment reduction shall not otherwise be applied to the Letter of Credit Sublimit or the Swing Line Sublimit unless otherwise specified by the Borrower. Notwithstanding the foregoing, the Borrower may rescind or postpone any notice of termination of the Commitments if such termination would have resulted from a refinancing of all of the applicable Facility, which refinancing shall not be consummated or otherwise shall be delayed.
(b) Mandatory. The Initial Term Commitment of each Term Lender of each Class shall be automatically and permanently reduced to $0 upon the funding of Initial Term Loans of such Class to be made by it on the Closing Date. The Revolving Credit Commitment of each Class shall automatically and permanently terminate on the Maturity Date with respect to such Class of Revolving Credit Commitments.
(c) Application of Commitment Reductions; Payment of Fees. The Administrative Agent will promptly notify the Appropriate Lenders of any termination or reduction of unused portions of the Letter of Credit Sublimit or the Swing Line Sublimit or the unused Commitments of any Class under this Section 2.06. Upon any reduction of unused Commitments of any Class, the Commitment of each Lender of such Class shall be reduced by such Lenders Pro Rata Share of the amount by which such Commitments are reduced (other than the termination of the Commitment of any Lender as provided in Section 3.07). All commitment fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.
SECTION 2.07 Repayment of Loans.
(a) Term Loans. The Borrower shall repay to the Administrative Agent for the ratable account of the Term Lenders (i) on the last Business Day of each March, June, September and December, commencing with the first full quarter after the Closing Date, an aggregate principal amount equal to 0.25% of the aggregate principal amount of all Initial Term Loans outstanding on the Closing Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05) and (ii) on the Maturity Date for the Initial Term Loans, the aggregate principal amount of all Initial Term Loans outstanding on such date. In the event any Incremental Term Loans, Refinancing Term Loans or Extended Term Loans are made, such Incremental Term Loans, Refinancing Term Loans or Extended Term Loans, as applicable, shall be repaid by the Borrower in the amounts and on the dates set forth in the Incremental Amendment, Refinancing Amendment or Extension Amendment with respect thereto and on the applicable Maturity Date thereof.
(b) Revolving Credit Loans . The Borrower shall repay to the Administrative Agent for the ratable account of the Appropriate Lenders on the applicable Maturity Date for the Revolving Credit Facilities of a given Class the aggregate principal amount of all of its Revolving Credit Loans of such Class outstanding on such date.
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(c) Swing Line Loans . The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date five (5) Business Days after such Loan is made and (ii) the Maturity Date for the Revolving Credit Facility (although Swing Line Loans may thereafter be reborrowed, in accordance with the terms and conditions hereof, if there are one or more Classes of Revolving Credit Commitments which remain in effect).
SECTION 2.08 Interest.
(a) Subject to the provisions of Section 2.08(b), (i) each Eurocurrency Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurocurrency Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan (other than a Swing Line Loan) shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for Revolving Credit Loans.
(b) During the continuance of a Default under Section 8.01(a), the Borrower shall pay interest on past due amounts owing by it hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws; provided that no interest at the Default Rate shall accrue or be payable to a Defaulting Lender so long as such Lender shall be a Defaulting Lender. Accrued and unpaid interest on such amounts (including interest on past due interest) shall be due and payable upon demand.
(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.
SECTION 2.09 Fees.
In addition to certain fees described in Sections 2.03(h) and (i):
(a) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender under each Facility in accordance with its Pro Rata Share or other applicable share provided for under this Agreement, a commitment fee in Dollars equal to the Applicable Rate with respect to Revolving Credit Loan commitment fees, times the actual daily amount by which the aggregate Revolving Credit Commitment for the applicable Facility exceeds the sum of (A) the Outstanding Amount of Revolving Credit Loans for such Facility and (B) the Outstanding Amount of L/C Obligations for such Facility; provided that any commitment fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender, except to the extent that such commitment fee shall otherwise have been due and payable by the Borrower prior to such time; and provided , further , that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. The commitment fee on each Revolving Credit Facility shall accrue at all times from the Closing Date until the Maturity Date for the Revolving Credit Commitments, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last
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Business Day of each March, June, September and December, commencing with the first such date during the first full fiscal quarter to occur after the Closing Date and on the Maturity Date for the Revolving Credit Commitments. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.
(b) Other Fees. The Borrower shall pay to the Agents such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever (except as expressly agreed between the Borrower and the applicable Agent).
SECTION 2.10 Computation of Interest and Fees.
All computations of interest for Base Rate Loans when the Base Rate is determined by the Prime Rate shall be made on the basis of a year of three hundred and sixty-five (365) days, or three hundred and sixty-six (366) days, as applicable, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a three hundred and sixty (360) day year and actual days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one (1) day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.11 Evidence of Indebtedness.
(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the Borrower, in each case in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be prima facie evidence absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note payable to such Lender, which shall evidence such Lenders Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount, currency and maturity of its Loans and payments with respect thereto.
(b) In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records and, in the case of the Administrative Agent, entries in the Register, evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
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(c) Entries made in good faith by the Administrative Agent in the Register pursuant to Sections 2.11(a) and (b), and by each Lender in its account or accounts pursuant to Sections 2.11(a) and (b), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement and the other Loan Documents.
SECTION 2.12 Payments Generally.
(a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein and except with respect to an Approved Foreign Currency, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agents Office for Dollar-denominated payments and in Same Day Funds not later than 1:00 p.m. New York City time on the date specified herein. Except as otherwise expressly provided herein, all payments by the Borrower hereunder in an Approved Foreign Currency shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agents Office in such Approved Foreign Currency and in Same Day Funds not later than 2:00 p.m. (London time) (or, if earlier, 9:00 a.m. New York city time) on the dates specified herein. If, for any reason, the Borrower is prohibited by any Law from making any required payment hereunder in an Approved Foreign Currency, the Borrower shall make such payment in Dollars in an amount equal to the Dollar Equivalent of such Approved Foreign Currency payment amount. The Administrative Agent will promptly distribute to each Appropriate Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lenders applicable Lending Office. All payments received by the Administrative Agent after the time specified above shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(b) Except as otherwise provided herein, if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be; provided that if such extension would cause payment of interest on or principal of Eurocurrency Rate Loans to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day.
(c) Unless the Borrower or any Lender has notified the Administrative Agent, prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in Same Day Funds, then:
(i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in Same Day Funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in Same Day Funds at the applicable Overnight Rate, plus any reasonable administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing; and
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(ii) if any Lender failed to make such payment (including, without limitation, failure to fund participations in respect of any Letter of Credit or Swing Line Loan), such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in Same Day Funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the Compensation Period ) at a rate per annum equal to the applicable Overnight Rate, plus any reasonable administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing. When such Lender makes payment to the Administrative Agent (together with all accrued interest thereon), then such payment amount (excluding the amount of any interest which may have accrued and been paid in respect of such late payment) shall constitute such Lenders Loan included in the applicable Borrowing. If such Lender does not pay such amount (including, without limitation, failure to fund participations in respect of any Letter of Credit or Swing Line Loan) forthwith upon the Administrative Agents demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this Section 2.12(c) shall be conclusive, absent manifest error.
(d) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV or in the applicable Incremental Amendment, Extension Amendment or Refinancing Amendment are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(e) The obligations of the Lenders hereunder to make Loans and to fund participations in Letters of Credit and Swing Line Loans are several and not joint. The failure of any Lender to make any Loan or to fund any such participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation.
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(f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
(g) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the order of priority set forth in Section 8.04. If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Administrative Agent may (to the fullest extent permitted by mandatory provisions of applicable Law), but shall not be obligated to, elect to distribute such funds to each of the Lenders in accordance with such Lenders Pro Rata Share of the sum of (a) the Outstanding Amount of all Loans outstanding at such time and (b) the Outstanding Amount of all L/C Obligations outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.
SECTION 2.13 Sharing of Payments.
If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations and Swing Line Loans held by it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lenders ratable share (according to the proportion of (i) the amount of such paying Lenders required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. For avoidance of doubt, the provisions of this paragraph shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement as in effect from time to time (including the application of funds arising from the existence of a Defaulting Lender) or (B) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant permitted hereunder. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by applicable Law, exercise all its rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.13 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 2.13 shall from and after such
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purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.
SECTION 2.14 Incremental Credit Extensions.
(a) Incremental Commitments . The Borrower may at any time or from time to time after the Closing Date, by notice to the Administrative Agent (an Incremental Loan Request ), request (A) one or more new commitments which may be in the same Facility as any outstanding Term Loans of an existing Class of Term Loans (a Term Loan Increase ) or a new Class of term loans (collectively with any Term Loan Increase, the Incremental Term Commitments ) and/or (B) one or more increases in the amount of the Revolving Credit Commitments (a Revolving Commitment Increase ) or the establishment of one or more new revolving credit commitments (any such new commitments, collectively with any Revolving Commitment Increases, the Incremental Revolving Credit Commitments and the Incremental Revolving Credit Commitments, collectively with any Incremental Term Commitments, the Incremental Commitments ), whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders.
(b) Incremental Loans . Any Incremental Commitments effected through the establishment of one or more new revolving credit commitments or new Term Loans made on an Incremental Facility Closing Date shall be designated a separate Class of Incremental Commitments for all purposes of this Agreement. On any Incremental Facility Closing Date on which any Incremental Term Commitments of any Class are effected (including through any Term Loan Increase), subject to the satisfaction of the terms and conditions in this Section 2.14, (i) each Incremental Term Lender of such Class shall make a Loan to the Borrower (an Incremental Term Loan ) in an amount equal to its Incremental Term Commitment of such Class and (ii) each Incremental Term Lender of such Class shall become a Lender hereunder with respect to the Incremental Term Commitment of such Class and the Incremental Term Loans of such Class made pursuant thereto. On any Incremental Facility Closing Date on which any Incremental Revolving Credit Commitments of any Class are effected through the establishment of one or more new revolving credit commitments (including through any Revolving Commitment Increase), subject to the satisfaction of the terms and conditions in this Section 2.14, (i) each Incremental Revolving Credit Lender of such Class shall make its Commitment available to the Borrower (when borrowed, an Incremental Revolving Credit Loan and collectively with any Incremental Term Loan, an Incremental Loan ) in an amount equal to its Incremental Revolving Credit Commitment of such Class and (ii) each Incremental Revolving Credit Lender of such Class shall become a Lender hereunder with respect to the Incremental Revolving Credit Commitment of such Class and the Incremental Revolving Credit Loans of such Class made pursuant thereto. Notwithstanding the foregoing, Incremental Term Loans may have identical terms to any of the Term Loans and be treated as the same Class as any of such Term Loans.
(c) Incremental Loan Request . Each Incremental Loan Request from the Borrower pursuant to this Section 2.14 shall set forth the requested amount and proposed terms of the relevant Incremental Term Loans or Incremental Revolving Credit Commitments. Incremental Term Loans may be made, and Incremental Revolving Credit Commitments may be provided, by any existing Lender (but each existing Lender will not have an obligation to make any Incremental Commitment, nor will the Borrower have any obligation to approach any existing lenders to provide any Incremental Commitment) or by any other bank or other financial institution (any such other bank or other financial institution being called an Additional Lender ) (each such existing Lender or
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Additional Lender providing such, an Incremental Revolving Credit Lender or Incremental Term Lender , as applicable, and, collectively, the Incremental Lenders ); provided that (i) the Administrative Agent, each Swing Line Lender and each L/C Issuer shall have consented (not to be unreasonably withheld or delayed) to such Lenders or Additional Lenders making such Incremental Term Loans or providing such Revolving Commitment Increases to the extent such consent, if any, would be required under Section 10.07(b) for an assignment of Loans or Revolving Credit Commitments, as applicable, to such Lender or Additional Lender, (ii) with respect to Incremental Term Commitments, any Affiliated Lender providing an Incremental Term Commitment shall be subject to the same restrictions set forth in Section 10.07(l) as they would otherwise be subject to with respect to any purchase by or assignment to such Affiliated Lender of Term Loans and (iii) Affiliated Lenders may not provide Incremental Revolving Credit Commitments.
(d) Effectiveness of Incremental Amendment . The effectiveness of any Incremental Amendment, and the Incremental Commitments thereunder, shall be subject to the satisfaction on the date thereof (the Incremental Facility Closing Date ) of each of the following conditions:
(i) (x) if the proceeds of such Incremental Commitments are being used to finance a Permitted Acquisition, no Event of Default under Sections 8.01(a) or (f) shall have occurred and be continuing or would exist after giving effect to such Incremental Commitments, or (y) if otherwise, no Event of Default shall have occurred and be continuing or would exist after giving effect to such Incremental Commitments;
(ii) after giving effect to such Incremental Commitments, the conditions of Sections 4.02(i) and (ii) shall be satisfied (it being understood that all references to the date of such Credit Extension or similar language in such Section 4.02 shall be deemed to refer to the effective date of such Incremental Amendment); provided that if the proceeds of such Incremental Commitments are being used to finance a Permitted Acquisition, (x) the reference in 4.02(i) to the accuracy of the representations and warranties shall refer to the accuracy of the representations and warranties that would constitute Specified Representations and (y) the reference to Material Adverse Effect in the Specified Representations shall be understood for this purpose to refer to Material Adverse Effect or similar definition as defined in the main transaction agreement governing such Permitted Acquisition;
(iii) the Borrower and its Restricted Subsidiaries shall be in compliance with the covenant set forth in Section 7.11 if such covenant is then in effect, determined on a Pro Forma Basis as of the Incremental Facility Closing Date and the last day of the most recently ended Test Period, as if any Incremental Term Loans or Incremental Revolving Credit Commitments, as applicable, available under such Incremental Commitments had been outstanding on the last day of such fiscal quarter of the Borrower for testing compliance therewith, and, in each case (x) with respect to any Incremental Revolving Credit Commitment, assuming a borrowing of the maximum amount of Loans available thereunder, and (y) without netting the cash proceeds of any such Incremental Loans;
(iv) each Incremental Term Commitment shall be in an aggregate principal amount that is not less than $20,000,000 and shall be in an increment of $1,000,000 ( provided that such amount may be less than $20,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence) and each Incremental Revolving Credit Commitment shall be in an aggregate principal amount that is not less than
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$5,000,000 and shall be in an increment of $1,000,000 ( provided that such amount may be less than $5,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence);
(v) the aggregate amount of the Incremental Term Loans and the Incremental Revolving Credit Commitments shall not exceed the sum of (A) $1,500,000,000 less the aggregate principal amount of Indebtedness incurred pursuant to Section 7.03(q) at or prior to such time plus (B) all voluntary prepayments of Term Loans and voluntary commitment reductions of Revolving Credit Commitments prior to or simultaneous with the Incremental Facility Closing Date (excluding voluntary prepayments of Incremental Term Loans and voluntary commitment reductions of Incremental Revolving Credit Commitments, to the extent such Incremental Term Loans and Incremental Revolving Credit Commitments were obtained pursuant to clause (C) below), plus (C) additional amounts so long as the Consolidated First Lien Net Leverage Ratio, determined on a Pro Forma Basis as of the last day of the most recently ended period of four consecutive fiscal quarters for which financial statements are internally available, as if any Incremental Term Loans or Incremental Revolving Credit Commitments, as applicable, available under such Incremental Commitments had been outstanding on the last day of such period, and, in each case (x) with respect to any Incremental Revolving Credit Commitment, assuming a borrowing of the maximum amount of Loans available thereunder, and (y) without netting the cash proceeds of any such Incremental Loans, does not exceed 5.20 to 1.00; and
(vi) such other conditions as the Borrower, each Incremental Lender providing such Incremental Commitments and the Administrative Agent shall agree.
(e) Required Terms . The terms, provisions and documentation of the Incremental Term Loans and Incremental Term Commitments or the Incremental Revolving Credit Loans and Incremental Revolving Credit Commitments, as the case may be, of any Class shall be as agreed between the Borrower and the applicable Incremental Lenders providing such Incremental Commitments, and except as otherwise set forth herein, to the extent not identical to the Term Loans or Revolving Credit Commitments, as applicable, each existing on the Incremental Facility Closing Date, shall be reasonably satisfactory to Administrative Agent (it being understood that to the extent any financial maintenance covenant is added for the benefit of any Incremental Term Loans and Incremental Term Commitments or the Incremental Revolving Credit Loans and Incremental Revolving Credit Commitments, no consent shall be required from the Administrative Agent or any of the Lenders to the extent that such financial maintenance covenant is also added for the benefit of any corresponding existing Facility). In any event:
(i) the Incremental Term Loans:
(A) shall rank pari passu in right of payment and of security with the Revolving Credit Loans and the Term Loans,
(B) shall not mature earlier than the Latest Maturity Date of any Term Loans outstanding at the time of incurrence of such Incremental Term Loans,
(C) shall have a Weighted Average Life to Maturity not shorter than the remaining Weighted Average Life to Maturity of the Initial Term Loans,
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(D) shall have an Applicable Rate, and subject to clauses (e)(i)(B) and (e)(i)(C) above and clause (e)(iii) below, amortization determined by the Borrower and the applicable Incremental Term Lenders, and
(E) the Incremental Term Loans may participate on a pro rata basis or less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments of Term Loans hereunder, as specified in the applicable Incremental Amendment.
(ii) the Incremental Revolving Credit Commitments and Incremental Revolving Credit Loans shall be identical to the Revolving Credit Commitments and the Revolving Credit Loans, other than the Maturity Date and as set forth in this Section 2.14(e)(ii); provided that notwithstanding anything to the contrary in this Section 2.14 or otherwise:
(A) any such Incremental Revolving Credit Commitments or Incremental Revolving Credit Loans shall rank pari passu in right of payment and of security with the Revolving Credit Loans and the Term Loans,
(B) any such Incremental Revolving Credit Commitments or Incremental Revolving Credit Loans shall not mature earlier than the Latest Maturity Date of any Revolving Credit Loans outstanding at the time of incurrence of such Incremental Revolving Credit Commitments,
(C) the borrowing and repayment (except for (1) payments of interest and fees at different rates on Incremental Revolving Credit Commitments (and related outstandings), (2) repayments required upon the maturity date of the Incremental Revolving Credit Commitments and (3) repayment made in connection with a permanent repayment and termination of commitments (subject to clause (E) below)) of Loans with respect to Incremental Revolving Credit Commitments after the associated Incremental Facility Closing Date shall be made on a pro rata basis with all other Revolving Credit Commitments on the Incremental Facility Closing Date,
(D) subject to the provisions of Sections 2.03(n) and 2.04(g) to the extent dealing with Swing Line Loans and Letters of Credit which mature or expire after a maturity date when there exists Incremental Revolving Credit Commitments with a longer maturity date, all Swing Line Loans and Letters of Credit shall be participated on a pro rata basis by all Lenders with Commitments in accordance with their percentage of the Revolving Credit Commitments on the Incremental Facility Closing Date (and except as provided in Section 2.03(n) and Section 2.04(g), without giving effect to changes thereto on an earlier maturity date with respect to Swing Line Loans and Letters of Credit theretofore incurred or issued),
(E) the permanent repayment of Revolving Credit Loans with respect to, and termination of, Incremental Revolving Credit Commitments after the associated Incremental Facility Closing Date shall be made on a pro rata basis with all other Revolving Credit Commitments on the Incremental Facility Closing Date, except that the Borrower shall be permitted to permanently repay and terminate commitments of any such Class on a better than a pro rata basis as compared to any other Class with a later maturity date than such Class,
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(F) assignments and participations of Incremental Revolving Credit Commitments and Incremental Revolving Credit Loans shall be governed by the same assignment and participation provisions applicable to Revolving Credit Commitments and Revolving Credit Loans on the Incremental Facility Closing Date, and
(G) any Incremental Revolving Credit Commitments may constitute a separate Class or Classes, as the case may be, of Commitments from the Classes constituting the applicable Revolving Credit Commitments prior to the Incremental Facility Closing Date.
(iii) the amortization schedule applicable to any Incremental Loans and the All-In Yield applicable to the Incremental Term Loans or Incremental Revolving Credit Loans of each Class shall be determined by the Borrower and the applicable new Lenders and shall be set forth in each applicable Incremental Amendment; provided , however , that with respect to any Loans under Incremental Term Loan Commitments or Incremental Revolving Credit Commitments made on or prior to the date that is 12 months after the Closing Date, if the All-In Yield applicable to such Incremental Term Loans or Incremental Revolving Credit Loans shall be greater than the applicable All-In Yield payable pursuant to the terms of this Agreement as amended through the date of such calculation with respect to Term Loans or Revolving Credit Loans, as applicable, by more than 50 basis points per annum (the amount of such excess, the Yield Differential ) then the interest rate (together with, as provided in the proviso below, the Eurocurrency or Base Rate floor) with respect to each Class of Term Loans or the Revolving Credit Loans, as applicable, shall be increased by the applicable Yield Differential; provided, further that, if any Incremental Term Loans include a Eurocurrency or Base Rate floor that is greater than the Eurocurrency or Base Rate floor applicable to any existing Class of Term Loans, such differential between interest rate floors shall be included in the calculation of All-In Yield for purposes of this clause (iii) but only to the extent an increase in the Eurocurrency or Base Rate Floor applicable to the existing Term Loans would cause an increase in the interest rate then in effect thereunder, and in such case the Eurocurrency and Base Rate floors (but not the Applicable Rate) applicable to the existing Term Loans shall be increased to the extent of such differential between interest rate floors.
(f) Incremental Amendment . Commitments in respect of Incremental Term Loans and Incremental Revolving Credit Commitment shall become Commitments (or in the case of an Incremental Revolving Credit Commitment to be provided by an existing Revolving Credit Lender, an increase in such Lenders applicable Revolving Credit Commitment), under this Agreement pursuant to an amendment (an Incremental Amendment ) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Incremental Lender providing such Commitments and the Administrative Agent. The Incremental Amendment may, without the consent of any other Loan Party, Agent or Lender, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.14. The Borrower will use the proceeds of the Incremental Term Loans and Incremental Revolving Credit Commitments for any purpose not prohibited by this Agreement. No Lender shall be obligated to provide any Incremental Term Loans or Incremental Revolving Credit Commitments, unless it so agrees.
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(g) Reallocation of Revolving Credit Exposure . Upon any Incremental Facility Closing Date on which Incremental Revolving Credit Commitments are effected through an increase in the Revolving Credit Commitments pursuant to this Section 2.14, (a) if the increase relates to the Revolving Credit Facility, each of the Revolving Credit Lenders shall assign to each of the Incremental Revolving Credit Lenders, and each of the Incremental Revolving Credit Lenders shall purchase from each of the Revolving Credit Lenders, at the principal amount thereof, such interests in the Incremental Revolving Credit Loans outstanding on such Incremental Facility Closing Date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Credit Loans will be held by existing Revolving Credit Lenders and Incremental Revolving Credit Lenders ratably in accordance with their Revolving Credit Commitments after giving effect to the addition of such Incremental Revolving Credit Commitments to the Revolving Credit Commitments, (b) each Incremental Revolving Credit Commitment shall be deemed for all purposes a Revolving Credit Commitment and each Loan made thereunder shall be deemed, for all purposes, a Revolving Credit Loan and (c) each Incremental Revolving Credit Lender shall become a Lender with respect to the Incremental Revolving Credit Commitments and all matters relating thereto. The Administrative Agent and the Lenders hereby agree that the minimum borrowing and prepayment requirements in Sections 2.02 and 2.05(a) of this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.
(h) This Section 2.14 shall supersede any provisions in Section 2.13 or 10.01 to the contrary.
SECTION 2.15 Refinancing Amendments.
(a) On one or more occasions after the Closing Date, the Borrower may obtain, from any Lender or any other bank, financial institution or other institutional lender or investor that agrees to provide any portion of Refinancing Term Loans pursuant to a Refinancing Amendment in accordance with this Section 2.15 (each, an Additional Refinancing Lender ) ( provided that (i) the Administrative Agent, each Swing Line Lender and each L/C Issuer shall have consented (not to be unreasonably withheld or delayed) to such Lenders or Additional Refinancing Lenders making such Refinancing Term Loans or providing such Other Revolving Credit Commitments to the extent such consent, if any, would be required under Section 10.07(b) for an assignment of Loans or Revolving Credit Commitments, as applicable, to such Lender or Additional Refinancing Lender, (ii) with respect to Refinancing Term Loans, any Affiliated Refinancing Lender providing an Refinancing Term Loans shall be subject to the same restrictions set forth in Section 10.07(l) as they would otherwise be subject to with respect to any purchase by or assignment to such Affiliated Lender of Term Loans and (iii) Affiliated Lenders may not provide Other Revolving Credit Commitments), Credit Agreement Refinancing Indebtedness in respect of all or any portion of any Class of Term Loans or Revolving Credit Loans (or unused Revolving Credit Commitments) then outstanding under this Agreement, in the form of Refinancing Term Loans, Refinancing Term Commitments, Other Revolving Credit Commitments, or Other Revolving Credit Loans pursuant to a Refinancing Amendment; provided that notwithstanding anything to the contrary in this Section 2.15 or otherwise, (1) the borrowing and repayment (except for (A) payments of interest and fees at different rates on Other Revolving Credit Commitments (and related outstandings), (B) repayments required upon the maturity date of the Other Revolving Credit Commitments and (C) repayment made in connection with a permanent repayment and termination of commitments (subject to clause (3)
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below)) of Loans with respect to Other Revolving Credit Commitments after the date of obtaining any Other Revolving Credit Commitments shall be made on a pro rata basis with all other Revolving Credit Commitments, (2) subject to the provisions of Section 2.03(n) and 2.04(g) to the extent dealing with Swing Line Loans and Letters of Credit which mature or expire after a maturity date when there exist Other Revolving Credit Commitments with a longer maturity date, all Swing Line Loans and Letters of Credit shall be participated on a pro rata basis by all Lenders with Commitments in accordance with their percentage of the Revolving Credit Commitments (and except as provided in Section 2.03(n) and Section 2.04(g), without giving effect to changes thereto on an earlier maturity date with respect to Swing Line Loans and Letters of Credit theretofore incurred or issued), (3) the permanent repayment of Revolving Credit Loans with respect to, and termination of, Other Revolving Credit Commitments after the date of obtaining any Other Revolving Credit Commitments shall be made on a pro rata basis with all other Revolving Credit Commitments, except that the Borrower shall be permitted to permanently repay and terminate commitments of any such Class on a better than a pro rata basis as compared to any other Class with a later maturity date than such Class and (4) assignments and participations of Other Revolving Credit Commitments and Other Revolving Credit Loans shall be governed by the same assignment and participation provisions applicable to Revolving Credit Commitments and Revolving Credit Loans.
(b) The effectiveness of any Refinancing Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.02 and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) customary legal opinions, board resolutions and officers certificates consistent with those delivered on the Closing Date other than changes to such legal opinion resulting from a change in law, change in fact or change to counsels form of opinion reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that such Credit Agreement Refinancing Indebtedness is provided with the benefit of the applicable Loan Documents.
(c) Each issuance of Credit Agreement Refinancing Indebtedness under Section 2.15(a) shall be in an aggregate principal amount that is (x) not less than $20,000,000 and (y) an integral multiple of $1,000,000 in excess thereof.
(d) Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to a Refinancing Amendment, without the consent of any other Lenders, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Credit Agreement Refinancing Indebtedness incurred pursuant thereto and (ii) make such other changes to this Agreement and the other Loan Documents consistent with the provisions and intent of the third paragraph of Section 10.01 (without the consent of the Required Lenders called for therein) and (iii) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.15, and the Required Lenders hereby expressly authorize the Administrative Agent to enter into any such Refinancing Amendment.
SECTION 2.16 Extension of Term Loans; Extension of Revolving Credit Loans.
(a) Extension of Term Loans . The Borrower may at any time and from time to time request that all or a portion of the Term Loans of a given Class (each, an Existing Term Loan Tranche ) be amended to extend the scheduled maturity date(s) with respect to all or a portion of any principal amount of such Term Loans (any such Term Loans which have been so amended,
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Extended Term Loans ) and to provide for other terms consistent with this Section 2.16. In order to establish any Extended Term Loans, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the applicable Existing Term Loan Tranche) (each, a Term Loan Extension Request ) setting forth the proposed terms of the Extended Term Loans to be established, which shall (x) be identical as offered to each Lender under such Existing Term Loan Tranche (including as to the proposed interest rates and fees payable) and offered pro rata to each Lender under such Existing Term Loan Tranche and (y) be identical to the Term Loans under the Existing Term Loan Tranche from which such Extended Term Loans are to be amended, except that: (i) all or any of the scheduled amortization payments of principal of the Extended Term Loans may be delayed to later dates than the scheduled amortization payments of principal of the Term Loans of such Existing Term Loan Tranche, to the extent provided in the applicable Extension Amendment; (ii) the Effective Yield with respect to the Extended Term Loans (whether in the form of interest rate margin, upfront fees, original issue discount or otherwise) may be different than the Effective Yield for the Term Loans of such Existing Term Loan Tranche, in each case, to the extent provided in the applicable Extension Amendment; (iii) the Extension Amendment may provide for other covenants and terms that apply solely to any period after the Latest Maturity Date that is in effect on the effective date of the Extension Amendment (immediately prior to the establishment of such Extended Term Loans); and (iv) Extended Term Loans may have call protection as may be agreed by the Borrower and the Lenders thereof; provided that no Extended Term Loans may be optionally prepaid prior to the date on which the Term Loans under the Existing Term Loan Tranche from which such Extended Term Loans were amended are repaid in full, unless such optional prepayment is accompanied by at least a pro rata optional prepayment of such Existing Term Loan Tranche; provided , however , that (A) no Default shall have occurred and be continuing at the time a Term Loan Extension Request is delivered to Lenders, (B) in no event shall the final maturity date of any Extended Term Loans of a given Term Loan Extension Series at the time of establishment thereof be earlier than the then Latest Maturity Date of any then existing Term Loans hereunder, (C) the Weighted Average Life to Maturity of any Extended Term Loans of a given Term Loan Extension Series at the time of establishment thereof shall be no shorter (other than by virtue of amortization or prepayment of such Indebtedness prior to the time of incurrence of such Extended Term Loans) than the remaining Weighted Average Life to Maturity of any Existing Term Loan Tranche, (D) any such Extended Term Loans (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreements (to the extent any Intercreditor Agreement is then in effect), (E) all documentation in respect of such Extension Amendment shall be consistent with the foregoing and (F) any Extended Term Loans may participate on a pro rata basis or less than a pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory repayments or prepayments hereunder, in each case as specified in the respective Term Loan Extension Request. Any Extended Term Loans amended pursuant to any Term Loan Extension Request shall be designated a series (each, a Term Loan Extension Series ) of Extended Term Loans for all purposes of this Agreement; provided that any Extended Term Loans amended from an Existing Term Loan Tranche may, to the extent provided in the applicable Extension Amendment, be designated as an increase in any previously established Term Loan Extension Series with respect to such Existing Term Loan Tranche. Each Term Loan Extension Series of Extended Term Loans incurred under this Section 2.16 shall be in an aggregate principal amount that is not less than $20,000,000.
(b) Extension of Revolving Credit Commitments . The Borrower may at any time and from time to time request that all or a portion of the Revolving Credit Commitments of a given Class (each, an Existing Revolver Tranche ) be amended to extend the Maturity Date with respect to all or a portion of any principal amount of such Revolving Credit Commitments (any such Revolving
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Credit Commitments which have been so amended, Extended Revolving Credit Commitments ) and to provide for other terms consistent with this Section 2.16. In order to establish any Extended Revolving Credit Commitments, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the applicable Existing Revolver Tranche) (each, a Revolver Extension Request ) setting forth the proposed terms of the Extended Revolving Credit Commitments to be established, which shall (x) be identical as offered to each Lender under such Existing Revolver Tranche (including as to the proposed interest rates and fees payable) and offered pro rata to each Lender under such Existing Revolver Tranche and (y) be identical to the Revolving Credit Commitments under the Existing Revolver Tranche from which such Extended Revolving Credit Commitments are to be amended, except that: (i) the Maturity Date of the Extended Revolving Credit Commitments may be delayed to a later date than the Maturity Date of the Revolving Credit Commitments of such Existing Revolver Tranche, to the extent provided in the applicable Extension Amendment; (ii) the Effective Yield with respect to extensions of credit under the Extended Revolving Credit Commitments (whether in the form of interest rate margin, upfront fees, commitment fees, original issue discount or otherwise) may be different than the Effective Yield for extensions of credit under the Revolving Credit Commitments of such Existing Revolver Tranche, in each case, to the extent provided in the applicable Extension Amendment; (iii) the Extension Amendment may provide for other covenants and terms that apply solely to any period after the Latest Maturity Date that is in effect on the effective date of the Extension Amendment (immediately prior to the establishment of such Extended Revolving Credit Commitments); and (iv) all borrowings under the applicable Revolving Credit Commitments ( i.e ., the Existing Revolver Tranche and the Extended Revolving Credit Commitments of the applicable Revolver Extension Series) and repayments thereunder shall be made on a pro rata basis (except for (I) payments of interest and fees at different rates on Extended Revolving Credit Commitments (and related outstandings) and (II) repayments required upon the Maturity Date of the non-extending Revolving Credit Commitments); provided , further , that (A) no Default shall have occurred and be continuing at the time a Revolver Extension Request is delivered to Lenders, (B) in no event shall the final maturity date of any Extended Revolving Credit Commitments of a given Revolver Extension Series at the time of establishment thereof be earlier than the then Latest Maturity Date of any other Revolving Credit Commitments hereunder, (C) any such Extended Revolving Credit Commitments (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreements (to the extent any Intercreditor Agreement is then in effect) and (D) all documentation in respect of such Extension Amendment shall be consistent with the foregoing. Any Extended Revolving Credit Commitments amended pursuant to any Revolver Extension Request shall be designated a series (each, a Revolver Extension Series ) of Extended Revolving Credit Commitments for all purposes of this Agreement; provided that any Extended Revolving Credit Commitments amended from an Existing Revolver Tranche may, to the extent provided in the applicable Extension Amendment, be designated as an increase in any previously established Revolver Extension Series with respect to such Existing Revolver Tranche. Each Revolver Extension Series of Extended Revolving Credit Commitments incurred under this Section 2.16 shall be in an aggregate principal amount that is not less than $5,000,000.
(c) Extension Request . The Borrower shall provide the applicable Extension Request at least three (3) Business Days prior to the date on which Lenders under the Existing Term Loan Tranche or Existing Revolver Tranche, as applicable, are requested to respond, and shall agree to such procedures, if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably to accomplish the purposes of this Section 2.16. No Lender shall have any obligation to agree to have any of its Term Loans of any Existing Term Loan Tranche amended into Extended Term Loans or any of its Revolving Credit Commitments amended into Extended
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Revolving Credit Commitments, as applicable, pursuant to any Extension Request. Any Lender holding a Loan under an Existing Term Loan Tranche (each, an Extending Term Lender ) wishing to have all or a portion of its Term Loans under the Existing Term Loan Tranche subject to such Extension Request amended into Extended Term Loans and any Revolving Credit Lender (each, an Extending Revolving Credit Lender ) wishing to have all or a portion of its Revolving Credit Commitments under the Existing Revolver Tranche subject to such Extension Request amended into Extended Revolving Credit Commitments, as applicable, shall notify the Administrative Agent (each, an Extension Election ) on or prior to the date specified in such Extension Request of the amount of its Term Loans under the Existing Term Loan Tranche or Revolving Credit Commitments under the Existing Revolver Tranche, as applicable, which it has elected to request be amended into Extended Term Loans or Extended Revolving Credit Commitments, as applicable (subject to any minimum denomination requirements imposed by the Administrative Agent). In the event that the aggregate principal amount of Term Loans under the Existing Term Loan Tranche or Revolving Credit Commitments under the Existing Revolver Tranche, as applicable, in respect of which applicable Term Lenders or Revolving Credit Lenders, as the case may be, shall have accepted the relevant Extension Request exceeds the amount of Extended Term Loans or Extended Revolving Credit Commitments, as applicable, requested to be extended pursuant to the Extension Request, Term Loans or Revolving Credit Commitments, as applicable, subject to Extension Elections shall be amended to Extended Term Loans or Revolving Credit Commitments, as applicable, on a pro rata basis (subject to rounding by the Administrative Agent, which shall be conclusive) based on the aggregate principal amount of Term Loans or Revolving Credit Commitments, as applicable, included in each such Extension Election.
(d) Extension Amendment . Extended Term Loans and Extended Revolving Credit Commitments shall be established pursuant to an amendment (each, an Extension Amendment ) to this Agreement among the Borrower, the Administrative Agent and each Extending Term Lender or Extending Revolving Credit Lender, as applicable, providing an Extended Term Loan or Extended Revolving Credit Commitment, as applicable, thereunder, which shall be consistent with the provisions set forth in Sections 2.16(a) or (b) above, respectively (but which shall not require the consent of any other Lender). The effectiveness of any Extension Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.02 and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) legal opinions, board resolutions and officers certificates consistent with those delivered on the Closing Date other than changes to such legal opinion resulting from a change in law, change in fact or change to counsels form of opinion reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that the Extended Term Loans or Extended Revolving Credit Commitments, as applicable, are provided with the benefit of the applicable Loan Documents. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Extension Amendment. Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to an Extension Amendment, without the consent of any other Lenders, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Extended Term Loans or Extended Revolving Credit Commitments, as applicable, incurred pursuant thereto, (ii) modify the scheduled repayments set forth in Section 2.07 with respect to any Existing Term Loan Tranche subject to an Extension Election to reflect a reduction in the principal amount of the Term Loans thereunder in an amount equal to the aggregate principal amount of the Extended Term Loans amended pursuant to the applicable Extension (with such amount to be applied ratably to reduce scheduled repayments of such Term Loans required pursuant to Section 2.07), (iii) modify the prepayments set forth in Section 2.05 to reflect the existence of the
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Extended Term Loans and the application of prepayments with respect thereto, (iv) make such other changes to this Agreement and the other Loan Documents consistent with the provisions and intent of the second paragraph of Section 10.01 (without the consent of the Required Lenders called for therein) and (v) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.16, and the Required Lenders hereby expressly authorize the Administrative Agent to enter into any such Extension Amendment.
(e) No conversion of Loans pursuant to any Extension in accordance with this Section 2.16 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.
SECTION 2.17 Defaulting Lenders.
(a) Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i) Waivers and Amendments . That Defaulting Lenders right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 10.01.
(ii) Reallocation of Payments . Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of that Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise), shall be applied at such time or times as may be determined by the Administrative Agent as follows: first , to the payment of any amounts owing by that Defaulting Lender to the Administrative Agent hereunder; second , to the payment on a pro rata basis of any amounts owing by that Defaulting Lender to L/C Issuers or Swing Line Lender hereunder; third , if so determined by the Administrative Agent or requested by any L/C Issuer or Swing Line Lender, to be held as Cash Collateral for future funding obligations of that Defaulting Lender of any participation in any Swing Line Loan or Letter of Credit; fourth , as the Borrower may request (so long as no Default or Event of Default has occurred and is continuing), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of that Defaulting Lender to fund Loans under this Agreement; sixth , to the payment of any amounts owing to the Lenders, the L/C Issuers or the Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, any L/C Issuer or the Swing Line Lender against that Defaulting Lender as a result of that Defaulting Lenders breach of its obligations under this Agreement; seventh , so long as no Default or Event of Default has occurred and is continuing, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lenders breach of its obligations under this Agreement; and eighth , to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Borrowings in respect of which that Defaulting Lender has not fully funded its appropriate share and (y) such Loans or L/C Borrowings were made at a time when the conditions set forth in
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Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Borrowings owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Borrowings owed to, that Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.17(a)(ii) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees . That Defaulting Lender (x) shall not be entitled to receive any commitment fee pursuant to Section 2.09(a) for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender) and (y) shall be limited in its right to receive Letter of Credit fees as provided in Section 2.03(h).
(iv) Reallocation of Pro Rata Share to Reduce Fronting Exposure . During any period in which there is a Defaulting Lender, for purposes of computing the amount of the obligation of each Non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swing Line Loans pursuant to Sections 2.03 and 2.04, the Pro Rata Share of each Non-Defaulting Lenders Revolving Credit Loans and L/C Obligations shall be computed without giving effect to the Commitment of that Defaulting Lender; provided that (i) each such reallocation shall be given effect only if, at the date the applicable Lender becomes a Defaulting Lender, no Default or Event of Default has occurred and is continuing; and (ii) the aggregate obligation of each Non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swing Line Loans shall not exceed the positive difference, if any, of (1) the Revolving Credit Commitment of that Non-Defaulting Lender minus (2) the aggregate Outstanding Amount of the Loans of that Lender. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lenders increased exposure following such reallocation.
(b) Defaulting Lender Cure . If the Borrower, the Administrative Agent, Swing Line Lender and the L/C Issuers agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Pro Rata Share (without giving effect to Section 2.17(a)(iv)), whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lenders having been a Defaulting Lender.
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ARTICLE III
Taxes, Increased Costs Protection and Illegality
SECTION 3.01 Taxes.
(a) Except as provided in this Section 3.01, any and all payments made by or on account of the Borrower (the term Borrower under Article III being deemed to include any Subsidiary for whose account a Letter of Credit is issued) or any Guarantor under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, assessments or withholdings (including backup withholding) or similar charges imposed by any Governmental Authority including interest, penalties and additions to tax (collectively Taxes ), except as required by applicable Law. If the Borrower, any Guarantor or other applicable withholding agent shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (A) to the extent the Tax in question is an Indemnified Tax, the sum payable by the Borrower or such Guarantor shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01), each of such Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (B) the applicable withholding agent shall make such deductions, (C) the applicable withholding agent shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Laws, and (D) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), if the Borrower or any Guarantor is the applicable withholding agent, shall furnish to such Agent or Lender (as the case may be) the original or a copy of a receipt evidencing payment thereof or other evidence reasonably acceptable to such Agent or Lender.
(b) In addition, each Loan Party agrees to pay any and all present or future stamp, court or documentary taxes and any other excise, property, intangible or mortgage recording taxes, or charges or levies of the same character, imposed by any Governmental Authority, which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (including additions to tax, penalties and interest related thereto) excluding, in each case, such amounts that result from an Agent or Lenders Assignment and Assumption, grant of a participation, transfer or assignment to or designation of a new applicable Lending Office or other office for receiving payments under any Loan Document (collectively, Assignment Taxes ) to the extent such Assignment Taxes result from a connection that the Agent or Lender has with the taxing jurisdiction other than the connection arising out of the Loan Documents or the transactions therein, except for such Assignment Taxes resulting from assignment or participation that is requested or required in writing by the Borrower (all such non-excluded Taxes described in this Section 3.01(b) being hereinafter referred to as Other Taxes ).
(c) Each Loan Party agrees to indemnify each Agent and each Lender for (i) the full amount of Indemnified Taxes and Other Taxes payable by such Agent or such Lender and (ii) any reasonable expenses arising therefrom or with respect thereto, in each case whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared in good faith by such Agent or Lender (or by an Agent on behalf of such Lender), accompanied by a written statement thereof setting forth in reasonable detail the basis and calculation of such amounts shall be conclusive absent manifest error.
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(d) Each Lender shall, at such times as are reasonably requested by the Borrower or the Administrative Agent, provide the Borrower and the Administrative Agent with any documentation prescribed by Law certifying as to any entitlement of such Lender to an exemption from, or reduction in, withholding Tax with respect to any payments to be made to such Lender under the Loan Documents. Each such Lender shall, whenever a lapse in time or change in circumstances renders such documentation obsolete or inaccurate in any material respect, deliver promptly to the Borrower and the Administrative Agent updated or other appropriate documentation (including any new documentation reasonably requested by the applicable withholding agent) or promptly notify the Borrower and the Administrative Agent in writing of its inability to do so. Unless the applicable withholding agent has received forms or other documents satisfactory to it indicating that payments under any Loan Document to or for a Lender are not subject to withholding Tax or are subject to such Tax at a rate reduced by an applicable tax treaty, the Borrower, the Administrative Agent or other applicable withholding agent shall withhold amounts required to be withheld by applicable Law from such payments at the applicable statutory rate. Notwithstanding any other provision of this clause (d), a Lender shall not be required to deliver any form pursuant to this clause (d) that such Lender is not legally able to deliver. Without limiting the foregoing:
(i) Each Lender that is a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly signed original copies of Internal Revenue Service Form W-9 (or any successor form) certifying that such Lender is exempt from federal backup withholding.
(ii) Each Lender that is not a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement whichever of the following is applicable:
(A) two properly completed and duly signed original copies of Internal Revenue Service Form W-8BEN (or any successor forms) claiming eligibility for the benefits of an income tax treaty to which the United States is a party, and such other documentation as required under the Code,
(B) two properly completed and duly signed original copies of Internal Revenue Service Form W-8ECI (or any successor forms),
(C) in the case of a Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (a) a United States Tax Compliance Certificate and (b) two properly completed and duly signed original copies of Internal Revenue Service Form W-8BEN (or any successor form), or
(D) to the extent a Lender is not the beneficial owner (for example, where the Lender is a partnership or a participating Lender), Internal Revenue Service Form W-8IMY (or any successor forms) of the Lender, accompanied by a Form W-8ECI, W-8BEN, United States Tax Compliance Certificate, Form W-9, Form W-8IMY and/or any other required information from each beneficial owner, as applicable ( provided that if the Lender is a partnership, and one or more beneficial partners of such Lender are claiming the portfolio interest exemption, the United States Tax Compliance Certificate may be provided by such Lender on behalf of such partner).
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(iii) If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA, to determine whether such Lender has or has not complied with such Lenders obligations under FATCA and, as necessary, to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 3.01(d)(iii), FATCA shall include any amendments made to FATCA after the Closing Date.
(e) Any Lender claiming any additional amounts payable pursuant to this Section 3.01 and Section 3.04(a) shall, if requested by the Borrower, use its reasonable efforts to change the jurisdiction of its Lending Office (or take any other measures reasonably requested by the Borrower) if such a change or other measures would reduce any such additional amounts (including any such additional amounts that may thereafter accrue) and would not, in the sole determination of such Lender, result in any unreimbursed cost or expense or be otherwise materially disadvantageous to such Lender.
(f) If any Lender or Agent receives a refund in respect of any Indemnified Taxes or Other Taxes as to which indemnification or additional amounts have been paid to it by any Loan Party pursuant to this Section 3.01, it shall promptly remit such refund to such Loan Party (but only to the extent of indemnification or additional amounts paid by such Loan Party under this Section 3.01 with respect to Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of the Lender or Agent, as the case may be, and without interest (other than any interest paid by the relevant taxing authority with respect to such refund); provided that such Loan Party, upon the request of the Lender or Agent, as the case may be, agrees promptly to return such refund (plus any penalties, interest or other charges imposed by the relevant taxing authority) to such party in the event such party is required to repay such refund to the relevant taxing authority. This section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to Taxes that it deems confidential) to the Borrower or any other person.
(g) For the avoidance of doubt, the term Lender for purposes of this Section 3.01 shall include each L/C Issuer and Swing Line Lender.
SECTION 3.02 Illegality.
If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurocurrency Rate Loans (whether denominated in Dollars or any other Approved Currency), or to determine or charge interest rates based upon the Eurocurrency Rate, then, on notice
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thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurocurrency Rate Loans in the affected currency or currencies, or, in the case of Eurocurrency Rate Loans denominated in Dollars, to convert Base Rate Loans to Eurocurrency Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable and such Loans are denominated in Dollars, convert all applicable Eurocurrency Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or promptly, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted and all amounts due, if any, in connection with such prepayment or conversion under Section 3.05. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.
SECTION 3.03 Inability to Determine Rates.
If the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the applicable Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan in a given Approved Currency, or that the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan in such Approved Currency does not adequately and fairly reflect the cost to such Lenders of funding such Loan, or that deposits in the applicable Approved Currency in which such proposed Eurocurrency Rate Loan is to be denominated are not being offered to banks in the applicable offshore interbank market for the applicable amount and the Interest Period of such Eurocurrency Rate Loan in the applicable Approved Currency, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurocurrency Rate Loans in the affected Approved Currency shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurocurrency Rate Loans denominated in the affected Approved Currency or, failing that, will be deemed to have converted such request, if applicable, into a request for a Borrowing of Base Rate Loan in the amount specified therein.
SECTION 3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans.
(a) If any Lender reasonably determines that as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the Closing Date, or such Lenders compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurocurrency Rate Loans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount resulting from (i) Indemnified Taxes or Other Taxes, or any Taxes excluded from the definition of Indemnified Taxes under exceptions (i)(B) through (vi) thereof or (ii) reserve requirements contemplated by Section 3.04(c)) and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining the Eurocurrency Rate Loan (or of maintaining its obligations to make any Loan), or to reduce the amount of any sum received or
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receivable by such Lender, then from time to time within fifteen (15) days after demand by such Lender setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. Notwithstanding anything herein to the contrary, for all purposes under this Agreement, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a change in law, regardless of the date enacted, adopted or issued; provided that to the extent any increased costs or reductions are incurred by any Lender as a result of any requests, rules, guidelines or directives promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act or pursuant to Basel III after the Closing Date, then such Lender shall be compensated pursuant to this Section 3.04 only if such Lender imposes such charges under other syndicated credit facilities involving similarly situated borrowers that such Lender is a lender under.
(b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, in each case after the Closing Date, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lenders obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lenders desired return on capital), then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction within fifteen (15) days after receipt of such demand.
(c) The Borrower shall pay to each Lender, (i) as long as such Lender shall be required to maintain reserves, capital or liquidity with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits, additional interest on the unpaid principal amount of each applicable Eurocurrency Rate Loan of the Borrower equal to the actual costs of such reserves, capital or liquidity allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive in the absence of manifest error), and (ii) as long as such Lender shall be required to comply with any reserve ratio, capital or liquidity requirement or analogous requirement of any other central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of any Eurocurrency Rate Loans of the Borrower, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error) which in each case shall be due and payable on each date on which interest is payable on such Loan; provided the Borrower shall have received at least fifteen (15) days prior notice (with a copy to the Administrative Agent) of such additional interest or cost from such Lender. If a Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest or cost shall be due and payable fifteen (15) days from receipt of such notice.
(d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section 3.04 shall not constitute a waiver of such Lenders right to demand such compensation.
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(e) If any Lender requests compensation under this Section 3.04, then such Lender will, if requested by the Borrower, use commercially reasonable efforts to designate another Lending Office for any Loan or Letter of Credit affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender, cause such Lender and its Lending Office(s) to suffer no material economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section 3.04(e) shall affect or postpone any of the Obligations of the Borrower or the rights of such Lender pursuant to Sections 3.04(a), (b), (c) or (d).
SECTION 3.05 Funding Losses.
Upon written demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense actually incurred by it as a result of:
(a) any continuation, conversion, payment or prepayment of any Eurocurrency Rate Loan of the Borrower on a day other than the last day of the Interest Period for such Loan;
(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurocurrency Rate Loan of the Borrower on the date or in the amount notified by the Borrower, including any loss or expense (excluding loss of anticipated profits) arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained; or
(c) any failure by the Borrower to make payment of any Loan or drawing under any Letter of Credit (or interest due thereon) denominated in an Approved Foreign Currency on its scheduled due date or any payment thereof in a difference currency.
For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurocurrency Rate Loan made by it at the Eurocurrency Rate for such Loan by a matching deposit or other borrowing in the offshore interbank market for the applicable currency for a comparable amount and for a comparable period, whether or not such Eurocurrency Rate Loan was in fact so funded.
SECTION 3.06 Matters Applicable to All Requests for Compensation.
(a) Any Agent or any Lender claiming compensation under this Article III shall deliver a certificate to the Borrower setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Agent or such Lender may use any reasonable averaging and attribution methods.
(b) With respect to any Lenders claim for compensation under Sections 3.01, 3.02, 3.03 or 3.04, the Borrower shall not be required to compensate such Lender for any amount incurred more than one hundred and eighty (180) days prior to the date that such Lender notifies the Borrower of the event that gives rise to such claim; provided that if the circumstance giving rise to such claim is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof. If any Lender requests compensation by the Borrower under Section 3.04, the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue from one Interest Period to another applicable
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Eurocurrency Rate Loan, or, if applicable, to convert Base Rate Loans into Eurocurrency Rate Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.06(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.
(c) If the obligation of any Lender to make or continue any Eurocurrency Rate Loan, or to convert Base Rate Loans into Eurocurrency Rate Loans shall be suspended pursuant to Section 3.06(b) hereof, such Lenders applicable Eurocurrency Rate Loans shall be automatically converted into Base Rate Loans (or, if such conversion is not possible, repaid) on the last day(s) of the then current Interest Period(s) for such Eurocurrency Rate Loans (or, in the case of an immediate conversion required by Section 3.02, on such earlier date as required by Law) and, unless and until such Lender gives notice as provided below that the circumstances specified in Sections 3.02, 3.03 or 3.04 hereof that gave rise to such conversion no longer exist:
(i) to the extent that such Lenders Eurocurrency Rate Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lenders applicable Eurocurrency Rate Loans shall be applied instead to its Base Rate Loans; and
(ii) all Loans that would otherwise be made or continued from one Interest Period to another by such Lender as Eurocurrency Rate Loans shall be made or continued instead as Base Rate Loans (if possible), and all Base Rate Loans of such Lender that would otherwise be converted into Eurocurrency Rate Loans shall remain as Base Rate Loans.
(d) If any Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Sections 3.02, 3.03 or 3.04 hereof that gave rise to the conversion of any of such Lenders Eurocurrency Rate Loans pursuant to this Section 3.06 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurocurrency Rate Loans made by other Lenders under the applicable Facility are outstanding, if applicable, such Lenders Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurocurrency Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurocurrency Rate Loans under such Facility and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments for the applicable Facility.
SECTION 3.07 Replacement of Lenders under Certain Circumstances.
(a) If at any time (i) the Borrower becomes obligated to pay additional amounts or indemnity payments described in Section 3.01 (with respect to Indemnified Taxes) or 3.04 as a result of any condition described in such Sections or any Lender ceases to make any Eurocurrency Rate Loans as a result of any condition described in Section 3.02 or Section 3.04, (ii) any Lender becomes a Defaulting Lender or (iii) any Lender becomes a Non-Consenting Lender, then the Borrower may so long as no Event of Default has occurred and is continuing, at its sole cost and expense, on ten (10) Business Days prior written notice to the Administrative Agent and such Lender, (x) replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 10.07(b) (with the assignment fee to be paid by the Borrower in such instance) all of its rights and obligations under this Agreement (in respect of any applicable Facility only in the case of clause (i) or, with respect to a Class vote, clause (iii)) to one or more Eligible Assignees; provided
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that neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such Person; and provided, further, that (A) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01 (with respect to Indemnified Taxes), such assignment will result in a reduction in such compensation or payments and (B) in the case of any such assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable Eligible Assignees shall have agreed to, and shall be sufficient (together with all other consenting Lenders) to cause the adoption of, the applicable departure, waiver or amendment of the Loan Documents; or (y) terminate the Commitment of such Lender or L/C Issuer (in respect of any applicable Facility only in the case of clause (i) or clause (iii)), as the case may be, and (1) in the case of a Lender (other than an L/C Issuer), repay all Obligations of the Borrower owing to such Lender relating to the Loans and participations held by such Lender as of such termination date and (2) in the case of an L/C Issuer, repay all Obligations of the Borrower owing to such L/C Issuer relating to the Loans and participations held by the L/C Issuer as of such termination date and cancel or backstop on terms satisfactory to such L/C Issuer any Letters of Credit issued by it; provided that in the case of any such termination of a Non-Consenting Lender such termination shall be sufficient (together with all other consenting Lenders) to cause the adoption of the applicable departure, waiver or amendment of the Loan Documents and such termination shall be in respect of any applicable Facility only in the case of clause (i) or, with respect to a Class vote, clause (iii).
(b) Any Lender being replaced pursuant to Section 3.07(a)(x) above shall (i) execute and deliver an Assignment and Assumption with respect to such Lenders applicable Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans in respect thereof, and (ii) deliver any Notes evidencing such Loans to the Borrower or Administrative Agent. Pursuant to such Assignment and Assumption, (A) the assignee Lender shall acquire all or a portion, as the case may be, of the assigning Lenders Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans, (B) all obligations of the Borrower owing to the assigning Lender relating to the Loans, Commitments and participations so assigned shall be paid in full by the assignee Lender to such assigning Lender concurrently with such Assignment and Assumption and (C) upon such payment and, if so requested by the assignee Lender, delivery to the assignee Lender of the appropriate Note or Notes executed by the Borrower, the assignee Lender shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification provisions under this Agreement, which shall survive as to such assigning Lender. In connection with any such replacement, if any such Non-Consenting Lender or Defaulting Lender does not execute and deliver to the Administrative Agent a duly executed Assignment and Assumption reflecting such replacement within five (5) Business Days of the date on which the assignee Lender executes and delivers such Assignment and Assumption to such Non-Consenting Lender or Defaulting Lender, then such Non-Consenting Lender or Defaulting Lender shall be deemed to have executed and delivered such Assignment and Assumption without any action on the part of the Non-Consenting Lender or Defaulting Lender.
(c) Notwithstanding anything to the contrary contained above, any Lender that acts as an L/C Issuer may not be replaced hereunder at any time that it has any Letter of Credit outstanding hereunder unless arrangements reasonably satisfactory to such L/C Issuer (including the furnishing of a backup standby letter of credit in form and substance, and issued by an issuer reasonably satisfactory to such L/C Issuer or the depositing of cash collateral into a cash collateral account in amounts and pursuant to arrangements reasonably satisfactory to such L/C Issuer) have been made with respect to each such outstanding Letter of Credit and the Lender that acts as the Administrative Agent may not be replaced hereunder except in accordance with the terms of Section 9.09.
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(d) In the event that (i) the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of each Lender, each affected Lender or each affected Lender of a certain Class in accordance with the terms of Section 10.01 or all the Lenders with respect to a certain Class of the Loans and (iii) the Required Lenders (or, in the case of a consent, waiver or amendment involving all affected Lenders of a certain Class, the Required Class Lenders as applicable) have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a Non-Consenting Lender .
SECTION 3.08 Survival.
All of the Borrowers obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.
ARTICLE IV
Conditions Precedent to Credit Extensions
SECTION 4.01 Conditions to Initial Credit Extension.
The obligation of each Lender to make a Credit Extension hereunder on the Closing Date is subject to satisfaction of the following conditions precedent, except as otherwise agreed between the Borrower and the Administrative Agent:
(a) The Administrative Agents receipt of the following, each of which shall be originals or pdf copies or other facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:
(i) a Committed Loan Notice in accordance with the requirements hereof;
(ii) executed counterparts of this Agreement;
(iii) each Collateral Document set forth on Schedule 1.01C required to be executed on the Closing Date as indicated on such schedule, duly executed by each Loan Party thereto, together with:
(A) certificates, if any, representing the Pledged Equity referred to therein accompanied by undated stock or membership interest powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank (or confirmation in lieu thereof that such certificates, powers and instruments have been sent for overnight delivery to the Collateral Agent or its counsel); and
(B) evidence that all other actions, recordings and filings required by the Collateral Documents as of the Closing Date or that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement shall have been taken, completed or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent;
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(iv) [Reserved];
(v) such certificates of good standing (to the extent such concept exists) from the applicable secretary of state of the state of organization of each Loan Party, certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party on the Closing Date;
(vi) an opinion from Simpson Thacher & Bartlett LLP, New York counsel to the Loan Parties;
(vii) a solvency certificate from the chief financial officer, chief accounting officer or other officer with equivalent duties of the Borrower (after giving effect to the Transactions) substantially in the form attached hereto as Exhibit E-2 ;
(viii) a certificate, dated the Closing Date and signed by a Responsible Officer of the Borrower, confirming satisfaction of the conditions set forth in Sections 4.02(i) and (ii);
(ix) the Perfection Certificate, duly completed and executed by the Loan Parties; and
(x) copies of a recent Lien and judgment search in each jurisdiction reasonably requested by the Administrative Agent with respect to the Loan Parties.
(b) The Closing Fees and all fees and expenses due to the Lead Arrangers and their Affiliates required to be paid on the Closing Date and (in the case of expenses) invoiced at least three Business Days before the Closing Date (except as otherwise reasonably agreed by the Borrower) shall have been paid from the proceeds of the initial funding under the Facilities.
(c) Prior to or substantially simultaneously with the initial Credit Extensions, the Borrower shall have received at least $1,500,000,000 in gross cash proceeds from the issuance of the 5 5/8% Senior Notes, which proceeds shall have been, or substantially simultaneously with the initial Credit Extensions shall be, released from escrow, if applicable.
(d) The Administrative Agent shall have received reasonably satisfactory evidence that prior to or substantially simultaneously with the initial Credit Extensions (i) the Refinancing has been consummated and (ii) the 8% Quarterly Interest Bonds due 2031 issued by Hilton Worldwide, Inc. have been called for redemption.
(e) The Lead Arrangers shall have received the Audited Financial Statements and the Unaudited Financial Statements.
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(f) The Administrative Agent shall have received at least 3 days prior to the Closing Date all documentation and other information about the Borrower and the Guarantors required under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act that has been requested by the Administrative Agent in writing at least 10 days prior to the Closing Date.
(g) Prior to or substantially simultaneously with the initial Credit Extensions, Unrestricted Subsidiaries of the Borrower shall have collectively received (i) at least $3,500,000,000 in gross cash proceeds from commercial mortgage backed securities financings and (ii) at least $525,000,000 in gross cash proceeds from a mortgage loan secured by the property known as the Waldorf-Astoria New York, in each case substantially on the terms disclosed to the Lead Arrangers prior to the date hereof.
Without limiting the generality of the provisions of Section 9.03(b), for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
SECTION 4.02 Conditions to All Credit Extensions.
The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurocurrency Rate Loans and other than a Request for Credit Extension for an Incremental Facility which shall be governed by Section 2.14(d)) including on the Closing Date is subject to the following conditions precedent:
(i) The representations and warranties of each Loan Party set forth in Article V and in each other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects as so qualified) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date.
(ii) No Default shall exist or would result from such proposed Credit Extension or from the application of the proceeds therefrom.
(iii) The Administrative Agent and, if applicable, the relevant L/C Issuer or the Swing Line Lender, shall have received a Request for Credit Extension in accordance with the requirements hereof.
Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurocurrency Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(i) and (ii) (or, in the case of a Request for Credit Extension for an Incremental Facility, the conditions specified in Section 2.14(d)) have been satisfied on and as of the date of the applicable Credit Extension.
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ARTICLE V
Representations and Warranties
The Borrower and each of the Subsidiary Guarantors party hereto represent and warrant to the Agents and the Lenders at the time of each Credit Extension that:
SECTION 5.01 Existence, Qualification and Power; Compliance with Laws.
Each Loan Party and each Restricted Subsidiary (a) is a Person duly organized or formed, validly existing and in good standing (where relevant) under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business as currently conducted and (ii) in the case of the Loan Parties, execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and in good standing (where relevant) under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Laws, orders, writs and injunctions and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case, referred to in clause (a) (other than with respect to the Borrower), (b)(i) (other than with respect to the Borrower), (c), (d) and (e), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.02 Authorization; No Contravention.
The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party, and the consummation of the Transactions, are within such Loan Partys corporate or other powers, (a) have been duly authorized by all necessary corporate or other organizational action, and (b) do not (i) contravene the terms of any of such Persons Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted by Section 7.01), or require any payment to be made under (x) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject, or (iii) violate any applicable Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (b)(ii)(x), to the extent that such violation, conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.03 Governmental Authorization; Other Consents.
No material approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, or for the consummation of the Transactions, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (c) the perfection or maintenance of the Liens created under the Collateral Documents (including the priority thereof) or (d) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for (i) filings, recordings and registrations with Governmental Authorities necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents,
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exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect (except to the extent not required to be obtained, taken, given or made or be in full force and effect pursuant to the Collateral and Guarantee Requirement) and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.04 Binding Effect.
This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is a party thereto. This Agreement and each other Loan Document constitutes, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is a party thereto in accordance with its terms, except as such enforceability may be limited by (i) Debtor Relief Laws and by general principles of equity, (ii) the need for filings, recordations and registrations necessary to create or perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties and (iii) the effect of foreign Laws, rules and regulations as they relate to pledges, if any, of Equity Interests in Foreign Subsidiaries.
SECTION 5.05 Financial Statements; No Material Adverse Effect.
(a) (i) The Audited Financial Statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates thereof and their results of operations for the periods covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.
(ii) The Unaudited Financial Statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates thereof and their results of operations for the periods covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.
(b) The forecasts of consolidated balance sheets and consolidated statements of income and cash flow of Holdings and its Subsidiaries which have been furnished to the Administrative Agent prior to the Closing Date have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such forecasts, it being understood that actual results may vary from such forecasts and that such variations may be material.
(c) Since June 30, 2013, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(d) As of the Closing Date, none of the Borrower and its Subsidiaries has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) the liabilities reflected on Schedule 5.05, (ii) obligations arising under the Loan Documents or under the Senior Notes Documents and (iii) liabilities incurred in the ordinary course of business that, either individually or in the aggregate, have not had nor could reasonably be expected to have a Material Adverse Effect).
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SECTION 5.06 Litigation.
Except as set forth on Schedule 5.06 , there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Restricted Subsidiaries or against any of their properties or revenues that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 5.07 [Reserved].
SECTION 5.08 Ownership of Property; Liens; Real Property; Management Agreements and Franchise Agreements.
(a) The Borrower and each of its Restricted Subsidiaries has good record title to, or valid leasehold interests in, or easements or other limited property interests in, all Real Property necessary in the ordinary conduct of its business, free and clear of all Liens except as set forth on Schedule 5.08 hereto and except for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 7.01 and except where the failure to have such title or other interest could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) As of the Closing Date, Schedule 8 to the Perfection Certificate dated as of the Closing Date contain a true and complete list of each Material Real Property owned by the Borrower and the Subsidiaries as of the Closing Date.
(c) Except as would not have a Material Adverse Effect, (i) none of the management agreements or franchise agreements relating to Real Property owned or leased by any Loan Party requires or will require any Loan Party to pay any material property improvement plan fees or charges or requires or will require any Loan Party to renovate, update, upgrade, repair, enhance, or improve such Real Property as a result of the Transactions, and (ii) all management agreements and franchise agreements, to which any Loan Party is a party, relating to Real Property are in full force and effect and no consent is required in connection with any such agreements for the consummation of the Transactions, except as shall have been obtained prior to the Closing Date.
SECTION 5.09 Environmental Matters.
Except as specifically disclosed in Schedule 5.09(a) or except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:
(a) Each Loan Party and its respective properties and operations are and, other than any matters which have been finally resolved, have been in compliance with all Environmental Laws, which includes obtaining, maintaining and complying with all applicable Environmental Permits required under such Environmental Laws to carry on the business of the Loan Parties;
(b) the Loan Parties have not received any written notice that alleges any of them is in violation of or potentially liable under any Environmental Laws and none of the Loan Parties nor any of the Real Property owned, leased, operated or licensed to a franchisee (subject to, in the case of such franchised Real Property not managed by the Loan Parties or Subsidiaries or their Affiliates, the knowledge of the Borrower) by any Loan Party or Subsidiary is the subject of any claims, investigations, liens, demands, or judicial, administrative or arbitral proceedings pending or, to the knowledge of the Borrower, threatened, under or relating to any Environmental Law;
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(c) there has been no Release of Hazardous Materials on, at, under or from any Real Property or facilities currently or formerly owned, leased, operated or licensed to a franchisee (subject to, in the case of such franchised Real Property not operated by the Loan Parties or Subsidiaries or their Affiliates, the knowledge of the Borrower) by any Loan Party or Subsidiary, or arising out of the conduct of the Loan Parties that could reasonably be expected to require investigation, remedial activity or corrective action or cleanup by, or on behalf of, any Loan Party or Subsidiary or could reasonably be expected to result in any Environmental Liability;
(d) there are no facts, circumstances or conditions arising out of or relating to the Loan Parties or any of their respective operations or any facilities currently or, to the knowledge of the Borrower, formerly owned, leased, operated or licensed to a franchisee (subject to, in the case of such franchised Real Property not operated by the Loan Parties or Subsidiaries or their Affiliates, the knowledge of the Borrower) by any of the Loan Parties or Subsidiaries, that could reasonably be expected to require investigation, remedial activity or corrective action or cleanup by, or on behalf of, any Loan Party or Subsidiary or could reasonably be expected to result in any Environmental Liability; and
(e) the Borrower has made available to the Administrative Agent all environmental reports, studies, assessments, audits, or other similar documents containing information regarding any Environmental Liability that are in the possession or control of the Borrower or any Loan Party or Subsidiary.
SECTION 5.10 Taxes.
Except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of the Loan Parties and their Subsidiaries have filed all tax returns required to be filed, and have paid all Taxes levied or imposed upon them or their properties, that are due and payable (including in their capacity as a withholding agent), except those that are being contested in good faith by appropriate proceedings diligently conducted. Except as described on Schedule 5.10, there is no proposed Tax deficiency or assessment known to any Loan Parties against the Loan Parties that would, if made, individually or in the aggregate, have a Material Adverse Effect.
SECTION 5.11 ERISA Compliance.
(a) Except as set forth on Schedule 5.11(a) or as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan maintained by a Loan Party or ERISA Affiliate is in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder and other federal or state Laws.
(b) (i) No ERISA Event has occurred during the six year period prior to the date on which this representation is made or deemed made or is reasonably expected to occur; (ii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, except, with respect to each of the foregoing clauses of this Section 5.11(b), as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
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(c) With respect to each Pension Plan, the adjusted funding target attainment percentage (as defined in Section 901 of the Code), as determined by the applicable Pension Plans Enrolled Actuary under Sections 436(j) and 430(d)(2) of the Code and all applicable regulatory guidance promulgated thereunder (AFTAP), would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. Neither any Loan Party nor any ERISA Affiliate maintains or contributes to a Plan that is, or is expected to be, in at-risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code) in each case, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 5.12 Subsidiaries; Equity Interests.
As of the Closing Date (after giving effect to the Transactions), no Loan Party has any material Subsidiaries other than those specifically disclosed in Schedule 5.12, and all of the outstanding Equity Interests owned by the Loan Parties (or a Subsidiary of any Loan Party) in such material Subsidiaries have been validly issued and are fully paid and all Equity Interests owned by a Loan Party in such material Subsidiaries are owned free and clear of all Liens except (i) those created under the Collateral Documents and (ii) any Lien that is permitted under Section 7.01. As of the Closing Date, Schedules 1(a) and 10 to the Perfection Certificate (a) set forth the name and jurisdiction of each Domestic Subsidiary that is a Loan Party and (b) set forth the ownership interest of the Borrower and any other Guarantor in each material wholly owned Subsidiary, including the percentage of such ownership.
SECTION 5.13 Margin Regulations; Investment Company Act.
(a) The Borrower is not engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Borrowings or drawings under any Letter of Credit will be used for any purpose that violates Regulation U of the Board of Governors of the United States Federal Reserve System.
(b) None of the Borrower, any Person Controlling the Borrower, or any of its Restricted Subsidiaries is or is required to be registered as an investment company under the Investment Company Act of 1940.
SECTION 5.14 Disclosure.
To the best of the Borrowers knowledge, no report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party (other than projected financial information, pro forma financial information and information of a general economic or industry nature) to any Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished), when taken as a whole, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein (when taken as a whole), in the light of the circumstances under which they were made, not materially misleading. With respect to projected financial information and pro forma financial information, the Borrower represents that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation; it being understood that such projections may vary from actual results and that such variances may be material.
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SECTION 5.15 Labor Matters.
Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect as of the Closing Date (a) there are no strikes or other labor disputes against the Borrower or any of its Restricted Subsidiaries pending or, to the knowledge of the Borrower, threatened, (b) hours worked by and payment made to employees of the Borrower or any of its Restricted Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Laws, (c) the Borrower and the other Loan Parties have complied with all applicable labor laws including work authorization and immigration and (d) all payments due from the Borrower or any of its Restricted Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.
SECTION 5.16 [Reserved].
SECTION 5.17 Intellectual Property; Licenses, Etc.
The Borrower and its Restricted Subsidiaries own, license or possess the right to use all of the trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how database rights, design rights and other intellectual property rights (collectively, IP Rights ) that are reasonably necessary for the operation of their respective businesses as currently conducted, and, to the knowledge of the Borrower, such IP Rights do not conflict with the rights of any Person, except to the extent such failure to own, license or possess or such conflicts, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. The business of any Loan Party or any of their Subsidiaries as currently conducted does not infringe upon, misappropriate or otherwise violate any IP Rights held by any Person except for such infringements, misappropriations and violations, individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the IP Rights, is filed and presently pending or, to the knowledge of the Borrower, presently threatened in writing against any Loan Party or any of its Subsidiaries, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Except pursuant to licenses and other user agreements entered into by each Loan Party in the ordinary course of business, as of the Closing Date, all registrations listed in Schedule 9 to the Perfection Certificate are valid and subsisting, except, in each case, to the extent failure of such registrations to be valid and subsisting could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 5.18 Solvency.
On the Closing Date, after giving effect to the Transactions, the Borrower and its Restricted Subsidiaries, on a consolidated basis, are Solvent.
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SECTION 5.19 Subordination of Junior Financing; First Lien Obligations.
The Obligations are Senior Debt, Senior Indebtedness, Guarantor Senior Debt or Senior Secured Financing (or any comparable term) under, and as defined in, any Junior Financing Documentation.
SECTION 5.20 OFAC; USA PATRIOT Act; FCPA.
(a) To the extent applicable, each of Holdings and its Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, the International Emergency Economic Powers Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto and (ii) the USA PATRIOT Act.
(b) Neither the Borrower nor any of its Subsidiaries nor, to the knowledge of the Borrower and the other Loan Parties, any director, officer, employee, agent or controlled affiliate of the Borrower or any Subsidiary is currently the subject of any Sanctions, nor is the Borrower or any of its Subsidiaries located, organized or resident in any country or territory that is the subject of Sanctions.
(c) No part of the proceeds of the Loans will be used, directly or indirectly, by the Borrower (i) in violation of the United States Foreign Corrupt Practices Act of 1977, as amended or (ii) for the purpose of financing any activities or business of or with any Person that, at the time of such financing, is the subject of any Sanctions.
SECTION 5.21 Security Documents.
(a) Valid Liens. Each Collateral Document delivered pursuant to Section 4.01 and Sections 6.11 and 6.13 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, the Collateral described therein to the extent intended to be created thereby and (i) when financing statements and other filings in appropriate form are filed in the offices specified on Schedule 5 to the Perfection Certificate and (ii) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by the Security Agreement), the Liens created by the Collateral Documents (other than the Mortgages) shall constitute fully perfected Liens on, and security interests in (to the extent intended to be created thereby), all right, title and interest of the grantors in such Collateral to the extent perfection can be obtained by filing financing statements, in each case subject to no Liens other than Liens permitted hereunder.
(b) PTO Filing; Copyright Office Filing . When the Intellectual Property Security Agreements are properly filed in the United States Patent and Trademark Office and the United States Copyright Office, to the extent such filings may perfect such interests, the Liens created by the Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in Patents and Trademarks (each as defined in the Security Agreement) registered or applied for with the United States Patent and Trademark Office and Copyrights (as defined in the Security Agreement) registered or applied for with the United States Copyright Office, as the case may be, in each case subject to no Liens other than Liens permitted hereunder (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to establish a Lien on registered Patents, Trademarks and Copyrights acquired by the grantors thereof after the Closing Date).
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(c) Mortgages . Upon recording thereof in the appropriate recording office, each Mortgage is effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable perfected Liens on, and security interest in, all of the Loan Parties right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, subject only to Liens permitted hereunder, and when the Mortgages are filed in the offices specified on Schedule 5 to the Perfection Certificate dated the Closing Date (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of Sections 6.11 and 6.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of Sections 6.11 and 6.13), the Mortgages shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than Liens permitted by hereunder.
Notwithstanding anything herein (including this Section 5.21) or in any other Loan Document to the contrary, neither the Borrower nor any other Loan Party makes any representation or warranty as to (A) the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign Law or (B) the pledge or creation of any security interest, or the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest to the extent such pledge, security interest, perfection or priority is not required pursuant to the Collateral and Guarantee Requirement.
ARTICLE VI
Affirmative Covenants
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation (other than obligations under Treasury Services Agreements or obligations under Secured Hedge Agreements) hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the L/C Obligations related thereto has been Cash Collateralized or a backstop letter of credit reasonably satisfactory to the applicable L/C Issuer is in place), then from and after the Closing Date, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each of its Restricted Subsidiaries to:
SECTION 6.01 Financial Statements.
(a) Deliver to the Administrative Agent for prompt further distribution to each Lender, within one hundred twenty (120) days after the end of the fiscal year ending December 31, 2013 and within ninety (90) days after the end of each subsequent fiscal year, a consolidated balance sheet of Holdings and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, stockholders equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of Ernst & Young LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any going concern or like qualification or exception or any
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qualification or exception as to the scope of such audit other than a going concern qualification resulting solely from an upcoming maturity date under the Facilities occurring within one year from the time such opinion is delivered;
(b) Deliver to the Administrative Agent for prompt further distribution to each Lender, within forty-five (45) days (or sixty (60) days in the case of the fiscal quarter ending on March 31, 2014) after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of Holdings and its Subsidiaries as at the end of such fiscal quarter and the related consolidated statements of income or operations for such fiscal quarter and the portion of the fiscal year then ended, setting forth in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, and statements of stockholders equity for the current fiscal quarter and consolidated statement of cash flows for the portion of the fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations, stockholders equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;
(c) Deliver to the Administrative Agent for prompt further distribution to each Lender, no later than one hundred twenty (120) days after the end of the fiscal year ending December 31, 2013 and within ninety (90) days after the end of each subsequent fiscal year, a detailed consolidated budget for the following fiscal year on a quarterly basis (including a projected consolidated balance sheet of Holdings and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto) (collectively, the Projections ), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such Projections, it being understood that actual results may vary from such Projections and that such variations may be material; and
(d) Deliver to the Administrative Agent with each set of consolidated financial statements referred to in Sections 6.01(a) and 6.01(b) above, supplemental financial information necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.
Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01 may be satisfied with respect to financial information of Holdings and the Subsidiaries by furnishing (A) the applicable financial statements of Holdings (or any direct or indirect parent of Holdings) or (B) Holdings (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that with respect to clauses (A) and (B), (i) to the extent such information relates to a parent of Holdings, such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdings (or such parent), on the one hand, and the information relating to Holdings and the Subsidiaries on a stand-alone basis, on the other hand and (ii) to the extent such information is in lieu of information required to be provided under Section 6.01(a), such materials are accompanied by a report and opinion of Ernst & Young LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and, except as permitted in Section 6.01(a), shall not be subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit.
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Documents required to be delivered pursuant to Section 6.01 and Sections 6.02(b) and (c) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower (or any direct or indirect parent of the Borrower) posts such documents, or provides a link thereto on the website on the Internet at the Borrowers website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrowers behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent; and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions ( i.e. , soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a) to the Administrative Agent; provided , however , that if such Compliance Certificate is first delivered by electronic means, the date of such delivery by electronic means shall constitute the date of delivery for purposes of compliance with Section 6.02(a). Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.
SECTION 6.02 Certificates; Other Information.
Deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) no later than five (5) days after the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower;
(b) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which the Borrower or any Restricted Subsidiary files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(c) promptly after the furnishing thereof, copies of any material requests or material notices received by any Loan Party (other than in the ordinary course of business) or material statements or material reports furnished to any holder of debt securities (other than in connection with any board observer rights) of any Loan Party or of any of its Restricted Subsidiaries pursuant to the terms of any Senior Notes Documents or any Junior Financing Documentation and, in each case, any Permitted Refinancing thereof, in a principal amount in excess of the Threshold Amount and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 6.02;
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(d) together with the delivery of each Compliance Certificate pursuant to Section 6.02(a), (i) in the case of annual Compliance Certificates only, a report setting forth the information required by sections describing the legal name and the jurisdiction of formation of each Loan Party and the location of the chief executive office of each Loan Party of the Perfection Certificate or confirming that there has been no change in such information since the later of the Closing Date or the date of the last such report, (ii) a description of each event, condition or circumstance during the last fiscal quarter covered by such Compliance Certificate requiring a mandatory prepayment under Section 2.05(b) and (iii) a list of each Subsidiary of the Borrower that identifies each Subsidiary as a Restricted Subsidiary, an Unrestricted Subsidiary, a Securitization Subsidiary or an Excluded Subsidiary as of the date of delivery of such Compliance Certificate or confirmation that there has been no change in such information since the later of the Closing Date or the date of the last such list; and
(e) promptly, such additional information regarding the business, legal, financial or corporate affairs of the Loan Parties or any of their respective Restricted Subsidiaries, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.
The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Lead Arrangers will make available to the Lenders and the L/C Issuers materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on IntraLinks or another similar electronic system (the Platform ) and (b) certain of the Lenders may be public-side Lenders ( i.e. , Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a Public Lender ). The Borrower hereby agrees to make all Borrower Materials that the Borrower intends to be made available to Public Lenders clearly and conspicuously designated as PUBLIC. By designating Borrower Materials as PUBLIC, the Borrower authorizes such Borrower Materials to be made available to a portion of the Platform designated Public Investor, which is intended to contain only information that is either publicly available or not material information (though it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States federal and state securities laws. Notwithstanding the foregoing, the Borrower shall not be under any obligation to mark any Borrower Materials PUBLIC. The Borrower agrees that (i) any Loan Documents, (ii) any financial statements delivered pursuant to Section 6.01 and (iii) any Compliance Certificates delivered pursuant to Section 6.02(a) will be deemed to be public-side Borrower Materials and may be made available to Public Lenders.
Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the Private Side Information or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lenders compliance procedures and applicable law, including United States federal and state securities laws, to make reference to communications that are not made available through the Public Side Information portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States federal or state securities laws.
SECTION 6.03 Notices.
Promptly after a Responsible Officer of the Borrower or any Subsidiary Guarantor has obtained knowledge thereof, notify the Administrative Agent:
(a) of the occurrence of any Default;
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(b) of any matter that has resulted or would reasonably be expected to result in a Material Adverse Effect; and
(c) of the filing or commencement of any action, suit, litigation or proceeding, whether at law or in equity by or before any Governmental Authority, (i) against Holdings, the Borrower or any of its Subsidiaries thereof that would reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document.
Each notice pursuant to this Section 6.03 shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to Sections 6.03(a), (b) or (c) (as applicable) and (y) setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.
SECTION 6.04 Payment of Obligations.
Pay, discharge or otherwise satisfy as the same shall become due and payable in the normal conduct of its business, all its obligations and liabilities in respect of Taxes imposed upon it or upon its income or profits or in respect of its property, except, in each case, (i) to the extent any such Tax is being contested in good faith and by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP or (ii) if such failure to pay or discharge such obligations and liabilities would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 6.05 Preservation of Existence, Etc.
(a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except (x) in a transaction permitted by Sections 7.04 or 7.05 and (y) any Restricted Subsidiary may merge or consolidate with any other Restricted Subsidiary and (b) take all reasonable action to maintain all rights, privileges (including its good standing where applicable in the relevant jurisdiction), permits, licenses and franchises necessary or desirable in the normal conduct of its business, except, in the case of (a) (other than with respect to the Borrower) or (b), (i) to the extent that failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) pursuant to a transaction permitted by Article VII or clause (y) of this Section 6.05.
SECTION 6.06 Maintenance of Properties.
Except if the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, maintain, preserve and protect all of its material tangible or intangible properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and fire, casualty or condemnation excepted.
SECTION 6.07 Maintenance of Insurance.
(a) Generally . Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such
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amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Borrower and the Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons.
(b) Requirements of Insurance . All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 10 days (or, to the extent reasonably available, 30 days) after receipt by the Collateral Agent of written notice thereof (the Borrower shall deliver a copy of the policy (and to the extent any such policy is cancelled or renewed, a renewal or replacement policy) or other evidence thereof to the Administrative Agent and the Collateral Agent, or insurance certificate with respect thereto) and (ii) name the Collateral Agent as mortgagee (in the case of property insurance) or additional insured on behalf of the Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance) (it being understood that, absent an Event of Default, any proceeds of any such property insurance shall be delivered by the insurer(s) to the Borrower or one of its Subsidiaries and applied in accordance with this Agreement), as applicable.
(c) Flood Insurance . With respect to each Mortgaged Property, obtain flood insurance in such total amount as the Administrative Agent or the Required Lenders may from time to time reasonably require, if at any time the area in which any material improvements located on any Mortgaged Property is designated a flood hazard area in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time. Following the Closing Date, the Borrower shall deliver to the Administrative Agent annual renewals of each flood insurance policy or annual renewals of each force-placed flood insurance policy, as applicable. In connection with any amendment to this Agreement pursuant to which any increase, extension, or renewal of Loans is contemplated, the Borrower shall cause to be delivered to the Administrative Agent for any Mortgaged Property, a completed life of the loan Federal Emergency Management Agency Standard Flood Hazard Determination, duly executed and acknowledged by the appropriate Loan Parties, and evidence of flood insurance, as applicable.
SECTION 6.08 Compliance with Laws.
Comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except if the failure to comply therewith could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 6.09 Books and Records.
Maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with GAAP consistently applied and which reflect all material financial transactions and matters involving the assets and business of the Borrower or a Restricted Subsidiary, as the case may be (it being understood and agreed that certain Foreign Subsidiaries maintain individual books and records in conformity with generally accepted accounting principles in their respective countries of organization and that such maintenance shall not constitute a breach of the representations, warranties or covenants hereunder).
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SECTION 6.10 Inspection Rights.
Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such accountants customary policies and procedures), all at the reasonable expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 6.10 and the Administrative Agent shall not exercise such rights more often than two times during any calendar year and only one (1) such time shall be at the Borrowers expense; provided, further, that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent and the Lenders shall give the Borrower the opportunity to participate in any discussions with the Borrowers independent public accountants. Notwithstanding anything to the contrary in this Section 6.10, none of the Borrower nor any Restricted Subsidiary shall be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by Law or (iii) is subject to attorney-client or similar privilege or constitutes attorney work-product.
SECTION 6.11 Additional Collateral; Additional Guarantors.
At the Borrowers expense, take all action either necessary or as reasonably requested by the Administrative Agent or the Collateral Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied, including:
(a) Upon (x) the formation or acquisition of any new direct or indirect wholly owned Domestic Subsidiary (in each case, other than an Excluded Subsidiary) by the Borrower, (y) any Excluded Subsidiary ceasing to constitute an Excluded Subsidiary or (z) the designation in accordance with Section 6.14 of an existing direct or indirect wholly owned Domestic Subsidiary (other than an Excluded Subsidiary) as a Restricted Subsidiary:
(i) within sixty (60) days after such formation, acquisition, cessation or designation, or such longer period as the Administrative Agent may agree in writing in its discretion:
(A) cause each such Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement to duly execute and deliver to the Administrative Agent or the Collateral Agent (as appropriate) joinders to this Agreement as Guarantors, Security Agreement Supplements, intellectual property security agreements, Mortgages, a counterpart of the Intercompany Note, each Intercreditor Agreement, if applicable, and other security agreements and documents (including, with respect to such Mortgages, the documents listed in Section 6.13), as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgages, Security Agreement and other security agreements in effect on the Closing Date), in each case granting Liens required by the Collateral and Guarantee Requirement;
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(B) cause each such Domestic Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement (and the parent of each such Domestic Subsidiary that is a Guarantor) to deliver any and all certificates representing Equity Interests (to the extent certificated) and intercompany notes (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank;
(C) take and cause such Restricted Subsidiary and each direct or indirect parent of such Restricted Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement to take whatever action (including the recording of Mortgages, the filing of Uniform Commercial Code financing statements and intellectual property security agreements, and delivery of stock and membership interest certificates) as may be necessary in the reasonable opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and perfected Liens to the extent required by the Collateral and Guarantee Requirement, and to otherwise comply with the requirements of the Collateral and Guarantee Requirement;
(ii) if reasonably requested by the Administrative Agent or the Collateral Agent, within sixty (60) days after such request (or such longer period as the Administrative Agent may agree in writing in its discretion), deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent and the Lenders, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this Section 6.11(a) as the Administrative Agent may reasonably request;
(iii) as promptly as practicable after the request therefor by the Administrative Agent or Collateral Agent, deliver to the Collateral Agent with respect to each Material Real Property, any existing title reports, abstracts or environmental assessment reports, to the extent available and in the possession or control of the Loan Parties or their respective Subsidiaries; provided, however, that there shall be no obligation to deliver to the Administrative Agent any existing environmental assessment report whose disclosure to the Administrative Agent would require the consent of a Person other than the Loan Parties or one of their respective Subsidiaries, where, despite the commercially reasonable efforts of the Loan Parties or their respective Subsidiaries to obtain such consent, such consent cannot be obtained; and
(iv) if reasonably requested by the Administrative Agent or the Collateral Agent, within sixty (60) days after such request (or such longer period as the Administrative Agent may agree in writing in its discretion), deliver to the Collateral Agent any other items necessary from time to time to satisfy the Collateral and Guarantee Requirement with respect to perfection and existence of security interests with respect to property of any Guarantor acquired after the Closing Date and subject to the Collateral and Guarantee Requirement, but not specifically covered by the preceding clauses (i), (ii) or (iii) or clause (b) below.
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(b) Not later than ninety (90) days after the acquisition by any Loan Party of any Material Real Property as determined by the Borrower (acting reasonably and in good faith) (or such longer period as the Administrative Agent may agree in writing in its discretion) that is required to be provided as Collateral pursuant to the Collateral and Guarantee Requirement, which property would not be automatically subject to another Lien pursuant to pre-existing Collateral Documents, cause such property to be subject to a Lien and Mortgage in favor of the Collateral Agent for the benefit of the Secured Parties and take, or cause the relevant Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect or record such Lien, in each case to the extent required by, and subject to the limitations and exceptions of, the Collateral and Guarantee Requirement and to otherwise comply with the requirements of the Collateral and Guarantee Requirement.
SECTION 6.12 Compliance with Environmental Laws.
Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, comply, and take all commercially reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and Environmental Permits; obtain, maintain and renew all Environmental Permits necessary for its operations and properties; and, in each case to the extent the Loan Parties or Subsidiaries are required by Environmental Laws, conduct any investigation, remedial or other corrective action necessary to address Hazardous Materials at any property or facility in accordance with applicable Environmental Laws.
SECTION 6.13 Further Assurances.
Promptly upon reasonable request by the Administrative Agent (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of any Intercreditor Agreement or any Collateral Document or other document or instrument relating to any Collateral, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent may reasonably request from time to time in order to carry out more effectively the purposes of any Intercreditor Agreement or the Collateral Documents, to the extent required pursuant to the Collateral and Guarantee Requirement. If the Administrative Agent or the Collateral Agent reasonably determines that it is required by applicable Law to have appraisals prepared in respect of the Real Property of any Loan Party subject to a mortgage constituting Collateral, the Borrower shall provide to the Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA.
SECTION 6.14 Designation of Subsidiaries.
The Borrower may at any time designate any Restricted Subsidiary of the Borrower as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Borrower shall be in compliance, on a Pro Forma Basis, with the covenant set forth in Section 7.11 (it being understood that if no Test Period cited in Section 7.11 has passed, the covenant in Section 7.11 for the first Test Period cited in such Section shall be satisfied as of the last four quarters ended) if then in effect, and, as a condition precedent to the effectiveness of any such designation, the Borrower shall deliver to the Administrative Agent a certificate setting forth in reasonable detail the calculations demonstrating
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such compliance, (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a Restricted Subsidiary for the purpose of any Senior Notes Documents or any Junior Financing, as applicable, and (iv) no Restricted Subsidiary may be designated an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary. The designation of any Subsidiary as an Unrestricted Subsidiary after the Closing Date shall constitute an Investment by the Borrower therein at the date of designation in an amount equal to the fair market value of the Borrowers or its Subsidiarys (as applicable) Investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute (i) the incurrence at the time of designation of any Investment, Indebtedness or Liens of such Subsidiary existing at such time and (ii) a return on any Investment by the Borrower in Unrestricted Subsidiaries pursuant to the preceding sentence in an amount equal to the fair market value at the date of such designation of the Borrowers or its Subsidiarys (as applicable) Investment in such Subsidiary.
SECTION 6.15 Maintenance of Ratings.
In respect of the Borrower, use commercially reasonable efforts to (i) cause each Facility to be continuously rated (but not any specific rating) by S&P and Moodys and (ii) maintain a public corporate rating (but not any specific rating) from S&P and a public corporate family rating (but not any specific rating) from Moodys.
SECTION 6.16 Post-Closing Covenants.
Except as otherwise agreed by the Administrative Agent in its sole discretion, the Borrower shall, and shall cause each of the other Loan Parties to, deliver each of the documents, instruments and agreements and take each of the actions set forth on Schedule 6.16 (Post-Closing Covenants) within the time periods set forth therein (or such longer time periods as determined by the Administrative Agent in its sole discretion).
ARTICLE VII
Negative Covenants
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder (other than obligations under Treasury Services Agreements or obligations under Secured Hedge Agreements) which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (unless the Outstanding Amount of the L/C Obligations related thereto has been Cash Collateralized or a backstop letter of credit reasonably satisfactory to the applicable L/C Issuer is in place), then from and after the Closing Date:
SECTION 7.01 Liens.
Neither the Borrower nor the Restricted Subsidiaries shall, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:
(a) Liens pursuant to any Loan Document;
(b) Liens existing on the Closing Date and listed on Schedule 7.01(b) and any modifications, replacements, renewals, refinancings or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or
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incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 7.03, and (B) proceeds and products thereof, and (ii) the replacement, renewal, extension or refinancing of the obligations secured or benefited by such Liens, to the extent constituting Indebtedness, is permitted by Section 7.03;
(c) Liens for Taxes that are not overdue for a period of more than thirty (30) days or that are being contested in good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person to the extent required in accordance with GAAP;
(d) statutory or common law Liens of landlords, sublandlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens that secure amounts not overdue for a period of more than forty-five (45) days or if more than forty-five (45) days overdue, that are unfiled and no other action has been taken to enforce such Lien or that are being contested in good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person to the extent required in accordance with GAAP;
(e) (i) pledges or deposits in the ordinary course of business in connection with workers compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any of its Restricted Subsidiaries;
(f) deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including (i) those to secure health, safety and environmental obligations and (ii) letters of credit and bank guarantees required or requested by any Governmental Authority in connection with any contract or Law) incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions, encroachments, protrusions and other similar encumbrances and minor title defects affecting Real Property, and any exceptions on the Mortgage Policies issued in connection with the Mortgaged Properties, that do not in the aggregate materially interfere with the ordinary conduct of the business of the Borrower or any of its Restricted Subsidiaries, taken as a whole;
(h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);
(i) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Borrower and its Restricted Subsidiaries, taken as a whole or (ii) secure any Indebtedness;
(j) Liens (i) in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and (ii) Liens on specific items of inventory or other goods and proceeds thereof of any Person securing such Persons obligations in respect of bankers acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;
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(k) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business and (iii) in favor of a banking or other financial institution arising as a matter of Law or under customary general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and that are within the general parameters customary in the banking industry or arising pursuant to such banking institutions general terms and conditions;
(l) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Sections 7.02(g), (i) and (n) or, to the extent related to any of the foregoing, Section 7.02(r) to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 7.05, in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;
(m) Liens (i) in favor of the Borrower or a Restricted Subsidiary on assets of a Restricted Subsidiary that is not a Loan Party securing permitted intercompany Indebtedness and (ii) in favor of the Borrower or any Subsidiary Guarantor;
(n) any interest or title of a lessor, sublessor, licensor or sublicensor under leases, subleases, licenses or sublicenses entered into by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business;
(o) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;
(p) Liens deemed to exist in connection with Investments in repurchase agreements under Section 7.02;
(q) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(r) Liens that are contractual rights of set-off or rights of pledge (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any of its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any of its Restricted Subsidiaries in the ordinary course of business;
(s) Liens solely on any cash earnest money deposits made by the Borrower or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
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(t) ground leases in respect of Real Property on which facilities owned or leased by the Borrower or any of its Restricted Subsidiaries are located;
(u) Liens to secure Indebtedness permitted under Section 7.03(e); provided that (i) such Liens are created within 365 days of the acquisition, construction, repair, lease or improvement of the property subject to such Liens, (ii) such Liens do not at any time encumber property (except for replacements, additions and accessions to such property) other than the property financed by such Indebtedness and the proceeds and products thereof and customary security deposits and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for replacements, additions and accessions to such assets) other than the assets subject to such Capitalized Leases and the proceeds and products thereof and customary security deposits; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;
(v) Liens on property (i) of any Subsidiary that is not a Loan Party and (ii) that does not constitute Collateral, which Liens secure Indebtedness of the Borrower or any Restricted Subsidiary permitted under Section 7.03;
(w) Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to Section 6.14), in each case after the Closing Date (other than Liens on the Equity Interests of any Person that becomes a Restricted Subsidiary); provided that (i) such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, (ii) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (iii) the Indebtedness secured thereby is permitted under Section 7.03(g);
(x) (i) zoning, building, entitlement and other land use regulations by Governmental Authorities with which the normal operation of the business complies, and (ii) any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of the Borrower and its Restricted Subsidiaries, taken as a whole;
(y) Liens arising from precautionary Uniform Commercial Code financing statement or similar filings;
(z) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
(aa) the modification, replacement, renewal or extension of any Lien permitted by clauses (u) and (w) of this Section 7.01; provided that (i) the Lien does not extend to any additional property, other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 7.03 (to the extent constituting Indebtedness);
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(bb) [Reserved];
(cc) Liens with respect to property or assets of the Borrower or any of its Restricted Subsidiaries securing obligations in an aggregate principal amount outstanding at any time not to exceed 2.0% of Total Assets, in each case determined as of the date of incurrence;
(dd) Liens to secure Indebtedness permitted under Sections 7.03(q) or 7.03(s); provided that the representative of the holders of each such Indebtedness becomes party to (i) if such Indebtedness is secured by the Collateral on a pari passu basis (but without regard to the control of remedies) with the Obligations, the Junior Lien Intercreditor Agreement as a Senior Representative (as defined in the Junior Lien Intercreditor Agreement) and the First Lien Intercreditor Agreement and (ii) if such Indebtedness is secured by the Collateral on a second priority (or other junior priority) basis to the liens securing the Obligations, the Junior Lien Intercreditor Agreement as a Second Priority Representative (as defined in the Junior Intercreditor Agreement);
(ee) Liens on the Collateral securing obligations in respect of Credit Agreement Refinancing Indebtedness constituting Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt (and any Permitted Refinancing of any of the foregoing); provided that (x) any such Liens securing any Permitted Refinancing in respect of such Permitted First Priority Refinancing Debt are subject to the First Lien Intercreditor Agreement and (y) any such Liens securing any Permitted Refinancing in respect of such Permitted Second Priority Refinancing Debt are subject to the Junior Lien Intercreditor Agreement;
(ff) Liens on specific items of inventory or other goods and the proceeds thereof securing such Persons obligations in respect of documentary letters of credit or bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or goods;
(gg) deposits of cash with the owner or lessor of premises leased and operated by the Borrower or any of its Subsidiaries to secure the performance of the Borrowers or such Subsidiarys obligations under the terms of the lease for such premises;
(hh) Liens on the Securitization Assets arising in connection with a Qualified Securitization Financing; and
(ii) Liens with respect to property or assets of the Borrower and its Restricted Subsidiaries (including accounts receivable or other revenue streams and other rights to payment and any other assets related thereto) in connection with a property managers obligations in respect of hotel collection accounts, operating accounts and reserve accounts.
Notwithstanding the foregoing, no consensual Liens shall exist on Equity Interests that constitute Collateral other than pursuant to clauses (a), (dd) and (ee) above.
SECTION 7.02 Investments.
Neither the Borrower nor the Restricted Subsidiaries shall directly or indirectly, make any Investments, except:
(a) Investments by the Borrower or any of its Restricted Subsidiaries in assets that were Cash Equivalents when such Investment was made;
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(b) loans or advances to officers, directors, managers and employees of any Loan Party (or any direct or indirect parent thereof) or any of its Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such Persons purchase of Equity Interests of Holdings or any direct or indirect parent thereof directly from such issuing entity ( provided that the amount of such loans and advances shall be contributed to the Borrower in cash as common equity) and (iii) for any other purposes not described in the foregoing clauses (i) and (ii); provided that the aggregate principal amount outstanding at any time under clause (iii) above shall not exceed $25,000,000;
(c) Investments by the Borrower or any of its Restricted Subsidiaries in the Borrower or any of its Restricted Subsidiaries or any Person that will, upon such Investment become a Restricted Subsidiary; provided that any Investment made by any Person that is not a Loan Party in any Loan Party pursuant to this clause (c) shall be subordinated in right of payment to the Loans;
(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;
(e) Investments (excluding loans and advances made in lieu of Restricted Payments pursuant to and limited by Section 7.02(m) below) consisting of transactions permitted under Sections 7.01, 7.03 (other than 7.03(c) and (d)), 7.04 (other than 7.04(c), (d) and (e)), 7.05 (other than 7.05(e)), 7.06 (other than 7.06(e) and (i)(iv)) and 7.13, respectively;
(f) Investments (i) existing or contemplated on the Closing Date and set forth on Schedule 7.02(f) and any modification, replacement, renewal, reinvestment or extension thereof and (ii) existing on the Closing Date by the Borrower or any Restricted Subsidiary in the Borrower or any other Restricted Subsidiary and any modification, renewal or extension thereof; provided that the amount of the original Investment is not increased except by the terms of such Investment as of the Closing Date or as otherwise permitted by this Section 7.02;
(g) Investments in Swap Contracts permitted under Section 7.03;
(h) promissory notes and other non-cash consideration received in connection with Dispositions permitted by Section 7.05;
(i) any acquisition of all or substantially all the assets of a Person, or any Equity Interests in a Person that becomes a Restricted Subsidiary or a division or line of business of a Person (or any subsequent Investment made in a Person, division or line of business previously acquired in a Permitted Acquisition), in a single transaction or series of related transactions, if immediately after giving effect thereto: (i) the Borrower and the Restricted Subsidiaries shall be in Pro Forma Compliance with the covenant set forth in Section 7.11 if the covenant set forth in Section 7.11 is then in effect after giving effect to such acquisition or Investment and any related transactions; (ii) any acquired or newly formed Restricted Subsidiary shall not be liable for any Indebtedness except for Indebtedness otherwise permitted by Section 7.03; (iii) to the extent required by the Collateral and Guarantee Requirement, (A) the property, assets and businesses acquired in such purchase or
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other acquisition shall constitute Collateral and (B) any such newly created or acquired Subsidiary (other than an Excluded Subsidiary, Securitization Subsidiary or an Unrestricted Subsidiary) shall become a Guarantor, in each case, in accordance with Section 6.11, and (iv) the aggregate amount of Investments made in Persons that do not become Loan Parties shall not exceed at any time outstanding the sum of (1) 2.0% of Total Assets and (2) so long as the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding such date is at least 2.00 to 1.00, determined on a pro forma basis, the Cumulative Credit at such time (any such acquisition, a Permitted Acquisition );
(j) [Reserved];
(k) Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices;
(l) Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;
(m) loans and advances to the Borrower and any other direct or indirect parent of the Borrower, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), Restricted Payments to the extent permitted to be made to such parent in accordance with Sections 7.06(g), (h) or (i);
(n) other Investments (including for Permitted Acquisitions pursuant to Section 7.02(i)(iv)) in an aggregate amount outstanding pursuant to this clause (n) (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) at any time not to exceed (x) 4.0% of Total Assets (in each case, net of any return in respect thereof, including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) plus (y) so long as the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding such date is at least 2.00 to 1.00, determined on a pro forma basis, the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this clause (y);
(o) advances of payroll payments to employees in the ordinary course of business;
(p) Investments to the extent that payment for such Investments is made solely with Equity Interests (other than Disqualified Equity Interests) of the Borrower (or any direct or indirect parent of the Borrower);
(q) Investments of a Restricted Subsidiary acquired after the Closing Date or of a Person merged or amalgamated or consolidated into the Borrower or merged, amalgamated or consolidated with a Restricted Subsidiary in accordance with Section 7.04 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger or consolidation;
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(r) Investments made by any Restricted Subsidiary that is not a Loan Party to the extent such Investments are financed with the proceeds received by such Restricted Subsidiary from an Investment in such Restricted Subsidiary contemplated pursuant to Section 7.02(i)(iv) or permitted under Section 7.02(n);
(s) Investments constituting the non-cash portion of consideration received in a Disposition permitted by Section 7.05;
(t) Guarantees by the Borrower or any of its Restricted Subsidiaries of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;
(u) (i) Investments in or relating to a Securitization Subsidiary that, in the good faith determination of the Borrower are necessary or advisable to effect any Qualified Securitization Financing (including any contribution of replacement or substitute assets to such subsidiary) or any repurchase obligation in connection therewith and (ii) distributions or payments of Securitization Fees and purchases of Securitization Assets in connection with a Qualified Securitization Financing;
(v) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (v) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities (until such proceeds are converted to Cash Equivalents), not to exceed the greater of $1,000,000,000 and 8.00% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided that any Investment made by any Loan Party pursuant to this clause (v) shall be subordinated in right of payment to the Loans;
(w) any Investment in a Similar Business taken together with all other Investments made pursuant to this clause (w) that are at that time outstanding not to exceed 4.0% of Total Assets (in each case, determined on the date such Investment is made, with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided, however , that if any Investment pursuant to this clause (w) is made in any Person that is not a Restricted Subsidiary of the Borrower at the date of the making of such Investment and such Person becomes a Restricted Subsidiary after such date, such investment shall thereafter be deemed to have been made pursuant to clause (c) above and shall cease to have been made pursuant to this clause (w);
(x) Permitted Intercompany Activities and Investments in Subsidiaries in connection with the Corporate Realignment;
(y) Investments in joint ventures of the Borrower or any of its Restricted Subsidiaries existing on the Closing Date; and
(z) Investments in joint ventures of the Borrower or any of its Restricted Subsidiaries, taken together with all other Investments made pursuant to this clause (z) that are at that time outstanding, not to exceed 2.0% of Total Assets (in each case, determined on the date such Investment is made, with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value).
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SECTION 7.03 Indebtedness.
Neither the Borrower nor any of the Restricted Subsidiaries shall directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party under (i) the Loan Documents and (ii) the Senior Notes Documents in an aggregate principal amount not to exceed $1,500,000,000 and, in the case of this clause (ii), any Permitted Refinancing thereof;
(b) (i) Indebtedness outstanding on the Closing Date and listed on Schedule 7.03(b) and any Permitted Refinancing thereof and (ii) Indebtedness owed to the Borrower or any Restricted Subsidiary outstanding on the Closing Date and any refinancing thereof with Indebtedness owed to the Borrower or any Restricted Subsidiary in a principal amount that does not exceed the principal amount (or accreted value, if applicable) of the intercompany Indebtedness so refinanced; provided that (x) any amount owed by a Restricted Subsidiary that is not a Loan Party to a Loan Party shall be evidenced by an Intercompany Note and (y) all such Indebtedness of any Loan Party owed to any Person or Restricted Subsidiary that is not a Loan Party shall be unsecured and subordinated to the Obligations pursuant to an Intercompany Note;
(c) Guarantees by the Borrower and any Restricted Subsidiary in respect of Indebtedness of the Borrower or any Restricted Subsidiary of the Borrower otherwise permitted hereunder; provided that (A) no Guarantee of any 5 5/8% Senior Notes or any Indebtedness constituting Junior Financing shall be permitted unless such guaranteeing party shall have also provided a Guarantee of the Obligations on the terms set forth herein and (B) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness;
(d) Indebtedness of the Borrower or any Restricted Subsidiary owing to the Borrower or any Restricted Subsidiary (or issued or transferred to any direct or indirect parent of a Loan Party which is substantially contemporaneously transferred to a Loan Party or any Restricted Subsidiary of a Loan Party) to the extent constituting an Investment permitted by Section 7.02; provided that all such Indebtedness of any Loan Party owed to any Person or Restricted Subsidiary that is not a Loan Party shall be evidenced by an Intercompany Note and any such Indebtedness owing to a Restricted Subsidiary that is not a Loan Party is subordinated in right of payment to the Loans (for the avoidance of doubt, any such Indebtedness owing to a Restricted Subsidiary that is not a Loan Party shall be deemed to be expressly subordinated in right of payment to the Loans unless the terms of such Indebtedness expressly provide otherwise);
(e) (i) Attributable Indebtedness and other Indebtedness (including Capitalized Leases) financing an acquisition, construction, repair, replacement, lease or improvement of a fixed or capital asset incurred by the Borrower or any Restricted Subsidiary prior to or within 365 days after the acquisition, construction, repair, replacement, lease or improvement of the applicable asset in an aggregate amount not to exceed 5.0% of Total Assets, in each case determined at the time of incurrence (together with any Permitted Refinancings thereof) at any time outstanding, (ii) Attributable Indebtedness arising out of sale-leaseback transactions permitted by Section 7.05(m) and (iii) any Permitted Refinancing of any of the foregoing;
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(f) Indebtedness in respect of Swap Contracts designed to hedge against the Borrowers or any Restricted Subsidiarys exposure to interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes;
(g) Indebtedness of the Borrower or any Restricted Subsidiary assumed in connection with any Permitted Acquisition so long as such Indebtedness is not incurred in contemplation of such Permitted Acquisition, and any Permitted Refinancing thereof; provided that after giving pro forma effect to such Permitted Acquisition and the assumption of such Indebtedness, the aggregate amount of such Indebtedness does not exceed (x) $100,000,000 at any time outstanding plus (y) any additional amount of such Indebtedness so long (i) if such Indebtedness is secured on a junior basis to the Facilities, the Consolidated Total Net Leverage Ratio determined on a Pro Forma Basis is no greater than 6.15 to 1.00, (ii) if such Indebtedness is secured on a pari passu basis with the Facilities, the Consolidated First Lien Net Leverage Ratio determined on a Pro Forma Basis is no greater than 5.20 to 1.00 or (iii) if such Indebtedness is unsecured, the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom); provided that any such Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party, together with any Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party pursuant to Sections 7.03(q), 7.03(s) or 7.03(w), does not exceed in the aggregate at any time outstanding 4.25% of Total Assets, in each case determined at the time of incurrence;
(h) Indebtedness representing deferred compensation to employees of the Borrower (or any direct or indirect parent thereof) or any of its Restricted Subsidiaries incurred in the ordinary course of business;
(i) Indebtedness consisting of promissory notes issued by the Borrower or any of its Restricted Subsidiaries to current or former officers, managers, consultants, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of the Borrower or any direct or indirect parent of the Borrower permitted by Section 7.06;
(j) Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries in a Permitted Acquisition, any other Investment expressly permitted hereunder or any Disposition, in each case, constituting indemnification obligations or obligations in respect of purchase price (including earnouts) or other similar adjustments;
(k) Indebtedness consisting of obligations of the Borrower or any of its Restricted Subsidiaries under deferred compensation or other similar arrangements incurred by such Person in connection with Permitted Acquisitions or any other Investment expressly permitted hereunder;
(l) obligations in respect of Treasury Services Agreements and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections and similar arrangements in each case in connection with deposit accounts;
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(m) Indebtedness of the Borrower or any of its Restricted Subsidiaries, in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof, would not exceed (x) the greater of $800,000,000 and 4.0% of Total Assets at any time outstanding plus (y) 200% of the cumulative amount of the net cash proceeds and Cash Equivalent proceeds from the sale of Equity Interests (other than Excluded Contributions, proceeds of Disqualified Equity Interests, Designated Equity Contributions or sales of Equity Interests to the Borrower or any of its Subsidiaries) of the Borrower or any direct or indirect parent of the Borrower after the Closing Date and on or prior to such time (including upon exercise of warrants or options) which proceeds have been contributed as common equity to the capital of the Borrower that has not been applied to incur debt pursuant to this clause (m)(y), to make Restricted Payments pursuant to Section 7.06 (other than pursuant to Section 7.06(h)(y)), to make Investments pursuant to clause 7.02(n), (v), (w), (y) or (z) or to make prepayments of subordinated indebtedness pursuant to Section 7.13 (other than 7.13(a)(iv)(y));
(n) Indebtedness consisting of (a) the financing of insurance premiums or (b) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(o) Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries in respect of letters of credit, bank guarantees, bankers acceptances or similar instruments issued or created in the ordinary course of business, including in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 30 days following the incurrence thereof;
(p) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any of its Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;
(q) Indebtedness incurred on (x) a pari passu basis with the Facilities or (y) junior to the Facilities in an aggregate principal amount, when aggregated with the amount of Incremental Term Loans and Incremental Revolving Credit Commitments pursuant to Section 2.14(d)(v)(A), not to exceed $1,500,000,000; provided that such Indebtedness shall (A) in the case of clause (x) above, have a maturity date that is after the Latest Maturity Date at the time such Indebtedness is incurred, and in the case of clause (y) above, have a maturity date that is at least ninety-one (91) days after the Latest Maturity Date at the time such Indebtedness is incurred, (B) in the case of clause (x) above, have a Weighted Average Life to Maturity not shorter than the longest remaining Weighted Average Life to Maturity of the Facilities and, in the case of clause (y) above, shall not be subject to scheduled amortization prior to maturity, (C) if such Indebtedness is incurred or guaranteed on a secured basis by a Loan Party, be subject to the Junior Lien Intercreditor Agreement and, if the Indebtedness is secured on a pari passu basis with the Facilities, be (x) in the form of debt securities and (y) subject to the First Lien Intercreditor Agreement and (D) have terms and conditions (other than pricing, rate floors, discounts, fees, premiums and optional prepayment or redemption provisions) that in the good faith determination of the Borrower are not materially less favorable (when taken as a whole) to the Borrower than the terms and conditions of the Loan Documents (when taken as a whole) ( provided that a certificate of the Borrower as to the satisfaction of the conditions described in this clause (D) delivered at least five (5) Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of
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documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirements of this clause (D), shall be conclusive unless the Administrative Agent notifies the Borrower within such five (5) Business Day period that it disagrees with such determination (including a description of the basis upon which it disagrees)); provided , further , that any such Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party, together with any Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party pursuant to Sections 7.03(g), 7.03(s) or 7.03(w), does not exceed in the aggregate at any time outstanding, 4.25% of Total Assets, in each case determined at the time of incurrence;
(r) Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;
(s) Permitted Ratio Debt and any Permitted Refinancing thereof;
(t) Credit Agreement Refinancing Indebtedness;
(u) [Reserved];
(v) Indebtedness incurred by a Foreign Subsidiary which, when aggregated with the principal amount of all other Indebtedness incurred pursuant to this clause (v) and then outstanding, does not exceed 10% of Foreign Subsidiary Total Assets;
(w) unsecured Indebtedness of the Borrower or any Restricted Subsidiary, so long as the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if such Indebtedness had been incurred and the application of proceeds therefrom had occurred at the beginning of such four-quarter period and without duplication, Permitted Refinancings of such Indebtedness; provided that any such Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party, together with any Indebtedness incurred by a Restricted Subsidiary that is not a Loan Party pursuant to Sections 7.03(g), 7.03(q) or 7.03(s), does not exceed in the aggregate at any time outstanding, 4.25% of Total Assets, in each case determined at the time of incurrence;
(x) Indebtedness arising from Permitted Intercompany Activities; and
(y) all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (x) above.
For purposes of determining compliance with this Section 7.03, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Indebtedness described in clauses (a) through (x) above, the Borrower shall, in its sole discretion, classify or later divide or classify such item of Indebtedness (or any portion thereof) and will only be required to include the amount and type of such Indebtedness in one or more of the above clauses; provided that all Indebtedness outstanding under the Loan Documents and any Senior Notes Documents and, in each case, any Permitted Refinancing thereof, will at all times be deemed to be outstanding in reliance only on the exception in Section 7.03(a).
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SECTION 7.04 Fundamental Changes.
Neither the Borrower nor any of the Restricted Subsidiaries shall merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that:
(a) any Restricted Subsidiary may merge, amalgamate or consolidate with (i) the Borrower (including a merger, the purpose of which is to reorganize the Borrower into a new jurisdiction); provided that the Borrower shall be the continuing or surviving Person and such merger does not result in the Borrower ceasing to be a corporation, partnership or limited liability company organized under the Laws of the United States, any state thereof or the District of Columbia or (ii) one or more other Restricted Subsidiaries; provided that when any Person that is a Loan Party is merging with a Restricted Subsidiary, a Loan Party shall be the continuing or surviving Person;
(b) (i) any Subsidiary that is not a Loan Party may merge, amalgamate or consolidate with or into any other Subsidiary that is not a Loan Party and (ii) any Subsidiary may liquidate or dissolve or the Borrower or any Subsidiary may change its legal form (x) if the Borrower determines in good faith that such action is in the best interest of the Borrower and its Subsidiaries and if not materially disadvantageous to the Lenders and (y) to the extent such Restricted Subsidiary is a Loan Party, any assets or business not otherwise disposed of or transferred in accordance with Sections 7.02 (other than 7.02(e)) or 7.05 or, in the case of any such business, discontinued, shall be transferred to otherwise owned or conducted by another Loan Party after giving effect to such liquidation or dissolution (it being understood that in the case of any change in legal form, a Subsidiary that is a Guarantor will remain a Guarantor unless such Guarantor is otherwise permitted to cease being a Guarantor hereunder);
(c) any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Restricted Subsidiary; provided that if the transferor in such a transaction is a Guarantor, then (i) the transferee must be a Guarantor or the Borrower or (ii) to the extent constituting an Investment, such Investment must be a permitted Investment in or Indebtedness of a Restricted Subsidiary that is not a Loan Party in accordance with Sections 7.02 and 7.03, respectively; and
(d) so long as no Default exists or would result therefrom, the Borrower may merge or consolidate with any other Person; provided that (i) the Borrower shall be the continuing or surviving corporation or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the Successor Company ), (A) the Successor Company shall be an entity organized or existing under the Laws of the United States, any state thereof, the District of Columbia or any territory thereof, (B) the Successor Company shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each Guarantor, unless it is the other party to such merger or consolidation, shall have confirmed that its Guaranty shall apply to the Successor Companys obligations under the Loan Documents, (D) each Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement and other applicable Collateral Documents confirmed that its obligations thereunder shall apply to the Successor Companys obligations under the Loan Documents, (E) if requested by the Administrative Agent, each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation,
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shall have by an amendment to or restatement of the applicable Mortgage (or other instrument reasonably satisfactory to the Administrative Agent) confirmed that its obligations thereunder shall apply to the Successor Companys obligations under the Loan Documents, and (F) the Borrower shall have delivered to the Administrative Agent an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document preserves the enforceability of this Agreement, the Guaranty and the Collateral Documents and the perfection of the Liens under the Collateral Documents; provided , further , that if the foregoing are satisfied, the Successor Company will succeed to, and be substituted for, the Borrower under this Agreement; and
(e) so long as no Default exists or would result therefrom (in the case of a merger involving a Loan Party), any Restricted Subsidiary may merge or consolidate with any other Person in order to effect an Investment permitted pursuant to Section 7.02; provided that the continuing or surviving Person shall be a Restricted Subsidiary or the Borrower, which together with each of its Restricted Subsidiaries, shall have complied with the requirements of Section 6.11 to the extent required pursuant to the Collateral and Guarantee Requirement;
(f) so long as no Default exists or would result therefrom, a merger, dissolution, liquidation, consolidation or Disposition, the purpose of which is to effect a Disposition permitted pursuant to Section 7.05; and
(g) the Borrower and its Subsidiaries may consummate Permitted Intercompany Activities and the Timeshare Disposition (individually or in the aggregate) and the Corporate Realignment.
SECTION 7.05 Dispositions.
Neither the Borrower nor any of the Restricted Subsidiaries shall, directly or indirectly, make any Disposition, except:
(a) (i) Dispositions of obsolete, worn out or surplus property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions of property no longer used or useful in the conduct of the business of the Borrower or any of its Restricted Subsidiaries and (ii) Dispositions of property no longer used or useful in the conduct of the business of the Borrower and its Restricted Subsidiaries outside the ordinary course of business (and for consideration complying with the requirements applicable to Dispositions pursuant to clause (j) below) in an aggregate amount not to exceed $25,000,000;
(b) Dispositions of inventory or goods (or other assets, including timeshare and residential assets, furniture and equipment) held for sale and immaterial assets (including allowing any registrations or any applications for registration of any immaterial intellectual property to lapse or go abandoned in the ordinary course of business), in each case, in the ordinary course of business;
(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property;
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(d) Dispositions of property to the Borrower or any Restricted Subsidiary; provided that if the transferor of such property is a Loan Party, (i) the transferee thereof must be a Loan Party or (ii) if such transaction constitutes an Investment, such transaction is permitted under Section 7.02;
(e) to the extent constituting Dispositions, transactions permitted by Sections 7.01, 7.02 (other than Section 7.02(e)), 7.04 (other than Section 7.04(f)) and 7.06;
(f) any conversions of hotel properties into timeshare or residential properties and the sale or other disposition of assets created in such conversions;
(g) Dispositions of Cash Equivalents;
(h) (i) leases, subleases, licenses or sublicenses (including the provision of software under an open source license), in each case in the ordinary course of business and which do not materially interfere with the business of the Borrower or any of its Restricted Subsidiaries and (ii) Dispositions of intellectual property that do not materially interfere with the business of the Borrower or any of its Restricted Subsidiaries so long as the Borrower or any of its Restricted Subsidiaries receives a license or other ownership rights to use such intellectual property;
(i) transfers of property subject to Casualty Events upon receipt of the Net Proceeds of such Casualty Event;
(j) Dispositions of property; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Default exists), no Default shall exist or would result from such Disposition and (ii) with respect to any Disposition pursuant to this clause (j) for a purchase price in excess of $100,000,000, the Borrower or any of its Restricted Subsidiaries shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Sections 7.01(a), (f), (k), (p), (q), (r)(i), (r)(ii), (dd) (only to the extent the Obligations are secured by such cash and Cash Equivalents) and (ee) (only to the extent the Obligations are secured by such cash and Cash Equivalents); provided, however , that for the purposes of this clause (j)(ii), the following shall be deemed to be cash: (A) any liabilities (as shown on the Borrowers (or the Restricted Subsidiaries, as applicable) most recent balance sheet provided hereunder or in the footnotes thereto) of Holdings or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Borrower and all of its Restricted Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by the Borrower or the applicable Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of the applicable Disposition, and (C) aggregate non-cash consideration received by the Borrower or the applicable Restricted Subsidiary having an aggregate fair market value (determined as of the closing of the applicable Disposition for which such non-cash consideration is received) not to exceed 4.00% of Total Assets at any time (net of any non-cash consideration converted into cash and Cash Equivalents);
(k) any Disposition of Securitization Assets (or of the Equity Interests in a Subsidiary, substantially all of the assets of which are Securitization Assets) to a Securitization Subsidiary;
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(l) Dispositions or discounts without recourse of accounts receivable in connection with the compromise or collection thereof in the ordinary course of business;
(m) Dispositions of property pursuant to sale-leaseback transactions; provided that the fair market value of all property so Disposed of after the Closing Date shall not exceed $100,000,000;
(n) any swap of assets in exchange for services or other assets of comparable or greater value or usefulness to the business of the Borrower and its Subsidiaries as a whole, as determined in good faith by the management of the Borrower;
(o) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary (or a Restricted Subsidiary which owns an Unrestricted Subsidiary so long as such Restricted Subsidiary owns no assets other than the Equity Interests of such an Unrestricted Subsidiary) and;
(p) the unwinding of any Swap Contract pursuant to its terms;
(q) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;
(r) the lapse or abandonment in the ordinary course of business of any registrations or applications for registration of any immaterial IP Rights;
(s) Permitted Intercompany Activities and Dispositions to or among Subsidiaries in connection with the Corporate Realignment; and
(t) the Timeshare Disposition (individually or in the aggregate);
provided that any Disposition of any property pursuant to this Section 7.05 (except pursuant to Sections 7.05(e), (i), (k), (p), (r) and (s) and except for Dispositions from a Loan Party to any other Loan Party) shall be for no less than the fair market value of such property at the time of such Disposition. To the extent any Collateral is Disposed of as expressly permitted by this Section 7.05 to any Person other than a Loan Party, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and the Administrative Agent or the Collateral Agent, as applicable, shall be authorized to take any actions deemed appropriate in order to effect the foregoing.
SECTION 7.06 Restricted Payments.
Neither the Borrower nor any of the Restricted Subsidiaries shall declare or make, directly or indirectly, any Restricted Payment, except:
(a) each Restricted Subsidiary may make Restricted Payments to the Borrower, and other Restricted Subsidiaries of the Borrower (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Borrower and any other Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests);
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(b) the Borrower and each Restricted Subsidiary may declare and make Restricted Payments payable solely in the Equity Interests (other than Disqualified Equity Interests not otherwise permitted by Section 7.03) of such Person;
(c) [Reserved];
(d) so long as no Event of Default has occurred and is continuing or would result therefrom, the Borrower and its Restricted Subsidiaries may make Restricted Payments in an unlimited amount so long as the Consolidated Total Net Leverage Ratio calculated on a Pro Forma Basis is less than or equal to 4.00 to 1.00;
(e) to the extent constituting Restricted Payments, the Borrower and its Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Sections 7.02 (other than 7.02(e) and (m)), 7.04 or 7.08 (other than Sections 7.08(e) or 7.08(j));
(f) repurchases of Equity Interests in the Borrower (or any direct or indirect parent thereof) or any Restricted Subsidiary of the Borrower deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;
(g) the Borrower and each Restricted Subsidiary may pay (or make Restricted Payments to allow the Borrower or any other direct or indirect parent thereof to pay) for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of such Restricted Subsidiary (or of the Borrower or any other such direct or indirect parent thereof) from any future, present or former employee, officer, director, manager or consultant of such Restricted Subsidiary (or the Borrower or any other direct or indirect parent of such Restricted Subsidiary) or any of its Subsidiaries upon the death, disability, retirement or termination of employment of any such Person or pursuant to any employee or director equity plan, employee, manager or director stock option plan or any other employee or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee, manager, director, officer or consultant of such Restricted Subsidiary (or the Borrower or any other direct or indirect parent thereof) or any of its Restricted Subsidiaries; provided that the aggregate amount of Restricted Payments made pursuant to this clause (g) shall not exceed $75,000,000 in any calendar year (which shall increase to $150,000,000 subsequent to the consummation of a Qualified IPO) (with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum of $150,000,000 in any calendar year or $400,000,000 subsequent to the consummation of a Qualified IPO, respectively); provided , further , that such amount in any calendar year may be increased by an amount not to exceed:
(i) to the extent contributed to the Borrower, the Net Proceeds from the sale of Equity Interests (other than Disqualified Equity Interests) of any of the Borrowers direct or indirect parent companies, in each case to members of management, managers, directors or consultants of Holdings, the Borrower, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Closing Date, to the extent Net Proceeds from the sale of such Equity Interests have been Not Otherwise Applied; plus
(ii) the Net Proceeds of key man life insurance policies received by the Borrower or its Restricted Subsidiaries; less
(iii) the amount of any Restricted Payments previously made with the cash proceeds described in clause (i) and (ii) of this Section 7.06(g);
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(h) the Borrower may make Restricted Payments in an aggregate amount not to exceed, when combined with prepayment of Indebtedness pursuant to Section 7.13(a)(iv), (x) 3.00% of Total Assets, plus (y) so long as no Default has occurred and is continuing or would result therefrom and the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding such date is at least 2.00 to 1.00, determined on a pro forma basis, the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this paragraph;
(i) the Borrower may make Restricted Payments to any direct or indirect parent of the Borrower:
(i) to pay its operating costs and expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal, accounting and similar expenses provided by third parties), which are reasonable and customary and incurred in the ordinary course of business and attributable to the ownership or operations of the Borrower and its Restricted Subsidiaries and, Transaction Expenses and any reasonable and customary indemnification claims made by directors, managers or officers of such parent attributable to the ownership or operations of the Borrower and its Restricted Subsidiaries;
(ii) the proceeds of which shall be used by such parent to pay franchise Taxes and other fees, Taxes and expenses required to maintain its (or any of its direct or indirect parents) corporate existence;
(iii) for any taxable period ending after the Closing Date (A) in which the Borrower and/or any of its Subsidiaries is a member of a consolidated, combined, unitary or similar Tax group (a Tax Group ) of which a direct or indirect parent of Borrower is the common parent or (B) in which the Borrower is treated as a disregarded entity or partnership for U.S. federal, state and/or local income tax purposes, to pay U.S. federal, state and local and foreign Taxes that are attributable to the taxable income, revenue, receipts, gross receipts, gross profits, capital or margin of the Borrower and/or its Subsidiaries; provided that for each taxable period, the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount of such Taxes that the Borrower and its Subsidiaries would have been required to pay if they were a stand-alone Tax Group with the Borrower as the corporate common parent of such stand-alone Tax Group; provided , further , that the permitted payment pursuant to this clause (iii) with respect to any Taxes of any Unrestricted Subsidiary shall be limited to the amount actually paid with respect to such period by such Unrestricted Subsidiary to the Borrower or its Restricted Subsidiaries for the purposes of paying such consolidated, combined unitary or similar Taxes;
(iv) to finance any Investment that would be permitted to be made pursuant to Section 7.02 if such parent were subject to such Section; provided that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (B) such parent shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or the
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Restricted Subsidiaries or (2) the merger (to the extent permitted in Section 7.04) of the Person formed or acquired into the Borrower or its Restricted Subsidiaries in order to consummate such Permitted Acquisition or Investment, in each case, in accordance with the requirements of Section 6.11;
(v) the proceeds of which shall be used to pay customary salary, bonus and other benefits payable to officers and employees of Holdings or any direct or indirect parent company of Holdings to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries; and
(vi) the proceeds of which shall be used by Holdings to pay (or to make Restricted Payments to allow any direct or indirect parent thereof to pay) fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering by Holdings (or any direct or indirect parent thereof) that is directly attributable to the operations of the Borrower and its Restricted Subsidiaries;
(j) payments made or expected to be made by the Borrower or any of the Restricted Subsidiaries in respect of required withholding or similar non-US Taxes with respect to any future, present or former employee, director, manager or consultant and any repurchases of Equity Interests in consideration of such payments including deemed repurchases in connection with the exercise of stock options;
(k) the Borrower or any Restricted Subsidiary may (i) pay cash in lieu of fractional Equity Interests in connection with any dividend, split or combination thereof or any Permitted Acquisition and (ii) honor any conversion request by a holder of convertible Indebtedness and make cash payments in lieu of fractional shares in connection with any such conversion and may make payments on convertible Indebtedness in accordance with its terms;
(l) after a Qualified IPO, (i) any Restricted Payment by the Borrower or any other direct or indirect parent of the Borrower to pay listing fees and other costs and expenses attributable to being a publicly traded company which are reasonable and customary and (ii) Restricted Payments not to exceed the sum of (A) up to 6% per annum of the net proceeds received by (or contributed to) the Borrower and its Restricted Subsidiaries from such Qualified IPO and (B) Restricted Payments in an aggregate amount per annum not to exceed (x) 3.50% of Market Capitalization, if, on a Pro Forma Basis after giving effect to the payment of any such Restricted Payment, the Consolidated Total Net Leverage Ratio is greater than 5.50 to 1.00 and (y) 4.75% of Market Capitalization, so long as, on a Pro Forma Basis after giving effect to the payment of any such Restricted Payment, the Consolidated Total Net Leverage Ratio shall be less than or equal to 5.50 to 1.00;
(m) distributions or payments of Securitization Fees;
(n) Restricted Payments that are made with the net proceeds of the Timeshare Disposition; provided that for the most recently ended Test Period immediately preceding the date of such Restricted Payment, after giving effect to the Timeshare Disposition and such Restricted Payment on a Pro Forma Basis, the Consolidated Total Net Leverage Ratio is less than or equal to 5.40 to 1.00;
(o) the distribution, by dividend or otherwise, of Equity Interests of, or Indebtedness owed to the Borrower or a Restricted Subsidiary by an Unrestricted Subsidiary (or a Restricted
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Subsidiary that owns an Unrestricted Subsidiary); provided that such Restricted Subsidiary owns no assets other than Equity Interests of an Unrestricted Subsidiary (other than Unrestricted Subsidiaries the primary assets of which are cash and/or Cash Equivalents); and
(p) Restricted Payments that are made (i) in an amount equal to the amount of Excluded Contributions previously received or (ii) without duplication with clause (i), in an amount equal to the Net Proceeds from a Disposition in respect of property or assets acquired after the Closing Date, if the acquisition of such property or assets was financed with Excluded Contributions.
SECTION 7.07 Change in Nature of Business.
The Borrower shall not, nor shall the Borrower permit any of the Restricted Subsidiaries to, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by the Borrower and the Restricted Subsidiaries on the Closing Date or any business reasonably related, complementary, synergistic or ancillary thereto or reasonable extensions thereof.
SECTION 7.08 Transactions with Affiliates.
Neither the Borrower shall, nor shall the Borrower permit any of the Restricted Subsidiaries to, directly or indirectly, enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than (a) loans and other transactions among the Borrower and its Restricted Subsidiaries and Securitization Subsidiaries or any entity that becomes a Restricted Subsidiary or Securitization Subsidiary as a result of such loan or other transaction to the extent permitted under this Article VII, (b) on terms substantially as favorable to the Borrower or such Restricted Subsidiary as would be obtainable by the Borrower or such Restricted Subsidiary at the time in a comparable arms-length transaction with a Person other than an Affiliate, (c) the Transactions and the payment of Transaction Expenses as part of or in connection with the Transactions, (d) so long as no Event of Default under Sections 8.01(a) or (f) has occurred and is continuing, the payment of management, monitoring, consulting, transaction, termination and advisory fees in an aggregate amount pursuant to the Investor Management Agreement and related indemnities and reasonable expenses, (e) Restricted Payments permitted under Section 7.06 and Investments permitted under Section 7.02, (f) employment and severance arrangements between the Borrower and its Restricted Subsidiaries and their respective officers and employees in the ordinary course of business and transactions pursuant to stock option plans and employee benefit plans and arrangements in the ordinary course of business, (g) the payment of customary fees and reasonable out of pocket costs to, and indemnities provided on behalf of, directors, managers, officers, employees and consultants of the Borrower and its Restricted Subsidiaries (or any direct or indirect parent of the Borrower) in the ordinary course of business to the extent attributable to the ownership or operation of the Borrower and its Restricted Subsidiaries, (h) transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 7.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (i) customary payments by the Borrower and any of its Restricted Subsidiaries to the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by the majority of the members of the board of directors or managers or a majority of the disinterested members of the board of directors or managers of the Borrower, in good faith, (j) payments by the Borrower or any of its Subsidiaries pursuant to any tax sharing agreements with any direct or indirect parent of the Borrower to the extent attributable to the ownership or operation of the
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Borrower and the Subsidiaries, but only to the extent permitted by Section 7.06(i)(iii), (k) the issuance or transfer of Equity Interests (other than Disqualified Equity Interests) of Holdings to any Permitted Holder or to any former, current or future director, manager, officer, employee or consultant (or any Affiliate of any of the foregoing) of the Borrower, any of its Subsidiaries or any direct or indirect parent thereof, (l) any Disposition of Securitization Assets or related assets in connection with any Qualified Securitization Financing, (m) Permitted Intercompany Activities, (n) transactions among Subsidiaries in connection with the Corporate Realignment and related transactions or (o) a joint venture which would constitute a transaction with an Affiliate solely as a result of the Borrower or any Restricted Subsidiary owning an equity interest or otherwise controlling such joint venture or similar entity.
SECTION 7.09 Burdensome Agreements.
The Borrower shall not, nor shall the Borrower permit any of the Restricted Subsidiaries to, enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of (a) any Restricted Subsidiary of the Borrower that is not a Guarantor to make Restricted Payments to the Borrower or any Guarantor or to make or repay intercompany loans and advances to the Borrower or any Guarantor or (b) any Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Lenders with respect to the Facilities and the Obligations or under the Loan Documents; provided that the foregoing clauses (a) and (b) shall not apply to Contractual Obligations which (i)(x) exist on the Closing Date and (to the extent not otherwise permitted by this Section 7.09) are listed on Schedule 7.09 hereto and (y) to the extent Contractual Obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted modification, replacement, renewal, extension or refinancing of such Indebtedness so long as such modification, replacement, renewal, extension or refinancing does not expand the scope of such Contractual Obligation, (ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of the Borrower, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of the Borrower; provided, further, that this clause (ii) shall not apply to Contractual Obligations that are binding on a Person that becomes a Restricted Subsidiary pursuant to Section 6.14, (iii) represent Indebtedness of a Restricted Subsidiary of the Borrower which is not a Loan Party which is permitted by Section 7.03, (iv) arise in connection with any Disposition permitted by Sections 7.04 or 7.05 and relate solely to the assets or Person subject to such Disposition, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 7.02 and applicable solely to such joint venture entered into in the ordinary course of business, (vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under Section 7.03 but solely to the extent any negative pledge relates to the property financed by such Indebtedness, (vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto, (viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Section 7.03(e), (g) or (m) and to the extent that such restrictions apply only to the property or assets securing such Indebtedness or to the Restricted Subsidiaries incurring or guaranteeing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Restricted Subsidiary, (x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business, (xii) arise in connection with cash or other deposits permitted under Sections 7.01 and 7.02 and limited to such cash or deposit and (xiii) are customary restrictions contained in any Senior Notes Documents or any Permitted Refinancing thereof.
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SECTION 7.10 Use of Proceeds.
The proceeds of the Term Loans received on the Closing Date, together with the proceeds of the issuance of the 5 5/8% Senior Notes received on the Closing Date shall not be used for any purpose other than for the Transactions. The proceeds of the Revolving Credit Loans on the Closing Date, if any, will be used to finance the Transactions and fees and expenses related to the Transactions, for working capital needs and general corporate purposes. After the Closing Date, the proceeds of the Revolving Credit Loans and Swing Line Loans shall be used for working capital, general corporate purposes and any other purpose not prohibited by this Agreement, including Permitted Acquisitions and other Investments. The Letters of Credit shall be used solely to support obligations of the Borrower and its Subsidiaries incurred for working capital, general corporate purposes and any other purpose not prohibited by this Agreement.
SECTION 7.11 Financial Covenant.
The Borrower will not permit the Consolidated First Lien Net Leverage Ratio as of the last day of a Test Period (commencing with the Test Period ending June 30, 2014) to exceed 7.90 to 1.00 ( provided that the provisions of this Section 7.11 shall not be applicable to any such Test Period if on the last day of such Test Period the aggregate principal amount of Revolving Credit Loans, Swing Line Loans and/or Letters of Credit (excluding up to $50,000,000 of Letters of Credit and other Letters of Credit which have been Cash Collateralized or backstopped by a letter of credit reasonably satisfactory to the applicable L/C Issuer) that are issued and/or outstanding is equal to or less than 25% of the Revolving Credit Facility):
SECTION 7.12 Accounting Changes.
The Borrower shall not make any change in its fiscal year; provided , however , that the Borrower may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.
SECTION 7.13 Prepayments, Etc. of Indebtedness.
(a) The Borrower shall not, nor shall the Borrower permit any of the Restricted Subsidiaries to, directly or indirectly, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner (it being understood that payments of regularly scheduled principal and interest shall be permitted), any subordinated Indebtedness incurred under Section 7.03(g) or any other Indebtedness that is or is required to be subordinated, in right of payment or as to Collateral, to the Obligations pursuant to the terms of the Loan Documents (collectively, Junior Financing ) or make any payment in violation of any subordination terms of any Junior Financing Documentation, except (i) the refinancing thereof with the Net Proceeds of any Indebtedness (to the extent such Indebtedness constitutes a Permitted Refinancing and, if such Indebtedness was originally incurred under Section 7.03(g), is permitted pursuant to Section 7.03(g)), to the extent not required to prepay any Loans pursuant to Section 2.05(b), (ii) the conversion of any Junior Financing to Equity Interests (other than Disqualified Equity Interests) of Holdings or any of
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its direct or indirect parents, (iii) the prepayment of Indebtedness of the Borrower or any Restricted Subsidiary to the Borrower or any Restricted Subsidiary to the extent not prohibited by the subordination provisions contained in the Intercompany Note and (iv) prepayments, redemptions, purchases, defeasances and other payments in respect of Junior Financings prior to their scheduled maturity in an aggregate amount not to exceed, when combined with the amount of Restricted Payments pursuant to Section 7.06(h), (x) 3.00% of Total Assets plus (y) so long as the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding such date is at least 2.00 to 1.00, determined on a pro forma basis, the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this paragraph.
(b) The Borrower shall not, nor shall it permit any of the Restricted Subsidiaries to amend, modify or change in any manner materially adverse to the interests of the Lenders any term or condition of any Junior Financing Documentation without the consent of the Administrative Agent (which consent shall not be unreasonably withheld, conditioned or delayed).
SECTION 7.14 Permitted Activities.
Holdings shall not engage in any material operating or business activities; provided that the following and activities incidental thereto shall be permitted in any event: (i) its ownership of the Equity Interests of Borrower and activities incidental thereto, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Loan Documents, the Senior Notes Documents and any other Indebtedness, (iv) any public offering of its common stock or any other issuance or sale of its Equity Interests, (v) financing activities, including the issuance of securities, incurrence of debt, payment of dividends, making contributions to the capital of the Borrower, guaranteeing the obligations of the Borrower and guaranteeing the obligations of any Securitization Subsidiary in an amount not to exceed $450,000,000, (vi) participating in tax, accounting and other administrative matters as owner of the Borrower, (vii) holding any cash incidental to any activities permitted under this Section 7.14, (viii) providing indemnification to officers, managers and directors and (ix) any activities incidental to the foregoing. Holdings shall not incur any Liens on Equity Interests of the Borrower other than those for the benefit of the Obligations or any comparable term in any Permitted Refinancing thereof and Holdings shall not own any Equity Interests other than those of the Borrower.
Notwithstanding anything to the contrary in Article VII of this Agreement, if on any date (i) the Loans have an Investment Grade Rating from either of the Rating Agencies and (ii) no Default has occurred and is continuing (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a Covenant Suspension Event ), then, beginning on such date and continuing so long as the Loans have an Investment Grade Rating, Sections 7.03, 7.06 and 7.08 (the Suspended Covenants ) will no longer be applicable to the Loans during such period (the Suspension Period ) until the occurrence of the Reversion Date.
In the event that the Borrower and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the Reversion Date ) (a) one or more of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Loans below an Investment Grade Rating (leaving neither of the Rating Agencies with an Investment Grade Rating for the Loans) and/or (b) the Borrower enters into an agreement to effect a transaction that would result in a Change of Control and one or more of
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the Rating Agencies indicate that if consummated, such transaction (alone or together with any related recapitalization or refinancing transactions) would cause such Rating Agency to withdraw its Investment Grade Rating or downgrade the ratings assigned to the Loans below an Investment Grade Rating (in either case leaving neither of the Rating Agencies with an Investment Grade Rating for the Loans), then the Borrower and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants with respect to future events, including, without limitation, a proposed transaction described in clause (b) above.
During a Suspension Period, the Borrower and its Restricted Subsidiaries will be entitled to consummate transactions to the extent not prohibited hereunder without giving effect to the Suspended Covenants. During a Suspension Period, the covenants that are not Suspended Covenants shall be interpreted as though the Suspended Covenants continue to be applicable during such Suspension Period. For illustrative purposes only, even though Section 7.03 will not be in effect during a Suspension Period, Section 7.01(dd) will be interpreted as though Section 7.03(q) were still in effect during such Suspension Period.
Notwithstanding the foregoing, in the event of any such reinstatement, no action taken or omitted to be taken by Holdings, the Borrower or any of its Restricted Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under this Agreement or any other Loan Document; provided that (1) with respect to Restricted Payments made after such reinstatement, the amount available to be made as Restricted Payments will be calculated as though the covenant described above under Section 7.06 had been in effect prior to, but not during, the Suspension Period; and (2) all Indebtedness incurred, or Disqualified Equity Interests issued, during the Suspension Period will be classified to have been incurred or issued pursuant to Section 7.03(b)(i); and (3) any transaction with an Affiliate entered into after such reinstatement pursuant to an agreement entered into during any Suspension Period shall be deemed to be permitted pursuant to Section 7.08(h).
ARTICLE VIII
Events of Default and Remedies
SECTION 8.01 Events of Default.
Any of the following from and after the Closing Date shall constitute an event of default (an Event of Default ):
(a) Non-Payment. Any Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document; or
(b) Specific Covenants. The Borrower, any Restricted Subsidiary or, in the case of Section 7.14, Holdings, fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a) or 6.05(a) (solely with respect to the Borrower) or Article VII; provided that a Default as a result of a breach of Section 7.11 (a Financial Covenant Event of Default ) is subject to cure pursuant to Section 8.05; provided , further , that a Financial Covenant Event of Default shall not constitute an Event of Default with respect to any Term Loans unless and until the Revolving Credit Lenders have declared all amounts outstanding under the Revolving Credit Facility to be immediately due and payable and all outstanding Revolving Credit Commitments to be immediately terminated, in each case in accordance with this Agreement and such declaration has not been rescinded on or before such date (the Term Loan Standstill Period ); or
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(c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Sections 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after written notice thereof by the Administrative Agent to the Borrower; or
(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect in any material respect when made or deemed made; or
(e) Cross-Default. Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period with respect thereto, if any, (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Indebtedness hereunder) having an outstanding aggregate principal amount of not less than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness, or any other event occurs (other than, with respect to Indebtedness consisting of Swap Agreement, termination events or equivalent events pursuant to the terms of such Swap Agreements), the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; or
(f) Insolvency Proceedings, Etc. Any Loan Party or any Restricted Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Restricted Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of the Loan Parties, taken as a whole, and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or
(h) Judgments. There is entered against any Loan Party or any Restricted Subsidiary a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold
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Amount (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied coverage) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of sixty (60) consecutive days; or
(i) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under Sections 7.04 or 7.05) or as a result of acts or omissions by the Administrative Agent or Collateral Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Loan Document or the validity or priority of a Lien as required by the Collateral Documents on a material portion of the Collateral; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Aggregate Commitments), or purports in writing to revoke or rescind any Loan Document; or
(j) Change of Control. There occurs any Change of Control; or
(k) Collateral Documents. (i) Any Collateral Document after delivery thereof pursuant to Section 4.01 or Sections 6.11 or 6.13 shall for any reason (other than pursuant to the terms thereof including as a result of a transaction not prohibited under this Agreement) cease to create a valid and perfected Lien, with the priority required by the Collateral Documents and the Intercreditor Agreements on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 7.01, (x) except to the extent that any such perfection or priority is not required pursuant to the Collateral and Guarantee Requirement or any loss thereof results from the failure of the Administrative Agent or the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file Uniform Commercial Code continuation statements and (y) except as to Collateral consisting of Real Property to the extent that such losses are covered by a lenders title insurance policy and such insurer has not denied coverage, or (ii) any of the Equity Interests of the Borrower shall for any reason cease to be pledged pursuant to the Collateral Documents; or
(l) ERISA. (i) An ERISA Event occurs which has resulted or could reasonably be expected to result in liability of a Loan Party or a Restricted Subsidiary or any ERISA Affiliate in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, or (ii) a Loan Party, any Restricted Subsidiary or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect; or
(m) Junior Financing Documentation . (i) Any of the Obligations of the Loan Parties under the Loan Documents for any reason shall cease to be (A) Senior Debt, Senior Indebtedness, Guarantor Senior Debt or Senior Secured Financing (or any comparable term) under, and as defined in, any Junior Financing Documentation and (B) First Lien Obligations (or any comparable term) under, and as defined in, the Junior Lien Intercreditor Agreement under, and as defined in any Junior Financing Documentation or (ii) the subordination provisions set forth in any Junior Financing Documentation shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against the holders of any Junior Financing, if applicable.
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SECTION 8.02 Remedies Upon Event of Default.
If any Event of Default occurs and is continuing, the Administrative Agent may and, at the request of the Required Lenders, shall take any or all of the following actions (or, if a Financial Covenant Event of Default occurs and is continuing and prior to the expiration of the Term Loan Standstill Period, at the request of the Required Revolving Credit Lenders under the Revolving Credit Facility only, and in such case only with respect to the Revolving Credit Commitments, Swing Line Loans, and any Letters of Credit):
(i) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;
(ii) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;
(iii) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and
(iv) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;
provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
SECTION 8.03 Exclusion of Immaterial Subsidiaries.
Solely for the purpose of determining whether a Default or Event of Default has occurred under clause (f) or (g) of Section 8.01, any reference in any such clause to any Restricted Subsidiary or Loan Party shall be deemed not to include any Restricted Subsidiary (an Immaterial Subsidiary ) affected by any event or circumstances referred to in any such clause that did not, as of the last day of the most recent completed fiscal quarter of the Borrower, have assets with a fair market value in excess of 2.5% of Total Assets (it being agreed that all Restricted Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether the condition specified above is satisfied).
SECTION 8.04 Application of Funds.
After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been
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required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order (to the fullest extent permitted by mandatory provisions of applicable Law):
First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.04 and amounts payable under Article III) payable to the Administrative Agent or the Collateral Agent in its capacity as such;
Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs payable under Section 10.04 and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;
Third , to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and L/C Borrowings, and any fees, premiums and scheduled periodic payments due under Treasury Services Agreements or Secured Hedge Agreements, ratably among the Secured Parties in proportion to the respective amounts described in this clause Third payable to them;
Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings (including to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit), and any breakage, termination or other payments under Treasury Services Agreements or Secured Hedge Agreements, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them;
Fifth , to the payment of all other Obligations of the Borrower that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and
Last , the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above and, if no Obligations remain outstanding, to the Borrower as applicable. Notwithstanding the foregoing, no amounts received from any Guarantor shall be applied to any Excluded Swap Obligation of such Guarantor.
SECTION 8.05 Borrowers Right to Cure.
(a) Notwithstanding anything to the contrary contained in Sections 8.01 or 8.02, if the Borrower determines that an Event of Default under the covenant set forth in Section 7.11 has occurred or may occur, during the period commencing after the beginning of the last fiscal quarter included in such Test Period and ending ten (10) Business Days after the date on which financial
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statements are required to be delivered hereunder with respect to such fiscal quarter, the Investors may make a Specified Equity Contribution to Holdings (a Designated Equity Contribution ), and the amount of the net cash proceeds thereof shall be deemed to increase Consolidated EBITDA with respect to such applicable quarter; provided that such net cash proceeds (i) are actually received by the Borrower as cash common equity (including through capital contribution of such net cash proceeds to the Borrower) during the period commencing after the beginning of the last fiscal quarter included in such Test Period by the Borrower and ending ten (10) Business Days after the date on which financial statements are required to be delivered with respect to such fiscal quarter hereunder and (ii) are Not Otherwise Applied. The parties hereby acknowledge that this Section 8.05(a) may not be relied on for purposes of calculating any financial ratios other than as applicable to Section 7.11 and shall not result in any adjustment to any baskets or other amounts other than the amount of the Consolidated EBITDA for the purpose of Section 7.11.
(b) (i) In each period of four consecutive fiscal quarters, there shall be at least two fiscal quarters in which no Designated Equity Contribution is made, (ii) no more than five Designated Equity Contributions may be made in the aggregate during the term of this Agreement, (iii) the amount of any Designated Equity Contribution shall be no more than the amount required to cause the Borrower to be in Pro Forma Compliance with Section 7.11 for any applicable period and (iv) there shall be no pro forma reduction in Indebtedness with the proceeds of any Designated Equity Contribution for determining compliance with Section 7.11 for the fiscal quarter with respect to which such Designated Equity Contribution was made.
ARTICLE IX
Administrative Agent and Other Agents
SECTION 9.01 Appointment and Authorization of Agents.
(a) Each Lender hereby irrevocably appoints, designates and authorizes each of the Administrative Agent and the Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, neither the Administrative Agent nor the Collateral Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent or the Collateral Agent have or be deemed to have any fiduciary relationship with any Lender or Participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent or the Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term agent herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(b) Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each such L/C Issuer shall have all of the benefits and immunities (i) provided to the Agents in this Article IX with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or
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proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term Agent as used in this Article IX and in the definition of Agent-Related Person included such L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such L/C Issuer.
(c) Each of the Secured Parties hereby irrevocably appoints and authorizes the Collateral Agent to act as the agent of (and to hold any security interest created by the Collateral Documents for and on behalf of or on trust for) such Secured Party for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent (and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Collateral Agent), shall be entitled to the benefits of all provisions of this Article IX (including Section 9.07, as though such co-agents, sub-agents and attorneys-in-fact were the Collateral Agent under the Loan Documents) as if set forth in full herein with respect thereto.
(d) Each Lender hereby (i) acknowledges that it has received a copy of the Intercreditor Agreements, (ii) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreements to the extent then in effect, and (iii) authorizes and instructs the Collateral Agent to enter into each Intercreditor Agreement as Collateral Agent and on behalf of such Lender.
(e) Except as provided in Sections 9.09 and 9.11, the provisions of this Article IX are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrower nor any other Loan Party shall have rights as a third-party beneficiary of any of such provisions.
SECTION 9.02 Delegation of Duties.
Each of the Administrative Agent and the Collateral Agent may execute any of its duties under this Agreement or any other Loan Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent, the Collateral Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Agent-Related Persons. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Agent-Related Persons of the Administrative Agent, the Collateral Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Facilities as well as activities as Administrative Agent or Collateral Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or sub-agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct (as determined in the final non-appealable judgment of a court of competent jurisdiction).
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SECTION 9.03 Liability of Agents.
No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct, as determined by the final non-appealable judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or Participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent or the Collateral Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, the existence, value or collectability of the Collateral, any failure to monitor or maintain any part of the Collateral, or the perfection or priority of any Lien or security interest created or purported to be created under the Collateral Documents, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof. Notwithstanding the foregoing, neither the Administrative Agent nor the Collateral Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent or Collateral Agent (as applicable) is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent or Collateral Agent (as applicable) shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent or Collateral Agent (as applicable) to liability or that is contrary to any Loan Document or applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law.
SECTION 9.04 Reliance by Agents.
Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by such Agent. Each Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.
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SECTION 9.05 Notice of Default.
The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a notice of default. The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to any Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Lenders.
SECTION 9.06 Credit Decision; Disclosure of Information by Agents.
Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to each Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their Affiliates which may come into the possession of any Agent-Related Person.
SECTION 9.07 Indemnification of Agents.
Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Agent-Related Persons own gross negligence or willful misconduct, as determined by the final non-appealable judgment of a court of competent jurisdiction; provided that no action taken in accordance with the directions of the Required Lenders (or such other number or percentage of the Lenders as shall be required by the Loan Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes
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of this Section 9.07; provided, further, that any obligation to indemnify an L/C Issuer pursuant to this Section 9.07 shall be limited to Revolving Credit Lenders only. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person. Without limitation of the foregoing, each Lender shall reimburse each of the Administrative Agent and the Collateral Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent or the Collateral Agent, as the case may be, in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent or the Collateral Agent, as the case may be, is not reimbursed for such expenses by or on behalf of the Loan Parties. The undertaking in this Section 9.07 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent or the Collateral Agent, as the case may be.
SECTION 9.08 Agents in Their Individual Capacities.
Deutsche Bank AG New York Branch and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its respective Affiliates as though Deutsche Bank AG New York Branch were not the Administrative Agent, the Collateral Agent or Swing Line Lender hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Deutsche Bank AG New York Branch or its Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Affiliate) and acknowledge that neither the Administrative Agent nor the Collateral Agent shall be under any obligation to provide such information to them. With respect to its Loans, Deutsche Bank AG New York Branch and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent, the Collateral Agent or a Swing Line Lender, and the terms Lender and Lenders include Deutsche Bank AG New York Branch in its individual capacity. Any successor to Deutsche Bank AG New York Branch as the Administrative Agent or the Collateral Agent shall also have the rights attributed to Deutsche Bank AG New York Branch under this paragraph.
SECTION 9.09 Successor Agents.
Each of the Administrative Agent and the Collateral Agent may resign as the Administrative Agent or the Collateral Agent, as applicable upon thirty (30) days notice to the Lenders and the Borrower and if either the Administrative Agent or the Collateral Agent is a Defaulting Lender, the Borrower may remove such Defaulting Lender from such role upon ten (10) days notice to the Lenders. If the Administrative Agent or the Collateral Agent resigns under this Agreement or is removed by the Borrower, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default under Sections 8.01(f) or (g) (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor agent is appointed prior to the effective date of the resignation or removal of the Administrative Agent or the Collateral Agent, as applicable, the Administrative Agent or the Collateral Agent, as applicable, in the case of a resignation, and the Borrower, in the case of a removal may appoint, after consulting with the
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Lenders and the Borrower (in the case of a resignation), a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent or retiring Collateral Agent and the term Administrative Agent or Collateral Agent shall mean such successor administrative agent or collateral agent and/or Supplemental Agent, as the case may be, and the retiring Administrative Agents or Collateral Agents appointment, powers and duties as the Administrative Agent or Collateral Agent shall be terminated. After the retiring Administrative Agents or the Collateral Agents resignation or removal hereunder as the Administrative Agent or Collateral Agent, the provisions of this Article IX and the provisions of Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent or Collateral Agent under this Agreement. If no successor agent has accepted appointment as the Administrative Agent or the Collateral Agent by the date which is thirty (30) days following the retiring Administrative Agents or Collateral Agents notice of resignation or ten (10) days following the Borrowers notice of removal, the retiring Administrative Agents or the retiring Collateral Agents resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent or Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Upon the acceptance of any appointment as the Administrative Agent or Collateral Agent hereunder by a successor and upon the execution and filing or recording of such financing statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to (a) continue the perfection of the Liens granted or purported to be granted by the Collateral Documents or (b) otherwise ensure that Section 6.11 is satisfied, the Administrative Agent or Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Administrative Agent or Collateral Agent, and the retiring Administrative Agent or Collateral Agent shall be discharged from its duties and obligations under the Loan Documents. After the retiring Administrative Agents or Collateral Agents resignation hereunder as the Administrative Agent or the Collateral Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent or the Collateral Agent.
SECTION 9.10 Administrative Agent May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower or the Collateral Agent) shall be (to the fullest extent permitted by mandatory provisions of applicable Law) entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Collateral Agent and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Collateral Agent and the Administrative Agent and their respective agents and counsel and all other amounts due to the Lenders, the Collateral Agent and the Administrative Agent under Sections 2.03(h) and (i), 2.09, 10.04 and 10.05) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
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and any custodian, curator, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent or the Collateral Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent or the Collateral Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Administrative Agent or the Collateral Agent under Sections 2.09, 10.04 and 10.05.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
SECTION 9.11 Collateral and Guaranty Matters.
The Lenders irrevocably agree:
(a) that any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document shall be automatically released (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (x) obligations under Secured Hedge Agreements and Treasury Services Agreements not yet due and payable and (y) contingent indemnification obligations not yet accrued and payable) and the expiration or termination or cash collateralization of all Letters of Credit, (ii) at the time the property subject to such Lien is Disposed or to be Disposed as part of or in connection with any Disposition permitted hereunder or under any other Loan Document to any Person other than a Person required to grant a Lien to the Administrative Agent or the Collateral Agent under the Loan Documents (or, if such transferee is a Person required to grant a Lien to the Administrative Agent or the Collateral Agent on such asset, at the option of the applicable Loan Party, such Lien on such asset may still be released in connection with the transfer so long as (x) the transferee grants a new Lien to the Administrative Agent or Collateral Agent on such asset substantially concurrently with the transfer of such asset, (y) the transfer is between parties organized under the laws of different jurisdictions and at least one of such parties is a Foreign Subsidiary and (z) the priority of the new Lien is the same as that of the original Lien), (iii) subject to Section 10.01, if the release of such Lien is approved, authorized or ratified in writing by the Required Lenders or (iv) if the property subject to such Lien is owned by a Guarantor, upon release of such Guarantor from its obligations under its Guaranty pursuant to clause (c) below;
(b) To release or subordinate any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Sections 7.01(u) or (w) (in the case of clause (w), to the extent required by the terms of the obligations secured by such Liens);
(c) That any Subsidiary Guarantor shall be automatically released from its obligations under the Guaranty if such Person ceases to be a Restricted Subsidiary or becomes an Excluded
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Subsidiary as a result of a transaction or designation permitted hereunder; provided that no such release shall occur if such Guarantor continues to be a guarantor in respect of the 5 5/8% Senior Notes or any Junior Financing; and
(d) the Collateral Agent may, without any further consent of any Lender, enter into (i) a First Lien Intercreditor Agreement with the collateral agent or other representatives of holders of Permitted Ratio Debt that is intended to be secured on a pari passu basis with the Obligations and/or (ii) a Junior Lien Intercreditor Agreement with the collateral agent or other representatives of the holders of Indebtedness permitted under Section 7.03, in each case, where such Indebtedness is secured by Liens permitted under Section 7.01. The Collateral Agent may rely exclusively on a certificate of a Responsible Officer of the Borrower as to whether any such other Liens are permitted. Any First Lien Intercreditor Agreement or Junior Lien Intercreditor Agreement entered into by the Collateral Agent in accordance with the terms of this Agreement shall be binding on the Secured Parties.
Upon request by the Administrative Agent or the Collateral Agent at any time, the Required Lenders will confirm in writing the Administrative Agents or the Collateral Agents authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.11. In each case as specified in this Section 9.11, the Administrative Agent or the Collateral Agent will promptly (and each Lender irrevocably authorizes the Administrative Agent and the Collateral Agent to), at the Borrowers expense, execute and deliver to the applicable Loan Party such documents as the Borrower may reasonably request to evidence the release or subordination of such item of Collateral from the assignment and security interest granted under the Collateral Documents, or to evidence the release of such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.11.
SECTION 9.12 Other Agents; Lead Arrangers and Managers.
None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a joint bookrunner, lead arranger, co-syndication agent or co-documentation agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.
SECTION 9.13 Withholding Tax Indemnity.
To the extent required by any applicable Law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender for any reason (including, without limitation, because the appropriate form was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of withholding Tax ineffective), such Lender shall, within 10 days after written demand therefor, indemnify and hold harmless the Administrative Agent (to the extent that the Administrative Agent has not already been
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reimbursed by the Borrower pursuant to Section 3.01 and Section 3.04 and without limiting or expanding the obligation of the Borrower to do so) for all amounts paid, directly or indirectly, by the Administrative Agent as Taxes or otherwise, together with all expenses incurred, including legal expenses and any other out-of-pocket expenses, whether or not such Tax was correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due the Administrative Agent under this Section 9.13. The agreements in this Section 9.13 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all other Obligations. For the avoidance of doubt, the term Lender for purposes of this Section 9.13 shall include each L/C Issuer and Swing Line Lender.
SECTION 9.14 Appointment of Supplemental Agents.
(a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent or the Collateral Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, the Administrative Agent and the Collateral Agent are hereby authorized to appoint an additional individual or institution selected by the Administrative Agent or the Collateral Agent in its sole discretion as a separate trustee, co-trustee, administrative agent, collateral agent, administrative sub-agent or administrative co-agent (any such additional individual or institution being referred to herein individually as a Supplemental Agent and collectively as Supplemental Agents ).
(b) In the event that the Collateral Agent appoints a Supplemental Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Agent to the extent, and only to the extent, necessary to enable such Supplemental Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Agent shall run to and be enforceable by either the Collateral Agent or such Supplemental Agent, and (ii) the provisions of this Article IX and of Sections 10.04 and 10.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Agent and all references therein to the Collateral Agent shall be deemed to be references to the Collateral Agent and/or such Supplemental Agent, as the context may require.
Should any instrument in writing from any Loan Party be required by any Supplemental Agent so appointed by the Administrative Agent or the Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent or the Collateral Agent. In case any Supplemental Agent, or a successor
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thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Agent, to the extent permitted by Law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Agent.
ARTICLE X
Miscellaneous
SECTION 10.01 Amendments, Etc.
Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders, or by the Administrative Agent with the consent of the Required Lenders, and such Loan Party and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that any amendment or waiver contemplated in clauses (g) or (i) below, shall only require the consent of such Loan Party and the Required Revolving Credit Lenders or the Required Facility Lenders under the applicable Facility, as applicable; provided, further, that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender without the written consent of each Lender holding such Commitment (it being understood that a waiver of any condition precedent or of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender);
(b) postpone any date scheduled for, or reduce or forgive the amount of, any payment of principal or interest under Sections 2.07 or 2.08 without the written consent of each Lender holding the applicable Obligation (it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of the Term Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest and it being understood that any change to the definition of Consolidated First Lien Net Leverage Ratio or Consolidated Total Net Leverage Ratio or, in each case, in the component definitions thereof shall not constitute a reduction or forgiveness in any rate of interest);
(c) reduce or forgive the principal of, or the rate of interest specified herein on, any Loan, or L/C Borrowing, or (subject to clause (iii) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document (or change the timing of payments of such fees or other amounts) without the written consent of each Lender holding such Loan, L/C Borrowing or to whom such fee or other amount is owed (it being understood that any change to the definition of Consolidated First Lien Net Leverage Ratio or Consolidated Total Net Leverage Ratio or, in each case, in the component definitions thereof shall not constitute a reduction or forgiveness in any rate of interest); provided that only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrower to pay interest at the Default Rate;
(d) change any provision of Sections 8.04 or 10.01 or the definition of Required Revolving Credit Lenders, Required Lenders, Required Facility Lenders, Required Class Lenders or any other provision specifying the number of Lenders or portion of the Loans or Commitments required to take any action under the Loan Documents, without the written consent of each Lender directly affected thereby;
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(e) other than in connection with a transaction permitted under Sections 7.04 or 7.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;
(f) other than in connection with a transaction permitted under Sections 7.04 or 7.05, release all or substantially all of the aggregate value of the Guaranty, without the written consent of each Lender;
(g) (1) waive any condition set forth in Section 4.02 as to any Credit Extension under one or more Revolving Credit Facilities or (2) amend, waive or otherwise modify any term or provision which directly affects Lenders under one or more Revolving Credit Facilities and does not directly affect Lenders under any other Facility (including any waiver, amendment or modification of Section 7.11 or the definition of Consolidated First Lien Net Leverage Ratio or the component definitions thereof (but only to the extent of any such component definitions effect on the definition of Consolidated First Lien Net Leverage Ratio for the purposes of Section 7.11), in each case, without the written consent of the Required Facility Lenders under such applicable Revolving Credit Facility or Facilities (and in the case of multiple Facilities which are affected, with respect to any such Facility, such consent shall be effected by the Required Facility Lenders of such Facility); provided , however , that the waivers described in this clause (g) shall not require the consent of any Lenders other than the Required Facility Lenders under such Facility or Facilities;
(h) amend, waive or otherwise modify the portion of the definition of Interest Period that provides for one, two, three or six month intervals to automatically allow intervals in excess of six months, without the written consent of each Lender affected thereby; or
(i) amend, waive or otherwise modify any term or provision (including the availability and conditions to funding under Section 2.14 with respect to Incremental Term Loans and Incremental Revolving Credit Commitments, under Section 2.15 with respect to Refinancing Term Loans and Other Revolving Credit Commitments and under Section 2.16 with respect to Extended Term Loans or Extended Revolving Credit Commitments and, in each case, the rate of interest applicable thereto) which directly affects Lenders of one or more Incremental Term Loans, Incremental Revolving Credit Commitments, Refinancing Term Loans, Other Revolving Credit Commitments, Extended Term Loans or Extended Revolving Credit Commitments and does not directly affect Lenders under any other Facility, in each case, without the written consent of the Required Facility Lenders under such applicable Incremental Term Loans, Incremental Revolving Credit Commitments, Refinancing Term Loans, Other Revolving Credit Commitments, Extended Term Loans or Extended Revolving Credit Commitments (and in the case of multiple Facilities which are affected, with respect to any such Facility, such consent shall be effected by the Required Facility Lenders of such Facility); provided , however , that the waivers described in this clause (i) shall not require the consent of any Lenders other than the Required Facility Lenders under such applicable Incremental Term Loans, Incremental Revolving Credit Commitments, Refinancing Term Loans, Other Revolving Credit Commitments, Extended Term Loans or Extended Revolving Credit Commitments, as the case may be;
and provided , further , that (i) no amendment, waiver or consent shall, unless in writing and signed by each L/C Issuer in addition to the Lenders required above, affect the rights or duties of an L/C Issuer under this Agreement or any Letter of Credit Issuance Request relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by a Swing Line Lender in addition to the Lenders required above, affect the rights or duties of such
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Swing Line Lender under this Agreement; provided , however , that this Agreement may be amended to adjust the borrowing mechanics related to Swing Line Loans with only the written consent of the Administrative Agent, the Swing Line Lender and the Borrower so long as the obligations of the Revolving Credit Lenders are not affected thereby; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Collateral Agent, as applicable, in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent or the Collateral Agent, as applicable, under this Agreement or any other Loan Document; (iv) Section 10.07(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (v) the consent of Lenders holding more than 50% of any Class of Commitments or Loans shall be required with respect to any amendment that by its terms adversely affects the rights of such Class in respect of payments or Collateral hereunder in a manner different than such amendment affects other Classes. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms materially and adversely affects any Defaulting Lender (if such Lender were not a Defaulting Lender) to a greater extent than other affected Lenders shall require the consent of such Defaulting Lender.
Notwithstanding the foregoing, no Lender consent is required to effect any amendment or supplement to any First Lien Intercreditor Agreement, any Junior Lien Intercreditor Agreement or other intercreditor agreement or arrangement permitted under this Agreement that is for the purpose of adding the holders of Permitted First Priority Refinancing Debt, or Permitted Second Priority Refinancing Debt, as expressly contemplated by the terms of such First Lien Intercreditor Agreement, such Junior Lien Intercreditor Agreement or such other intercreditor agreement or arrangement permitted under this Agreement, as applicable (it being understood that any such amendment or supplement may make such other changes to the applicable intercreditor agreement as, in the good faith determination of the Administrative Agent, are required to effectuate the foregoing and provided that such other changes are not adverse, in any material respect, to the interests of the Lenders); provided , further , that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent.
Notwithstanding the foregoing, this Agreement and any other Loan Document may be amended solely with the consent of the Administrative Agent and the Borrower without the need to obtain the consent of any other Lender if such amendment is delivered in order (x) to correct or cure ambiguities, errors, omissions, defects, (y) to effect administrative changes of a technical or immaterial nature or (z) to fix incorrect cross references or similar inaccuracies in this Agreement or the applicable Loan Document. The Collateral Documents and related documents in connection with this Agreement and the other Loan Documents may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended, supplemented and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment, supplement or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities, omissions, mistakes or defects or (iii) to cause such Collateral Documents or other document to be consistent with this Agreement and the other Loan Documents.
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Notwithstanding anything in this Agreement or any other Loan Document to the contrary, the Borrower and the Administrative Agent may enter into any Incremental Amendment in accordance with Section 2.14, Refinancing Amendment in accordance with Section 2.15 and Extension Amendment in accordance with Section 2.16 and such Incremental Amendments, Refinancing Amendments and Extension Amendments shall be effective to amend the terms of this Agreement and the other applicable Loan Documents, in each case, without any further action or consent of any other party to any Loan Document.
SECTION 10.02 Notices and Other Communications; Facsimile Copies.
(a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to the Borrower (or any other Loan Party) or the Administrative Agent, the Collateral Agent, an L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and
(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower and the Administrative Agent, the Collateral Agent, an L/C Issuer or the Swing Line Lender.
All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 10.02(c)), when delivered; provided that notices and other communications to the Administrative Agent, the Collateral Agent, an L/C Issuer and the Swing Line Lender pursuant to Article II shall not be effective until actually received by such Person. In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.
(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile or other electronic communication. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Agents and the Lenders.
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(c) Reliance by Agents and Lenders. The Administrative Agent, the Collateral Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower in the absence of gross negligence or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction. All telephonic notices to the Administrative Agent or Collateral Agent may be recorded by the Administrative Agent or the Collateral Agent, and each of the parties hereto hereby consents to such recording.
SECTION 10.03 No Waiver; Cumulative Remedies.
No failure by any Lender or the Administrative Agent or the Collateral Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.
SECTION 10.04 Attorney Costs and Expenses.
The Borrower agrees (a) if the Closing Date occurs, to pay or reimburse the Administrative Agent, the Collateral Agent, the Lead Arrangers and the Joint Bookrunners for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby (including all Attorney Costs, which shall be limited to Davis Polk & Wardwell LLP and one local counsel as reasonably necessary in each relevant jurisdiction material to the interests of the Lenders taken as a whole) and (b) from and after the Closing Date, to pay or reimburse the Administrative Agent, the Collateral Agent, the Lead Arrangers, the Joint Bookrunners and each Lender for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all respective Attorney Costs which shall be limited to Attorney Costs of one counsel to the Administrative Agent and the Lead Arrangers (and one local counsel as reasonably necessary in each relevant jurisdiction material to the interests of the Lenders taken as a whole)). The foregoing costs and expenses shall include all reasonable search, filing, recording and title insurance charges and fees related thereto, and other reasonable and documented out-of-pocket expenses incurred by any Agent. The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 10.04 shall be paid within thirty (30) days of receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail including, if requested by the Borrower and to the extent reasonably available, backup documentation
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supporting such reimbursement request; provided that with respect to the Closing Date, all amounts due under this Section 10.04 shall be paid on the Closing Date solely to the extent invoiced to the Borrower within three Business Days of the Closing Date. If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion. For the avoidance of doubt, this Section 10.04 shall not apply to Taxes, except any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, demands, actions, prepayments, suits, costs, expenses and disbursements arising from any non-Tax claims.
SECTION 10.05 Indemnification by the Borrower.
The Borrower shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, and their respective officers, directors, employees, partners, agents, advisors and other representatives of each of the foregoing (collectively the Indemnitees ) from and against any and all liabilities (including Environmental Liabilities), obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs but limited in the case of legal fees and expenses to the reasonable and documented out-of-pocket fees, disbursements and other charges of one counsel to all Indemnitees taken as a whole and, if reasonably necessary, one local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interests of the Lenders, and solely in the case of a conflict of interest, one additional counsel in each relevant jurisdiction to each group of similarly situated affected Indemnitees) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom including any refusal by an L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Indemnified Liabilities ) in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that, notwithstanding the foregoing, such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements resulted from (x) the gross negligence, bad faith or willful misconduct of such Indemnitee or of any of its Affiliates or their respective directors, officers, employees, partners, agents, advisors or other representatives, as determined by a final non-appealable judgment of a court of competent jurisdiction, (y) a material breach of any obligations under any Loan Document by such Indemnitee or of any of its Affiliates or their respective directors, officers, employees, partners, advisors or other representatives, as determined by a final non-appealable judgment of a court of competent jurisdiction or (z) any dispute solely among Indemnitees (other than any claims against an Indemnitee in its capacity or in fulfilling its role as an agent or arranger or any similar role or as a letter of credit issuer or swing line bank under any Facility and other than any claims arising out of any act or omission of Holdings, the Borrower, the Investors or any of their Affiliates). No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in
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connection with this Agreement, nor shall any Indemnitee, Loan Party or any Subsidiary have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date) (other than, in the case of any Loan Party, in respect of any such damages incurred or paid by an Indemnitee to a third party and for any out-of-pocket expenses); it being agreed that this sentence shall not limit the indemnification obligations of Holdings, the Borrower or any Subsidiary. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, any Subsidiary of any Loan Party, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents are consummated. All amounts due under this Section 10.05 shall be paid within thirty (30) days after written demand therefor (together with backup documentation supporting such reimbursement request); provided , however , that such Indemnitee shall promptly refund the amount of any payment to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification rights with respect to such payment pursuant to the express terms of this Section 10.05. The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent or Collateral Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. For the avoidance of doubt, this Section 10.05 shall not apply to Taxes, except any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, demands, actions, prepayments, suits, costs, expenses and disbursements arising from any non-Tax claims.
SECTION 10.06 Payments Set Aside.
To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall, to the fullest extent possible under provisions of applicable Law, be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by any Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect, in the applicable currency of such recovery or payment.
SECTION 10.07 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (except as permitted by Section 7.04) and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Assignee pursuant to an assignment made in accordance with the provisions of Section 10.07(b) (such an assignee, an Eligible Assignee ) and (A) in the case of any Assignee that, immediately prior to or upon giving
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effect to such assignment, is an Affiliated Lender, Section 10.07(l), (B) in the case of any Assignee that is Holdings or any of its Subsidiaries, Section 10.07(m), or (C) in the case of any Assignee that, immediately prior to or upon giving effect to such assignment, is a Debt Fund Affiliate, Section 10.07(p), (ii) by way of participation in accordance with the provisions of Section 10.07(f), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.07(h) or (iv) to an SPC in accordance with the provisions of Section 10.07(i) (and any other attempted assignment or transfer by any party hereto shall be null and void); provided , however , that notwithstanding anything to the contrary, (x) no Lender may assign or transfer by participation any of its rights or obligations hereunder to (i) any Person that is a Defaulting Lender or a Disqualified Lender, (ii) a natural Person or (iii) to Holdings, the Borrower or any of their respective Subsidiaries (except pursuant to Section 2.05(a)(v) or Section 10.07(m)) and (y) no Lender may assign or transfer by participation any of its rights or obligations under the Revolving Credit Facility hereunder without the consent of the Borrower (not to be unreasonably withheld) unless (i) such assignment or transfer is to a Revolving Credit Lender or (ii) an Event of Default under Section 8.01(a) or, solely with respect to the Borrower, Section 8.01(f) has occurred and is continuing; provided that the Borrower shall be deemed to have consented to any assignment of Term Loans or participations in respect of the Revolving Credit Facility unless the Borrower shall have objected thereto within fifteen (15) Business Days after having received written notice thereof. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.07(f) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees ( Assignees ) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this Section 10.07(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Borrower; provided that no consent of the Borrower shall be required for (i) an assignment of all or any portion of the Term Loans to a Lender, an Affiliate of a Lender or an Approved Fund, (ii) an assignment related to Revolving Credit Commitments or Revolving Credit Exposure to a Revolving Credit Lender, (iii) if an Event of Default under Section 8.01(a) or, solely with respect to the Borrower, Section 8.01(f) has occurred and is continuing or (iv) an assignment of all or a portion of the Loans pursuant to Section 10.07(l), Section 10.07(m) or Section 10.07(p);
(B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment (i) of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund or (ii) all or any portion of the Loans pursuant to Section 10.07(l) or Section 10.07(m);
(C) each L/C Issuer at the time of such assignment; provided that no consent of the L/C Issuers shall be required for any assignment not related to Revolving Credit Commitments or Revolving Credit Exposure; and
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(D) the Swing Line Lender; provided that no consent of the Swing Line Lender shall be required for any assignment not related to Revolving Credit Commitments or Revolving Credit Exposure.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lenders Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than an amount of $5,000,000 (in the case of each Revolving Credit Loan), $1,000,000 (in the case of a Term Loan), and shall be in increments of an amount of $1,000,000 (in the case of each Revolving Credit Loan) or $1,000,000 (in the case of Term Loans) in excess thereof ( provided that simultaneous assignments to or from two or more Approved Funds shall be aggregated for purposes of determining compliance with this Section 10.07(b)(ii)(A)), unless each of the Borrower and the Administrative Agent otherwise consents; provided that such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;
(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption via an electronic settlement system acceptable to the Administrative Agent (or if previously agreed with the Administrative Agent, manually), together with a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent); provided that only one such fee shall be payable in the event of simultaneous assignments to or from two or more Approved Funds; and
(C) other than in the case of assignments pursuant to Section 10.07(m), the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire (in which the Assignee shall designate one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Loan Parties and their Affiliates or their respective securities) will be made available and who may receive such information in accordance with the Assignees compliance procedures and applicable laws, including federal and state securities laws) and all applicable tax forms required pursuant to Section 3.01(d).
This paragraph (b) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis among such Facilities.
In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by
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the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Line Loans in accordance with its Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
(c) Subject to acceptance and recording thereof by the Administrative Agent pursuant to Sections 10.07(d) and (e), from and after the effective date specified in each Assignment and Assumption, (1) other than in connection with an assignment pursuant to Section 10.07(m), the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and (2) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, and the surrender by the assigning Lender of its Note, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause (c) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.07(f).
(d) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agents Office a copy of each Assignment and Assumption, each Affiliated Lender Assignment and Assumption delivered to it, and each notice of cancellation of any Loans delivered by the Borrower pursuant to Section 10.07(m) and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Loans, L/C Obligations (specifying the Unreimbursed Amounts), L/C Borrowings and the amounts due under Section 2.03, owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Agent and, with respect to such Lenders own interest only, any Lender, at any reasonable time and from time to time upon reasonable prior notice. This Section 10.07(d) and Section 2.11 shall be construed so that all Loans are at all times maintained in registered form within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any other relevant or successor provisions of the Code or of such Treasury regulations). Notwithstanding the foregoing, in no event shall the Administrative Agent be obligated to ascertain, monitor or inquire as to whether any Lender is an Affiliated Lender nor shall the Administrative Agent be obligated to monitor the aggregate amount of Term Loans or Incremental Term Loans held by Affiliated Lenders. Upon request by the Administrative Agent, the Borrower shall (i) promptly (and in any case, not less than five (5) Business Days (or shorter period as agreed to by the Administrative Agent) prior to the proposed effective date of any amendment, consent or
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waiver pursuant to Section 10.01) provide to the Administrative Agent, a complete list of all Affiliated Lenders holding Term Loans or Incremental Term Loans at such time and (ii) not less than five (5) Business Days (or shorter period as agreed to by the Administrative Agent) prior to the proposed effective date of any amendment, consent or waiver pursuant to Section 10.01, provide to the Administrative Agent, a complete list of all Debt Fund Affiliates holding Term Loans or Incremental Term Loans at such time.
(e) Upon its receipt of, and consent to, a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, an Administrative Questionnaire completed in respect of the assignee (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above, if applicable, and the written consent of the Administrative Agent, if required, and, if required, the Borrower, the Swing Line Lender and each L/C Issuer to such assignment and any applicable tax forms required pursuant to Section 3.01(d), the Administrative Agent shall promptly (i) accept such Assignment and Assumption and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).
(f) Any Lender may at any time sell participations to any Person, subject to the proviso to Section 10.07(a) (each, a Participant ), in all or a portion of such Lenders rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lenders participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that requires the affirmative vote of such Lender. Subject to Section 10.07(g), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 (subject to the requirements and limitations of such Sections) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.07(c). To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each participants interest in the Loans or other obligations under this Agreement (the Participant Register ); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participants interest in any Commitments, Loans or Letters of Credit or its other obligations under any Loan Document) except to the extent that such disclosure is necessary in connection with an audit or other proceeding to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.
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(g) A Participant shall not be entitled to receive any greater payment under Sections 3.01, 3.04 or 3.05 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent, not to be unreasonably withheld or delayed.
(h) Any Lender may, without the consent of the Borrower or the Administrative Agent, at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(i) Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender ) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an SPC ) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) such SPC and the applicable Loan or any applicable part thereof, shall be appropriately reflected in the Participant Register. Each party hereto hereby agrees that (i) an SPC shall be entitled to the benefit of Sections 3.01, 3.04 and 3.05 (subject to the requirements and the limitations of such Section), but neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement except in the case of Sections 3.01 or 3.04, to the extent that the grant to the SPC was made with the prior written consent of the Borrower (not to be unreasonably withheld or delayed; for the avoidance of doubt, the Borrower shall have reasonable basis for withholding consent if an exercise by SPC immediately after the grant would result in materially increased indemnification obligations to the Borrower at such time), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.
(j) Notwithstanding anything to the contrary contained herein, without the consent of the Borrower or the Administrative Agent, (1) any Lender may in accordance with applicable Law create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it and (2) any Lender that is a Fund may create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and
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(ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.
(k) Notwithstanding anything to the contrary contained herein, any L/C Issuer or Swing Line Lender may, upon thirty (30) days notice to the Borrower and the Lenders, resign as an L/C Issuer or Swing Line Lender, respectively; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the relevant L/C Issuer or Swing Line Lender shall have identified a successor L/C Issuer or Swing Line Lender reasonably acceptable to the Borrower willing to accept its appointment as successor L/C Issuer or Swing Line Lender, as applicable. In the event of any such resignation of an L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders willing to accept such appointment a successor L/C Issuer or Swing Line Lender hereunder; provided that no failure by the Borrower to appoint any such successor shall affect the resignation of the relevant L/C Issuer or the Swing Line Lender, as the case may be, except as expressly provided above. If an L/C Issuer resigns as an L/C Issuer, it shall retain all the rights and obligations of an L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If the Swing Line Lender resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans, Eurocurrency Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).
(l) Any Lender may, so long as no Default or Event of Default has occurred and is continuing, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to a Person who is or will become, after such assignment, an Affiliated Lender through (x) Dutch auctions open to all Lenders on a pro rata basis in accordance with procedures of the type described in Section 2.05(a)(v) or (y) open market purchases on a non-pro rata basis, in each case subject to the following limitations:
(i) the assigning Lender and the Affiliated Lender purchasing such Lenders Term Loans shall execute and deliver to the Administrative Agent an assignment agreement substantially in the form of Exhibit M-1 hereto (an Affiliated Lender Assignment and Assumption );
(ii) Affiliated Lenders will not receive information provided solely to Lenders by the Administrative Agent or any Lender and will not be permitted to attend or participate in conference calls or meetings attended solely by the Lenders and the Administrative Agent, other than the right to receive notices of prepayments and other administrative notices in respect of its Loans or Commitments required to be delivered to Lenders pursuant to Article II;
(iii) the aggregate principal amount of Term Loans held at any one time by Affiliated Lenders shall not exceed 30% of the original principal amount of all Term Loans at such time outstanding (such percentage, the Affiliated Lender Cap ) ; provided that to the extent any assignment to an Affiliated Lender would result in the aggregate principal amount of all Loans held by Affiliated Lenders exceeding the Affiliated Lender Cap, the assignment of such excess amount will be void ab initio ; and
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(iv) as a condition to each assignment pursuant to this clause (l), the Administrative Agent shall have been provided a notice in the form of Exhibit M-2 to this Agreement in connection with each assignment to an Affiliated Lender or a Person that upon effectiveness of such assignment would constitute an Affiliated Lender pursuant to which such Affiliated Lender shall waive any right to bring any action in connection with such Term Loans against the Administrative Agent, in its capacity as such.
Each Affiliated Lender agrees to notify the Administrative Agent promptly (and in any event within ten (10) Business Days) if it acquires any Person who is also a Lender, and each Lender agrees to notify the Administrative Agent promptly (and in any event within ten (10) Business Days) if it becomes an Affiliated Lender. Such notice shall contain the type of information required and be delivered to the same addressee as set forth in Exhibit M-2.
(m) Any Lender may, so long as no Default or Event of Default has occurred and is continuing and no proceeds of Revolving Credit Borrowings are applied to fund the consideration for any such assignment, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to Holdings or the Borrower through (x) Dutch auctions open to all Lenders on a pro rata basis in accordance with procedures of the type described in Section 2.05(a)(v) or (y) notwithstanding Sections 2.12 and 2.13 or any other provision in this Agreement, open market purchase on a non-pro rata basis; provided that in connection with assignments pursuant to clause (y) above:
(i) if Holdings is the assignee, upon such assignment, transfer or contribution, Holdings shall automatically be deemed to have contributed the principal amount of such Term Loans, plus all accrued and unpaid interest thereon, to the Borrower; or
(ii) if the assignee is the Borrower (including through contribution or transfers set forth in clause (i) above), (A) the principal amount of such Term Loans, along with all accrued and unpaid interest thereon, so contributed, assigned or transferred to the Borrower shall be deemed automatically cancelled and extinguished on the date of such contribution, assignment or transfer, (B) the aggregate outstanding principal amount of Term Loans of the remaining Lenders shall reflect such cancellation and extinguishing of the Term Loans then held by the Borrower and (C) the Borrower shall promptly provide notice to the Administrative Agent of such contribution, assignment or transfer of such Term Loans, and the Administrative Agent, upon receipt of such notice, shall reflect the cancellation of the applicable Term Loans in the Register.
(n) Notwithstanding anything in Section 10.01 or the definition of Required Lenders, Required Class Lenders, or Required Facility Lenders to the contrary, for purposes of determining whether the Required Lenders, the Required Class Lenders (in respect of a Class of Term Loans) or the Required Facility Lenders have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom unless the action in question affects any Non-Debt Affiliate in a disproportionately adverse manner than its effect on the other Lenders, or subject to Section 10.07(o), any plan of reorganization pursuant to the U.S. Bankruptcy Code, (ii) otherwise acted on any matter related to any Loan Document, or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, no Affiliated Lender shall have any right to consent (or not consent), otherwise act or direct or require the Administrative Agent or any Lender to take (or refrain from taking) any such action and:
(A) all Term Loans held by any Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether the Required Lenders, the Required Class Lenders (in respect of a Class of Term Loans) or the Required Facility Lenders have taken any actions; and
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(B) all Term Loans held by Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether all Lenders have taken any action unless the action in question affects such Affiliated Lender in a disproportionately adverse manner than its effect on other Lenders.
(o) Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, each Affiliated Lender hereby agrees that and each Affiliated Lender Assignment and Assumption shall provide a confirmation that, if a proceeding under any Debtor Relief Law shall be commenced by or against the Borrower or any other Loan Party at a time when such Lender is an Affiliated Lender, such Affiliated Lender irrevocably authorizes and empowers the Administrative Agent to vote on behalf of such Affiliated Lender with respect to the Term Loans held by such Affiliated Lender in any manner in the Administrative Agents sole discretion, unless the Administrative Agent instructs such Affiliated Lender to vote, in which case such Affiliated Lender shall vote with respect to the Term Loans held by it as the Administrative Agent directs; provided that such Affiliated Lender shall be entitled to vote in accordance with its sole discretion (and not in accordance with the direction of the Administrative Agent) in connection with any plan of reorganization to the extent any such plan of reorganization proposes to treat any Obligations held by such Affiliated Lender in a disproportionately adverse manner to such Affiliated Lender than the proposed treatment of similar Obligations held by Term Lenders that are not Affiliated Lenders.
(p) Notwithstanding anything in Section 10.01 or the definition of Required Lenders to the contrary, for purposes of determining whether the Required Lenders have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, (ii) otherwise acted on any matter related to any Loan Document or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, all Term Loans, Revolving Credit Commitments and Revolving Credit Loans held by Debt Fund Affiliates may not account for more than 50% (pro rata among such Debt Fund Affiliates) of the Term Loans, Revolving Credit Commitments and Revolving Credit Loans of consenting Lenders included in determining whether the Required Lenders have consented to any action pursuant to Section 10.01.
SECTION 10.08 Confidentiality.
Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information and not to disclose such information, except that Information may be disclosed (a) to its Affiliates and its Affiliates managers, administrators, directors, officers, employees, trustees, partners, investors, investment advisors and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any Governmental Authority or self-regulatory authority having or asserting
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jurisdiction over such Person (including any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender or its Affiliates); provided that the Administrative Agent or such Lender, as applicable, agrees that it will notify the Borrower as soon as practicable in the event of any such disclosure by such Person (other than at the request of a regulatory authority or examiner) unless such notification is prohibited by law, rule or regulation; (c) to the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the Facilities or market data collectors, similar services providers to the lending industry and service providers to the Administrative Agent in connection with the administration and management of this Agreement and the Loan Documents; (d) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; provided that the Administrative Agent or such Lender, as applicable, agrees that it will notify the Borrower as soon as practicable in the event of any such disclosure by such Person (other than at the request of a regulatory authority or examiner) unless such notification is prohibited by law, rule or regulation; (e) to any other party to this Agreement; (f) subject to an agreement containing provisions at least as restrictive as those set forth in this Section 10.08 (or as may otherwise be reasonably acceptable to the Borrower), to any pledgee referred to in Section 10.07(h), counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in any of its rights or obligations under this Agreement ( provided that the disclosure of any such Information to any Lenders or Eligible Assignees or Participants shall be made subject to the acknowledgement and acceptance by such Lender, Eligible Assignee or Participant that such Information is being disseminated on a confidential basis (on substantially the terms set forth in this Section 10.08 or as otherwise reasonably acceptable to the Borrower, including, without limitation, as agreed in any Borrower Materials) in accordance with the standard processes of the Administrative Agent or customary market standards for dissemination of such type of Information; (g) with the written consent of the Borrower; (h) to the extent such Information becomes publicly available other than as a result of a breach of this Section 10.08 or becomes available to the Administrative Agent, the Lead Arrangers, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than a Loan Party or any Investor or their respective Affiliates (so long as such source is not known to the Administrative Agent, the Lead Arrangers, such Lender, such L/C Issuer or any of their respective Affiliates to be bound by confidentiality obligations to any Loan Party); (i) to any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; (j) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to Loan Parties and their Subsidiaries received by it from such Lender) or to the CUSIP Service Bureau or any similar organization; (k) in connection with the exercise of any remedies hereunder, under any other Loan Document or the enforcement of its rights hereunder or thereunder or (l) to the extent such Information is independently developed by the Administrative Agent, the Lead Arrangers, such Lender, such L/C Issuer or any of their respective Affiliates; provided that no disclosure shall be made to any Disqualified Lender. In addition, the Agents and the Lenders may disclose the existence of this Agreement and publicly available information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions. For the purposes of this Section 10.08, Information means all information received from the Loan Parties relating to any Loan Party, its Affiliates or its Affiliates directors, managers, officers, employees, trustees, investment advisors or agents, relating to Holdings, the Borrower or any of their Subsidiaries or its business, other than any such information that is publicly available to any Agent, any L/C Issuer or any Lender prior to disclosure by any Loan Party other than as a result of a breach
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of this Section 10.08; provided that all information received after the Closing Date from Parent, Holdings, the Borrower or any of its Subsidiaries shall be deemed confidential unless such information is clearly identified at the time of delivery as not being confidential.
SECTION 10.09 Setoff.
In addition to any rights and remedies of the Lenders provided by Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates (and the Collateral Agent, in respect of any unpaid fees, costs and expenses payable hereunder) is authorized at any time and from time to time, without prior notice to the Borrower, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party and each of its Subsidiaries) to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates or the Collateral Agent to or for the credit or the account of the respective Loan Parties and their Subsidiaries against any and all Obligations owing to such Lender and its Affiliates or the Collateral Agent hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.17 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the L/C Issuers, and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Administrative Agent, the Collateral Agent and each Lender under this Section 10.09 are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent, the Collateral Agent and such Lender may have. No amounts set off from any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor.
SECTION 10.10 Interest Rate Limitation.
Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate ). If any Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by an Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
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SECTION 10.11 Counterparts.
This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by telecopier or other electronic transmission of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document. The Agents may also require that any such documents and signatures delivered by telecopier or other electronic transmission be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier or other electronic transmission.
SECTION 10.12 Integration; Termination.
This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Agents or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.
SECTION 10.13 Survival of Representations and Warranties.
All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by each Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
SECTION 10.14 Severability.
If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 10.14, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited. Without limiting the foregoing provisions of this Section 10.14, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
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SECTION 10.15 GOVERNING LAW.
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY, EACH AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THOSE COURTS AND AGREES THAT IT WILL NOT COMMENCE OR SUPPORT ANY SUCH ACTION OR PROCEEDING IN ANOTHER JURISDICTION. EACH LOAN PARTY, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS , WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS IN THE MANNER PROVIDED FOR NOTICES (OTHER THAN TELECOPIER OR OTHER ELECTRONIC TRANSMISSION) IN SECTION 10.02. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
SECTION 10.16 WAIVER OF RIGHT TO TRIAL BY JURY.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.16 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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SECTION 10.17 Binding Effect.
This Agreement shall become effective when it shall have been executed by the Loan Parties, the Administrative Agent, the Collateral Agent, the L/C Issuers, and the Administrative Agent shall have been notified by each Lender, the Swing Line Lender and the L/C Issuers that each Lender, the Swing Line Lender and the L/C Issuers have executed it and thereafter shall be binding upon and inure to the benefit of the Loan Parties, each Agent and each Lender and their respective successors and assigns, in each case in accordance with Section 10.07 (if applicable) and except that no Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders except as permitted by Section 7.04.
SECTION 10.18 USA PATRIOT Act.
Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name, address and tax identification number of such Loan Party and other information regarding such Loan Party that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the USA PATRIOT Act. This notice is given in accordance with the requirements of the USA PATRIOT Act and is effective as to the Lenders and the Administrative Agent.
SECTION 10.19 No Advisory or Fiduciary Responsibility.
(a) In connection with all aspects of each transaction contemplated hereby, each Loan Party acknowledges and agrees, and acknowledges its Affiliates understanding, that (i) the facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arms-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Agents, the Lead Arrangers and the Lenders, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof), (ii) in connection with the process leading to such transaction, each of the Agents, the Lead Arrangers and the Lenders is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person, (iii) none of the Agents, the Lead Arrangers or the Lenders has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any Agent or Lender has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Agents, the Lead Arrangers or the Lenders has any obligation to the Borrower or any of its Affiliates with respect to the financing transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents, (iv) the Agents, the Lead Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from, and may conflict with, those of the Borrower and its Affiliates, and none of the Agents, the Lead Arrangers or the Lenders has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship and (v) the Agents, the Lead Arrangers and the Lenders have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Loan Parties have
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consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate. Each Loan Party hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Agents, the Lead Arrangers and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty under applicable law relating to agency and fiduciary obligations.
Each Loan Party acknowledges and agrees that each Lender, the Lead Arrangers and any affiliate thereof may lend money to, invest in, and generally engage in any kind of business with, any of the Borrower, Holdings, any Investor, any Affiliate thereof or any other person or entity that may do business with or own securities of any of the foregoing, all as if such Lender, the Lead Arrangers or Affiliate thereof were not an Lender or the Lead Arrangers (or an agent or any other person with any similar role under the Facilities) and without any duty to account therefor to any other Lender, the Lead Arrangers, Holdings, the Borrower, any Investor or any Affiliate of the foregoing. Each Lender, the Lead Arrangers and any affiliate thereof may accept fees and other consideration from Holdings, the Borrower, any Investor or any Affiliate thereof for services in connection with this Agreement, the Facilities or otherwise without having to account for the same to any other Lender, the Lead Arrangers, Holdings, the Borrower, any Investor or any Affiliate of the foregoing. Some or all of the Lenders and the Lead Arrangers may have directly or indirectly acquired certain equity interests (including warrants) in Holdings, the Borrower, an Investor or an Affiliate thereof or may have directly or indirectly extended credit on a subordinated basis to Holdings, the Borrower, an Investor or an Affiliate thereof. Each party hereto, on its behalf and on behalf of its affiliates, acknowledges and waives the potential conflict of interest resulting from any such Lender, the Lead Arrangers or an Affiliate thereof holding disproportionate interests in the extensions of credit under the Facilities or otherwise acting as arranger or agent thereunder and such Lender, the Lead Arrangers or Affiliate thereof directly or indirectly holding equity interests in or subordinated debt issued by Holdings, the Borrower, an Investor or an Affiliate thereof.
SECTION 10.20 Electronic Execution of Assignments.
The words execution, signed, signature, and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based record keeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
SECTION 10.21 Effect of Certain Inaccuracies.
In the event that any financial statement or Compliance Certificate previously delivered pursuant to Section 6.02 was inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Rate for any period (an Applicable Period ) than the Applicable Rate applied for such Applicable Period, then (i) the Borrower shall as soon as practicable deliver to the Administrative Agent a corrected financial statement and a corrected Compliance Certificate for such Applicable Period, (ii) the Applicable Rate shall be determined based on the corrected Compliance Certificate for such Applicable Period, and (iii) the Borrower shall within 15 days after the delivery of the corrected financial statements and Compliance Certificate pay to the Administrative Agent the accrued additional interest or fees owing as a result of such increased Applicable Rate for such Applicable Period. This Section 10.21 shall not limit the rights of the Administrative Agent or the Lenders with respect to Sections 2.08(b) and 8.01.
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SECTION 10.22 Judgment Currency.
If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder in the currency expressed to be payable herein (the specified currency ) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures any Lender could purchase the specified currency with such other currency at such Lenders New York office on the Business Day preceding that on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Lender hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender of any sum adjudged to be so due in such other currency such Lender may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Lender in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to such Lender in the specified currency, such Lender agrees to remit such excess to the Borrower.
ARTICLE XI
Guaranty
SECTION 11.01 The Guaranty.
Each Guarantor hereby jointly and severally with the other Guarantors guarantees, as a primary obligor and not merely as a surety to each Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of (i) Title 11 of the United States Code after any bankruptcy or insolvency petition under Title 11 of the United States Code and (ii) any other Debtor Relief Laws) on the Loans made by the Lenders to, and the Notes held by each Lender of, the Borrower, and all other Obligations (other than with respect to any Guarantor, Excluded Swap Obligations of such Guarantor) from time to time owing to the Secured Parties by any Loan Party under any Loan Document or any Secured Hedge Agreement or any Treasury Services Agreement, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the Guaranteed Obligations ). The Guarantors hereby jointly and severally agree that if the Borrower or other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.
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SECTION 11.02 Obligations Unconditional.
The obligations of the Guarantors under Section 11.01 shall constitute a guarantee of payment and to the fullest extent permitted by applicable Law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Borrower under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:
(i) at any time or from time to time, without notice to the Guarantors, to the extent permitted by Law, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or except as permitted pursuant to Section 11.10 any security therefor shall be released or exchanged in whole or in part or otherwise dealt with;
(iv) any Lien or security interest granted to, or in favor of, an L/C Issuer or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or
(v) the release of any other Guarantor pursuant to Section 11.10.
The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and, to the extent permitted by Law, all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against the Borrower under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive, to the extent permitted by Law, any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guaranty or acceptance of this Guaranty, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guaranty, and all dealings between the Borrower and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. This Guaranty shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by
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the Secured Parties or any other person at any time of any right or remedy against the Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding.
SECTION 11.03 Reinstatement.
The obligations of the Guarantors under this Article XI shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in insolvency, bankruptcy or reorganization or otherwise.
SECTION 11.04 Subrogation; Subordination.
Each Guarantor hereby agrees that until the payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement, it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 11.01, whether by subrogation or otherwise, against the Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. Any Indebtedness of any Loan Party permitted pursuant to Sections 7.03(b)(ii) or 7.03(d) shall be subordinated to such Loan Partys Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness.
SECTION 11.05 Remedies.
The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Borrower under this Agreement and the Notes, if any, may be declared to be forthwith due and payable as provided in Section 8.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 8.02) for purposes of Section 11.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 11.01.
SECTION 11.06 Instrument for the Payment of Money.
Each Guarantor hereby acknowledges that the guarantee in this Article XI constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.
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SECTION 11.07 Continuing Guaranty.
The guarantee in this Article XI is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising.
SECTION 11.08 General Limitation on Guarantee Obligations.
In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other Law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 11.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 11.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 11.11) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.
SECTION 11.09 Information.
Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrowers financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that each Guarantor assumes and incurs under this Guaranty, and agrees that none of any Agent, any L/C Issuer or any Lender shall have any duty to advise any Guarantor of information known to it regarding those circumstances or risks.
SECTION 11.10 Release of Guarantors.
If, in compliance with the terms and provisions of the Loan Documents, (i) all or substantially all of the Equity Interests or property of any Guarantor are sold or otherwise transferred (a Transferred Guarantor ) to a person or persons, none of which is a Loan Party or (ii) any Subsidiary Guarantor becomes an Excluded Subsidiary, such Transferred Guarantor shall, upon the consummation of such sale or transfer, be automatically released from its obligations under this Agreement (including under Section 10.05 hereof) and its obligations to pledge and grant any Collateral owned by it pursuant to any Collateral Document and, in the case of a sale of all or substantially all of the Equity Interests of the Transferred Guarantor, the pledge of such Equity Interests to the Collateral Agent pursuant to the Collateral Documents shall be automatically released, and, so long as the Borrower shall have provided the Agents such certifications or documents as any Agent shall reasonably request, the Administrative Agent and the Collateral Agent shall, at such Transferred Guarantors expense, take such actions as are necessary to effect each release described in this Section 11.10 in accordance with the relevant provisions of the Collateral Documents.
When all Commitments hereunder have terminated, and all Loans or other Obligation (other than obligations under Treasury Services Agreements or Secured Hedge Agreements) hereunder which are accrued and payable have been paid or satisfied, and no Letter of Credit remains outstanding (except any Letter of Credit the Outstanding Amount of which the Obligations related thereto has been Cash Collateralized or for which a backstop letter of credit reasonably satisfactory to the applicable L/C Issuer has been put in place), this Agreement and the guarantees made herein shall terminate with respect to all Obligations, except with respect to Obligations that expressly survive
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such repayment pursuant to the terms of this Agreement. The Collateral Agent shall, at each Guarantors expense, take such actions as are necessary to release any Collateral owned by such Guarantor in accordance with the relevant provisions of the Collateral Documents.
SECTION 11.11 Right of Contribution.
Each Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Subsidiary Guarantors right of contribution shall be subject to the terms and conditions of Section 11.04. The provisions of this Section 11.11 shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Administrative Agent, the L/C Issuer, the Swing Line Lender and the Lenders, and each Subsidiary Guarantor shall remain liable to the Administrative Agent, the L/C Issuer, the Swing Line Lender and the Lenders for the full amount guaranteed by such Subsidiary Guarantor hereunder.
SECTION 11.12 Cross-Guaranty.
Each Qualified ECP Guarantor hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Guarantor as may be needed by such Specified Guarantor from time to time to honor all of its obligations under its Guaranty and the other Loan Documents in respect of any Swap Obligation ( provided, however , that each Qualified ECP Guarantor shall only be liable under this Section 11.12 for up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantors obligations and undertakings under this Section 11.12 voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section 11.12 shall remain in full force and effect until the Obligations have been indefeasibly paid and performed in full and all Commitments have been terminated. Each Qualified ECP Guarantor intends that this Section 11.12 constitute, and this Section 11.12 shall be deemed to constitute, an agreement for the benefit of each Specified Guarantor for all purposes of the Commodity Exchange Act.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
HILTON WORLDWIDE FINANCE LLC, | ||||
as Borrower | ||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President | |||
HILTON WORLDWIDE HOLDINGS INC., as Holdings |
||||
By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President and Treasurer |
[Credit Agreement Signature Page]
90210 BILTMORE MANAGEMENT, LLC | ||||
90210 DESERT RESORTS MANAGEMENT CO., LLC | ||||
90210 GRAND WAILEA MANAGEMENT CO., LLC | ||||
90210 LLC | ||||
90210 MANAGEMENT COMPANY, LLC | ||||
ANDIAMOS OHARE, LLC | ||||
BALLYS GRAND PROPERTY SUB I, INC. | ||||
BLUE BONNET SECURITY, LLC | ||||
CHESTERFIELD VILLAGE HOTEL, LLC | ||||
COMPRIS HOTEL LLC | ||||
CONRAD FRANCHISE LLC | ||||
CONRAD INTERNATIONAL (BELGIUM) LLC | ||||
CONRAD INTERNATIONAL (EGYPT) RESORTS CORPORATION | ||||
CONRAD INTERNATIONAL (INDONESIA) CORPORATION | ||||
CONRAD INTERNATIONAL INVESTMENT (JAKARTA) CORPORATION | ||||
CONRAD INTERNATIONAL MANAGE (CIS) LLC | ||||
CONRAD MANAGEMENT LLC | ||||
DESTINATION RESORTS LLC | ||||
DOUBLETREE DTWC LLC | ||||
DOUBLETREE FRANCHISE LLC | ||||
DOUBLETREE HOTEL SYSTEMS LLC | ||||
DOUBLETREE HOTELS LLC | ||||
DOUBLETREE LLC | ||||
DOUBLETREE MANAGEMENT LLC | ||||
DT MANAGEMENT LLC | ||||
DT REAL ESTATE, INC. | ||||
DTM ATLANTA/LEGACY, INC. | ||||
DTM CAMBRIDGE, INC. | ||||
DTM COCONUT GROVE, INC. | ||||
DTM LARGO, INC. | ||||
DTM MARYLAND, INC. | ||||
DTM SANTA CLARA LLC | ||||
DTM WALNUT CREEK, INC. | ||||
DTR FCH HOLDINGS, INC. | ||||
DTR PAH HOLDING, INC., each as a Guarantor |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[Credit Agreement Signature Page]
DTR SAN ANTONIO, INC. | ||||
DTR TM HOLDINGS, INC. | ||||
DTWC SPOKANE CITY CENTER SPE, LLC | ||||
EJP CORPORATION | ||||
EMBASSY DEVELOPMENT CORPORATION | ||||
EMBASSY EQUITY DEVELOPMENT LLC | ||||
EMBASSY MEMPHIS CORPORATION | ||||
EMBASSY SUITES (ISLA VERDE), INC. | ||||
EMBASSY SUITES CLUB NO. 1, INC. | ||||
EMBASSY SUITES CLUB NO. THREE, INC. | ||||
EMBASSY SUITES CLUB NO. TWO, INC. | ||||
EMBASSY SUITES FRANCHISE LLC | ||||
EMBASSY SYRACUSE DEVELOPMENT LLC | ||||
EPAM CORPORATION | ||||
FLORIDA CONRAD INTERNATIONAL CORP. | ||||
GRAND VACATIONS REALTY, LLC | ||||
GRAND VACATIONS SERVICES LLC | ||||
GRAND VACATIONS TITLE, LLC | ||||
HAMPTON INNS FRANCHISE LLC | ||||
HAMPTON INNS LLC | ||||
HAMPTON INNS MANAGEMENT LLC | ||||
HAPEVILLE INVESTORS, LLC | ||||
HHC BC ORLANDO, LLC | ||||
HHC ONE PARK BOULEVARD, LLC | ||||
HIC FIRST CORPORATION | ||||
HIC GAMING CALIFORNIA, INC. | ||||
HIC HOLDINGS CORPORATION | ||||
HIC HOTELS U.S.A. CORPORATION | ||||
HIC RACING CORPORATION | ||||
HIC SAN PABLO LIMITED, INC. | ||||
HIC SAN PABLO, L.P. | ||||
HIC SECOND CORPORATION | ||||
HILTON BEVERAGE LLC | ||||
HILTON CHICAGO BEVERAGE I LLC | ||||
HILTON CHICAGO BEVERAGE II LLC | ||||
HILTON CHICAGO BEVERAGE III LLC | ||||
HILTON CHICAGO BEVERAGE IV LLC | ||||
HILTON CORPORATE DIRECTOR LLC | ||||
HILTON CP OPERATOR LLC | ||||
HILTON EL CON MANAGEMENT LLC, each as a Guarantor |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[Credit Agreement Signature Page]
HILTON EL CON OPERATOR LLC | ||||
HILTON ELECTRONIC DISTRIBUTION SYSTEMS, LLC | ||||
HILTON ENERGY INVESTMENTS, LLC | ||||
HILTON ESJ OPERATOR LLC | ||||
HILTON FRANCHISE HOLDING LLC | ||||
HILTON FRANCHISE LLC | ||||
HILTON GARDEN INNS FRANCHISE LLC | ||||
HILTON GARDEN INNS MANAGEMENT LLC | ||||
HILTON GRAND VACATIONS CLUB, LLC | ||||
HILTON GRAND VACATIONS COMPANY, LLC | ||||
HILTON GRAND VACATIONS FINANCING, LLC | ||||
HILTON GRAND VACATIONS MANAGEMENT, LLC | ||||
HILTON HAWAII CORPORATION | ||||
HILTON HHONORS WORLDWIDE, L.L.C. | ||||
HILTON HOLDINGS, LLC | ||||
HILTON HOSPITALITY, LLC | ||||
HILTON ILLINOIS CORP. | ||||
HILTON ILLINOIS HOLDINGS LLC | ||||
HILTON INNS LLC | ||||
HILTON INTERNATIONAL CO. | ||||
HILTON KINGSLAND 1, LLC | ||||
HILTON MANAGEMENT LLC | ||||
HILTON NEW JERSEY SERVICE CORP. | ||||
HILTON OPB, LLC | ||||
HILTON ORLANDO PARTNERS II, LLC | ||||
HILTON ORLANDO PARTNERS III, LLC | ||||
HILTON RECREATION LLC | ||||
HILTON RESORTS CORPORATION | ||||
HILTON RESORTS MARKETING CORP. | ||||
HILTON SAN DIEGO CORPORATION | ||||
HILTON SPRING CORPORATION | ||||
HILTON SUPPLY MANAGEMENT LLC | ||||
HILTON SYSTEMS SOLUTIONS, LLC | ||||
HILTON SYSTEMS, LLC | ||||
HILTON WORLDWIDE FINANCE CORP. | ||||
HILTON WORLDWIDE, INC. | ||||
HILTON-OCCC HOTEL, LLC, each as a Guarantor |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[Credit Agreement Signature Page]
HILTON-OCCC MEZZ LENDER, LLC | ||||
HLT AUDUBON LLC | ||||
HLT CA HILTON LLC | ||||
HLT CONRAD DOMESTIC LLC | ||||
HLT CONRAD GP LLC | ||||
HLT DOMESTIC JV HOLDINGS LLC | ||||
HLT DOMESTIC OWNER LLC | ||||
HLT ESP FRANCHISE LLC | ||||
HLT ESP INTERNATIONAL FRANCHISE LLC | ||||
HLT ESP INTERNATIONAL FRANCHISOR CORPORATION | ||||
HLT ESP INTERNATIONAL MANAGE LLC | ||||
HLT ESP INTERNATIONAL MANAGEMENT CORPORATION | ||||
HLT ESP MANAGE LLC | ||||
HLT FRANCHISE II BORROWER LLC | ||||
HLT HQ SPE LLC | ||||
HLT HSM HOLDING LLC | ||||
HLT HSS HOLDING LLC | ||||
HLT JV ACQUISITION LLC | ||||
HLT JV I BORROWER LLC | ||||
HLT LIFESTYLE FRANCHISE LLC | ||||
HLT LIFESTYLE INTERNATIONAL FRANCHISE LLC | ||||
HLT LIFESTYLE INTERNATIONAL FRANCHISOR CORPORATION | ||||
HLT LIFESTYLE INTERNATIONAL MANAGE LLC | ||||
HLT LIFESTYLE INTERNATIONAL MANAGEMENT CORPORATION | ||||
HLT LIFESTYLE MANAGE LLC | ||||
HLT MEMPHIS DATA LLC | ||||
HLT OHARE LLC | ||||
HLT OPERATE DTWC LLC | ||||
HLT OWNED II HOLDING LLC | ||||
HLT OWNED II-A BORROWER LLC | ||||
HLT PALMER LLC | ||||
HLT TIMESHARE BORROWER I LLC | ||||
HLT TIMESHARE BORROWER II LLC | ||||
HOMEWOOD SUITES FRANCHISE LLC | ||||
HOMEWOOD SUITES MANAGEMENT LLC, each as a Guarantor |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[Credit Agreement Signature Page]
HOTEL CLUBS OF CORPORATE WOODS, INC. | ||||
HOTELS STATLER COMPANY, INC. | ||||
HPP HOTELS USA, INC. | ||||
HPP INTERNATIONAL CORPORATION | ||||
HRC ISLANDER LLC | ||||
HTGV, LLC | ||||
INNVISION, LLC | ||||
INTERNATIONAL RIVERCENTER LESSEE, L.L.C. | ||||
LOCKWOOD PALMER HOUSE, LLC | ||||
MERITEX, LLC | ||||
PEACOCK ALLEY SERVICE COMPANY, LLC | ||||
POTTERS BAR PALMER HOUSE, LLC | ||||
PROMUS HOTEL SERVICES, INC. | ||||
PROMUS HOTELS FLORIDA LLC | ||||
PROMUS HOTELS LLC | ||||
PROMUS HOTELS MINNEAPOLIS, INC. | ||||
PROMUS HOTELS PARENT LLC | ||||
PROMUS OPERATING LLC | ||||
PROMUS/KINGSTON DEVELOPMENT CORPORATION | ||||
SALC, INC. | ||||
SAMANTHA HOTEL LLC | ||||
SUITE LIFE, INC. | ||||
TEX HOLDINGS, INC. | ||||
WA COLLECTION INTERNATIONAL, LLC | ||||
WALDORF ASTORIA FRANCHISE LLC | ||||
WALDORF=ASTORIA MANAGEMENT LLC | ||||
WASHINGTON HILTON, L.L.C., each as a Guarantor |
||||
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
[Credit Agreement Signature Page]
DEUTSCHE BANK AG NEW YORK BRANCH, | ||||
as Administrative Agent, Collateral Agent, Swing Line Lender, L/C Issuer and a Lender | ||||
By: |
/s/ Mary Kay Coyle |
|||
Name: | Mary Kay Coyle | |||
Title: | Managing Director | |||
By: |
/s/ Kirk L. Tashjian |
|||
Name: | Kirk L. Tashjian | |||
Title: | Vice President |
[Credit Agreement Signature Page]
BANK OF AMERICA, N.A., | ||||
as a Lender | ||||
By: |
/s/ Suzanne Eaddy |
|||
Name: | Suzanne Eaddy | |||
Title: | Vice President |
[Credit Agreement Signature Page]
GOLDMAN SACHS LENDING PARTNERS LLC, | ||||
as a Lender | ||||
By: |
/s/ Robert Ehudin |
|||
Name: | Robert Ehudin | |||
Title: | Auhtorized Signatory |
[Credit Agreement Signature Page]
MORGAN STANLEY BANK, N.A., | ||||
as a Lender | ||||
By: |
/s/ Pramod Raju |
|||
Name: | Pramod Raju | |||
Title: | Authorized Signatory |
[Credit Agreement Signature Page]
MORGAN STANLEY SENIOR FUNDING, INC., | ||||
as a Lender | ||||
By: |
/s/ Pramod Raju |
|||
Name: | Pramod Raju | |||
Title: | Authorized Signatory |
[Credit Agreement Signature Page]
JPMORGAN CHASE BANK, N.A., | ||||
as a Lender | ||||
By: |
/s/ Marc E. Costantino |
|||
Name: | Marc E. Costantino | |||
Title: | Executive Director |
[Credit Agreement Signature Page]
WELLS FARGO BANK, NATIONAL ASSOCIATION, | ||||
as a Lender | ||||
By: |
/s/ R. Cullen Powell |
|||
Name: | R. Cullen Powell | |||
Title: | Senior Vice President |
[Credit Agreement Signature Page]
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, | ||||
as a Lender | ||||
By: |
/s/ William ODaly |
|||
Name: | William ODaly | |||
Title: | Authorized Signatory | |||
By: |
/s/ Michael Spaight |
|||
Name: | Michael Spaight | |||
Title: | Authorized Signatory |
[Credit Agreement Signature Page]
THE ROYAL BANK OF SCOTLAND plc, | ||||
as a Lender | ||||
By: |
/s/ Michaela V. Galluzzo |
|||
Name: | Michaela V. Galluzzo | |||
Title: | Authorized Signatory |
[Credit Agreement Signature Page]
CITIBANK, N.A., | ||||
as a Lender | ||||
By: |
/s/ John Rowland |
|||
Name: | John Rowland | |||
Title: | Vice President |
[Credit Agreement Signature Page]
BARCLAYS BANK PLC, | ||||
as a Lender | ||||
By: |
/s/ Noam Azachi |
|||
Name: | Noam Azachi | |||
Title: | Vice President |
[Credit Agreement Signature Page]
MIHI LLC, | ||||
as a Lender | ||||
By: |
/s/ Andy Stock |
|||
Name: | Andy Stock | |||
Title: | Authorized Signatory | |||
By: |
/s/ Stephen Mehos |
|||
Name: | Stephen Mehos | |||
Title: | Authorized Signatory |
[Credit Agreement Signature Page]
HSBC BANK USA, NATIONAL ASSOCIATION, | ||||
as a Lender | ||||
By: |
/s/ John P. Treadwell, Jr. |
|||
Name: | John P. Treadwell, Jr. | |||
Title: | Vice President |
[Credit Agreement Signature Page]
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., | ||||
as a Lender | ||||
By: |
/s/ George Stoecklein |
|||
Name: | George Stoecklein | |||
Title: | Director |
[Credit Agreement Signature Page]
SUMITOMO MITSUI BANKING CORPORATION, | ||||
as a Lender | ||||
By: |
/s/ William G. Karl |
|||
Name: | William G. Karl | |||
Title: | General Manager |
[Credit Agreement Signature Page]
Schedule 1.01A
Commitments and L/C Sublimit
Total | ||||||||
Initial Term Commitments: |
||||||||
Deutsche Bank AG New York Branch |
$ | 6,393,650,793.65 | ||||||
Bank of America, N.A. |
$ | 1,206,349,206.35 | ||||||
Total: | $ | 7,600,000,000.00 | ||||||
Revolving Credit Commitments: |
||||||||
Deutsche Bank AG New York Branch |
$ | 213,627,596.45 | ||||||
Bank of America, N.A. |
$ | 181,706,231.45 | ||||||
Goldman Sachs Lending Partners LLC |
$ | 152,240,356.08 | ||||||
Morgan Stanley Senior Funding, Inc. |
$ | 152,240,356.08 | ||||||
JPMorgan Chase Bank, N.A. |
$ | 127,685,459.94 | ||||||
Wells Fargo Bank, National Association |
$ | 35,000,000.00 | ||||||
Credit Suisse AG, Cayman Islands Branch |
$ | 17,500,000.00 | ||||||
The Royal Bank of Scotland plc |
$ | 17,500,000.00 | ||||||
Citibank, N.A. |
$ | 17,500,000.00 | ||||||
Barclays Bank PLC |
$ | 17,500,000.00 | ||||||
MIHI LLC |
$ | 17,500,000.00 | ||||||
HSBC Bank USA, National Association |
$ | 17,500,000.00 | ||||||
The Bank of Tokyo-Mitsubishi UFJ, Ltd. |
$ | 17,500,000.00 | ||||||
Sumitomo Mitsui Trust Bank, Ltd. |
$ | 15,000,000.00 | ||||||
Total: | $ | 1,000,000,000.00 |
Schedule 1.01B
Disqualified Lenders
Four Seasons Hotels and Resorts or any of its Subsidiaries
Hyatt Hotels Corporation or any of its Subsidiaries
Marriott International, Inc. or any of its Subsidiaries
Starwood Hotels & Resorts Worldwide, Inc. or any of its Subsidiaries
Société du Louvre, Wyndham Hotels and Resorts, LLC or any of its Subsidiaries
InterContinental Hotels Group PLC or any of its Subsidiaries
FRHI Hotels & Resorts or any of its Subsidiaries
Choice Hotels International, Inc. or any of its Subsidiaries
Accor S.A. or any of its Subsidiaries
Schedule 1.01C
Collateral Documents
The Security Agreement, dated as of October 25, 2013, among the Borrower, Hilton Worldwide Holdings Inc., certain subsidiaries of the Borrower and Deutsche Bank AG New York Branch, as Collateral Agent.
The Trademark Security Agreement, dated as of October 25, 2013, among Hilton HHonors Worldwide, L.L.C. and Deutsche Bank AG New York Branch, as Collateral Agent.
Copyright Security Agreement, dated as of October 25, 2013, by Compris Hotel LLC (as successor in interest to Compris Hotel Corporation) in favor of Deutsche Bank AG New York Branch, as Collateral Agent.
Copyright Security Agreement, dated as of October 25, 2013, by Doubletree LLC (as successor in interest to Doubletree, Inc.) in favor of Deutsche Bank AG New York Branch, as Collateral Agent.
Copyright Security Agreement, dated as of October 25, 2013, by Hilton Hospitality, LLC (as successor in interest to Hilton Hospitality, Inc.) in favor of Deutsche Bank AG New York Branch, as Collateral Agent.
Copyright Security Agreement, dated as of October 25, 2013, by Hilton Inns LLC (as successor in interest to Hilton Inns, Inc.) in favor of Deutsche Bank AG New York Branch, as Collateral Agent.
Copyright Security Agreement, dated as of October 25, 2013, by Hilton Worldwide, Inc. (as successor in interest to Hilton Hotels Corporation) in favor of Deutsche Bank AG New York Branch, as Collateral Agent.
Copyright Security Agreement, dated as of October 25, 2013, by Promus Hotels, LLC (as successor in interest to Promus Hotels, Inc.) in favor of Deutsche Bank AG New York Branch, as Collateral Agent.
Schedule 1.01D
Excluded Subsidiaries
But For Corporate Realignment Entities
Entity Name | Jurisdiction |
%
ownership |
||||
Conrad International (Egypt) Corporation |
Nevada | 100 | % | |||
Embassy Suites (Puerto Rico), Inc. |
Delaware | 100 | % | |||
Embassy Suites Management LLC |
Delaware | 100 | % | |||
HHI Worldwide Holdings Inc. |
Delaware | 100 | % | |||
Hilton CP Management LLC |
Delaware | 100 | % | |||
Hilton ESJ Management LLC |
Delaware | 100 | % | |||
HLT Conrad International Manage LLC |
Delaware | 100 | % | |||
HLT Conrad International Management Corporation |
Delaware | 100 | % | |||
HLT Domestic IP LLC |
Delaware | 100 | % | |||
HLT Domestic IP Sub Inc. |
Delaware | 100 | % | |||
HLT Existing Franchise Holding LLC |
Delaware | 100 | % | |||
HLT Franchise III Borrower LLC |
Delaware | 100 | % | |||
HLT International Conrad Franchise LLC |
Delaware | 100 | % | |||
HLT International Waldorf=Astoria Franchise LLC |
Delaware | 100 | % | |||
HLT IP LLC |
Delaware | 100 | % | |||
HLT Managed VII Holding LLC |
Delaware | 100 | % | |||
HLT Managed VII-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed VII-A Holding LLC |
Delaware | 100 | % | |||
HLT Managed XII-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed XII-A Holding LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Holdco LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Holding LLC |
Delaware | 100 | % | |||
HLT Mexico LLC |
Delaware | 100 | % | |||
HLT Waldorf=Astoria International Manage LLC |
Delaware | 100 | % | |||
HLT Waldorf=Astoria International Management Corporation |
Delaware | 100 | % |
Schedule 1.01E
Securitization Subsidiaries
Timeshare Entities
Entity Name | Jurisdiction |
%
ownership |
||||
HGV Depositor LLC |
Delaware | 100 | % | |||
Hilton Grand Vacations Trust 2013-A |
Delaware | 100 | % | |||
Hilton Grand Vacations Trust I LLC |
Delaware | 100 | % |
Unrestricted Subsidiaries
Entity Name | Jurisdiction |
%
ownership |
||||
Buckinghams Chicago LLC |
Delaware | 100 | % | |||
Chicago Hilton LLC |
Delaware | 100 | % | |||
Crystal City LLC |
Delaware | 100 | % | |||
Global Resort Partners |
Hawaii | 100 | % | |||
Hapeville Hotel Limited Partnership |
Delaware | 100 | % | |||
Hilton CMBS Holdings LLC |
Delaware | 100 | % | |||
Hilton Domestic Property LLC |
Delaware | 100 | % | |||
Hilton El Segundo LLC |
Delaware | 100 | % | |||
Hilton Hawaiian Village LLC |
Hawaii | 100 | % | |||
Hilton International of Puerto Rico Inc. |
Delaware | 100 | % | |||
Hilton Land Investment 1, LLC |
Delaware | 100 | % | |||
Hilton New Orleans LLC |
Delaware | 100 | % | |||
Hilton Riverside, LLC |
Delaware | 100 | % | |||
Hilton Seattle Airport LLC |
Delaware | 100 | % | |||
Hilton Suites, LLC |
Delaware | 100 | % | |||
Hilton Waldorf Holdings LLC |
Delaware | 100 | % | |||
HLT DC Owner LLC |
Delaware | 100 | % | |||
HLT GP LLC |
Delaware | 100 | % | |||
HLT Hawaii Holding LLC |
Delaware | 100 | % | |||
HLT Logan LLC |
Delaware | 100 | % | |||
HLT Memphis LLC |
Delaware | 100 | % | |||
HLT NY Hilton LLC |
Delaware | 100 | % | |||
HLT NY Waldorf LLC |
Delaware | 100 | % | |||
HLT Owned VIII Holding LLC |
Delaware | 100 | % | |||
HLT Property Acquisition LLC |
Delaware | 100 | % | |||
HLT Resorts GP LLC |
Delaware | 100 | % | |||
HLT San Jose LLC |
Delaware | 100 | % |
International Rivercenter, L.L.C. |
Louisiana | 100 | % | |||||
Kenner Hotel Limited Partnership |
Delaware | 100 | % | |||||
Kitty OSheas Chicago LLC |
Delaware | 100 | % | |||||
McLean Hilton LLC |
Delaware | 100 | % | |||||
Miami Airport LLC |
Delaware | 100 | % | |||||
New Orleans Rivercenter |
Louisiana | 100 | % | |||||
NORC Riparian Property, Inc. |
Louisiana | 100 | % | |||||
Oakbrook Hilton Suites and Garden Inn LLC |
Illinois | 100 | % | |||||
Phoenix SP Hilton LLC |
Delaware | 100 | % | |||||
S.F. Hilton LLC |
Delaware | 100 | % | |||||
Short Hills Hilton LLC |
Delaware | 100 | % |
Schedule 1.01F
Unrestricted Subsidiaries
Entity Name | Jurisdiction |
%
ownership |
||||
Buckinghams Chicago LLC |
Delaware | 100 | % | |||
Chicago Hilton LLC |
Delaware | 100 | % | |||
Crystal City LLC |
Delaware | 100 | % | |||
Global Resort Partners |
Hawaii | 100 | % | |||
Hapeville Hotel Limited Partnership |
Delaware | 100 | % | |||
Hilton CMBS Holdings LLC |
Delaware | 100 | % | |||
Hilton Domestic Property LLC |
Delaware | 100 | % | |||
Hilton El Segundo LLC |
Delaware | 100 | % | |||
Hilton Hawaiian Village LLC |
Hawaii | 100 | % | |||
Hilton International of Puerto Rico Inc. |
Delaware | 100 | % | |||
Hilton Land Investment 1, LLC |
Delaware | 100 | % | |||
Hilton New Orleans LLC |
Delaware | 100 | % | |||
Hilton Riverside, LLC |
Delaware | 100 | % | |||
Hilton Seattle Airport LLC |
Delaware | 100 | % | |||
Hilton Suites, LLC |
Delaware | 100 | % | |||
Hilton Waldorf Holdings LLC |
Delaware | 100 | % | |||
HLT DC Owner LLC |
Delaware | 100 | % | |||
HLT GP LLC |
Delaware | 100 | % | |||
HLT Hawaii Holding LLC |
Delaware | 100 | % | |||
HLT Logan LLC |
Delaware | 100 | % | |||
HLT Memphis LLC |
Delaware | 100 | % | |||
HLT NY Hilton LLC |
Delaware | 100 | % | |||
HLT NY Waldorf LLC |
Delaware | 100 | % | |||
HLT Owned VIII Holding LLC |
Delaware | 100 | % | |||
HLT Property Acquisition LLC |
Delaware | 100 | % | |||
HLT Resorts GP LLC |
Delaware | 100 | % | |||
HLT San Jose LLC |
Delaware | 100 | % | |||
International Rivercenter, L.L.C. |
Louisiana | 100 | % | |||
Kenner Hotel Limited Partnership |
Delaware | 100 | % | |||
Kitty OSheas Chicago LLC |
Delaware | 100 | % | |||
McLean Hilton LLC |
Delaware | 100 | % | |||
Miami Airport LLC |
Delaware | 100 | % | |||
New Orleans Rivercenter |
Louisiana | 100 | % | |||
NORC Riparian Property, Inc. |
Louisiana | 100 | % | |||
Oakbrook Hilton Suites and Garden Inn LLC |
Illinois | 100 | % | |||
Phoenix SP Hilton LLC |
Delaware | 100 | % | |||
S.F. Hilton LLC |
Delaware | 100 | % | |||
Short Hills Hilton LLC |
Delaware | 100 | % |
Schedule 1.01G
Approved Counterparties
Bank of America and any of its affiliates
Bank of New York Mellon and any of its affiliates
Bank of Tokyo-Mitsubishi UFJ and any of its affiliates
Barclays and any of its affiliates
Citibank and any of its affiliates
Credit Suisse and any of its affiliates
Deutsche Bank and any of its affiliates
Fifth Third and any of its affiliates
Goldman Sachs and any of its affiliates
HSBC and any of its affiliates
J.P. Morgan and any of its affiliates
Morgan Stanley and any of its affiliates
The Royal Bank of Scotland plc and any of its affiliates
Wells Fargo and any of its affiliates
Schedule 5.05
Certain Liabilities
Indebtedness |
|
|||||
Unsecured Notes Due 2017 |
54,863,000 | |||||
Contingently Convertible Notes due 2023 |
401,322 | |||||
DoubleTree Ontario Mortgage |
32,292,710 | |||||
DoubleTree Spokane Mortgage |
11,902,442 | |||||
Antwerp Capital Lease |
44,862,385 | |||||
Bradford Capital Lease |
16,000,854 | |||||
Munich Park Capital Lease |
5,797,351 | |||||
Odawara Capital Lease |
12,223,379 | |||||
Tokyo Capital Lease |
173,749,872 | |||||
Tokyo Other Debt |
19,973,023 | |||||
CMBS Debt (anticipated at closing) |
3,500,000,000 | |||||
W=A New York Mortgage (anticipated at closing) |
525,000,000 | |||||
Compensation Arrangements : |
||||||
Share based compensation obligations paid to executives under our Promote Plan |
(A) | |||||
Guarantees : |
||||||
Hilton Baltimore |
Limited Loan Pmt Guarantee |
25,000,000 | ||||
UK Pension Plan |
Guarantee of pension obligation |
23,000,000 | ||||
HGV |
Guarantee of timeshare receivable sale |
1,787,000 | ||||
LivingWell |
Lease Performance Guarantee |
248,000 | ||||
Columbia Sussex Hotels |
Performance Guaranty for Mgmt Contracts |
52,000,000 | ||||
Hilton Venice |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hilton Eilat |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hilton Manchester Deansgate |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hilton The Hague |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hampton London Luton Airport, Luton, UK |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hilton, London Southbank |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hilton Moscow Prechistenskaya |
Performance Guaranty for Mgmt Contract |
(B) | ||||
Hampton Inn Bournemouth, UK |
Performance Guaranty for Mgmt Contract |
(B) |
Contract
Letters of Credit (issued for benefit of): |
||||
ACE American Ins Co & Pacific Employers Ins Co. |
15,429,189 | |||
Old Republic Insurance Company |
350,000 | |||
Old Republic Insurance Company |
250,701 | |||
National Union Fire Insurance Co. of Pittsburgh, PA |
500,000 | |||
Industrial Commission of Arizona, State of Arizona |
100,000 | |||
Wells Fargo Bank (Hilton Baltimore) |
25,000,000 | |||
Chartis Insurance UK |
668,882 | |||
ACE American Insurance Company |
551,967 | |||
ACE American Insurance Company |
216,000 | |||
ACE American Insurance Company |
700,000 | |||
Reliance National Indemnity Company |
120,000 | |||
The Travelers Insurance Company |
500,000 | |||
National Union Fire Insurance Co. of Pittsburgh, PA |
890,000 | |||
The Royal Bank of Scotland PLC |
2,500,000 | |||
Mesa Properties c/o GE Corporation |
1,786,509 | |||
The Sports Equipment Administrative Center of China |
1,000,000 | |||
ICANN |
30,000 | |||
Mun Hilton, LLC |
352,000 | |||
Mun Hilton, LLC |
176,000 | |||
Pensions: |
||||
Hilton Hotels Retirement Plan |
209,458,005 | |||
Intercompany: |
||||
See Attachment I |
Notes
(A) | Amounts dependent on equity value of BH Hotels Holdco LLC (Ultimate parent of Hilton) |
(B) | Amounts contingent on performance of hotels. |
Attachment I to Schedule 5.05: Intercompany Loans
Lender |
Borrower |
Transaction
CCY |
6/30/13 Balance
(Transaction CCY) |
|||||
AfroAm Prop Hotels Pty Ltd |
Hilton Intl Co |
ZAR | 45,819,668.72 | |||||
Adda Hotels |
HIC Treasury Ltd |
GBP | 42,942,146.78 | |||||
Adda Prop Ltd |
Hilton Finance UK Ltd |
GBP | 9,636,528.46 | |||||
Admiral I Pty Ltd |
HIC Treasury Ltd |
AUD | 145,467,363.67 | |||||
Admiral I Pty Ltd |
Hilton PCB SarL |
AUD | 223,840,855.62 | |||||
HPP Intl Corp |
Avenue Louise Hotel Partners SNC |
EUR | 25,503,767.36 | |||||
HPP Intl Corp |
Avenue Louise Hotel Partners SNC |
EUR | 7,595,028.63 | |||||
HLT ARO Manage Ltd |
HIC Treasury Ltd |
GBP | 2,383,314.19 | |||||
ARO Participation Ltd |
Hilton Finance UK Ltd |
GBP | 701,992,464.08 | |||||
Hilton Finance UK Ltd |
Belfast Hilton Ltd |
GBP | 2,266,213.95 | |||||
Hilton of Malaysia LLC |
Hilton do Brasil Ltd |
USD | 55,434,475.39 | |||||
CBYH LLC |
Hilton Intl Co |
USD | 1,920,271.83 | |||||
Comfort Hotels Intl Ltd |
Hilton Finance UK Ltd |
GBP | 8,490,004.35 | |||||
Hilton Finance UK Ltd |
Comfort Hotels Ltd |
GBP | 456,580.36 | |||||
Hilton Finance UK Ltd |
HPP Intl Corp |
EUR | 11,359,542.24 | |||||
HLT Conrad IP LLC |
Hilton Intl Manage LLC |
USD | 19,945,053.20 | |||||
HLT Conrad IP Sub Inc |
Hilton Intl Manage LLC |
USD | 1,798,389.36 | |||||
Comfort Lodge UK Ltd |
Hilton Finance UK Ltd |
GBP | 23,350,654.31 | |||||
Comfort Inns BV |
Hilton PCB SarL |
EUR | 89,778,030.54 | |||||
Hilton Finance UK Ltd |
Comfort Inns BV |
USD | 52,491,803.79 | |||||
HLT Conrad LLC |
Hilton Intl Manage LLC |
USD | 283,350.82 | |||||
Conrad Intl Egypt Corp |
Hilton Intl Manage LLC |
USD | 2,648,393.18 | |||||
Conrad Intl Hotels HK Ltd |
HIC Treasury Ltd |
USD | 27,762,129.89 | |||||
HLT Conrad Intl Manage LLC |
Hilton Intl Manage LLC |
USD | 3,677,108.57 |
Craigendarroch Ltd |
HIC Treasury Ltd |
GBP | 1,525,755.04 | |||||
Hilton Finance UK Ltd |
Soc dExp Hotel La Defense |
EUR | 974,562.78 | |||||
Doubletree Intl Franchise LLC |
Hilton Intl Manage LLC |
USD | 21,173,563.47 | |||||
Doubletree Intl Franchise LLC |
HIC Treasury Ltd |
USD | 762,587.48 | |||||
HLT Domestic IP LLC |
HIC Treasury Ltd |
USD | 6,734,887.44 | |||||
Hilton Intl Manage LLC |
HLT Domestic Owner LLC |
USD | 1,441,510,184.45 | |||||
HIC Treasury Ltd |
HLT English Operator Ltd |
GBP | 10,194,198.52 | |||||
HPP Intl Corp |
Hilton HIH Ltd |
GBP | 1,427,040,838.25 | |||||
HPP Intl Corp |
Hilton HIH Ltd |
GBP | 5,000,000.00 | |||||
Hilton Worldwide Inc |
Munchen Park Branch HIC |
EUR | 153,759,811.67 | |||||
Hilton Worldwide Inc |
HIC Hotels USA Corp |
USD | 305,254,121.09 | |||||
Hilton Worldwide Inc |
HIC Hotels USA Corp |
USD | 908,953,846.98 | |||||
HIC Treasury Ltd |
Greatkey Ltd |
GBP | 2,616,161.67 | |||||
HIC Treasury Ltd |
HIC Belgium |
EUR | 18,769,314.79 | |||||
Hilton Copenhagen APS |
HIC Treasury Ltd |
DKK | 6,518,558.07 | |||||
Hilton Intl Manage LLC |
HLT ESP Intl Mgmt Corp |
USD | 1,068.51 | |||||
Hilton Intl Manage LLC |
HLT ESP Intl Manage LLC |
USD | 1,068.51 | |||||
Hilton Intl France SASU |
Hilton PCB SarL |
EUR | 63,462,210.97 | |||||
HGI Intl Franchise LLC |
Hilton Intl Manage LLC |
USD | 1,490,537.69 | |||||
Hilton Finance UK Ltd |
Hilton Worldwide Inc |
AUD | 1,951,673.55 | |||||
Hilton Finance UK Ltd |
Hilton Worldwide Inc |
CAD | 962,509.55 | |||||
Hilton Finance UK Ltd |
Hilton Worldwide Inc |
CHF | 1,597,565.11 | |||||
HIC Treasury Ltd |
Hotel Corp of Europe Milan |
EUR | 22,185,582.48 | |||||
HIC Treasury Ltd |
Hotel Corp of Europe Milan |
EUR | 59,657.62 | |||||
Hilton Finance UK Ltd |
Hilton Worldwide Inc |
EUR | 7,191,576.44 |
Hilton Finance UK Ltd |
Hilton Worldwide Inc | GBP | 224,000,472.63 | |||||
Hilton Worldwide Inc |
Hilton PCB SarL | USD | 596,234,577.26 | |||||
Hilton Worldwide Inc |
Hilton PCB SarL | EUR | 245,310,026.17 | |||||
Hilton Finance UK Ltd |
Hilton Worldwide Inc | SEK | 20,199,222.44 | |||||
Hilton Finance UK Ltd |
Hilton Worldwide Inc | SGD | 723,167.91 | |||||
Hilton Worldwide Inc |
Hilton Intl Co | USD | 645,574,477.08 | |||||
Hilton Worldwide Inc |
Hilton Intl Co | SEK | 458,159.85 | |||||
Hilton Intl Co |
Hilton Worldwide Inc | SEK | 3,327,793,568.62 | |||||
Hilton Finance UK Ltd |
Hilton Intl Hotels UK Ltd | GBP | 26,842,452.84 | |||||
Hilton Intl Hotels UK Ltd |
Hilton Finance UK Ltd | SEK | 254,581.54 | |||||
Hotel Hilton Plaza AB |
Hilton Finance UK Ltd | SEK | 47,261,843.13 | |||||
Hilton Intl Co |
HIC Hotels USA Corp | USD | 210,493,260.65 | |||||
Hilton Intl Co |
Hilton Intl Australia Pty Ltd | AUD | 74,589,025.97 | |||||
Hilton Intl Co |
Hilton Intl Australia Pty Ltd | AUD | 608,352,791.07 | |||||
Hilton Intl Co |
Hilton Intl Barbados Ltd | USD | 4,545,487.20 | |||||
Hilton Intl Co |
HIC Hotels USA Corp | USD | 143,242,128.76 | |||||
Hilton Intl Co |
HIC Hotels USA Corp | USD | 20,917,936.42 | |||||
Hilton Intl Co |
Hilton Canada Co | CAD | 85,465,287.94 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | AUD | 223,376,806.99 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | CAD | 1,423,138.59 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | CHF | 147,095,720.35 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | DKK | 85,457,440.14 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | EUR | 91,687,162.88 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | GBP | 697,015,084.63 | |||||
HIC Group Intl Luxembourg SarL |
Hilton Worldwide Inc | GBP | 1,014,431.36 | |||||
Hilton Finance UK Ltd |
HIC Hldgs BV | GBP | 937,495.65 |
Hilton Intl Co |
Hilton Worldwide Inc | USD | 1,822,481,854.00 | |||||
Hilton Finance UK Ltd |
HIC Hotels USA Corp | USD | 18,275,668.24 | |||||
HIC Group Intl Luxembourg SarL |
Hilton Finance UK Ltd | EUR | 267,348.39 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | NOK | 80,977,198.52 | |||||
Hilton Intl Co |
Soc dExp Hotel dOrly | EUR | 2,500,197.06 | |||||
Hilton Finance UK Ltd |
Hilton Intl Co | SEK | 754,322,128.66 | |||||
Hilton Intl Co |
Hilton PCB SarL | SEK | 5,833,830,817.01 | |||||
Hilton Intl Co |
Hilton Worldwide Ltd | USD | 326,184,748.73 | |||||
Hilton Intl Co |
Hilton Finance UK Ltd | USD | 73,242,331.45 | |||||
HLT Intl Exist Franchise Hldg |
Hilton Intl Manage LLC | USD | 44,935,407.67 | |||||
HIC Treasury Ltd |
Hilton Intl Franchise LLC | USD | 3,013,263.49 | |||||
Hilton Intl Franchise LLC |
Hilton Intl Manage LLC | USD | 22,820,392.65 | |||||
Hilton Finance UK Ltd |
Hilton Intl France SASU | EUR | 46,042,223.14 | |||||
Hilton Intl GAMMA |
Hilton Finance UK Ltd | EUR | 8,269,078.86 | |||||
Hilton Intl Germany GmbH |
HIC Treasury Ltd | EUR | 8,534,418.01 | |||||
HI Hotel Mgmt Guam Inc |
HIC Treasury Ltd | USD | 554,241.07 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | AUD | 108,692,437.59 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | CAD | 222,846,167.67 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | CHF | 49,370,403.58 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | DKK | 78,762,767.53 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | EUR | 281,678,096.24 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | GBP | 435,044,124.44 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | GBP | 297,917,679.04 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | GBP | 678,557,257.89 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | NOK | 81,433,573.30 | |||||
HIH Sweden AB |
Hilton Finance UK Ltd | SEK | 1,880,609.84 |
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | SEK | 304,533,131.16 | |||||
Hilton Intl Hotels UK Ltd |
HIC Hotels USA Corp | GBP | 184,192,381.48 | |||||
Hilton Intl Co |
Hilton Intl Hotels UK Ltd | USD | 1,263,282,696.77 | |||||
Hampton Inns Intl Franchise LLC |
Hilton Intl Manage LLC | USD | 2,740,607.55 | |||||
HIC Treasury Ltd |
Hilton Intl Manage LLC | USD | 430,101,749.05 | |||||
Hilton Intl Mgmt Corp |
Hilton Intl Manage LLC | USD | 224,730,369.67 | |||||
HIC Treasury Ltd |
Hilton Intl Mgmt Corp | USD | 199,198,478.25 | |||||
Hilton Intl Manage Maldives Pvt Ltd |
Hilton Intl Manage LLC | USD | 3,436,833.88 | |||||
Hilton Intl Moscow LLC |
Hilton Intl Co | GBP | 3,930,643,603.14 | |||||
Hilton Intl Moscow LLC |
Hilton Intl Co | USD | 549,865,744.49 | |||||
HIC Treasury Ltd |
Hilton Intl Netherlands BV | EUR | 2,905,010.26 | |||||
HLT Intl IP LLC |
Hilton Intl Manage LLC | USD | 108,866,511.85 | |||||
HLT Intl IP Sub Inc |
Hilton Intl Manage LLC | USD | 20,777,482.23 | |||||
Hilton Intl of Puerto Rico Inc |
Hilton Intl Manage LLC | USD | 125,125,086.71 | |||||
Hilton Intl Manage LLC |
Hilton Russia LLC - Moscow | USD | 7,587,827.49 | |||||
Hilton Intl Switzerland GmbH |
Hilton Finance UK Ltd | CHF | 124,871,728.46 | |||||
Hilton Italiana Srl |
HIC Treasury Ltd | EUR | 7,241,409.46 | |||||
Hilton Intl Wien GmbH |
HIC Treasury Ltd | EUR | 13,885,709.85 | |||||
HLT Intl W=A Franchise |
Hilton Intl Manage LLC | USD | 233,166.60 | |||||
Hilton Leisure Breaks Ltd |
Hilton Finance UK Ltd | GBP | 890,681.48 | |||||
Hilton Intl Germany GmbH |
HLT Manage Franchise Holdco LLC | EUR | 41,552,892.51 | |||||
HLT Intl Exist Franchise Hldg |
HIC Treasury Ltd | USD | 29,208,639.42 | |||||
HLT Intl W=A Franchise |
HIC Treasury Ltd | USD | 165,996.22 | |||||
HLT Intl IP LLC |
HIC Treasury Ltd | USD | 466,833,287.25 | |||||
HLT Intl IP Sub Inc |
HIC Treasury Ltd | USD | 52,377,193.21 | |||||
HIC Treasury Ltd |
HLT Operating V-A Borrower Ltd | GBP | 4,868,250.00 |
Hotel Mgmt of Minneapolis Inc |
Hilton Intl Co | USD | 7,242,224.36 | |||||
Hilton of Spain SL |
HIC Treasury Ltd | EUR | 2,285,314.48 | |||||
HIC Hldgs BV |
Hilton PCB SarL | EUR | 7,388,549.44 | |||||
HIC Roissy Netherlands BV |
Hilton PCB SarL | EUR | 43,142,504.02 | |||||
Hilton Finance UK Ltd |
Hilton UK Hotels Ltd | GBP | 56,748,802.54 | |||||
HLT Waldorf=Astoria Intl Mgmt Corp |
Hilton Intl Manage LLC | USD | 3,478,998.52 | |||||
HLT Waldorf=Astoria Intl Manage LLC |
Hilton Intl Manage LLC | USD | 1,043,291.09 | |||||
Intl Brand Hosp GmbH Austria |
Hilton Finance UK Ltd | EUR | 597,019.10 | |||||
Intl Brand Hosp GmbH Germany |
Hilton Finance UK Ltd | EUR | 4,006,093.38 | |||||
HLT Intl Conrad Franchise LLC |
Hilton Intl Manage LLC | USD | 976,926.22 | |||||
HIC Treasury Ltd |
Hilton Hotels Ireland Ltd | EUR | 734,534.22 | |||||
HLT Manage Franchise Holdco LLC |
Izmir Hilton | TRY | 2,494,182.69 | |||||
HLT London Manage Ltd |
HIC Treasury Ltd | GBP | 5,965,768.13 | |||||
Hilton of Malaysia LLC |
Hilton Intl Manage LLC | USD | 40,897,881.13 | |||||
HIC Treasury Ltd |
HLT Manage Franchise Holdco LLC | GBP | 174,988,258.21 | |||||
HLT Manage Franchise Holdco LLC |
HIC Treasury Ltd | EUR | 173,890.80 | |||||
Hilton Intl Manage LLC |
HLT Manage Franchise Holdco LLC | USD | 117,202,402.42 | |||||
HLT Managed I-A Hldg LLC |
HIC Treasury Ltd | USD | 2,597,732.96 | |||||
Hilton Intl Franchise Hldg LLC |
HLT Managed XI-A Borrower GmbH | EUR | 26,466,274.34 | |||||
HIC Treasury Ltd |
Maple Hotels Mgmt Co Ltd | GBP | 848,862.74 | |||||
Hilton Intl Co |
Mayaguez Hilton Corp | USD | 1,029,108.36 | |||||
Comfort Inns BV |
MC Treasury Ltd | EUR | 29,997,671.13 | |||||
Hilton Finance UK Ltd |
MC Treasury Ltd | GBP | 294,812,305.99 | |||||
Hilton Worldwide Inc |
MC Treasury Ltd | USD | 54,499,640.42 | |||||
Hilton Intl Co |
MC Treasury Ltd | USD | 40,428,228.60 | |||||
MC Treasury Ltd |
Hilton Intl Co | AUD | 59,533,370.15 |
MC Treasury Ltd |
Hilton Intl Co | CAD | 220,445,815.14 | |||||
MC Treasury Ltd |
Hilton Intl Co | EUR | 154,335,214.50 | |||||
MC Treasury Ltd |
Hilton Intl Co | GBP | 571,954,125.79 | |||||
MC Treasury Ltd |
Hilton Intl Switzerland GmbH | CHF | 25,548,867.12 | |||||
HIC Hotels USA Corp |
MC Treasury Ltd | USD | 5,883,006.62 | |||||
MC Treasury Ltd |
HIC Group Intl Luxembourg SarL | EUR | 46,157.63 | |||||
MC Treasury Ltd |
Hilton Intl Co | USD | 373,619,785.73 | |||||
MC Treasury Ltd |
Hilton Intl France SASU | EUR | 21,711,888.87 | |||||
HIH Sweden AB |
MC Treasury Ltd | SEK | 100,851,703.14 | |||||
Intl Brand Hosp GmbH Austria |
MC Treasury Ltd | EUR | 4,813,164.03 | |||||
HLT Milton Keynes Ltd |
HIC Treasury Ltd | GBP | 1,714,863.07 | |||||
MC Treasury Ltd |
HIC Hldgs BV | GBP | 8,630,732.57 | |||||
MC Treasury Ltd |
HIC Roissy Netherlands BV | EUR | 1,592,792.65 | |||||
HIC Second Corp |
MC Treasury Ltd | USD | 392,571.81 | |||||
Munchen Park Branch HIC |
MC Treasury Ltd | EUR | 23,959,652.06 | |||||
Hotel Hilton Plaza AB |
MC Treasury Ltd | SEK | 319,047,514.91 | |||||
Hilton Finance UK Ltd |
Munchen Park Branch HIC | EUR | 10,287,933.34 | |||||
Hilton Nairobi Ltd |
HIC Treasury Ltd | USD | 4,141,275.78 | |||||
Hilton Intl Co |
Odawara Hilton - HFS Odawara | JPY | 64,053,137.00 | |||||
HLT Manage Franchise Hldg LLC |
Operadora de Hoteles Loreto | USD | 1,040,579.19 | |||||
Hilton Intl Franchise Hldg LLC |
HLT Operating VII-A Borrower GmbH | EUR | 12,171,772.74 | |||||
Soc dExp Hotel dOrly |
Hilton Finance UK Ltd | EUR | 1,574,851.59 | |||||
Hilton PCB SarL |
Hilton Intl Co | USD | 28,759,413.95 | |||||
Hilton Intl Co |
Hilton PCB SarL | USD | 1,834,263,380.00 | |||||
HIC Treasury Ltd |
Puckrup Hall Hotel Ltd | GBP | 400,318.32 | |||||
HIC Racing Chiswick Ltd |
Hilton Intl Co | USD | 1,289,505,535.08 |
HIC Racing Chiswick Ltd |
Hilton Worldwide Inc | GBP | 474,152,880.26 | |||||
Soc dExp Hotel du Xveme |
Hilton Finance UK Ltd | EUR | 211,368.36 | |||||
HLT Singapore Manage LLC |
HIC Treasury Ltd | USD | 7,990,596.57 | |||||
Splendid Prop Co Ltd |
HIC Treasury Ltd | GBP | 100,653,362.72 | |||||
Hilton Worldwide Ltd |
Hilton Finance UK Ltd | GBP | 120,304,470.17 | |||||
HLT Stakis IP Ltd |
HIC Treasury Ltd | GBP | 1,377,347.50 | |||||
HIC Treasury Ltd |
HLT Stakis Operator Ltd | GBP | 32,805,074.48 | |||||
HLT Stakis SPE Ltd |
HIC Treasury Ltd | GBP | 25,052,959.68 | |||||
St Helens Hotels Ltd |
HIC Treasury Ltd | GBP | 2,496,350.73 | |||||
Hilton Intl Trinidad Ltd |
Hilton Intl Co | USD | 5,410,884.54 | |||||
Hilton UK Manage Ltd |
HIC Treasury Ltd | GBP | 8,674,157.87 | |||||
Vista Intl Illinois Inc |
Hilton Intl Co | USD | 72,380,249.71 | |||||
HIC Treasury Ltd |
HLT Waldorf=Astoria Intl Manage LLC | USD | 393,679.64 | |||||
World Hotels BV |
Hilton PCB SarL | EUR | 23,246,540.39 | |||||
HLT German Manage GmbH |
Hilton Finance UK Ltd | EUR | 1,872,891.33 | |||||
Hilton Intl Franchise Hldg LLC |
Hilton Intl Manage LLC | USD | 381,301,222.46 | |||||
Hilton Intl Franchisor Corp |
Hilton Intl Manage LLC | USD | 2,412,835.07 | |||||
Hilton Insurance Corp |
Hilton Worldwide Inc | USD | 10,000,000.00 | |||||
Hilton Insurance Corp |
Hilton Worldwide Inc | USD | 8,600,000.00 | |||||
Hilton Insurance Corp |
Hilton Worldwide Inc | USD | 4,900,000.00 | |||||
Hilton HHonors Worldwide LLC |
Hilton Worldwide Inc | USD | 531,692,285.00 | |||||
Hilton Hellas Monosopropi EPE |
Hilton Finance UK Ltd | EUR | 90,000.00 | |||||
Hilton Intl Germany GmbH |
HIRO GrundstucksGS GmbH and Co KG | EUR | 20,334,080.98 | |||||
Hilton Intl Germany GmbH |
HIRO Hotel GmbH and Co KG | EUR | 4,528,070.29 | |||||
HIRO Hotel GmbH and Co KG |
Hilton Intl Germany GmbH | EUR | 116,034,830.45 | |||||
GrundstucksGS Belevedere Weimar |
Hilton Intl Germany GmbH | EUR | 6,530,613.67 |
Hilton Intl Co |
Nippon Hilton - HFS Tokyo | JPY | 500,000,000.00 | |||||
Hilton Intl Co |
Odawara Hilton - HFS Odawara | JPY | 421,859,816.00 | |||||
Maatshappij Spol - HFS Schiphol |
HIC Treasury Ltd | EUR | 1,926,000.00 | |||||
Hilton Finance UK Ltd |
HLT Craigendarroch Suites Ltd | GBP | 2,767,860.14 | |||||
Hilton Worldwide Inc |
Avenue Louise Hotel Partners SNC | EUR | 11,305,902.07 | |||||
Hilton Intl Mgmt Corp |
Tel Aviv Hilton Ltd | USD | 3,011,308.38 | |||||
Hilton Israel Ltd |
HLT Managed II-A Borrower Corp | USD | 4,005,543.33 | |||||
HLT Managed II-A Borrower Corp |
Tel Aviv Hilton Ltd | USD | 4,005,543.33 | |||||
HLT English Operator Ltd |
HLT Operating V-A Borrower Ltd | GBP | 6,010.53 | |||||
Hilton Intl Co |
Hilton of Panama Ltd | USD | 712,920.76 | |||||
Hilton Intl Co |
HI Asia Pac - Regional HQ APAC | SGD | 42,287,135.74 | |||||
HLT Drake LLC |
Hilton Intl Co | USD | 45,656.00 | |||||
HH Australia Pty Ltd |
HIC Treasury Ltd | AUD | 30,688,438.48 | |||||
Hilton Finance UK Ltd |
Hilton Malta Ltd | EUR | 1,500,838.03 | |||||
Hilton Intl South Africa Pty Ltd |
HIM - HLT Intl Manage South Africa | ZAR | 1,300,000.00 | |||||
HIC Treasury Ltd |
HLT Stakis SPE Ltd Sweden | SEK | 67,233,977.75 |
Schedule 5.06
Litigation
That audit of Hilton Worldwide Holdings Inc.s (Holdings) consolidated U.S. federal income tax returns for the fiscal years ended December 31, 2006 and October 24, 2007 by the Internal Revenue Service with respect to which the Internal Revenue Service has proposed adjustments to increase Holdings taxable income for such periods based on several assertions involving intercompany loans, Holdings Hilton HHonors guest loyalty and reward program and Holdings foreign-currency denominated loans issued by one of Holdings Subsidiaries. In total, the proposed adjustments sought by the IRS in connection with the specified tax dispute would result in U.S. federal tax owed of approximately $695 million, excluding interest and penalties and potential state income taxes.
Hilton Worldwide, Inc. is a defendant in a federal multi-district litigation, currently pending in the U.S. District Court for the Northern District of Texas, which consolidates 30 previously separate actions originally filed in federal courts between August 2012 and February 2013. The consolidated amended complaint alleges that approximately a dozen hotel and online travel company defendants engaged in an anti-competitive scheme to fix the prices of hotel rooms in violation of federal and state antitrust and consumer protection laws. The defendants have filed a joint motion to dismiss the amended complaint on the basis that, among other things, the plaintiffs have failed to demonstrate facts sufficient to support their allegations of an industry-wide conspiracy.
Schedule 5.08
Ownership of Property
All liens related to the Second Amended and Restated Promissory Note in the original principal amount of $30,000,000 made as of August 1, 2013 by Metropolitan Life Insurance Company, as Lender, to DT Ontario Hotel Partners, as Borrower (Doubletree Hotel Ontario Airport)
All liens related to the loans encumbering the Tokyo Hilton.
Schedule 5.09(a)
Environmental Matters
None.
Schedule 5.10
Taxes
That audit of Hilton Worldwide Holdings Inc.s (Holdings) consolidated U.S. federal income tax returns for the fiscal years ended December 31, 2006 and October 24, 2007 by the Internal Revenue Service with respect to which the Internal Revenue Service has proposed adjustments to increase Holdings taxable income for such periods based on several assertions involving intercompany loans, Holdings Hilton HHonors guest loyalty and reward program and Holdings foreign-currency denominated loans issued by one of Holdings Subsidiaries. In total, the proposed adjustments sought by the IRS in connection with the specified tax dispute would result in U.S. federal tax owed of approximately $695 million, excluding interest and penalties and potential state income taxes.
Schedule 5.11(a)
ERISA Compliance
On August 26, 1998, Kifafi sued Hilton and its retirement plan alleging that Hiltons plan violated ERISA by: (1) calculating his normal retirement age benefits without prorating the Social Security offset based upon his years of service (backloading) and (2) failing to count his years of union service in determining his eligibility for early retirement benefits. Litigation has continued since that time. The Company received an order from the court on January 19, 2012, but based on the instructions under the order did not believe that any significant change to the estimated pension liability was necessary. On April 11, 2012, the Company filed an appeal with respect to this case with the U.S. Court of Appeals, claiming that much of the U.S. District Courts findings were inappropriate with respect to the Companys lack of compliance with ERISA and the period for which the back loading remedy applies. Oral arguments were held on September 21, 2012 before the U.S. Court of Appeals for the District of Columbia Circuit. On December 14, 2012, the U.S. Court of Appeals for the District of Columbia Circuit ruled on the Companys appeal and Kifafis cross-appeal and affirmed the U.S. District Courts decision. Based on the final order, the Companys best estimate of the minimum additional pension obligation is $109 million. The Company is in the process of implementing the changes required by the Court. The Company has sought clarification from the District Court regarding certain details of implementation and attorneys fees. It is awaiting the Courts ruling.
Schedule 5.12
Subsidiaries and Other Equity Investments
Entity Name | Jurisdiction |
%
ownership |
||||
259 Pitt Street Pty Ltd. |
Australia | 100 | % | |||
90210 Biltmore Management, LLC |
Delaware | 100 | % | |||
90210 Desert Resorts Management Co., LLC |
Delaware | 100 | % | |||
90210 Grand Wailea Management Co., LLC |
Delaware | 100 | % | |||
90210 LLC |
Delaware | 100 | % | |||
90210 Management Company, LLC |
Delaware | 100 | % | |||
Adana Hilton Enternasyonal Otelcilik Limited Sirketi |
Turkey | 100 | % | |||
Adda Hotels |
England, UK | 100 | % | |||
Adda Properties Limited |
England, UK | 100 | % | |||
Addis Ababa Hilton Pvt Ltd Co |
Ethiopia | 100 | % | |||
Admiral I Pty Limited |
Australia | 100 | % | |||
Admiral II Pty Limited |
Australia | 100 | % | |||
Admiral III Pty Limited |
Australia | 100 | % | |||
Admiral Investments Pty Limited |
Australia | 100 | % | |||
African American Investment Corporation (Pty) Ltd |
South Africa | 100 | % | |||
African American Properties (Pty) Ltd. |
South Africa | 100 | % | |||
African American Properties Hotels (Pty) Ltd. |
South Africa | 100 | % | |||
American Plaza Parking LLC |
Utah | 34.70 | % | |||
Andiamos OHare, LLC |
Delaware | 100 | % | |||
Ankara Enternasyonel Otelcilik Anonim Sirketi |
Turkey | 10 | % | |||
A-R HHC Orlando Convention Hotel LLC |
Delaware | 20 | % | |||
A-R HHC Orlando Convention Hotel Member, LLC |
Delaware | 20 | % | |||
Aro Participation Limited |
England, UK | 100 | % | |||
Ashford HHC Partners III, LP |
Delaware | 25 | % | |||
ATM Hotels Pty. Limited |
Australia | 100 | % | |||
Avenue Louise Hotel Partners S.N.C. |
Belgium | 100 | % | |||
Ballys Grand Property Sub I, Inc. |
Nevada | 100 | % | |||
Belfast Hilton Limited |
Northern Ireland, UK | 100 | % | |||
Blue Bonnet Security, LLC |
Delaware | 100 | % | |||
Bondarea Limited |
Scotland, UK | 100 | % | |||
Bradley Court Limited |
England, UK | 100 | % | |||
Brasilton Contagem Hoteis e Turismo SA |
Brazil | 100 | % | |||
Brighton at Kingston Plantation, L.L.C. |
Delaware | 50 | % | |||
Buckinghams Chicago, LLC |
Delaware | 100 | % | |||
CBYH LLC |
Delaware | 100 | % | |||
Centennial Hotel Company, LLC |
Georgia | 36.40 | % |
Chancel Service Corporation |
Delaware | 100 | % | |||
Chesterfield Village Hotel, LLC |
Missouri | 100 | % | |||
CHH Capital Hotel GP, LLC |
Delaware | 25 | % | |||
CHH Capital Hotel Partners, LP |
Delaware | 25 | % | |||
CHH Capital Tenant Corp. |
Delaware | 25 | % | |||
CHH III Tenant Parent Corp. |
Delaware | 25 | % | |||
CHH Torrey Pines Hotel GP, LLC |
Delaware | 25 | % | |||
CHH Torrey Pines Hotel Partners, LP |
Delaware | 25 | % | |||
CHH Torrey Pines Tenant Corp. |
Delaware | 25 | % | |||
Chicago Hilton LLC |
Delaware | 100 | % | |||
CHW Holdings, LLC |
Delaware | 100 | % | |||
Clive Hall Limited |
England, UK | 100 | % | |||
Club Mack OPCO, L.L.C. |
Nevada | 50 | % | |||
Comfort Hotels International Limited |
England, UK | 100 | % | |||
Comfort Hotels Limited |
England, UK | 100 | % | |||
Comfort Inns BV |
Netherlands | 100 | % | |||
Comfort Lodge (U.K.) Limited |
England, UK | 100 | % | |||
Comfort Lodge Limited |
England, UK | 100 | % | |||
Compris Hotel LLC |
Delaware | 100 | % | |||
Conrad Franchise LLC |
Delaware | 100 | % | |||
Conrad Hospitality, LLC |
Delaware | 100 | % | |||
Conrad Hotels Worldwide, LLC |
Delaware | 100 | % | |||
Conrad International (Belgium) LLC |
Nevada | 100 | % | |||
Conrad International (Egypt) Corporation |
Nevada | 100 | % | |||
Conrad International (Egypt) Resorts Corporation |
Nevada | 100 | % | |||
Conrad International (Indonesia) Corporation |
Nevada | 100 | % | |||
Conrad International (Thailand) Limited |
Thailand | 100 | % | |||
Conrad International Hotels (HK) Limited |
Hong Kong | 100 | % | |||
Conrad International Investment (Jakarta) Corporation |
Nevada | 100 | % | |||
Conrad International Manage (CIS) LLC |
Delaware | 100 | % | |||
Conrad International Management Services (Singapore) Pte Ltd |
Singapore | 100 | % | |||
Conrad Management LLC |
Delaware | 100 | % | |||
Corporate Associates-Boise Limited Partnership |
Arizona | 13.33 | % | |||
Coylumbridge Highland Lodges (Management) Limited |
Scotland, UK | 100 | % | |||
Craigendarroch Limited |
Scotland, UK | 100 | % | |||
Crystal City LLC |
Delaware | 100 | % | |||
Custom House Hotel, L.P. |
Missouri | 2.34 | % | |||
Destination Resort Affiliates |
Arizona | 50 | % | |||
Destination Resorts LLC |
Arizona | 100 | % | |||
Die Flotte Schiffsgastronomie GmbH |
Germany | 100 | % | |||
DJONT Leasing LLC |
Delaware | 50 | % | |||
DJONT/EPT Leasing LLC |
Delaware | 49 | % | |||
Domhotel GmbH |
Germany | 40 | % |
Doubletree De Mexico, S.A. De C.V. |
Mexico | 50 | % | |||
Doubletree DTWC LLC |
Delaware | 100 | % | |||
Doubletree Franchise LLC |
Delaware | 100 | % | |||
Doubletree Hotel Systems LLC |
Arizona | 100 | % | |||
Doubletree Hotels LLC |
Arizona | 100 | % | |||
Doubletree International Franchise LLC |
Delaware | 100 | % | |||
Doubletree LLC |
Delaware | 100 | % | |||
Doubletree Management LLC |
Delaware | 100 | % | |||
Doubletree Partners |
Delaware | 100 | % | |||
Doubletree Spokane City Center LLC |
Delaware | 10 | % | |||
DR Spokane City Center LLC |
Delaware | 50 | % | |||
DT Management LLC |
Arizona | 100 | % | |||
DT Ontario Hotel Partners |
California | 66.70 | % | |||
DT Real Estate, Inc. |
Arizona | 100 | % | |||
DTM Atlanta/Legacy, Inc. |
Arizona | 100 | % | |||
DTM Cambridge, Inc. |
Massachusetts | 100 | % | |||
DTM Coconut Grove, Inc. |
Arizona | 100 | % | |||
DTM Largo, Inc. |
Arizona | 100 | % | |||
DTM Maryland, Inc. |
Arizona | 100 | % | |||
DTM Santa Clara LLC |
Arizona | 100 | % | |||
DTM Walnut Creek, Inc. |
Arizona | 100 | % | |||
DTR FCH Holdings, Inc. |
Arizona | 100 | % | |||
DTR Houston, Inc. |
Arizona | 80 | % | |||
DTR PAH Holding, Inc. |
Arizona | 100 | % | |||
DTR San Antonio, Inc. |
Arizona | 100 | % | |||
DTR TM Holdings, Inc. |
Arizona | 100 | % | |||
DTWC Spokane City Center SPE, LLC |
Delaware | 100 | % | |||
Dunkeld Lodges (Management) Limited |
Scotland, UK | 100 | % | |||
Durban Hotel Asset Trust |
South Africa | 100 | % | |||
E.S. Hotel Isla Verde, S.E. |
Puerto Rico | 28.92 | % | |||
Earlsfort Centre Hotel Proprietors Limited |
Ireland | 25 | % | |||
EJP Corporation |
Delaware | 100 | % | |||
Embassy Development Corporation |
Delaware | 100 | % | |||
Embassy Equity Development LLC |
Delaware | 100 | % | |||
Embassy Memphis Corporation |
Tennessee | 100 | % | |||
Embassy Suites (Isla Verde), Inc. |
Delaware | 100 | % | |||
Embassy Suites (Puerto Rico), Inc. |
Delaware | 100 | % | |||
Embassy Suites Club No. 1, Inc. |
Kansas | 100 | % | |||
Embassy Suites Club No. Three, Inc. |
Louisiana | 100 | % | |||
Embassy Suites Club No. Two, Inc. |
Texas | 100 | % | |||
Embassy Suites Franchise LLC |
Delaware | 100 | % | |||
Embassy Suites International Franchise LLC |
Delaware | 100 | % | |||
Embassy Suites Management LLC |
Delaware | 100 | % |
Embassy Syracuse Development LLC |
Delaware | 100 | % | |||
EPAM Corporation |
Delaware | 100 | % | |||
EPT Atlanta-Perimeter Center Limited Partnership |
Delaware | 50 | % | |||
EPT Austin Limited Partnership |
Delaware | 50 | % | |||
EPT Kansas City Limited Partnership |
Delaware | 50 | % | |||
EPT Meadowlands Limited Partnership |
Delaware | 50 | % | |||
EPT Raleigh Limited Partnership |
Delaware | 50 | % | |||
Exhibition Hall Brighton |
England, UK | 100 | % | |||
FCH/DT BWI Holdings, L.P. |
Delaware | 10 | % | |||
FCH/DT BWI Hotel, L.L.C. |
Delaware | 10 | % | |||
FCH/DT Holdings, L.P. |
Delaware | 10 | % | |||
FCH/DT Hotels, L.L.C. |
Delaware | 10 | % | |||
FelCor/JPM Austin Holdings, L.P. |
Delaware | 10 | % | |||
FelCor/JPM Austin Hotel, L.L.C. |
Delaware | 10 | % | |||
FelCor/JPM BWI Hotel, L.L.C. |
Delaware | 10 | % | |||
FelCor/JPM Wilmington Hotel, L.L.C. |
Delaware | 10 | % | |||
Fess Parker-Red Lion Hotel |
California | 50 | % | |||
Florida Conrad International Corp. |
Florida | 100 | % | |||
Global Resort Partners |
Hawaii | 100 | % | |||
Grand Hotel Imperial dd |
Croatia | 17.54 | % | |||
Grand Vacations Realty, LLC |
Delaware | 100 | % | |||
Grand Vacations Services LLC |
Delaware | 100 | % | |||
Grand Vacations Title, LLC |
Delaware | 100 | % | |||
Greatkey Limited |
England, UK | 100 | % | |||
Grundstucksgesellschaft An Der Frauenkirche Dresden mbH |
Germany | 100 | % | |||
Grundstucksgesellschaft Belvederer Allee Weimar mbH |
Germany | 100 | % | |||
GSP Investments 1, LLC |
Hawaii | 50 | % | |||
H Alliance, Inc. |
Delaware | 100 | % | |||
Hampton Inns Franchise LLC |
Delaware | 100 | % | |||
Hampton Inns International Franchise LLC |
Delaware | 100 | % | |||
Hampton Inns LLC |
Delaware | 100 | % | |||
Hampton Inns Management LLC |
Delaware | 100 | % | |||
Hapeville Hotel Limited Partnership |
Delaware | 100 | % | |||
Hapeville Investors, LLC |
Delaware | 100 | % | |||
HCWW Inc. |
Delaware | 100 | % | |||
HFS San Francisco Liquor License, LLC |
Delaware | 50 | % | |||
HGV Depositor LLC |
Delaware | 100 | % | |||
HHC BC Orlando, LLC |
Delaware | 100 | % | |||
HHC One Park Boulevard, LLC |
Delaware | 100 | % | |||
HHI Worldwide Holdings, Inc. |
Delaware | 100 | % | |||
HI (Maldives) Pte Limited |
Maldives | 100 | % | |||
HI Hotel Management (Guam), Inc. |
Guam | 100 | % | |||
HI Investment (Colombia) EU |
Colombia | 100 | % |
HI US Finance LLC |
Delaware | 100 | % | |||
HI US Investments Unlimited |
England, UK | 100 | % | |||
HIC Dormant Holding LLC |
Delaware | 100 | % | |||
HIC First Corporation |
Delaware | 100 | % | |||
HIC Gaming California, Inc. |
California | 100 | % | |||
HIC Group Finance Limited |
England, UK | 100 | % | |||
HIC Group International Luxembourg Sarl |
Luxembourg | 100 | % | |||
HIC Holdings BV |
Netherlands | 100 | % | |||
HIC Holdings Corporation |
Delaware | 100 | % | |||
HIC Hotels U.S.A. Corporation |
Delaware | 100 | % | |||
HIC Racing (Chiswick) Limited |
England, UK | 100 | % | |||
HIC Racing Corporation |
Delaware | 100 | % | |||
HIC Roissy Netherlands BV |
Netherlands | 100 | % | |||
HIC San Pablo Limited, Inc. |
California | 100 | % | |||
HIC San Pablo, L.P. |
California | 100 | % | |||
HIC Second Corporation |
Delaware | 100 | % | |||
HIC Treasury Limited |
England, UK | 100 | % | |||
HIEF Germany BV |
Netherlands | 40 | % | |||
HIEF Holding GmbH |
Germany | 40 | % | |||
HIH Sweden AB |
Sweden | 100 | % | |||
Hillview Holding GmbH |
Germany | 40 | % | |||
Hilstock Hotel Holding Corporation |
Delaware | 100 | % | |||
Hilton (Hellas) Monoprosopi EPE |
Greece | 100 | % | |||
Hilton Argentina SRL |
Argentina | 100 | % | |||
Hilton Beverage LLC |
Delaware | 100 | % | |||
Hilton Canada Co. |
Canada | 100 | % | |||
Hilton Canada ULC |
Canada | 100 | % | |||
Hilton Chicago Beverage I LLC |
Delaware | 100 | % | |||
Hilton Chicago Beverage II LLC |
Delaware | 100 | % | |||
Hilton Chicago Beverage III LLC |
Delaware | 100 | % | |||
Hilton Chicago Beverage IV LLC |
Delaware | 100 | % | |||
Hilton Chicago Corporation |
Nevada | 100 | % | |||
Hilton CMBS Holdings LLC |
Delaware | 100 | % | |||
Hilton Copenhagen ApS |
Denmark | 100 | % | |||
Hilton Corporate Director LLC |
Delaware | 100 | % | |||
Hilton CP Management LLC |
Delaware | 100 | % | |||
Hilton CP Operator LLC |
Delaware | 100 | % | |||
Hilton Cyprus Limited |
Cyprus | 100 | % | |||
Hilton do Brasil Ltd |
Brazil | 100 | % | |||
Hilton Domestic Property LLC |
Delaware | 100 | % | |||
Hilton Egypt Lil Tigara |
Egypt | 100 | % | |||
Hilton El Con Management LLC |
Delaware | 100 | % | |||
Hilton El Con Operator LLC |
Delaware | 100 | % |
Hilton El Segundo LLC |
Delaware | 100 | % | |||
Hilton Electronic Distribution Systems, LLC |
Delaware | 100 | % | |||
Hilton Energy Investments, LLC |
Delaware | 100 | % | |||
Hilton Enternasyonal Otelcilik AS |
Turkey | 100 | % | |||
Hilton ESJ Management LLC |
Delaware | 100 | % | |||
Hilton ESJ Operator LLC |
Delaware | 100 | % | |||
Hilton Finance (UK) Limited |
England, UK | 100 | % | |||
Hilton Franchise Holding LLC |
Delaware | 100 | % | |||
Hilton Franchise LLC |
Delaware | 100 | % | |||
Hilton Garden Inns Franchise LLC |
Delaware | 100 | % | |||
Hilton Garden Inns International Franchise LLC |
Delaware | 100 | % | |||
Hilton Garden Inns Management LLC |
Delaware | 100 | % | |||
Hilton Grand Vacations Club, LLC |
Delaware | 100 | % | |||
Hilton Grand Vacations Company, LLC |
Delaware | 100 | % | |||
Hilton Grand Vacations Financing, LLC |
Delaware | 100 | % | |||
Hilton Grand Vacations Japan Godo Kaisha |
Japan | 100 | % | |||
Hilton Grand Vacations Management, LLC |
Nevada | 100 | % | |||
Hilton Grand Vacations Trust 2013-A |
Delaware | 100 | % | |||
Hilton Grand Vacations Trust I LLC |
Delaware | 100 | % | |||
Hilton Hawaii Corporation |
Delaware | 100 | % | |||
Hilton Hawaiian Village LLC |
Hawaii | 100 | % | |||
Hilton HHC Limited |
England, UK | 100 | % | |||
Hilton HHonors Worldwide, L.L.C. |
Delaware | 100 | % | |||
Hilton HIH Limited |
England, UK | 100 | % | |||
Hilton Holdings, LLC |
Nevada | 100 | % | |||
Hilton Hospitality, LLC |
Nevada | 100 | % | |||
Hilton Hotel Management (Shanghai) Co Ltd |
China | 100 | % | |||
Hilton Hotel Management Services Private Limited |
India | 100 | % | |||
Hilton Hotel Service Co Limited |
Japan | 100 | % | |||
Hilton Hotels (Ireland) Limited |
Ireland | 100 | % | |||
Hilton Hotels of Australia (Melbourne) Pty Ltd |
Australia | 100 | % | |||
Hilton Hotels of Australia Pty Limited |
Australia | 100 | % | |||
Hilton Illinois Corp. |
Nevada | 100 | % | |||
Hilton Illinois Holdings LLC |
Delaware | 100 | % | |||
Hilton Inns LLC |
Delaware | 100 | % | |||
Hilton Insurance Corporation |
Vermont | 100 | % | |||
Hilton Internacional de Venezuela CA |
Venezuela | 100 | % | |||
Hilton International (Bulgaria) EAD |
Bulgaria | 100 | % | |||
Hilton International (France) SASU |
France | 100 | % | |||
Hilton International (Germany) GmbH |
Germany | 100 | % | |||
Hilton International (Moscow) LLC |
Delaware | 100 | % | |||
Hilton International (Nederland) BV |
Netherlands | 100 | % | |||
Hilton International (Switzerland) GmbH |
Switzerland | 100 | % |
Hilton International (Thailand) Company Limited |
Thailand | 100 | % | |||
Hilton International Aruba NV (DORMANT) |
Aruba | 100 | % | |||
Hilton International Asia Pacific Pte Ltd. |
Singapore | 100 | % | |||
Hilton International Australia Pty Limited |
Australia | 100 | % | |||
Hilton International Barbados Limited |
Barbados | 100 | % | |||
Hilton International Co (Belgium) SPRL/BVBA |
Belgium | 100 | % | |||
Hilton International Co Limited |
England, UK | 100 | % | |||
Hilton International Co. |
Delaware | 100 | % | |||
Hilton International Ecuador LLC |
Delaware | 100 | % | |||
Hilton International European Fund BV |
Netherlands | 40 | % | |||
Hilton International Franchise (UK) Limited |
England, UK | 100 | % | |||
Hilton International Franchise Holding LLC |
Delaware | 100 | % | |||
Hilton International Franchise LLC |
Delaware | 100 | % | |||
Hilton International Franchisor Corporation |
Delaware | 100 | % | |||
Hilton International GAMMA |
France | 100 | % | |||
Hilton International Holdings LLC |
Delaware | 100 | % | |||
Hilton International Hotels (U.K.) Limited |
England, UK | 100 | % | |||
Hilton International Jamaica Limited |
Jamaica | 100 | % | |||
Hilton International Manage (Americas) LLC |
Delaware | 100 | % | |||
Hilton International Manage (Argentina) SRL |
Argentina | 100 | % | |||
Hilton International Manage (CIS) LLC |
Delaware | 100 | % | |||
Hilton International Manage (Maldives) Pvt. Ltd |
Maldives | 100 | % | |||
Hilton International Manage (Middle East) LLC |
Delaware | 100 | % | |||
Hilton International Manage LLC |
Delaware | 100 | % | |||
Hilton International Management (Americas) Corporation |
Delaware | 100 | % | |||
Hilton International Management (India) Corporation |
Delaware | 100 | % | |||
Hilton International Management (Middle East) Corporation |
Delaware | 100 | % | |||
Hilton International Management Corporation |
Delaware | 100 | % | |||
Hilton International of Puerto Rico Inc. |
Delaware | 100 | % | |||
Hilton International South Africa (PTY) Limited |
South Africa | 100 | % | |||
Hilton International Trinidad Limited |
Trinidad and Tobago | 100 | % | |||
Hilton International Vermogensverwaltung GmbH |
Germany | 100 | % | |||
Hilton Israel Ltd |
Israel | 100 | % | |||
Hilton Italiana Srl |
Italy | 100 | % | |||
Hilton Kingsland 1, LLC |
Delaware | 100 | % | |||
Hilton Land Investment 1, LLC |
Delaware | 100 | % | |||
Hilton Leisure Breaks Limited |
England, UK | 100 | % | |||
Hilton Malta Limited |
Malta | 100 | % | |||
Hilton Management LLC |
Delaware | 100 | % | |||
Hilton MAPC, Inc. |
Delaware | 100 | % | |||
Hilton Mexico Promotora SA de CV (Dormant) |
Mexico | 100 | % | |||
Hilton Michigan Avenue Corporation |
Delaware | 100 | % | |||
Hilton Nairobi Limited |
Kenya | 100 | % |
Hilton New Jersey Service Corp. |
Delaware | 100 | % | |||
Hilton New Orleans, LLC |
Delaware | 100 | % | |||
Hilton of Malaysia LLC |
Delaware | 100 | % | |||
Hilton of Panama Limited |
Panama | 100 | % | |||
Hilton of Singapore LLC |
Delaware | 100 | % | |||
Hilton of Spain S.L. |
Spain | 100 | % | |||
Hilton OPB, LLC |
Delaware | 100 | % | |||
Hilton Orlando Partners II, LLC |
Delaware | 100 | % | |||
Hilton Orlando Partners III, LLC |
Delaware | 100 | % | |||
Hilton PCB Sarl |
Luxembourg | 100 | % | |||
Hilton Recreation LLC |
Delaware | 100 | % | |||
Hilton Reservations Worldwide, L.L.C. |
Delaware | 100 | % | |||
Hilton Resorts Corporation |
Delaware | 100 | % | |||
Hilton Resorts Marketing Corp. |
Delaware | 100 | % | |||
Hilton Resorts Marketing Korea, LLC |
Korea, Republic of | 100 | % | |||
Hilton Riverside, LLC |
Delaware | 100 | % | |||
Hilton Russia LLC |
Delaware | 100 | % | |||
Hilton San Diego Corporation |
California | 100 | % | |||
Hilton Seattle Airport LLC |
Delaware | 100 | % | |||
Hilton Service Center GmbH |
Germany | 100 | % | |||
Hilton Services Communs GIE |
France | 50 | % | |||
Hilton SPE Holding, Inc. |
Delaware | 100 | % | |||
Hilton Spring Corporation |
Delaware | 100 | % | |||
Hilton Suites, Inc. |
Delaware | 100 | % | |||
Hilton Supply Management LLC |
Delaware | 100 | % | |||
Hilton Systems Solutions, LLC |
Delaware | 100 | % | |||
Hilton Systems, LLC |
Delaware | 100 | % | |||
Hilton Tobago Limited |
Trinidad and Tobago | 100 | % | |||
Hilton UK Hotels Limited |
England, UK | 100 | % | |||
Hilton UK Manage Limited |
England, UK | 100 | % | |||
Hilton UK Pension Trustee Limited |
England, UK | 100 | % | |||
Hilton Waldorf Holdings LLC |
Delaware | 100 | % | |||
Hilton Worldwide Finance Corp. |
Delaware | 100 | % | |||
Hilton Worldwide Finance, LLC |
Delaware | 100 | % | |||
Hilton Worldwide Holdings Inc. |
Delaware | 100 | % | |||
Hilton Worldwide Limited |
England, UK | 100 | % | |||
Hilton Worldwide, Inc. |
Delaware | 100 | % | |||
Hilton-OCCC Hotel, LLC |
Florida | 100 | % | |||
Hilton-OCCC Mezz Lender, LLC |
Florida | 100 | % | |||
Hiro Grundstucks GmbH & Co KG |
Germany | 100 | % | |||
HIRO Hotel GmbH & Co KG |
Germany | 100 | % | |||
HIRO Verwaltungs GmbH |
Germany | 100 | % | |||
HLT Adda GP Limited |
England, UK | 100 | % |
HLT Aro Manage Limited |
England, UK | 100 | % | |||
HLT Audubon LLC |
Delaware | 100 | % | |||
HLT Brazil LLC |
Delaware | 100 | % | |||
HLT CA Hilton LLC |
Delaware | 100 | % | |||
HLT Canada Managed A GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed B GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed Borrower GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed C GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed D GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed E GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed F GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed G GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed H GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed I GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed J GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed K GP Inc. |
Canada | 100 | % | |||
HLT Canada Managed LP |
Delaware | 100 | % | |||
HLT Conrad Domestic LLC |
Delaware | 100 | % | |||
HLT Conrad GP LLC |
Delaware | 100 | % | |||
HLT Conrad International Manage LLC |
Delaware | 100 | % | |||
HLT Conrad International Management Corporation |
Delaware | 100 | % | |||
HLT Conrad IP LLC |
Delaware | 100 | % | |||
HLT Conrad IP Sub Inc. |
Delaware | 100 | % | |||
HLT Conrad LLC |
Delaware | 100 | % | |||
HLT Craigendarroch Suites Limited |
England, UK | 100 | % | |||
HLT DC Owner LLC |
Delaware | 100 | % | |||
HLT Domestic IP LLC |
Delaware | 100 | % | |||
HLT Domestic IP Sub Inc. |
Delaware | 100 | % | |||
HLT Domestic JV Holdings LLC |
Delaware | 100 | % | |||
HLT Domestic Owner LLC |
Delaware | 100 | % | |||
HLT Drake LLC |
Delaware | 100 | % | |||
HLT English Operator Limited |
England, UK | 100 | % | |||
HLT ESP Franchise LLC |
Delaware | 100 | % | |||
HLT ESP International Franchise LLC |
Delaware | 100 | % | |||
HLT ESP International Franchisor Corporation |
Delaware | 100 | % | |||
HLT ESP International Manage LLC |
Delaware | 100 | % | |||
HLT ESP International Management Corporation |
Delaware | 100 | % | |||
HLT ESP Manage LLC |
Delaware | 100 | % | |||
HLT Existing Franchise Holding LLC |
Delaware | 100 | % | |||
HLT Franchise I Borrower LLC |
Delaware | 100 | % | |||
HLT Franchise II Borrower LLC |
Delaware | 100 | % | |||
HLT Franchise III Borrower LLC |
Delaware | 100 | % |
HLT Franchise IV Borrower LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-A LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-B LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-C LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-D LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-E LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-F LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-G LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-H LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-I LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-A LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-B LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-C LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-D LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-E LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-F LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-G LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-H LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-I LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-A LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-B LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-C LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-D LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-E LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-F LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-G LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-H LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-I LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-J LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz III-K LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-J LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz II-K LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-J LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-A LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-B LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-C LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-D LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-E LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-F LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-G LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-H LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-I LLC |
Delaware | 100 | % |
HLT Franchise Mezz IV-J LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz IV-K LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-A LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-B LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-C LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-D LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-E LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-F LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-G LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-H LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-I LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-J LLC |
Delaware | 100 | % | |||
HLT Franchise Mezz V-K LLC |
Delaware | 100 | % | |||
HLT Franchise V Borrower LLC |
Delaware | 100 | % | |||
HLT German Manage GmbH |
Germany | 100 | % | |||
HLT German Services GmbH |
Germany | 100 | % | |||
HLT GP LLC |
Delaware | 100 | % | |||
HLT Hawaii Holding LLC |
Delaware | 100 | % | |||
HLT HQ SPE LLC |
Delaware | 100 | % | |||
HLT HSM Holding LLC |
Delaware | 100 | % | |||
HLT HSS Holding LLC |
Delaware | 100 | % | |||
HLT International Conrad Franchise LLC |
Delaware | 100 | % | |||
HLT International Existing Franchise Holding LLC |
Delaware | 100 | % | |||
HLT International IP LLC |
Delaware | 100 | % | |||
HLT International IP Sub Inc. |
Delaware | 100 | % | |||
HLT International Manage LLC |
Delaware | 100 | % | |||
HLT International Waldorf=Astoria Franchise LLC |
Delaware | 100 | % | |||
HLT IP LLC |
Delaware | 100 | % | |||
HLT JV Acquisition LLC |
Delaware | 100 | % | |||
HLT JV I Borrower LLC |
Delaware | 100 | % | |||
HLT JV II Borrower LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-A LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-B LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-C LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-D LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-E LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-F LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-G LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-H LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-I LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-A LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-B LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-C LLC |
Delaware | 100 | % |
HLT JV Mezz II-D LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-E LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-F LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-G LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-H LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-I LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-J LLC |
Delaware | 100 | % | |||
HLT JV Mezz II-K LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-J LLC |
Delaware | 100 | % | |||
HLT JV Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Lifestyle Franchise LLC |
Delaware | 100 | % | |||
HLT Lifestyle International Franchise LLC |
Delaware | 100 | % | |||
HLT Lifestyle International Franchisor Corporation |
Delaware | 100 | % | |||
HLT Lifestyle International Manage LLC |
Delaware | 100 | % | |||
HLT Lifestyle International Management Corporation |
Delaware | 100 | % | |||
HLT Lifestyle Manage LLC |
Delaware | 100 | % | |||
HLT Logan LLC |
Delaware | 100 | % | |||
HLT London Manage Limited |
England, UK | 100 | % | |||
HLT Managed Holdco LLC |
Delaware | 100 | % | |||
HLT Managed Holding Corporation |
Delaware | 100 | % | |||
HLT Managed I Holding LLC |
Delaware | 100 | % | |||
HLT Managed I-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed I-A Holding LLC |
Delaware | 100 | % | |||
HLT Managed II Holding Corporation |
Delaware | 100 | % | |||
HLT Managed II-A Borrower Corporation |
Delaware | 100 | % | |||
HLT Managed II-A Holding Corporation |
Delaware | 100 | % | |||
HLT Managed III-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed IV Holding Limited |
England, UK | 100 | % | |||
HLT Managed IV-A Borrower Limited |
England, UK | 100 | % | |||
HLT Managed IV-A Holding Limited |
England, UK | 100 | % | |||
HLT Managed IX Holding LLC |
Delaware | 100 | % | |||
HLT Managed IX-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz II-A Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-B Corporation |
Delaware | 100 | % |
HLT Managed Mezz II-C Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-D Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-E Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-F Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-G Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-H Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-I Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz III-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-J LLC |
Delaware | 100 | % | |||
HLT Managed Mezz III-K LLC |
Delaware | 100 | % | |||
HLT Managed Mezz II-J Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz II-K Corporation |
Delaware | 100 | % | |||
HLT Managed Mezz I-J LLC |
Delaware | 100 | % | |||
HLT Managed Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IV-A Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-B Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-C Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-D Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-E Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-F Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-G Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-H Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-I Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-J Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IV-K Limited |
England, UK | 100 | % | |||
HLT Managed Mezz IX-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz IX-J LLC |
Delaware | 100 | % |
HLT Managed Mezz IX-K LLC |
Delaware | 100 | % | |||
HLT Managed Mezz V-A Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-B Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-C Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-D Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-E Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-F Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-G Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-H Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-I Limited |
England, UK | 100 | % | |||
HLT Managed Mezz VI-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-J LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VIII-K LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-J LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VII-K LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-J LLC |
Delaware | 100 | % | |||
HLT Managed Mezz VI-K LLC |
Delaware | 100 | % |
HLT Managed Mezz V-J Limited |
England, UK | 100 | % | |||
HLT Managed Mezz V-K Limited |
England, UK | 100 | % | |||
HLT Managed Mezz X-A LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-B LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-C LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-D LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-E LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-F LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-G LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-H LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-I LP |
Delaware | 100 | % | |||
HLT Managed Mezz XI-A GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-B GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-C GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-D GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-E GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-F GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-G GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-H GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-I GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XII-A LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-B LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-C LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-D LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-E LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-F LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-G LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-H LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-I LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-J LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XII-K LLC |
Delaware | 100 | % | |||
HLT Managed Mezz XI-J GmbH |
Germany | 100 | % | |||
HLT Managed Mezz XI-K GmbH |
Germany | 100 | % | |||
HLT Managed Mezz X-J LP |
Delaware | 100 | % | |||
HLT Managed Mezz X-K LP |
Delaware | 100 | % | |||
HLT Managed V Holding Limited |
England, UK | 100 | % | |||
HLT Managed V-A Borrower Limited |
England, UK | 100 | % | |||
HLT Managed V-A Holding Limited |
England, UK | 100 | % | |||
HLT Managed VI Holding LLC |
Delaware | 100 | % | |||
HLT Managed VI-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed VI-A Holding LLC |
Delaware | 100 | % | |||
HLT Managed VII Holding LLC |
Delaware | 100 | % | |||
HLT Managed VII-A Borrower LLC |
Delaware | 100 | % |
HLT Managed VII-A Holding LLC |
Delaware | 100 | % | |||
HLT Managed VIII-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed X-A Borrower LP |
Delaware | 100 | % | |||
HLT Managed XI-A Borrower GmbH |
Germany | 100 | % | |||
HLT Managed XII-A Borrower LLC |
Delaware | 100 | % | |||
HLT Managed XII-A Holding LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Holdco LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Holding LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-A LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-B LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-C LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-D LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-E LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-F LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-G LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-H LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-I LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-J LLC |
Delaware | 100 | % | |||
HLT Manage-Franchise Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Memphis Data LLC |
Delaware | 100 | % | |||
HLT Memphis LLC |
Delaware | 100 | % | |||
HLT Mexico LLC |
Delaware | 100 | % | |||
HLT Milton Keynes Limited |
England, UK | 100 | % | |||
HLT NY Hilton LLC |
Delaware | 100 | % | |||
HLT NY Waldorf LLC |
Delaware | 100 | % | |||
HLT OHare LLC |
Delaware | 100 | % | |||
HLT Operate DTWC LLC |
Delaware | 100 | % | |||
HLT Operating II-A Borrower LLC |
Delaware | 100 | % | |||
HLT Operating II-A Holding LLC |
Delaware | 100 | % | |||
HLT Operating III-A Borrower Limited |
England, UK | 100 | % | |||
HLT Operating III-A Holding Limited |
England, UK | 100 | % | |||
HLT Operating IV-A Borrower LLC |
Delaware | 100 | % | |||
HLT Operating IV-A GP LLC |
Delaware | 100 | % | |||
HLT Operating IV-A Holding LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-A LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-B LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-C LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-D LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-E LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-F LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-G LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-H LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-I LLC |
Delaware | 100 | % |
HLT Operating Mezz II-A LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-B LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-C LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-D LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-E LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-F LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-G LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-H LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-I LLC |
Delaware | 100 | % | |||
HLT Operating Mezz III-A Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-B Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-C Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-D Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-E Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-F Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-G Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-H Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-I Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-J Limited |
England, UK | 100 | % | |||
HLT Operating Mezz III-K Limited |
England, UK | 100 | % | |||
HLT Operating Mezz II-J LLC |
Delaware | 100 | % | |||
HLT Operating Mezz II-K LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-J LLC |
Delaware | 100 | % | |||
HLT Operating Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-A LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-B LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-C LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-D LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-E LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-F LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-G LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-H LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-I LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-J LLC |
Delaware | 100 | % | |||
HLT Operating Mezz IV-K LLC |
Delaware | 100 | % | |||
HLT Operating Mezz V-A Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-B Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-C Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-D Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-E Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-F Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-G Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-H Limited |
England, UK | 100 | % |
HLT Operating Mezz V-I Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-A Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-B Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-C Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-D Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-E Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-F Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-G Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-H Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-I Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-J Limited |
England, UK | 100 | % | |||
HLT Operating Mezz VII-K Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-J Limited |
England, UK | 100 | % | |||
HLT Operating Mezz V-K Limited |
England, UK | 100 | % | |||
HLT Operating V-A Borrower Limited |
England, UK | 100 | % | |||
HLT Operating V-A Holding Limited |
England, UK | 100 | % | |||
HLT Operating VII-A Borrower GmbH |
Germany | 100 | % | |||
HLT Owned II Holding LLC |
Delaware | 100 | % | |||
HLT Owned II-A Borrower LLC |
Delaware | 100 | % | |||
HLT Owned IV-A Borrower Corporation |
Delaware | 100 | % | |||
HLT Owned IV-A Holding Corporation |
Delaware | 100 | % | |||
HLT Owned IX Holding Limited |
England, UK | 100 | % | |||
HLT Owned IX-A Holding Limited |
England, UK | 100 | % | |||
HLT Owned Mezz I-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-B LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-B LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-B LLC |
Delaware | 100 | % |
HLT Owned Mezz III-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz III-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz II-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz IV-A Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-B Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-C Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-D Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-E Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-F Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-G Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-H Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-I Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-J Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IV-K Corporation |
Delaware | 100 | % | |||
HLT Owned Mezz IX-A Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-B Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-C Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-D Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-E Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-F Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-G Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-H Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-I Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-J Limited |
England, UK | 100 | % | |||
HLT Owned Mezz IX-K Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-A Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-B Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-C Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-D Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-E Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-F Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-G Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-H Limited |
England, UK | 100 | % |
HLT Owned Mezz V-I Limited |
England, UK | 100 | % | |||
HLT Owned Mezz VI-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-B LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-B LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-B LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VIII-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VII-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz VI-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz V-J Limited |
England, UK | 100 | % | |||
HLT Owned Mezz V-K Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-A Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-B Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-C Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-D Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-E Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-F Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-G Limited |
England, UK | 100 | % |
HLT Owned Mezz X-H Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-I Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-A Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-B Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-C Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-D Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-E Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-F Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-G Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-H Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-I Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XII-A LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-B LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-C LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-D LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-E LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-F LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-G LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-H LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-I LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-J LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XII-K LLC |
Delaware | 100 | % | |||
HLT Owned Mezz XI-J Limited |
England, UK | 100 | % | |||
HLT Owned Mezz XI-K Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-J Limited |
England, UK | 100 | % | |||
HLT Owned Mezz X-K Limited |
England, UK | 100 | % | |||
HLT Owned V Holding Limited |
England, UK | 100 | % | |||
HLT Owned V-A Holding Limited |
England, UK | 100 | % | |||
HLT Owned VI Holding LLC |
Delaware | 100 | % | |||
HLT Owned VI-A Holding LLC |
Delaware | 100 | % | |||
HLT Owned VII Holding LLC |
Delaware | 100 | % | |||
HLT Owned VII-A Holding LLC |
Delaware | 100 | % | |||
HLT Owned VIII Holding LLC |
Delaware | 100 | % | |||
HLT Owned X Holding Limited |
England, UK | 100 | % | |||
HLT Owned X-A Borrower Limited |
England, UK | 100 | % | |||
HLT Owned X-A Holding Limited |
England, UK | 100 | % | |||
HLT Owned XI Holding Limited |
England, UK | 100 | % | |||
HLT Owned XI-A Borrower Limited |
England, UK | 100 | % | |||
HLT Palmer LLC |
Delaware | 100 | % | |||
HLT Property Acquisition LLC |
Delaware | 100 | % | |||
HLT Resorts GP LLC |
Delaware | 100 | % | |||
HLT San Jose LLC |
Delaware | 100 | % | |||
HLT Secretary Limited |
England, UK | 100 | % |
HLT Singapore Manage LLC |
Delaware | 100 | % | |||
HLT Stakis IP Limited |
England, UK | 100 | % | |||
HLT Stakis Operator Limited |
England, UK | 100 | % | |||
HLT Stakis SPE Limited |
England, UK | 100 | % | |||
HLT Timeshare Borrower I LLC |
Delaware | 100 | % | |||
HLT Timeshare Borrower II LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-A LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-B LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-C LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-D LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-E LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-F LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-G LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-H LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-I LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-A LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-B LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-C LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-D LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-E LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-F LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-G LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-H LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-I LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-J LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz II-K LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-J LLC |
Delaware | 100 | % | |||
HLT Timeshare Mezz I-K LLC |
Delaware | 100 | % | |||
HLT Treasury Mezz I-A Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-B Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-C Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-D Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-E Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-F Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-G Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-H Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-I Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-J Limited |
England, UK | 100 | % | |||
HLT Treasury Mezz I-K Limited |
England, UK | 100 | % | |||
HLT Waldorf=Astoria International Manage LLC |
Delaware | 100 | % | |||
HLT Waldorf=Astoria International Management Corporation |
Delaware | 100 | % | |||
Homewood Suites Franchise LLC |
Delaware | 100 | % | |||
Homewood Suites International Franchise LLC |
Delaware | 100 | % |
Homewood Suites Management LLC |
Delaware | 100 | % | |||
Hotel Clubs of Corporate Woods, Inc. |
Kansas | 100 | % | |||
Hotel Corporation of Europe |
New York | 100 | % | |||
Hotel Hilton Plaza AB |
Sweden | 100 | % | |||
Hotel Maatschappij Rotterdam BV |
Netherlands | 100 | % | |||
Hotel Maatschappij Schiphol BV |
Netherlands | 100 | % | |||
Hotel Management (Middle East) LLC |
Delaware | 100 | % | |||
Hotel Management of Minneapolis Inc. |
Minnesota | 100 | % | |||
Hotelbetriebsgesellschaft Hochstrasse GmbH |
Germany | 100 | % | |||
Hotels Statler Company, Inc. |
Delaware | 100 | % | |||
HPP Hotels USA, Inc. |
Delaware | 100 | % | |||
HPP International Corporation |
Nevada | 100 | % | |||
HRC Islander LLC |
Delaware | 100 | % | |||
HTGV, LLC |
Delaware | 100 | % | |||
Hyden Holdings Limited |
Gibraltar | 100 | % | |||
Inhil Co., Inc. |
New York | 100 | % | |||
Innvision, LLC |
Delaware | 100 | % | |||
International Brand Hospitality GmbH |
Austria | 100 | % | |||
International Brand Hospitality GmbH |
Germany | 100 | % | |||
International Company for Touristic Investments SAE |
Egypt | 10 | % | |||
International Hotels (Kenya) Limited |
Kenya | 59 | % | |||
International Rivercenter Lessee, L.L.C. |
Louisiana | 100 | % | |||
International Rivercenter, L.L.C. |
Louisiana | 100 | % | |||
Intersection Hotels Limited |
England, UK | 100 | % | |||
Istanbul Park Hilton Enternasyonal Otelcilik Limited Sirketi |
Turkey | 100 | % | |||
Izmir Hilton Enternasyonal Otelcilik AS |
Turkey | 100 | % | |||
Kayseri Hilton Enternasyonal Otelcilik AS |
Turkey | 100 | % | |||
Kenner Hotel Limited Partnership |
Delaware | 100 | % | |||
King Street Station Hotel Associates, L.P. |
Virginia | 50 | % | |||
Kitty OSheas Chicago, LLC |
Delaware | 100 | % | |||
Konya Hilton Enternasyonal Otelcilik AS |
Turkey | 100 | % | |||
Livingwell Australia Pty Limited |
Australia | 100 | % | |||
LivingWell Limited |
England, UK | 100 | % | |||
Lockwood Palmer House, LLC |
Delaware | 100 | % | |||
Madagascar Hilton SARL |
Madagascar | 100 | % | |||
Maple Hotels Management Company Limited |
England, UK | 100 | % | |||
Margate Towers at Kingston Plantation, L.L.C. |
Delaware | 50 | % | |||
Marquette Holdings LLC |
Delaware | 100 | % | |||
Marquette MPT, Inc. |
Delaware | 50 | % | |||
Mayaguez Hilton Corporation |
Delaware | 100 | % | |||
MC Treasury Limited |
England, UK | 100 | % | |||
McLean Hilton LLC |
Delaware | 100 | % | |||
Meritex, LLC |
Delaware | 100 | % |
Mersin Hilton Enternasyonal Otelcilik AS |
Turkey | 100 | % | |||
Metropole Hotels Limited |
England, UK | 100 | % | |||
MHV Joint Venture |
Texas | 50 | % | |||
Miami Airport LLC |
Delaware | 100 | % | |||
Middle East Hotels LLC |
Delaware | 100 | % | |||
Milbuck Holdings, Inc |
Delaware | 100 | % | |||
Morning Light Co. Limited |
Mauritius | 19.48 | % | |||
Nagoya Hilton Co Ltd |
Japan | 24 | % | |||
New Orleans International Hotel |
Louisiana | 100 | % | |||
New Orleans Rivercenter |
Louisiana | 100 | % | |||
Nippon Hilton Co Ltd |
Japan | 53 | % | |||
NORC Riparian Property, Inc. |
Louisiana | 100 | % | |||
Oakbrook Hilton Suites and Garden Inn LLC |
Illinois | 100 | % | |||
Odawara Hilton Co., Ltd |
Japan | 100 | % | |||
One Park Boulevard, LLC |
Delaware | 25 | % | |||
Operadora de Hoteles Loreto, S. de R.L. de C.V |
Mexico | 100 | % | |||
Osaka Hilton Co Ltd |
Japan | 50 | % | |||
P.T. Jakarta International Artha |
Indonesia | 100 | % | |||
Peacock Alley Service Company, LLC |
New York | 100 | % | |||
Pembroke Hotel Limited |
England, UK | 100 | % | |||
Phoenix SP Hilton LLC |
Delaware | 100 | % | |||
Potters Bar Palmer House, LLC |
Delaware | 100 | % | |||
Promus Hotel Services, Inc. |
Delaware | 100 | % | |||
Promus Hotels Florida LLC |
Delaware | 100 | % | |||
Promus Hotels LLC |
Delaware | 100 | % | |||
Promus Hotels Minneapolis, Inc. |
Delaware | 100 | % | |||
Promus Hotels Parent LLC |
Delaware | 100 | % | |||
Promus Operating LLC |
Delaware | 100 | % | |||
Promus/FCH Condominium Company, L.L.C. |
Delaware | 50 | % | |||
Promus/FCH Development Company, L.L.C. |
Delaware | 50 | % | |||
Promus/FelCor Hotels, L.L.C. |
Delaware | 50 | % | |||
Promus/FelCor Lombard Venture |
Illinois | 50 | % | |||
Promus/FelCor Manager, Inc. |
Delaware | 50 | % | |||
Promus/FelCor Parsippany Venture |
New Jersey | 50 | % | |||
Promus/FelCor San Antonio Venture |
Texas | 50 | % | |||
Promus/Kingston Development Corporation |
Delaware | 100 | % | |||
PT Hilton International Manage Indonesia |
Indonesia | 100 | % | |||
PT. Conrad Management Indonesia |
Indonesia | 100 | % | |||
Puckrup Hall Hotel Limited |
England, UK | 100 | % | |||
S.F. Hilton LLC |
Delaware | 100 | % | |||
Sacramento Hotel Partners, LLC |
California | 25 | % | |||
SALC, Inc. |
Texas | 100 | % | |||
Samantha Hotel LLC |
Delaware | 100 | % |
San Francisco Hilton, Inc. |
Delaware | 100 | % | |||
Servicios y Recursos Administrativos Hoteleros S. de R.L. de C.V. |
Mexico | 100 | % | |||
Short Hills Hilton LLC |
Delaware | 100 | % | |||
SL Secundus GmbH |
Germany | 100 | % | |||
SL Secundus GmbH & Co. Objekt Nürnberg KG |
Germany | 100 | % | |||
Societe de Developpement Hotel Pointe des Blagueurs B.V. |
Netherlands | 25 | % | |||
Societe dExploitation Hoteliere dOrly EURL |
France | 100 | % | |||
Societe dExploitation Hoteliere du XVeme EURL |
France | 100 | % | |||
Societe dExploitation Hoteliere La Defense SAS |
France | 100 | % | |||
Societe Tunis Hilton SARL |
Tunisia | 100 | % | |||
Splendid Property Company Limited |
Scotland, UK | 100 | % | |||
St Helens Hotels Limited |
England, UK | 100 | % | |||
Stakis Central Services Limited |
Scotland, UK | 100 | % | |||
Stakis Finance Limited |
Scotland, UK | 100 | % | |||
Stakis Limited |
Scotland, UK | 100 | % | |||
Suite Life, Inc. |
Delaware | 100 | % | |||
Sunrise Resources (Australia) Pty Ltd |
Australia | 100 | % | |||
Sunstone Park Lessee LLC |
Delaware | 25 | % | |||
Tandem Limited |
Isle of Man | 100 | % | |||
Tel Aviv Hilton Limited |
Israel | 100 | % | |||
Tex Holdings, Inc. |
Delaware | 100 | % | |||
Thayer Hotel Investors Trust IV |
Maryland | 8.91 | % | |||
The Lodore Hotel Limited |
England, UK | 100 | % | |||
Tokyo Bay Hilton Co. Ltd |
Japan | 24 | % | |||
Village Motor Inn |
Montana | 50 | % | |||
Vista International (Illinois), Inc. |
Illinois | 100 | % | |||
Vista International DE LLC |
Delaware | 100 | % | |||
Vista International II, Inc. |
Delaware | 100 | % | |||
Vista Real Estate Management Company |
Egypt | 55 | % | |||
WA Collection International, LLC |
Delaware | 100 | % | |||
Waldorf Astoria Franchise LLC |
Delaware | 100 | % | |||
Waldorf=Astoria Management LLC |
Delaware | 100 | % | |||
Washington Hilton, L.L.C. |
New York | 100 | % | |||
World Hotels, B.V. |
Netherlands | 100 | % | |||
Yeditepe Beynelmilel Otelcilik Turizm ve Ticaret, A.S. |
Turkey | 25 | % | |||
ZCOF CH Holdings LLC |
Delaware | 15 | % | |||
ZCOF Chicago Hotel LLC |
Delaware | 15 | % |
Schedule 6.16
Post-Closing Covenants
Within sixty (60) days after the Closing Date (or such longer period as the Administrative Agent may allow in its reasonable discretion), the Collateral Agent shall have received, with respect to the Equity Interests of Restricted Subsidiaries (that are not Excluded Subsidiaries), to the extent required pursuant to the Collateral and Guarantee Requirement, any certificates and undated stock powers or other instruments of transfer with respect thereto endorsed in blank.
Within sixty (60) days after the Closing Date (or such longer period as the Administrative Agent may allow in its reasonable discretion), the Collateral Agent shall have received the executed Intercompany Note in substantially the form attached as Exhibit I to the Credit Agreement and an undated note power or other instruments of transfer with respect thereto endorsed in blank.
Within sixty (60) days after the Closing Date (or such longer period as the Administrative Agent may allow in its reasonable discretion), the Collateral Agent shall have received the promissory notes listed on Part 2 of Schedule II to the Security Agreement and undated note powers or other instruments of transfer with respect thereto endorsed in blank.
Schedule 7.01(b)
Existing Liens
Debtor |
|
Jurisdiction |
Thru Date |
Original File Date and Number |
Secured Party |
Collateral |
Related Filings |
|||||||
Doubletree DTWC LLC Addl debtor Village Motor Inn, a Montana Joint Venture |
DE | Secretary of State | 09-20-13 | 04-08-03 #3100672 8 | First Interstate Bank Missoula Office | assets related to Doubletree Hotel Edgewater, 100 East Madison Avenue, Missoula, MT |
Continuations 03-03-08 & 12-11-12 |
|||||||
Doubletree DTWC LLC | DE | Secretary of State | 09-20-13 | 10-03-11 #2011 3783126 | U.S. Bancorp Equipment Finance Group | equipment lease | ||||||||
Doubletree Franchise LLC Addl party R B W H Rocky Mount DB LLC |
DE | New Castle County |
10-01-13 (rcdr) 10-02-13 (chancery) 09-26-13 (superior) |
12-06-12 #N12C-12-055 | Savo & Dragana Djukic | personal injury litigation | ||||||||
Doubletree Hotel Systems LLC | AZ | Secretary of State | 09-27-13 | 12-24-07#2007-151-9012-0 | US Express Leasing, Inc. | equipment lease [note: filing is past its lapse date] | ||||||||
Doubletree Hotel Systems LLC | AZ | Secretary of State | 09-27-13 | 05-10-10 #2010-161-5821-0 | ADT Security Services, Inc. | equipment lease | ||||||||
Doubletree Hotel Systems LLC | AZ | Secretary of State | 09-27-13 | 04-14-11 #2011-164-9011-3 | Everbank Commercial Finance, Inc. | equipment lease | ||||||||
Doubletree Hotel Systems LLC | AZ | Secretary of State | 09-27-13 | 04-01-13 #2013-173-4486-6 | Everbank Commercial Finance, Inc. | equipment lease | ||||||||
Doubletree Hotel Systems LLC | AZ | Secretary of State | 09-27-13 | 04-01-13#2013-173-4512-7 | Everbank Commercial Finance, Inc. | equipment lease |
Doubletree LLC | DE | Secretary of State | 09-20-13 | 10-13-09 #2009 3286751 | CIT Technology Financing Services, Inc. | equipment lease | ||||||||
Hilton Garden Inns Management LLC | DE | Secretary of State | 09-19-13 | 03-15-10 #2010 0881205 | GFC Leasing | equipment lease | ||||||||
Hilton Grand Vacations Company, LLC | DE | Secretary of State | 09-19-13 | 11-19-07 #2007 4396569 | Steelcase Financial Services Inc. | equipment lease | Assignment 11-19-07 Continuation 09-25-12 | |||||||
Hilton Grand Vacations Company, LLC | DE | Secretary of State | 09-19-13 | 12-17-08 #2008 4191274 | Wells Fargo Financial Leasing, Inc. | equipment lease | ||||||||
Hilton Grand Vacations Company, LLC | DE | Secretary of State | 09-19-13 | 04-20-09 #2009 1241303 | Wells Fargo Financial Leasing, Inc. | equipment lease | ||||||||
Hilton Grand Vacations Company, LLC | DE | Secretary of State | 09-19-13 | 09-24-09 #2009 3118616 | De Lage Landen Financial Services, Inc. | equipment lease | ||||||||
Hilton Grand Vacations Club Addl defts Hilton Grand Vacations Company LLC Hilton Hotels Corporation | FL | Orange County | 10-03-13 | 01-12-10#2010-CA-000708-O | Jack & Judith S. Harwell | personal injury litigation | ||||||||
Grand Vacations Realty, LLC Addl defendants Hilton Grand Vacations Club, LLC Hilton Grand Vacations Company LLC Hilton Resorts Corporation et al | FL | Orange County | 10-03-13 | 02-28-11 #2011-CA-002532-O | Jeffrey Coleman White & Kimberly Marie White | breach of contract litigation | ||||||||
Hilton Grand Vacations Company LLC Hilton Hotels Corporation Fiesta Americana Vacation Club | FL | Orange County | 10-03-13 | 04-08-11#2011-CA-004393-O | Jonathan J. O Connor | personal injury litigation |
Hilton Grand Vacations Development Company-Las Vegas, LLC | NV | Secretary of State | 10-03-13 | 06-25-02 #2002016502-8 | Hilton Grand Vacations Financing LLC | all receivables and related assets | Continuation 02-20-07 & 03-26-12 | |||||||
Hilton Grand Vacations Development Company-Las Vegas, LLC | NV | Secretary of State | 10-03-13 | 06-25-02 #2002016503-0 | Mesa Properties Inc. | all receivables and related assets | Continuation 02-20-07 & 03-28-12 | |||||||
Hilton Grand Vacations Financing, LLC | DE | Secretary of State | 09-19-13 | 06-25-02#2002 1559412 | Mesa Properties Inc. | all receivables and related assets | Continuation 02-19-07 & 03-23-12 | |||||||
Hilton Grand Vacations Management, LLC See attached for addl parties | NV | Clark County District Court (8th) | 09-16-13 | 08-05-11 #A-11-646653-C | Nancy Jean McCauley | premises liability litigation | ||||||||
Hilton Grand Vacations Management, LLC Addl party Hilton Grand Vacations Club, LLC | NV | Clark County District Court (8th) | 09-16-13 | 04-30-13 #A-13-680930-C | Luiz Perez | premises liability litigation | ||||||||
Hilton Grand Vacations Management, LLC | NV | Secretary of State | 10-03-13 | 07-10-13 #2013017398-9 | Western Equipment Finance, Inc. | equipment lease | ||||||||
Hilton Grand Vacations Management, LLC | NV | US District Court | 10-02-13 | 06-08-12#12-cv-00972 | Carolyn Hacker | premises liability litigation | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 08-16-01 #1096718 7 | Sage Capital Corporation | equipment lease | Continuation 07-18-06 & 04-25-11 Assignment 07-18-06 | |||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 02-01-06 #6049667 9 | Sun Microsystems Finance, a Sun Microsystems, Inc. Business | equipment lease | Continuation 01-25-11 | |||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 09-25-06#6329637 3 | Wachovia BankWells Fargo Bank | equipment lease | Assignment 04-21-0809-26-0810-01-0811-18-0801-21-0903-09-0907-10-0901-15-1003-26-1009-30-1110-07-1102-15-13 & 04-30-13 Continuation 09-02-11 |
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-30-06 #6458858 8 | National City Commercial Corporation | equipment lease | Continuation 11-21-11 | |||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-14-07 #2007 4328802 | General Electric Capital Corporation | equipment lease | Continuation 08-22-12 Amendment 08-22-12 | |||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-22-08 #2008 3569311 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-24-08#2008 3598875 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-30-08 #2008 3657549 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-31-08 #2008 3670211 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-06-08 #2008 3729058 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-10-08#2008 3759188 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-11-08 #2008 3773130 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-20-08 #2008 3884440 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-08-08 #2008 4058366 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-1-08#2008 4103832 | IBM Credit LLC | equipment lease |
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-24-08 #2008 4281935 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-31-08 #2008 4332332 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-05-09 #2009 0019668 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-15-09#2009 0157138 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-16-09 #2009 0169083 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-20-09 #2009 0187564 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-30-09 #2009 0320991 | IBM Credit LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 02-12-09#2009 0478542 | Banc of America Leasing & Capital, LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 02-19-09 #2009 0548955 | Hewlett-Packard Financial Services Company | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 05-01-09 #2009 1383170 | Wells Fargo Financial Leasing, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 05-07-09 #2009 1447140 | Canon Financial Services | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 06-02-09#2009 1738654 | Banc of America Leasing & Capital, LLC | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 07-29-09 #2009 2429592 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 08-27-09 #2009 2758719 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 09-01-09 #2009 2820915 | GreatAmerica Leasing Corporation | equipment lease |
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-27-09#2009 3439897 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-27-09 #2009 3449193 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-23-09 #2009 3756837 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-28-09 #2009 4139827 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 02-15-10#2010 0490544 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 03-22-10 #2010 00971923 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 03-26-10 #2010 1044910 | Ikon Financial Svcs | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 04-22-10 #2010 1387210 | Ikon Financial Svcs | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 04-28-10#2010 1479876 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 06-23-10 #2010 2195380 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 07-28-10 #2010 2618019 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 08-12-10 #2010 2811929 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 09-23-10#2010 3322918 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 09-23-10 #2010 3322926 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 10-26-10 #2010 3736315 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 11-18-10 #2010 4051862 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 12-14-10#2010 4412916 | AT&T Capital Services, Inc. | equipment lease |
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-04-11 #2010 0018112 | Dell Financial Services L.L.C. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 01-27-11 #2011 0314669 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Hotels Corporation | DE | Secretary of State | 09-20-13 | 03-22-11 #2011 1053860 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Illinois Corp. | NV | Secretary of State | 10-03-13 | 09-11-09#2009022130-1 | General Electric Capital Corporation | equipment lease | ||||||||
Hilton Illinois Corp. | NV | Secretary of State | 10-03-13 | 10-03-13 #2013025685-8 | General Electric Capital Corporation | equipment lease | ||||||||
Hilton Resorts Corporation | DE | Secretary of State | 09-19-13 | 06-25-02 #2155942 0 | Hilton Grand Vacations Financing LLC | all receivables and related assets | Continuation 02-19-07 & 03-23-12 | |||||||
Hilton Resorts Corporation | DE | Secretary of State | 09-19-13 | 06-25-02 #2155943 8 | Mesa Properties Inc. | all receivables and related assets | Continuation 02-19-07 & 03-23-12 | |||||||
Hilton Resorts Corporation | DE | Secretary of State | 09-19-13 | 05-09-13 #2013 1775437 | Deutsche Bank Securities Inc., as Administrative Agent | all interests under Transferred Timehare Loans | ||||||||
Hilton Resorts Corporation | DE | Secretary of State | 09-19-13 | 08-08-13#2013 3112258 | Wells Fargo Bank, National Association, as Indenture Trustee | all interests under Initial Transferred Timehare Loans | Assignment 08-12-13 | |||||||
Hilton Resorts Corporation | DE | Secretary of State | 09-19-13 | 08-08-13 #2013 3112340 | Wells Fargo Bank, National Association, as Indenture Trustee | all interests under Qualified Substitute Timeshare Loans | ||||||||
Hilton Resorts Corporation | FL | Orange County | 10-03-13 | 05-25-10 #2010-CA-012374-O | William Donegan as Orange county Property Appraiser | real property litigation |
Grand Vacations Realty, LLC Addl defendants Hilton Grand Vacations Club, LLC Hilton Grand Vacations Company LLC Hilton Resorts Corporation et al |
FL | Orange County | 10-03-13 | 02-28-11#2011-CA-002532-O | Jeffrey Coleman White & Kimberly Marie White | breach of contract litigation | ||||||||
Hilton Resorts Corporation, et al | FL | Orange County | 10-03-13 | 06-14-12 #2012-CA-009955-O | MAA LLC addl plaintiff Kennedy Funding Inc. | commercial foreclosure litigation | ||||||||
Hilton Resorts Corporation | FL | Orange County | 10-03-13 | 08-30-13#2013-CA-011016-O | JPMorgan chase Bank National Association | residential foreclosure litigation | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 11-09-10 #2010 3917840 | Ikon Financial Svcs | equipment lease | ||||||||
Hilton Worldwide, Inc. Addl debtor Hilton Hotels Corporation | DE | Secretary of State | 09-19-13 | 01-04-11 #2011 0018112 | Dell Financial Services L.L.C. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 01-04-11#2011 0024235 | OCE Financial Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 03-28-11 #2011 1329807 | SP US V5 Colonnade, LP | trade fixtures, furniture, inventory, equipment | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 04-01-11 #2011 12170278 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 04-01-11 #2011 1217325 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 04-11-11#2011 1331878 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 04-29-11 #2011 1609471 | Ikon Financial Svcs | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 05-06-11 #2011 1717365 | AT&T Capital Services, Inc. | equipment lease |
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 05-20-11 #2011 1929937 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 07-28-11#2011 2910647 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 11-18-11 #2011 4452648 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 01-05-12 #2012 0056822 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 01-05-12 #2012 0056830 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 04-26-12#2012 1612425 | Ikon Financial Svcs | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 06-14-12 #2012 2297705 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 07-11-12 #2012 2670919 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 07-13-12 #2012 2712919 | AT&T Capital Services, Inc. | equipment lease | ||||||||
Hilton Worldwide, Inc. | DE | Secretary of State | 09-19-13 | 11-21-12#2012 4508109 | Noreast Capital Corporation | equipment lease | ||||||||
Hilton Worldwide, Inc. | VA | Fairfax County | 09-30-13 | 06-28-13 #CM-2013-0000343 | Norair Engineering Corp. | construction litigation | ||||||||
HLT Domestic Owner LLC | DE | Secretary of State | 09-19-13 | 04-21-11 #2011 1510992 | U.S. Bancorp Business Equipment Finance Group | equipment lease | ||||||||
HLT Domestic Owner LLC | DE | Secretary of State | 09-19-13 | 08-08-11 #2011 3063891 | U.S. Bancorp Business Equipment Finance Group | equipment lease | ||||||||
HLT Operate DTWC LLC | DE | Secretary of State | 09-20-13 | 02-02-10#2010 0354039 | Tygris Vendor Finance, Inc. | equipment lease | ||||||||
HLT Operate DTWC LLC | DE | Secretary of State | 09-20-13 | 12-14-11 #2011 4803022 | Konica Minolta Business USA Inc. | equipment lease |
Meritex, LLC | DE | Secretary of State | 09-20-13 | 10-26-01 #2001 1517304 | Dell Financial Services L.L.C. | equipment lease | Continuation 10-03-06 & 09-19-11 Amendment 06-08-12 | |||||||
Waldorf-Astoria Management LLC | DE | Secretary of State | 09-24-13 | 03-03-11#2011 0797525 | Chihuly, Inc. | consigned goods and inventory including works of art |
| Liens with respect to certain pieces of equipment leased by Doubletree Hotel Systems LLC from US Express Leasing, Inc. |
| Liens with respect to certain pieces of equipment leased by Hilton Grand Vacations Company, LLC from Agricredit Acceptance LLC, Citicapital Commercial Corporation, Wells Fargo Financial Leasing, Inc., US Express Leasing, Inc. and textron Financial Corporation |
| Liens with respect to certain pieces of equipment leased by Hilton Worldwide, Inc. (f/k/a Hilton Hotels Corporation) from IBM Credit LLC |
Schedule 7.02(f)
Existing Investments
Investments in Joint Ventures:
Joint Venture | Jurisdiction | Hilton Investor |
Beneficial
Ownership |
|||||
Ankara Enternasyonel Otelcilik Anonim Sirketi |
Turkey | Hilton International Co. | 10 | % | ||||
A-R HHC Orlando Convention Hotel Member, LLC |
Delaware | Hilton-OCCC Hotel, LLC | 20 | % | ||||
A-R HHC Orlando Convention Hotel LLC |
Delaware | A-R HHC Orlando Convention Hotel Member, LLC | 20 | % | ||||
Ashford HHC Partners III, LP |
Delaware | Hilton Orlando Partners III, LLC | 25 | % | ||||
Brighton at Kingston Plantation, L.L.C. |
Delaware | Promus/Kingston Development Corporation | 50 | % | ||||
Centennial Hotel Company, LLC |
Georgia | DTM Atlanta/Legacy, Inc. | 36.40 | % | ||||
CHH Capital Hotel GP, LLC |
Delaware | Ashford HHC Partners III LP | 25 | % | ||||
CHH Capital Hotel Partners, LP |
Delaware | Ashford HHC Partners III LP | 24.875 | % | ||||
CHH Capital Hotel GP, LLC | 0.125 | % | ||||||
CHH Capital Tenant Corp. |
Delaware | CHH III Tenant Parent Corp. | 25 | % | ||||
CHH III Tenant Parent Corp. |
Delaware | Ashford HHC Partners III LP | 25 | % | ||||
CHH Torrey Pines Hotel GP, LLC |
Delaware | Ashford HHC Partners III LP | 25 | % | ||||
CHH Torrey Pines Hotel Partners, LP |
Delaware | Ashford HHC Partners III LP | 24.875 | % | ||||
CHH Torrey Pines Hotel GP, LLC | 0.125 | % | ||||||
CHH Torrey Pines Tenant Corp. |
Delaware | CHH III Tenant Parent Corp. | 25 | % | ||||
Club Mack OPCO, L.L.C. |
Nevada | DTR TM Holdings, Inc. | 50 | % | ||||
Corporate Associates-Boise Limited Partnership |
Arizona | DT Management LLC | 13.33 | % | ||||
Custom House Hotel, L.P. |
Missouri | DT Real Estate, Inc. | 2.11 | % | ||||
DT Management LLC | 0.23 | % | ||||||
Destination Resort Affiliates |
Arizona | Destination Resorts LLC | 50 | % | ||||
DJONT Leasing LLC |
Delaware | Promus Hotels LLC | 50 | % | ||||
DJONT/EPT Leasing LLC |
Delaware | Promus Hotels LLC | 49 | % | ||||
Domhotel GmbH |
Germany | HIEF Holding GmbH | 38.86 | % | ||||
Hillview Holding GmbH | 1.14 | % | ||||||
Doubletree de Mexico, S.A. de C.V. |
Mexico | DTR San Antonio | 50 | % | ||||
Doubletree Spokane City Center LLC |
Delaware | Doubletree DTWC LLC | 10 | % |
DR Spokane City Center LLC |
Delaware | Doubletree Spokane City Center LLC | 10 | % | ||||
DT Ontario Hotel Partners |
California | Doubletree DTWC LLC | 66.70 | % | ||||
DTR Houston, Inc. |
Arizona | DT Real Estate, Inc. | 80 | % | ||||
E.S. Hotel (Isla Verde), S.E. |
Puerto Rico | Embassy Suites (Isla Verde), Inc. | 28.92 | % | ||||
Earlsfort Centre Hotel Proprietors Limited |
Ireland | HPP International Corporation | 25 | % | ||||
EPT Atlanta-Perimeter Center Limited Partnership |
Delaware | Promus Hotels LLC | 49 | % | ||||
Suite Life, Inc. | 1 | % | ||||||
EPT Austin Limited Partnership |
Delaware | Promus Hotels LLC | 49 | % | ||||
Suite Life, Inc. | 1 | % | ||||||
EPT Kansas City Limited Partnership |
Delaware | Promus Hotels LLC | 49 | % | ||||
Suite Life, Inc. | 1 | % | ||||||
EPT Meadowlands Limited Partnership |
Delaware | Promus Hotels LLC | 49 | % | ||||
Suite Life, Inc. | 1 | % | ||||||
EPT Raleigh Limited Partnership |
Delaware | Promus Hotels LLC | 49 | % | ||||
Suite Life, Inc. | 1 | % | ||||||
FCH/DT BWI Holdings, L.P. |
Delaware | FCH/DT Holdings, L.P. | 9.9 | % | ||||
FCH/DT Hotels, L.L.C. | 0.1 | % | ||||||
FCH/DT BWI Hotel, L.L.C. |
Delaware | FCH/DT BWI Holdings, L.P. | 10 | % | ||||
FCH/DT Holdings, L.P. |
Delaware | DTR FCH Holdings, Inc. | 9.9 | % | ||||
FCH/DT Hotels, L.L.C. | 0.1 | % | ||||||
FCH/DT Hotels, L.L.C. |
Delaware | DTR FCH Holdings, Inc. | 10 | % | ||||
FelCor/JPM Austin Holdings, L.P. |
Delaware | FCH/DT Holdings, L.P. | 9.9 | % | ||||
FelCor/JPM Austin Hotel, L.L.C. | 1.0 | % | ||||||
FelCor/JPM Austin Hotel, L.L.C. |
Delaware | FCH/DT Holdings, L.P. | 10 | % | ||||
FelCor/JPM BWI Hotel, L.L.C. |
Delaware | FCH/DT Holdings, L.P. | 10 | % | ||||
FelCor/JPM Wilmington Hotel, L.L.C. |
Delaware | FCH/DT Holdings, L.P. | 10 | % | ||||
Fess Parker-Red Lion Hotel |
California | Doubletree DTWC LLC | 50 | % | ||||
Grand Hotel Imperial DD |
Croatia | Hilton International Co. | 17.54 | % | ||||
GSP Investments 1, LLC |
Hawaii | Hilton Worldwide, Inc. | 50 | % | ||||
HFS San Francisco Liquor License, LLC |
Delaware | Hilton Worldwide, Inc. | 50 | % | ||||
HIEF Germany BV |
Netherlands | Hilton International European Fund BV | 40 | % | ||||
HIEF Holding GmbH |
Germany | HIEF Germany BV | 40 | % | ||||
Hillview Holding GmbH |
Germany | Comfort Inns BV | 40 | % | ||||
Hilton International European Fund BV |
Netherlands | Comfort Inns BV | 40 | % | ||||
Hilton Services Communs GIE |
France | Societe dExploitation Hoteliere dOrly EURL | 10 | % | ||||
Hilton International (France) SASU | 30 | % | ||||||
Societe dExploitation Hoteliere La Defense SAS | 10 | % |
Hotel Properties-Boise |
Arizona | DT Management LLC | 27.4 | % | ||||
Corporate Associates-Boise Limited Partnership | 3.1 | % | ||||||
International Company for Touristic Investments, S.A.E. |
Egypt | HPP International Corporation | 10 | % | ||||
International Hotels (Kenya) Limited |
Kenya | Hilton International Co. | 59.421 | % | ||||
King Street Station Hotel Associates, L.P. |
Virginia | Promus Hotels LLC | 50 | % | ||||
Margate Towers at Kingston Plantation, L.L.C. |
Delaware | Promus/Kingston Development Corporation | 50 | % | ||||
Marquette MPT, Inc. |
Delaware | Hilton International Co. | 50 | % | ||||
MHV Joint Venture |
Texas | Promus Hotels LLC | 50 | % | ||||
Morning Light Co. Limited |
Mauritius | Hilton International Co. | 19.478 | % | ||||
Nagoya Hilton Co Ltd |
Japan | Hilton International Co. | 24 | % | ||||
Nippon Hilton Co Ltd |
Japan | Hilton International Co. | 53 | % | ||||
One Park Boulevard, LLC |
Delaware | HHC One Park Boulevard, LLC | 25 | % | ||||
Osaka Hilton Co Ltd |
Japan | Hilton International Co. | 49 | % | ||||
Nagoya Hilton Co. Ltd. | 1.5 | % | ||||||
Promus/FCH Condominium Company, L.L.C. |
Delaware | Promus Hotels LLC | 50 | % | ||||
Promus/FCH Development Company, L.L.C. |
Delaware | Promus Hotels LLC | 50 | % | ||||
Promus/FelCor Hotels, L.L.C. |
Delaware | Promus/Felcor Lombard Venture | 8 | % | ||||
Promus/Felcor Manager, LLC | 0.5 | % | ||||||
EPT Raleigh Limited Partnership | 9.9 | % | ||||||
EPT Atlanta-Perimeter Center Limited Partnership | 8.5 | % | ||||||
EPT Austin Limited Partnership | 7.6 | % | ||||||
MHV Joint Venture | 4.1 | % | ||||||
Promus/Felcor Parsippany Venture | 11.4 | % | ||||||
Promus/FelCor Lombard Venture |
Illinois | Promus Hotels LLC | 49 | % | ||||
Embassy Development Corporation | 1 | % |
Promus/FelCor Manager, Inc. |
Delaware | Promus Hotels LLC | 49.4 | % | ||||
Suite Life, Inc. | 0.6 | % | ||||||
Promus/FelCor Parsippany Venture |
New Jersey | Promus Hotels LLC | 50 | % | ||||
Promus/FelCor San Antonio Venture |
Texas | Promus Hotels LLC | 50 | % | ||||
Sacramento Hotel Partners, LLC |
California | Promus Hotels LLC | 25 | % | ||||
Societe de Developpement Hotel Pointe des Blagueurs B.V. |
Netherlands | Hilton International Co. | 25 | % | ||||
Sunstone Park Lessee LLC |
Delaware | HLT JV Acquisition LLC | 25 | % | ||||
Tokyo Bay Hilton Co. Ltd |
Japan | Hilton International Co. | 24 | % | ||||
Valencia Hotel Joint Venture |
California | Hilton Inns LLC | 25 | % | ||||
Village Motor Inn |
Montana | Doubletree DTWC LLC | 50 | % | ||||
Vista Real Estate Management Company |
Egypt | Hilton International Co. | 55 | % | ||||
Yeditepe Beynelmilel Otelcilik Turizm ve Ticaret, A.S. |
Turkey | HPP International Corporation | 25 | % | ||||
ZCOF CH Holdings LLC |
Delaware | HLT JV Acquisition LLC | 15 | % | ||||
ZCOF Chicago Hotel LLC |
Delaware | ZCOF Chicago Hotel LLC | 15 | % |
Investments in Unrestricted Subsidiaries:
Unrestricted Subsidiary | Jurisdiction | Hilton Investor |
Beneficial
Ownership |
|||||||
Hilton Domestic Property LLC |
Delaware | Hilton Worldwide, Inc. | 100 | % | ||||||
HLT Owned VIII Holding LLC |
Delaware | Vista International DE LLC | 100 | % | ||||||
Other Investments:
|
||||||||||
Thayer Hotel Investors Trust IV |
9,429,822 | |||||||||
Emerging Markets Fund |
100,000 | |||||||||
Hotel Joint Venture Services |
6,000,000 | |||||||||
Memphis Arena Bond |
973,669 | |||||||||
Notes Receivable:
|
||||||||||
Hilton Anatole |
15,068,541 | |||||||||
Hilton Altamonte Springs |
227,500 | |||||||||
DT Jackson |
283,376 | |||||||||
DT Johnson City |
201,250 | |||||||||
DT Oak Ridge |
201,250 | |||||||||
DT Murphreesboro |
218,750 | |||||||||
Hilton Naples |
437,500 | |||||||||
Hilton Memphis |
175,000 | |||||||||
Hilton Orange County Convention Center |
17,000,000 |
Hilton Santa Fe |
5,500,000 | |||||||
Beirut |
1,459,432 | |||||||
Conrad Istanbul |
950,000 | |||||||
DT Detroit |
551,290 | |||||||
Waldorf Astoria Beverly Hills |
45,000,000 | |||||||
Conrad Dublin |
916,319 | |||||||
Hilton Dubrovnik |
352,834 | |||||||
Hilton Dubrovnik |
605,730 | |||||||
Conrad Istanbul |
800,000 | |||||||
DT Spokane |
150,000 | |||||||
Hilton Osaka |
14,280,903 | |||||||
Timeshare notes
|
||||||||
Notes receivable for timeshare hotels |
||||||||
(Portion not held by Timeshare Warehouse or ABS entities) |
579,000,000 |
Schedule 7.03(b)
Existing Indebtedness
Debt Balances |
||||||
Unsecured Notes Due 2017 |
54,863,000 | |||||
Contingently Convertible Notes due 2023 |
401,322 | |||||
DoubleTree Ontario Mortgage |
32,292,710 | |||||
DoubleTree Spokane Mortgage |
11,902,442 | |||||
Antwerp Capital Lease |
44,862,385 | |||||
Bradford Capital Lease |
16,000,854 | |||||
Munich Park Capital Lease |
5,797,351 | |||||
Odawara Capital Lease |
12,223,379 | |||||
Tokyo Capital Lease |
173,749,872 | |||||
Tokyo Other Debt |
19,973,023 | |||||
Guarantees: |
||||||
Hilton Baltimore |
Limited Loan Pmt Guarantee | 25,000,000 | ||||
UK Pension Plan |
Guarantee of pension obligation | 23,000,000 | ||||
HGV |
Guarantee of timeshare receivable sale | 1,787,000 | ||||
LivingWell |
Lease Performance Guarantee | 248,000 | ||||
Columbia Sussex Hotels |
Performance Guaranty for Mgmt Contracts | 52,000,000 | ||||
Hilton Venice |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hilton Eilat |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hilton Manchester Deansgate |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hilton The Hague |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hampton London Luton Airport, Luton, UK |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hilton, London Southbank |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hilton Moscow Prechistenskaya |
Performance Guaranty for Mgmt Contract | (A) | ||||
Hampton Inn Bournemouth, UK |
Performance Guaranty for Mgmt Contract | (A) |
Letters of Credit (issued for benefit of): |
||||
ACE American Ins Co & Pacific Employers Ins Co. |
15,429,189 | |||
Old Republic Insurance Company |
350,000 | |||
Old Republic Insurance Company |
250,701 | |||
National Union Fire Insurance Co. of Pittsburgh, PA |
500,000 | |||
Industrial Commission of Arizona, State of Arizona |
100,000 | |||
Wells Fargo Bank (Hilton Baltimore) |
25,000,000 | |||
Chartis Insurance UK |
668,882 | |||
ACE American Insurance Company |
551,967 | |||
ACE American Insurance Company |
216,000 | |||
ACE American Insurance Company |
700,000 | |||
Reliance National Indemnity Company |
120,000 | |||
The Travelers Insurance Company |
500,000 | |||
National Union Fire Insurance Co. of Pittsburgh, PA |
890,000 | |||
The Royal Bank of Scotland PLC |
2,500,000 | |||
Mesa Properties c/o GE Corporation |
1,786,509 | |||
The Sports Equipment Administrative Center of China |
1,000,000 | |||
ICANN |
30,000 | |||
Mun Hilton, LLC |
352,000 | |||
Mun Hilton, LLC |
176,000 | |||
Intercompany: |
||||
Intercompany loan from Hilton International of Puerto Rico Inc. (lender) to Hilton International Manage LLC (borrower) |
125,125,086 |
Notes
(A) | Amounts contingent on performance of hotels. |
Schedule 7.08
Transactions with Affiliates
Agreements in existence on the Closing Date, or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, and all interested party transactions described under the heading Certain Relationships and Related Party Transactions in the Companys Form S-1 filed with the SEC on September 12, 2013.
Schedule 7.09
Certain Contractual Obligations
The DT Ontario Hotel Partners Joint Venture Agreement: (a) Joint Venture Agreement dated February 15, 1980 between Airport Executive Group (Owner), a California general partnership, consisting of Charles Leggio and Shirley Leggio, Frank DeSalvo and Stella DeSalvo, Leggio Realty and Investment Co., Inc. and Milford Bunnell and Lucille Bunnell, and Ontario-Red Lion Motor Inn, a CA general partnership consisting of Edward H. Pietz and Tod E. McClaskey; (b) Amendment to Joint Venture Agreement of Ontario-Red Lion Motor Inn dated July 24, 1980 between Owner and Ontario-Red Lion Motor Inn, to provide for correct names of parties to Joint Venture; (c) Amended Statement of Partnership and Notice of Dissolution of Ontario-Red Lion Motor Inn recorded on April 10, 1985; (d) Substitution of Joint Venturer dated April 17, 1985 between Ontario Airport Executive Center, a CA general partnership (OAEC) and RL Acquisition Company, a CA limited partnership; (e) Statement of Partnership of Ontario-Red Lion recorded on April 17, 1985; (f) Acknowledgement dated April 21, 1994 by OAEC (g) Second Amendment to Joint Venture Agreement of Ontario-Red Lion Motor Inn dated July 28, 1994 between OAEC and Red Lion, a California limited partnership (Red Lion); (h) Third Amendment to Joint Venture Agreement dated April 9, 1996 between OAEC, Red Lion Hotels, Inc., a Delaware corporation (RLHI), and Red Lion; (i) Assignment and Assumption of Joint Venture and Partnership Interests dated September 12, 1996 between RLHI and Red Lion; (j) Fourth Amendment to Joint Venture Agreement dated October 4, 1996 between OAEC and RLHI; (k) Fifth Amendment to Joint Venture Agreement dated September 24, 1999 between OAEC and RLHI; (l) Agreement Regarding Assignment and Assumption of Partnership Agreement dated November 30, 2001 between RLHI and Doubletree DTWC Corporation, a Delaware corporation (DTWC); (m) Sixth Amendment to Joint Venture Agreement dated October 1, 2002 between OAEC and DTWC; (n) Misnumbered Amendment to Joint Venture Agreement dated March 31, 2003 between OAEC and DTWC; (o) Eighth Amendment to Joint Venture Agreement dated January 23, 2006 between OAEC and DTWC ; and (p) Ninth Amendment to Joint Venture Agreement dated August 27, 2013 between OAEC and DTWC
The Second Amended and Restated Promissory Note in the original principal amount of $30,000,000 made as of August 1, 2013 by Metropolitan Life Insurance Company, as Lender, to DT Ontario Hotel Partners, as Borrower (Doubletree Hotel Ontario Airport)
The Tokyo Hilton Joint Venture Agreement: the Joint Venture Agreement dated as of March 20, 1981, by and among Tokyo Urban Development Co., Ltd. (Entity A); Hilton International Co. (Entity B) , and Nippon Koa Insurance Co., Ltd. (Entity C), as amended pursuant to Agreement concerning Reorganization of Nippon Hilton Co., Ltd., dated as of May 1, 1996, Agreement concerning Reconstruction of Nippon Hilton Co., Ltd., dated as of June 14, 1999, Agreement concerning Management Improvement towards Reconstruction of Nippon Hilton Co., Ltd. and Good Management Performance by Hotel Renovation, dated as of February 1, 2005, by and among Entity A, Entity B and Entity C.
The loan documents governing the loans encumbering the Tokyo Hilton.
Schedule 10.02
Administrative Agents Office, Certain Addresses for Notices
If to the Borrower:
Hilton Worldwide Finance LLC
c/o Hilton Worldwide, Inc.
7930 Jones Branch Drive
McLean, VA 22102
Attention: Chief Financial Officer
Facsimile No.: [(703) 883-6189]
With a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attention: Alden Millard
Facsimile No.: (212) 455-2502
If to the Administrative Agent:
Deutsche Bank AG New York Branch
c/o Sara Pelton and MaryKay Coyle
60 Wall Street
New York, NY 10005
with electronic copies to: Sara Pelton ( sara.pelton@db.com ), MaryKay Coyle ( marykay.coyle@db.com ) and Agency.Transactions@DB.com
Borrowers Website:
www.hilton worldwide.com or such other website with respect to which Hilton gives reasonable advance notice to each Lender and the Administrative Agent.
Exhibit 10.2
EXECUTION VERSION
SECURITY AGREEMENT
dated as of
October 25, 2013
among
THE GRANTORS IDENTIFIED HEREIN
and
DEUTSCHE BANK AG NEW YORK BRANCH,
as Collateral Agent
TABLE OF CONTENTS
Page | ||||||
ARTICLE I | ||||||
Definitions | ||||||
Section 1.01. |
Credit Agreement |
1 | ||||
Section 1.02. |
Other Defined Terms |
1 | ||||
ARTICLE II | ||||||
Pledge of Securities | ||||||
Section 2.01. |
Pledge |
5 | ||||
Section 2.02. |
Delivery of the Pledged Equity |
6 | ||||
Section 2.03. |
Representations, Warranties and Covenants |
6 | ||||
Section 2.04. |
Certification of Limited Liability Company and Limited Partnership Interests |
8 | ||||
Section 2.05. |
Registration in Nominee Name; Denominations |
8 | ||||
Section 2.06. |
Voting Rights; Dividends and Interest |
9 | ||||
ARTICLE III | ||||||
Security Interests in Personal Property | ||||||
Section 3.01. |
Security Interest |
11 | ||||
Section 3.02. |
Representations and Warranties |
12 | ||||
Section 3.03. |
Covenants |
14 | ||||
ARTICLE IV | ||||||
Remedies | ||||||
Section 4.01. |
Remedies Upon Default |
17 | ||||
Section 4.02. |
Application of Proceeds |
19 | ||||
Section 4.03. |
Grant of License to Use Intellectual Property |
19 | ||||
ARTICLE V | ||||||
Subordination | ||||||
Section 5.01. |
Subordination |
20 |
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Page | ||||||
ARTICLE VI | ||||||
Miscellaneous | ||||||
Section 6.01. |
Notices |
20 | ||||
Section 6.02. |
Waivers; Amendment |
20 | ||||
Section 6.03. |
Collateral Agents Fees and Expenses; Indemnification |
21 | ||||
Section 6.04. |
Successors and Assigns |
21 | ||||
Section 6.05. |
Survival of Agreement |
21 | ||||
Section 6.06. |
Counterparts; Effectiveness; Several Agreement |
22 | ||||
Section 6.07. |
Severability |
22 | ||||
Section 6.08. |
Governing Law; Jurisdiction; Venue; Waiver of Jury Trial; Consent to Service of Process |
22 | ||||
Section 6.09. |
Headings |
22 | ||||
Section 6.10. |
Security Interest Absolute |
22 | ||||
Section 6.11. |
Termination or Release |
23 | ||||
Section 6.12. |
Additional Grantors |
24 | ||||
Section 6.13. |
Collateral Agent Appointed Attorney-in-Fact |
24 | ||||
Section 6.14. |
General Authority of the Collateral Agent |
25 | ||||
Section 6.15. |
Reasonable Care |
25 | ||||
Section 6.16. |
Delegation; Limitation |
25 | ||||
Section 6.17. |
Reinstatement |
25 | ||||
Section 6.18. |
Miscellaneous |
25 |
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Schedule I |
Subsidiary Parties |
|
Schedule II |
Pledged Equity and Pledged Debt |
|
Schedule III |
Commercial Tort Claims |
|
Exhibits |
||
Exhibit I |
Form of Security Agreement Supplement |
|
Exhibit II |
Form of Patent Security Agreement |
|
Exhibit III |
Form of Trademark Security Agreement |
|
Exhibit IV |
Form of Copyright Security Agreement |
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SECURITY AGREEMENT dated as of October 25, 2013, among the Grantors (as defined below) and Deutsche Bank AG New York Branch, as Collateral Agent for the Secured Parties (in such capacity, the Collateral Agent ).
Reference is made to the Credit Agreement dated as of October 25, 2013 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among Hilton Worldwide Holdings Inc., a Delaware corporation ( Parent ), Hilton Worldwide Finance, LLC, a Delaware limited liability company, ( Borrower ), the other Guarantors party thereto from time to time, each lender from time to time party thereto (collectively, the Lenders and individually, a Lender ), and Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Parent and the Subsidiary Parties are affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement, and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Credit Agreement .
(a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Credit Agreement. All terms defined in the UCC (as defined herein) and not defined in this Agreement have the meanings specified therein; the term instrument shall have the meaning specified in Article 9 of the UCC.
(b) The rules of construction specified in Article I of the Credit Agreement also apply to this Agreement.
Section 1.02. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
Account Debtor means any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.
Accounts has the meaning specified in Article 9 of the UCC.
Agreement means this Security Agreement.
Article 9 Collateral has the meaning assigned to such term in Section 3.01(a).
Borrower has the meaning assigned to such term in the recitals of this Agreement.
Collateral means the Article 9 Collateral and the Pledged Collateral.
Collateral Agent has the meaning assigned to such term in the recitals of this Agreement.
Copyright License means any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.
Copyrights means all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States, including registrations, recordings, supplemental registrations and pending applications for registration in the USCO.
Credit Agreement has the meaning assigned to such term in the preliminary statement of this Agreement.
Excluded Assets means (i) in excess of 65% of the Equity Interests of any direct Foreign Subsidiary of a Loan Party or a Domestic Subsidiary substantially all of whose assets consist of Equity Interests and/or Indebtedness of one or more Foreign Subsidiaries that are treated as controlled foreign corporations within the meaning of Section 957 of the Code, (ii) any property or assets owned by any Foreign Subsidiary or an Unrestricted Subsidiary, (iii) any lease, license or agreement or any property subject to a purchase money security interest or similar arrangement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or purchase money arrangement or create a right of termination in favor of any other party thereto after giving effect to the applicable anti-assignment provisions of the UCC or other applicable Law, other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other applicable Law notwithstanding such prohibition, (iv) any interest in fee-owned real property (other than Material Real Properties), (v) Excluded Contracts, Excluded Equipment and any interest in leased real property (including any requirement to deliver landlord waivers, estoppels and collateral access letters), (vi) motor vehicles and other assets subject to certificates of title except to the extent perfection of a security interest therein may be accomplished by filing of financing statements in appropriate form in the applicable jurisdiction under the UCC, (vii) Margin Stock and Equity Interests of any Person other than wholly-owned Subsidiaries that are Restricted Subsidiaries, (viii) any trademark application filed in the United States Patent and Trademark Office on the basis of the Borrowers or any Guarantors intent to use such mark and for which a form evidencing use of the mark has not yet been filed with the United States Patent and Trademark Office, to the extent that granting a security interest in such trademark application prior to such filing would impair the enforceability or validity of such trademark application or any registration that issues therefrom under applicable federal Law, (ix) the creation or perfection of pledges of, or security interests in, any property or assets that would result in material adverse tax consequences to Parent, the Borrower or any of its Subsidiaries, as determined in the reasonable judgment of the Borrower and communicated in writing delivered to the Collateral Agent, (x) any governmental licenses
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or state or local franchises, charters and authorizations, to the extent a security in any such license, franchise, charter or authorization is prohibited or restricted thereby after giving effect to the UCC and other applicable Law, (xi) pledges and security interests prohibited or restricted by applicable Law (including any requirement to obtain the consent of any Governmental Authority or third party), (xii) all commercial tort claims in an amount less than $10,000,000, (xiii) accounts, property and other assets pledged pursuant to a Qualified Securitization Financing, (xiv) letter of credit rights, except to the extent constituting a support obligation for other Collateral as to which perfection of the security interest in such other Collateral is accomplished solely by the filing of a UCC financing statement (it being understood that no actions shall be required to perfect a security interest in letter of credit rights, other than the filing of a UCC financing statement), (xv) any particular assets if, in the reasonable judgment of the Collateral Agent and the Borrower, the burden, cost or consequences of creating or perfecting such pledges or security interests in such assets or obtaining title insurance is excessive in relation to the benefits to be obtained therefrom by the Lenders under the Loan Documents, (xvi) proceeds from any and all of the foregoing assets described in clauses (i) through (xv) above to the extent such proceeds would otherwise be excluded pursuant to clauses (i) through (xv) above and (xvii) so long as the Corporate Realignment shall have occurred on or prior to the date that is 12-months after the Closing Date, any assets, property, Equity Interests or other collateral which would not constitute Collateral under this Agreement or the other Loan Documents after giving effect to the Corporate Realignment, except to the extent perfection can be achieved by filing a UCC financing statement.
General Intangibles has the meaning specified in Article 9 of the UCC.
Grantor means the Borrower, each Guarantor that is a party hereto, and each Guarantor that becomes a party to this Agreement after the Closing Date.
Intellectual Property means all intellectual and similar property of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, the intellectual property rights in software and databases and related documentation and all additions and improvements to the foregoing.
Intellectual Property Security Agreements means the short-form Patent Security Agreement, short-form Trademark Security Agreement, and short-form Copyright Security Agreement, each substantially in the form attached hereto as Exhibits II , III and IV , respectively.
License means any (i) Patent License, (ii) Trademark License, (iii) Copyright License or other Intellectual Property license or sublicense agreement to which any Grantor is a party, together with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder or with respect thereto including damages and payments for past, present or future infringements or violations thereof, and (iii) rights to sue for past, present and future violations thereof.
Patent License means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter
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owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.
Patents means all of the following now owned or hereafter acquired by any Grantor: (a) all letters Patent of the United States in or to which any Grantor now or hereafter has any right, title or interest therein, all registrations and recordings thereof, and all applications for letters Patent of the United States, including registrations, recordings and pending applications in the USPTO, and (b) all reissues, continuations, divisions, continuations-in-part, renewals, improvements or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.
Perfection Certificate means a certificate substantially in the form of Exhibit H to the Credit Agreement, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of each of the Grantors.
Pledged Collateral has the meaning assigned to such term in Section 2.01.
Pledged Debt has the meaning assigned to such term in Section 2.01.
Pledged Equity has the meaning assigned to such term in Section 2.01.
Pledged Securities means the Pledged Equity and Pledged Debt.
Secured Approved Counterparty means an Approved Counterparty party to a Secured Hedge Agreement or Treasury Services Agreement.
Secured Obligations means the Obligations (as defined in the Credit Agreement).
Secured Parties means, collectively, the Administrative Agent, the Collateral Agent, the Lenders, each Secured Approved Counterparty, the Supplemental Agents and each co-agent or sub-agent appointed by the Administrative Agent or Collateral Agent from time to time pursuant to Section 9.02 of the Credit Agreement.
Security Agreement Supplement means an instrument substantially in the form of Exhibit I hereto.
Security Interest has the meaning assigned to such term in Section 3.01.
Subsidiary Parties means (a) the Restricted Subsidiaries identified on Schedule I and (b) each other Restricted Subsidiary that becomes a party to this Agreement as a Subsidiary Party after the Closing Date.
Trademark License means any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.
-4-
Trademarks means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, trade dress, logos, designs, fictitious business names and other source or business identifiers, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the USPTO or any similar offices in any State of the United States or any political subdivision thereof, and all extensions or renewals thereof, as well as any unregistered trademarks and service marks used by a Grantor and (b) all goodwill connected with the use of and symbolized thereby.
UCC means the Uniform Commercial Code as from time to time in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, UCC means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
USCO means the United States Copyright Office.
USPTO means the United States Patent and Trademark Office.
ARTICLE II
Pledge of Securities
Section 2.01. Pledge . As security for the payment or performance, as the case may be, in full of the Secured Obligations, including the Guarantees, each of the Grantors hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in all of such Grantors right, title and interest in, to and under:
(i) all Equity Interests held by it that are listed on Schedule II and any other Equity Interests obtained in the future by such Grantor and the certificates representing all such Equity Interests (the Pledged Equity ); provided that the Pledged Equity shall not include Excluded Assets;
(ii) (A) the debt securities owned by it and listed opposite the name of such Grantor on Schedule II , (B) any debt securities obtained in the future by such Grantor and (C) the promissory notes and any other instruments evidencing such debt securities (the Pledged Debt ); provided that the Pledged Debt shall not include any Excluded Assets;
(iii) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 2.01;
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(iv) subject to Section 2.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (i) and (ii) above;
(v) subject to Section 2.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (i), (ii), (iii) and (iv) above; and
(vi) all Proceeds of any of the foregoing
(the items referred to in clauses (i) through (vi) above being collectively referred to as the Pledged Collateral ).
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, forever, subject, however, to the terms, covenants and conditions hereinafter set forth.
Section 2.02. Delivery of the Pledged Equity .
(a) Each Grantor agrees promptly (but in any event within 60 days after receipt by such Grantor or such longer period as the Collateral Agent may agree in its reasonable discretion) to deliver or cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties, any and all (i) Pledged Equity to the extent certificated and (ii) to the extent required to be delivered pursuant to paragraph (b) of this Section 2.02, Pledged Debt.
(b) Each Grantor will cause any Indebtedness for borrowed money having an aggregate principal amount in excess of $10,000,000 owed to such Grantor by any Person that is evidenced by a duly executed promissory note to be pledged and delivered to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms hereof.
(c) Upon delivery to the Collateral Agent, any Pledged Securities shall be accompanied by stock or security powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request (other than instruments or documents governed by or requiring actions in any non-U.S. jurisdiction related to Equity Interests of Foreign Subsidiaries). Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be deemed to supplement Schedule II and made a part hereof; provided that failure to supplement Schedule II shall not affect the validity of such pledge of such Pledged Equity. Each schedule so delivered shall supplement any prior schedules so delivered.
Section 2.03. Representations, Warranties and Covenants . Each Grantor represents, warrants and covenants to and with the Collateral Agent, for the benefit of the Secured Parties, that:
(a) as of the date hereof, Schedule II includes all Equity Interests, debt securities and promissory notes required to be pledged by such Grantor hereunder in order to satisfy the Collateral and Guarantee Requirement;
-6-
(b) the Pledged Equity issued by the Borrower or a wholly-owned Restricted Subsidiary have been duly and validly authorized and issued by the issuers thereof and are fully paid and nonassessable;
(c) except for the security interests granted hereunder, such Grantor (i) is, subject to any transfers made in compliance with the Credit Agreement, the direct owner, beneficially and of record, of the Pledged Equity indicated on Schedule II , (ii) holds the same free and clear of all Liens, other than (A) Liens created by the Collateral Documents and (B) Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement, and (iii) if requested by the Collateral Agent, will defend its title or interest thereto or therein against any and all Liens (other than the Liens permitted pursuant to this Section 2.03(c)), however arising, of all Persons whomsoever;
(d) except for restrictions and limitations (i) imposed or permitted by the Loan Documents or securities laws generally, (ii) in the case of Pledged Equity of Persons that are not Subsidiaries, transfer restrictions that exist at the time of acquisition of Equity Interests in such Persons, and (iii) except as described in the Perfection Certificate, the Pledged Collateral is freely transferable and assignable, and none of the Pledged Collateral is subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect in any manner material and adverse to the Secured Parties the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;
(e) the execution and performance by the Grantors of this Agreement are within each Grantors corporate powers and have been duly authorized by all necessary corporate action or other organizational action;
(f) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby, except for (i) filings and registrations necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties and (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect (except to the extent not required to be obtained, taken, given, or made or to be in full force and effect pursuant to the Collateral and Guarantee Requirement);
(g) by virtue of the execution and delivery by each Grantor of this Agreement, and delivery of the Pledged Securities in accordance with this Agreement to and continued possession by the Collateral Agent in the State of New York, the Collateral Agent for the benefit of the Secured Parties has a legal, valid and perfected lien upon and security interest in such Pledged Security as security for the payment and performance of the Secured Obligations to the extent such perfection is governed by the UCC, subject only to Liens permitted by Section 7.01 of the Credit Agreement; and
-7-
(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral to the extent intended hereby.
Subject to the terms of this Agreement, each Grantor hereby agrees that upon the occurrence and during the continuance of an Event of Default, it will comply with instructions of the Collateral Agent with respect to the Equity Interests in such Grantor that constitute Pledged Equity hereunder that are not certificated without further consent by the applicable owner or holder of such Equity Interests.
Notwithstanding anything to the contrary in this Agreement, to the extent any provision of this Agreement or the Credit Agreement excludes any assets from the scope of the Pledged Collateral, or from any requirement to take any action to perfect any security interest in favor of the Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral, the representations, warranties and covenants made by any relevant Grantor in this Agreement with respect to the creation, perfection or priority (as applicable) of the security interest granted in favor of the Collateral Agent for the benefit of the Secured Parties (including, without limitation, this Section 2.03) shall be deemed not to apply to such excluded assets.
Section 2.04. Certification of Limited Liability Company and Limited Partnership Interests . No interest in any limited liability company or limited partnership controlled by any Grantor that constitutes Pledged Equity shall be represented by a certificate unless (i) the limited liability company agreement or partnership agreement expressly provides that such interests shall be a security within the meaning of Article 8 of the UCC of the applicable jurisdiction, and (ii) such certificate shall be delivered to the Collateral Agent in accordance with Section 2.02. Any limited liability company and any limited partnership controlled by any Grantor shall either (a) not include in its operative documents any provision that any Equity Interests in such limited liability company or such limited partnership be a security as defined under Article 8 of the UCC or (b) certificate any Equity Interests in any such limited liability company or such limited partnership. To the extent an interest in any limited liability company or limited partnership controlled by any Grantor and pledged under Section 2.01 is certificated or becomes certificated, (i) each such certificate shall be delivered to the Collateral Agent, pursuant to Section 2.02(a) and (ii) such Grantor shall fulfill all other requirements under Section 2.02 applicable in respect thereof. Such Grantor hereby agrees that if any of the Pledged Collateral are at any time not evidenced by certificates of ownership, then each applicable Grantor shall, to the extent permitted by applicable Law, if necessary or, upon the reasonable request of the Collateral Agent, desirable to perfect a security interest in such Pledged Collateral, cause such pledge to be recorded on the equity holder register or the books of the issuer, execute any customary pledge forms or other documents necessary or appropriate to complete the pledge and give the Collateral Agent the right to transfer such Pledged Collateral under the terms hereof.
Section 2.05. Registration in Nominee Name; Denominations . If an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the Borrower prior written notice of its intent to exercise such rights, (a) the Collateral Agent, on behalf of the Secured Parties, shall have the right to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent and each Grantor will
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promptly give to the Collateral Agent copies of any written notices or other written communications received by it with respect to Pledged Equity registered in the name of such Grantor and (b) the Collateral Agent shall have the right to exchange the certificates representing Pledged Equity for certificates of smaller or larger denominations for any purpose consistent with this Agreement, to the extent permitted by the documentation governing such Pledged Securities and applicable Laws.
Section 2.06. Voting Rights; Dividends and Interest .
(a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have provided prior notice to the Borrower that the rights of the Grantor under this Section 2.06 are being suspended:
(i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof and each Grantor agrees that it shall exercise such rights for purposes consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents.
(ii) The Collateral Agent shall promptly (after reasonable advance notice) execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.
(iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable Laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Equity or Pledged Debt, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the Secured Parties and shall be promptly (and in any event within 10 Business Days or such longer period as the Collateral Agent may agree in its reasonable discretion) delivered to the Collateral Agent in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). So long as no Default or Event of Default has occurred and is continuing, the Collateral Agent shall promptly deliver to each Grantor any Pledged Securities in its possession if requested to be delivered to the issuer thereof in connection with any exchange or redemption of such Pledged Securities permitted by the Credit Agreement in accordance with this Section 2.06(a)(iii).
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(b) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Borrower of the suspension of the Grantors rights under paragraph (a)(iii) of this Section 2.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 2.06 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 2.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be promptly (and in any event within 10 days or such longer period as the Collateral Agent may agree in its reasonable discretion) delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement reasonably requested by the Collateral Agent). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 4.02. After all Events of Default have been cured or waived, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.06 and that remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have provided the Borrower with notice of the suspension of its rights under paragraph (a)(i) of this Section 2.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights. After all Events of Default have been cured or waived, each Grantor shall have the exclusive right to exercise the voting and/or consensual rights and powers that the Borrower would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 2.06 shall be reinstated.
(d) Any notice given by the Collateral Agent to the Borrower under Section 2.05 or Section 2.06 (i) shall be given in writing, (ii) may be given with respect to one or more Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) of this Section 2.06 in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agents rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.
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ARTICLE III
Security Interests in Personal Property
Section 3.01. Security Interest .
(a) As security for the payment or performance, as the case may be, in full of the Secured Obligations, including the Guarantees, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the Security Interest ) in, all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the Article 9 Collateral ):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Goods;
(vii) all Instruments;
(viii) all Inventory;
(ix) all Investment Property;
(x) all books and records pertaining to the Article 9 Collateral;
(xi) all Fixtures;
(xii) all Letter-of-Credit Rights, but only to the extent constituting a supporting obligation for other Article 9 Collateral as to which perfection of security interests in such Article 9 Collateral is accomplished by the filing of a UCC financing statement;
(xiii) all Intellectual Property;
(xiv) all Commercial Tort Claims listed on Schedule III and on any supplement thereto received by the Collateral Agent pursuant to Section 3.03(g); and
(xv) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all Supporting Obligations, collateral security and guarantees given by any Person with respect to any of the foregoing;
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provided that, notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest in any Excluded Assets.
(b) Subject to Section 3.01(e), each Grantor hereby irrevocably authorizes the Collateral Agent for the benefit of the Secured Parties at any time and from time to time to file in any relevant jurisdiction any initial financing statements with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Article 9 Collateral as all assets or all personal property of such Grantor or words of similar effect as being of an equal or lesser scope or with greater detail and (ii) contain the information required by Article 9 of the UCC or the analogous legislation of each applicable jurisdiction for the filing of any financing statement or amendment, including whether such Grantor is an organization, the type of organization and, if required, any organizational identification number issued to such Grantor. Each Grantor agrees to provide such information to the Collateral Agent promptly upon any reasonable request.
(c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.
(d) The Collateral Agent is authorized to file with the USPTO or the USCO (or any successor office) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest in United States Intellectual Property of each Grantor in which a security interest has been granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantor as debtors and the Collateral Agent as secured party.
(e) Notwithstanding anything to the contrary in the Loan Documents, none of the Grantors shall be required, nor is the Collateral Agent authorized, (i) to perfect the Security Interests granted by this Security Agreement (including Security Interests in Investment Property and Fixtures) by any means other than by (A) filings pursuant to the UCC in the office of the secretary of state (or similar central filing office) of the relevant State(s), and filings in the applicable real estate records with respect to any fixtures relating to Mortgaged Properties, (B) filings in United States government offices with respect to Intellectual Property of Grantor as expressly required elsewhere herein, (C) delivery to the Collateral Agent to be held in its possession of all Collateral consisting of Instruments and certificated Pledged Equity as expressly required elsewhere herein or (D) other methods expressly provided herein, (ii) to enter into any deposit account control agreement, securities account control agreement or any other control agreement with respect to any deposit account, securities account or any other Collateral that requires perfection by control, (iii) to take any action (other than the actions listed in clauses (i)(A) and (C) above) with respect to any assets located outside of the United States, (iv) to perfect in any assets subject to a certificate of title statute or (v) to deliver any Equity Interests except as expressly provided in Section 2.01.
Section 3.02. Representations and Warranties . Each Grantor jointly and severally represents and warrants, as to itself and the other Grantors, to the Collateral Agent and the Secured Parties that:
(a) Subject to Liens permitted by Section 7.01 of the Credit Agreement, each Grantor has good and valid rights in and title (except as otherwise permitted by the Loan Documents) to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained and those consents or approvals, the failure of which to be obtained or to be made could not reasonably be expected to have a Material Adverse Effect.
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(b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete in all material respects (except the information therein with respect to the exact legal name of each Grantor shall be correct and complete in all respects) as of the Closing Date. Subject to Section 3.01(e), the UCC financing statements or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing in the applicable filing office (or specified by notice from the Borrower to the Collateral Agent after the Closing Date in the case of filings, recordings or registrations (other than filings required to be made in the USPTO and the USCO in order to perfect the Security Interest in Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights), in each case, as required by Section 6.11 of the Credit Agreement), are all the filings, recordings and registrations that are necessary to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the UCC, and no further or subsequent filing, re-filing, recording, rerecording, registration or re-registration is necessary in any such jurisdiction, except as provided under applicable Law with respect to the filing of continuation statements.
(c) Each Grantor represents and warrants that short-form Intellectual Property Security Agreements containing a description of all Article 9 Collateral consisting of material United States registered Patents (and Patents for which United States registration applications are pending), United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights, respectively (other than, in each case, any Excluded Assets), have been delivered to the Collateral Agent for recording by the USPTO and the USCO pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, (for the benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of registrations and applications for Patents, Trademarks and Copyrights. To the extent a security interest may be perfected by filing, recording or registration in USPTO or USCO under the Federal intellectual property laws, then no further or subsequent filing, re-filing, recording, rerecording, registration or re-registration is necessary (other than (i) such filings and actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed by any Grantor after the date hereof and (ii) the UCC financing and continuation statements contemplated in Section 3.02(b)).
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(d) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Secured Obligations and (ii) subject to the filings described in Sections 3.02(b) and 3.02(c), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the UCC. Subject to Section 3.01(e) of this Agreement, the Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than any Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement.
(e) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement. None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the UCC or any other applicable Laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the USPTO or the USCO or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 7.01 of the Credit Agreement and assignments permitted by the Credit Agreement.
(f) As of the date hereof, no Grantor has any Commercial Tort Claim in excess of $10,000,000, other than the Commercial Tort Claims listed on Schedule III .
Section 3.03. Covenants .
(a) The Borrower agrees to notify the Collateral Agent in writing promptly, but in any event within 60 days (or such longer period as the Collateral Agent may agree in its reasonable discretion), after any change in (i) the legal name of any Grantor, (ii) the identity or type of organization or corporate structure of any Grantor, (iii) the jurisdiction of organization of any Grantor or (iv) the organizational identification number of such Grantor, if any.
(b) Subject to Section 3.01(e) and Section 3.03(f)(iv), each Grantor shall, at its own expense, upon the reasonable request of the Collateral Agent, take any and all commercially reasonable actions necessary to defend title to the Article 9 Collateral against all Persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 7.01 of the Credit Agreement; provided that, nothing in this Agreement shall prevent any Grantor from discontinuing the operation or maintenance of any of its assets or properties if such discontinuance is (x) determined by such Grantor to be desirable in the conduct of its business and (y) permitted by the Credit Agreement.
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(c) Subject to Section 3.01(e), each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral that is in excess of $10,000,000 shall be or become evidenced by any promissory note, other instrument or debt security, such note, instrument or debt security shall be promptly (and in any event within 60 days of its acquisition or such longer period as the Collateral Agent may agree in its reasonable discretion) pledged and delivered to the Collateral Agent, for the benefit of the Secured Parties, duly endorsed in a manner reasonably satisfactory to the Collateral Agent.
(d) At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 7.01 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or any other Loan Document and within a reasonable period of time after the Collateral Agent has requested that it do so, and each Grantor jointly and severally agrees to reimburse the Collateral Agent within 10 Business Days after demand for any payment made or any reasonable expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided , however , the Grantors shall not be obligated to reimburse the Collateral Agent with respect to any Intellectual Property that any Grantor has failed to maintain or pursue, or otherwise allowed to lapse, terminate or be put into the public domain in accordance with Section 3.03(f)(iv). Nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.
(e) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person the value of which is in excess of $10,000,000 to secure payment and performance of an Account, such Grantor shall promptly (but in any event within 60 days after such action by such Grantor or such longer period as the Collateral Agent may agree in its reasonable discretion) assign such security interest to the Collateral Agent for the benefit of the Secured Parties provided that, notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest in any Excluded Assets. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.
(f) Intellectual Property Covenants .
(i) Other than to the extent not prohibited herein or in the Credit Agreement or with respect to registrations and applications no longer used or useful, except to the extent failure to act would not, as deemed by the applicable Grantor in its reasonable business judgment,
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reasonably be expected to have a Material Adverse Effect, with respect to registration or pending application of each item of its Intellectual Property for which such Grantor has standing to do so, each Grantor agrees to take, at its expense, all reasonable steps, including, without limitation, in the USPTO, the USCO and any other Governmental Authority located in the United States, to pursue the registration and maintenance of each Patent, Trademark, or Copyright registration or application now or hereafter included in the Intellectual Property of such Grantor that are not Excluded Assets.
(ii) Other than to the extent not prohibited herein or in the Credit Agreement, or with respect to registrations and applications no longer used or useful, or except as would not, as deemed by the applicable Grantor in its reasonable business judgment, reasonably be expected to have a Material Adverse Effect, no Grantor shall do or permit any act or knowingly omit to do any act whereby any of its Intellectual Property, excluding Excluded Assets, may lapse, be terminated, or become invalid or unenforceable or placed in the public domain (or in the case of a trade secret, become publicly known).
(iii) Other than as excluded or as not prohibited herein or in the Credit Agreement, or with respect to Patents, Copyrights or Trademarks which are no longer used or useful in the applicable Grantors business operations or except where failure to do so would not, as deemed by the applicable Grantor in its reasonable business judgment, reasonably be expected to have a Material Adverse Effect, each Grantor shall take all reasonable steps to preserve and protect each item of its Intellectual Property, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks, consistent with the quality of the products and services as of the date hereof, and taking reasonable steps necessary to ensure that all licensed users of any of the Trademarks abide by the applicable licenses terms with respect to standards of quality.
(iv) Notwithstanding any other provision of this Agreement, nothing in this Agreement or any other Loan Document prevents or shall be deemed to prevent any Grantor from disposing of, discontinuing the use or maintenance of, failing to pursue, or otherwise allowing to lapse, terminate or be put into the public domain, any of its Intellectual Property to the extent permitted by the Credit Agreement if such Grantor determines in its reasonable business judgment that such discontinuance is desirable in the conduct of its business.
(v) Within the same delivery period as required for the delivery of the annual Compliance Certificate required to be delivered under Section 6.02(a) of the Credit Agreement the Borrower shall provide a list of any additional registrations of Intellectual Property of all Grantors not previously disclosed to the Collateral Agent including such information as is necessary for such Grantor to make appropriate filings in the USPTO and USCO.
(g) Commercial Tort Claims . If the Grantors shall at any time hold or acquire a Commercial Tort Claim in an amount reasonably estimated by such Grantor to exceed $10,000,000 for which this clause has not been satisfied and for which a complaint in a court of competent jurisdiction has been filed, such Grantor shall within 60 days (or such longer period as the Collateral Agent may agree in its reasonable discretion) after the end of the fiscal quarter in which such complaint was filed notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent, for the benefit of the Secured Parties, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement.
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ARTICLE IV
Remedies
Section 4.01. Remedies Upon Default . Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have the right to exercise any and all rights afforded to a secured party with respect to the Secured Obligations, including the Guarantees, under the UCC or other applicable Law and also may (i) require each Grantor to, and each Grantor agrees that it will at its expense and upon request of the Collateral Agent, promptly assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) occupy any premises owned or, to the extent lawful and permitted, leased (it being acknowledged and agreed that the Grantors are not required to obtain any waiver or consent from any owner of such leased premises in connection with such occupancy or attempted occupancy) by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under Law, without obligation to such Grantor in respect of such occupation; provided that the Collateral Agent shall provide the applicable Grantor with reasonable prior notice thereof which in any event shall be at least 10 days prior to such occupancy; (iii) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral; provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to such exercise; and (iv) subject to the mandatory requirements of applicable Law and the notice requirements described below, sell or otherwise dispose of all or any part of the Collateral securing the Secured Obligations at a public or private sale or at any brokers board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by Law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any Law now existing or hereafter enacted.
The Collateral Agent shall give the applicable Grantors 10 days written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the UCC or its equivalent in other jurisdictions) of the Collateral Agents intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a brokers board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral
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Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by Law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by Law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by Law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at Law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 4.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the UCC or its equivalent in other jurisdictions.
Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantors true and lawful agent (and attorney-in-fact) during the continuance of an Event of Default ( provided that the Collateral Agent shall provide the applicable Grantor with notice thereof prior to, to the extent reasonably practicable, or otherwise promptly after, exercising such rights), for the purpose of (i) making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies if insurance, (ii) making all determinations and decisions with respect thereto and (iii) obtaining or maintaining the policies of insurance required by Section 6.07 of the Credit Agreement or to pay any premium in whole or in part relating thereto. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys fees, court costs, expenses and other charges relating thereto, shall be payable, within 10 days of demand, by the Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.
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Section 4.02. Application of Proceeds . The Collateral Agent shall apply the proceeds of any collection or sale of Collateral, including any Collateral consisting of cash in accordance with Section 8.04 of the Credit Agreement.
The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.
The Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on information supplied to it as to the amounts of unpaid principal and interest and other amounts outstanding with respect to the Secured Obligations, provided that nothing in this sentence shall prevent any Grantor from contesting any amounts claimed by any Secured Party in any information so supplied. All distributions made by the Collateral Agent pursuant to this Section 4.02 shall be (subject to any decree of any court of competent jurisdiction) final (absent manifest error).
Section 4.03. Grant of License to Use Intellectual Property . For the exclusive purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies at any time after and during the continuance of an Event of Default, each Grantor hereby grants to the Collateral Agent a non-exclusive, royalty-free, limited license (until the termination or cure of the Event of Default) for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate to use, license or sublicense any of the Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof; provided , however , that all of the foregoing rights of the Collateral Agent to use such licenses, sublicenses and other rights, and (to the extent permitted by the terms of such licenses and sublicenses) all licenses and sublicenses granted thereunder, shall expire immediately upon the termination or cure of all Events of Default and shall be exercised by the Collateral Agent solely during the continuance of an Event of Default and upon 10 Business Days prior written notice to the applicable Grantor, and nothing in this Section 4.03 shall require Grantors to grant any license that is prohibited by any rule of law, statute or regulation, or is prohibited by, or constitutes a breach or default under or results in the termination of any contract, license, agreement, instrument or other document evidencing, giving rise to or theretofore granted, to the extent permitted by the Credit Agreement, with respect to such property or otherwise unreasonably prejudices the value thereof to the relevant Grantor; provided , further , that any such license and any such license granted by the Collateral Agent to a third party shall include reasonable and customary terms and conditions necessary to preserve the existence, validity and value of the affected Intellectual Property, including without limitation, provisions requiring the continuing confidential handling of trade secrets, requiring the use of appropriate notices and prohibiting the use of false notices, quality control and inurement provisions with regard to Trademarks, patent designation
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provisions with regard to Patents, copyright notices and restrictions on decompilation and reverse engineering of copyrighted software (it being understood and agreed that, without limiting any other rights and remedies of the Collateral Agent under this Agreement, any other Loan Document or applicable Law, nothing in the foregoing license grant shall be construed as granting the Collateral Agent rights in and to such Intellectual Property above and beyond (x) the rights to such Intellectual Property that each Grantor has reserved for itself and (y) in the case of Intellectual Property that is licensed to any such Grantor by a third party, the extent to which such Grantor has the right to grant a sublicense to such Intellectual Property hereunder). For the avoidance of doubt, the use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, only during the continuation of an Event of Default. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may also exercise the rights afforded under Section 4.01 of this Agreement with respect to Intellectual Property contained in the Article 9 Collateral.
ARTICLE V
Subordination
Section 5.01. Subordination .
(a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Grantors to indemnity, contribution or subrogation under applicable Law or otherwise shall be fully subordinated to the payment in full in cash of the Secured Obligations. No failure on the part of the Borrower or any Grantor to make the payments required under applicable Law or otherwise shall in any respect limit the obligations and liabilities of any Grantor with respect to its obligations hereunder, and each Grantor shall remain liable for the full amount of the obligations of such Grantor hereunder.
(b) Each Grantor hereby agrees that upon the occurrence and during the continuance of an Event of Default and after notice from the Collateral Agent, all Indebtedness owed to it by any other Grantor shall be fully subordinated to the payment in full in cash of the Secured Obligations.
ARTICLE VI
Miscellaneous
Section 6.01. Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 10.02 of the Credit Agreement. All communications and notices hereunder to the Borrower or any other Grantor shall be given to it in care of the Borrower as provided in Section 10.02 of the Credit Agreement.
Section 6.02. Waivers; Amendment .
(a) No failure or delay by any Secured Party in exercising any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege hereunder
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preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Secured Parties herein provided, and provided under each other Loan Document, are cumulative and are not exclusive of any rights, remedies, powers and privileges provided by Law. No waiver of any provision of this Agreement or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan, the issuance of a Letter of Credit or the provision of services under Treasury Services Agreements or Secured Hedge Agreements shall not be construed as a waiver of any Default, regardless of whether any Secured Party may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 10.01 of the Credit Agreement.
Section 6.03. Collateral Agents Fees and Expenses; Indemnification .
(a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its reasonable out-of-pocket expenses incurred hereunder and indemnity for its actions in connection herewith as provided in Sections 10.04 and 10.05 of the Credit Agreement.
(b) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Collateral Documents. The provisions of this Section 6.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 6.03 shall be payable within 30 days of written demand therefor.
Section 6.04. Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
Section 6.05. Survival of Agreement . All covenants, agreements, representations and warranties made by the Grantors hereunder and in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of the Loan Documents, the making of any Loans and issuance of any Letters of Credit and the provision of services under Treasury Services Agreements or Secured Hedge Agreements, regardless of any investigation made by any Secured Party or on its behalf and notwithstanding that any Secured Party may have had notice or knowledge of any Default at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as this Agreement has not been terminated or released pursuant to Section 6.11 below.
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Section 6.06. Counterparts; Effectiveness; Several Agreement . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile or other electronic communication of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective permitted successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.
Section 6.07. Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 6.08. Governing Law; Jurisdiction; Venue; Waiver of Jury Trial; Consent to Service of Process .
(a) The terms of Sections 10.15 and 10.16 of the Credit Agreement with respect to governing law, submission of jurisdiction, venue and waiver of jury trial are incorporated herein by reference, mutatis mutandis , and the parties hereto agree to such terms.
(b) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.
Section 6.09. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 6.10. Security Interest Absolute . To the extent permitted by Law, all rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other
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agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) subject only to termination of a Grantors obligations hereunder in accordance with the terms of Section 6.11, any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Secured Obligations or this Agreement.
Section 6.11. Termination or Release .
(a) This Agreement, the Security Interest and all other security interests granted hereby shall terminate with respect to all Secured Obligations and any Liens arising therefrom shall be automatically released upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (i) in respect of a release by any Secured Approved Counterparty, if obligations under any Secured Hedge Agreement or Treasury Services Agreement, as applicable, are due and payable at such time and (ii) contingent indemnification obligations not yet accrued and payable) and the expiration or termination of all Letters of Credit (other than Letters of Credit in which the Outstanding Amount of the L/C Obligations related thereto have been Cash Collateralized or otherwise back-stopped, including by grandfathering into any future credit facilities, in each case, on terms reasonably satisfactory to the relevant L/C Issuer in its reasonable discretion).
(b) A Subsidiary Party shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Subsidiary Party shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Party ceases to be a Restricted Subsidiary of the Borrower or becomes an Excluded Subsidiary; provided that the Required Lenders shall have consented to such transaction (if and to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise.
(c) Upon any sale or transfer by any Grantor of any Collateral that is permitted under the Credit Agreement (other than a sale or transfer to another Loan Party), or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 10.01 of the Credit Agreement, the security interest in such Collateral shall be automatically released.
(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) of this Section 6.11, the Collateral Agent shall execute and deliver to any Grantor, at such Grantors expense, all documents that such Grantor shall reasonably request to evidence such termination or release and shall perform such other actions reasonably requested by such Grantor to effect such release, including delivery of certificates, securities and instruments. Any execution and delivery of documents pursuant to this Section 6.11 shall be without recourse to or warranty by the Collateral Agent.
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(e) Notwithstanding anything to contrary set forth in this Agreement, each Secured Approved Counterparty by the acceptance of the benefits under this Agreement hereby acknowledges and agrees that (i) the Security Interests granted under this Agreement of the Obligations of any Grantor and its Subsidiaries under any Secured Hedge Agreement and any Treasury Services Agreement shall be automatically released upon termination of the Commitments and payment in full of all other Obligations, in each case, unless the Obligations under the Secured Hedge Agreement or the Treasury Services Agreement are due and payable at such time (it being understood and agreed that this Agreement and the Security Interests granted herein shall survive solely as to such due and payable Obligations and until such time as such due and payable Obligations have been paid in full) and (ii) any release of Collateral or of a Grantor, as the case may be, effected in the manner permitted by this Agreement shall not require the consent of any Secured Approved Counterparty.
Section 6.12. Additional Grantors . Pursuant to Section 6.11 of the Credit Agreement, certain additional Restricted Subsidiaries of the Borrower may be required to enter in this Agreement as Grantors. Upon execution and delivery by the Collateral Agent and a Restricted Subsidiary of a Security Agreement Supplement, such Restricted Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.
Section 6.13. Collateral Agent Appointed Attorney-in-Fact . Each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof at any time after and during the continuance of an Event of Default, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default and notice by the Collateral Agent to the applicable Grantor of the Collateral Agents intent to exercise such rights, with full power of substitution either in the Collateral Agents name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at Law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to
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make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence, bad faith, or willful misconduct or that of any of their Affiliates, directors, officers, employees, counsel, agents or attorneys-in-fact, in each case, as determined by a final non-appealable judgment of a court of competent jurisdiction.
Section 6.14. General Authority of the Collateral Agent . By acceptance of the benefits of this Agreement and any other Collateral Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (a) to consent to the appointment of the Collateral Agent as its agent hereunder and under such other Collateral Documents, (b) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provisions of this Agreement and such other Collateral Documents against any Grantor, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder or thereunder relating to any Collateral or any Grantors obligations with respect thereto, (c) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Collateral Document against any Grantor, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Collateral Document and (d) to agree to be bound by the terms of this Agreement and any other Collateral Documents.
Section 6.15. Reasonable Care . The Collateral Agent is required to use reasonable care in the custody and preservation of any of the Collateral in its possession; provided , that the Collateral Agent shall be deemed to have used reasonable care in the custody and preservation of any of the Collateral, if such Collateral is accorded treatment substantially similar to that which the Collateral Agent accords its own property.
Section 6.16. Delegation; Limitation . The Collateral Agent may execute any of the powers granted under this Agreement and perform any duty hereunder either directly or by or through agents or attorneys-in-fact, and shall not be responsible for the gross negligence or willful misconduct of any agents or attorneys-in-fact selected by it with reasonable care and without gross negligence or willful misconduct.
Section 6.17. Reinstatement . The obligations of the Grantors under this Security Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Secured Obligations is rescinded or must be otherwise restored by any holder of any of the Secured Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.
Section 6.18. Miscellaneous . The Collateral Agent shall not be deemed to have actual, constructive, direct or indirect notice or knowledge of the occurrence of any Event of Default unless and until the Collateral Agent shall have received a notice of Event of Default or a notice from the Grantor or the Secured Parties to the Collateral Agent in its capacity as Collateral Agent indicating that an Event of Default has occurred.
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[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
HILTON WORLDWIDE HOLDINGS INC. | ||||
By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||
Title: | Senior Vice President and Treasurer | |||
HILTON WORLDWIDE FINANCE LLC | ||||
By: |
/s/ W. Steven Standefer |
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Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
90210 BILTMORE MANAGEMENT, LLC |
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90210 DESERT RESORTS MANAGEMENT CO., LLC |
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90210 GRAND WAILEA MANAGEMENT CO., LLC |
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90210 LLC |
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90210 MANAGEMENT COMPANY, LLC |
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ANDIAMOS OHARE, LLC |
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BALLYS GRAND PROPERTY SUB I, INC. |
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BLUE BONNET SECURITY, LLC |
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CHESTERFIELD VILLAGE HOTEL, LLC |
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COMPRIS HOTEL LLC |
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CONRAD FRANCHISE LLC |
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CONRAD INTERNATIONAL (BELGIUM) LLC |
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CONRAD INTERNATIONAL (EGYPT) RESORTS CORPORATION |
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CONRAD INTERNATIONAL (INDONESIA) CORPORATION |
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CONRAD INTERNATIONAL INVESTMENT (JAKARTA) CORPORATION |
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CONRAD INTERNATIONAL MANAGE (CIS) LLC |
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CONRAD MANAGEMENT LLC |
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DESTINATION RESORTS LLC |
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DOUBLETREE DTWC LLC |
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DOUBLETREE FRANCHISE LLC |
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DOUBLETREE HOTEL SYSTEMS LLC |
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DOUBLETREE HOTELS LLC |
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DOUBLETREE LLC |
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DOUBLETREE MANAGEMENT LLC |
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DT MANAGEMENT LLC |
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DT REAL ESTATE, INC. |
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DTM ATLANTA/LEGACY, INC. |
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DTM CAMBRIDGE, INC. |
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DTM COCONUT GROVE, INC. |
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DTM LARGO, INC. |
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DTM MARYLAND, INC. |
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DTM SANTA CLARA LLC |
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DTM WALNUT CREEK, INC. |
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DTR FCH HOLDINGS, INC. |
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DTR PAH HOLDING, INC. |
By: |
/s/ W. Steven Standefer |
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Name: | W. Steven Standefer | |||||
Title: | Senior Vice President |
DTR SAN ANTONIO, INC. |
DTR TM HOLDINGS, INC. |
DTWC SPOKANE CITY CENTER SPE, LLC |
EJP CORPORATION |
EMBASSY DEVELOPMENT CORPORATION |
EMBASSY EQUITY DEVELOPMENT LLC |
EMBASSY MEMPHIS CORPORATION |
EMBASSY SUITES (ISLA VERDE), INC. |
EMBASSY SUITES CLUB NO. 1, INC. |
EMBASSY SUITES CLUB NO. THREE, INC. |
EMBASSY SUITES CLUB NO. TWO, INC. |
EMBASSY SUITES FRANCHISE LLC |
EMBASSY SYRACUSE DEVELOPMENT LLC |
EPAM CORPORATION |
FLORIDA CONRAD INTERNATIONAL CORP. |
GRAND VACATIONS REALTY, LLC |
GRAND VACATIONS SERVICES LLC |
GRAND VACATIONS TITLE, LLC |
HAMPTON INNS FRANCHISE LLC |
HAMPTON INNS LLC |
HAMPTON INNS MANAGEMENT LLC |
HAPEVILLE INVESTORS, LLC |
HHC BC ORLANDO, LLC |
HHC ONE PARK BOULEVARD, LLC |
HIC FIRST CORPORATION |
HIC GAMING CALIFORNIA, INC. |
HIC HOLDINGS CORPORATION |
HIC HOTELS U.S.A. CORPORATION |
HIC RACING CORPORATION |
HIC SAN PABLO LIMITED, INC. |
HIC SAN PABLO, L.P. |
HIC SECOND CORPORATION |
HILTON BEVERAGE LLC |
HILTON CHICAGO BEVERAGE I LLC |
HILTON CHICAGO BEVERAGE II LLC |
HILTON CHICAGO BEVERAGE III LLC |
HILTON CHICAGO BEVERAGE IV LLC |
HILTON CORPORATE DIRECTOR LLC |
HILTON CP OPERATOR LLC |
HILTON EL CON MANAGEMENT LLC |
HILTON EL CON OPERATOR LLC |
By: |
/s/ W. Steven Standefer |
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Name: | W. Steven Standefer | |||||
Title: | Senior Vice President |
HILTON ELECTRONIC DISTRIBUTION SYSTEMS, LLC |
HILTON ENERGY INVESTMENTS, LLC |
HILTON ESJ OPERATOR LLC |
HILTON FRANCHISE HOLDING LLC |
HILTON FRANCHISE LLC |
HILTON GARDEN INNS FRANCHISE LLC |
HILTON GARDEN INNS MANAGEMENT LLC |
HILTON GRAND VACATIONS CLUB, LLC |
HILTON GRAND VACATIONS COMPANY, LLC |
HILTON GRAND VACATIONS FINANCING, LLC |
HILTON GRAND VACATIONS MANAGEMENT, LLC |
HILTON HAWAII CORPORATION |
HILTON HHONORS WORLDWIDE, L.L.C. |
HILTON HOLDINGS, LLC |
HILTON HOSPITALITY, LLC |
HILTON ILLINOIS CORP. |
HILTON ILLINOIS HOLDINGS LLC |
HILTON INNS LLC |
HILTON INTERNATIONAL CO. |
HILTON KINGSLAND 1, LLC |
HILTON MANAGEMENT LLC |
HILTON NEW JERSEY SERVICE CORP. |
HILTON OPB, LLC |
HILTON ORLANDO PARTNERS II, LLC |
HILTON ORLANDO PARTNERS III, LLC |
HILTON RECREATION LLC |
HILTON RESORTS CORPORATION |
HILTON RESORTS MARKETING CORP. |
HILTON SAN DIEGO CORPORATION |
HILTON SPRING CORPORATION |
HILTON SUPPLY MANAGEMENT LLC |
HILTON SYSTEMS SOLUTIONS, LLC |
HILTON SYSTEMS, LLC |
HILTON WORLDWIDE FINANCE CORP. |
HILTON WORLDWIDE, INC. |
By: |
/s/ W. Steven Standefer |
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Name: | W. Steven Standefer | |||||
Title: | Senior Vice President |
HILTON-OCCC HOTEL, LLC |
HILTON-OCCC MEZZ LENDER, LLC |
HLT AUDUBON LLC |
HLT CA HILTON LLC |
HLT CONRAD DOMESTIC LLC |
HLT CONRAD GP LLC |
HLT DOMESTIC JV HOLDINGS LLC |
HLT DOMESTIC OWNER LLC |
HLT ESP FRANCHISE LLC |
HLT ESP INTERNATIONAL FRANCHISE LLC |
HLT ESP INTERNATIONAL FRANCHISOR CORPORATION |
HLT ESP INTERNATIONAL MANAGE LLC |
HLT ESP INTERNATIONAL MANAGEMENT CORPORATION |
HLT ESP MANAGE LLC |
HLT FRANCHISE II BORROWER LLC |
HLT HQ SPE LLC |
HLT HSM HOLDING LLC |
HLT HSS HOLDING LLC |
HLT JV ACQUISITION LLC |
HLT JV I BORROWER LLC |
HLT LIFESTYLE FRANCHISE LLC |
HLT LIFESTYLE INTERNATIONAL FRANCHISE LLC |
HLT LIFESTYLE INTERNATIONAL FRANCHISOR CORPORATION |
HLT LIFESTYLE INTERNATIONAL MANAGE LLC |
HLT LIFESTYLE INTERNATIONAL MANAGEMENT CORPORATION |
HLT LIFESTYLE MANAGE LLC |
HLT MEMPHIS DATA LLC |
HLT OHARE LLC |
HLT OPERATE DTWC LLC |
HLT OWNED II HOLDING LLC |
HLT OWNED II-A BORROWER LLC |
HLT PALMER LLC |
HLT TIMESHARE BORROWER I LLC |
HLT TIMESHARE BORROWER II LLC |
By: |
/s/ W. Steven Standefer |
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Name: | W. Steven Standefer | |||||
Title: | Senior Vice President |
HOMEWOOD SUITES FRANCHISE LLC |
HOMEWOOD SUITES MANAGEMENT LLC |
HOTEL CLUBS OF CORPORATE WOODS, INC. |
HOTELS STATLER COMPANY, INC. |
HPP HOTELS USA, INC. |
HPP INTERNATIONAL CORPORATION |
HRC ISLANDER LLC |
HTGV, LLC |
INNVISION, LLC |
INTERNATIONAL RIVERCENTER LESSEE, L.L.C. |
LOCKWOOD PALMER HOUSE, LLC |
MERITEX, LLC |
PEACOCK ALLEY SERVICE COMPANY, LLC |
POTTERS BAR PALMER HOUSE, LLC |
PROMUS HOTEL SERVICES, INC. |
PROMUS HOTELS FLORIDA LLC |
PROMUS HOTELS LLC |
PROMUS HOTELS MINNEAPOLIS, INC. |
PROMUS HOTELS PARENT LLC |
PROMUS OPERATING LLC |
PROMUS/KINGSTON DEVELOPMENT CORPORATION |
SALC, INC. |
SAMANTHA HOTEL LLC |
SUITE LIFE, INC. |
TEX HOLDINGS, INC. |
WA COLLECTION INTERNATIONAL, LLC |
WALDORF ASTORIA FRANCHISE LLC |
WALDORF=ASTORIA MANAGEMENT LLC |
WASHINGTON HILTON, L.L.C. |
By: |
/s/ W. Steven Standefer |
|||
Name: | W. Steven Standefer | |||
Title: | Senior Vice President |
DEUTSCHE BANK AG NEW YORK BRANCH , as Collateral Agent |
||||
By: |
/s/ Mary Kay Coyle |
|||
Name: | Mary Kay Coyle | |||
Title: | Managing Director | |||
By: |
/s/ Kirk L. Tashjian |
|||
Name: | Kirk L. Tashjian | |||
Title: | Vice President |
Schedule I
to the Security Agreement
SUBSIDIARY PARTIES
90210 Biltmore Management, LLC
90210 Desert Resorts Management Co., LLC
90210 Grand Wailea Management Co., LLC
90210 LLC
90210 Management Company, LLC
Andiamos OHare, LLC
Ballys Grand Property Sub I, Inc.
Blue Bonnet Security, LLC
Chesterfield Village Hotel, LLC
Compris Hotel LLC
Conrad Franchise LLC
Conrad International (Belgium) LLC
Conrad International (Egypt) Resorts Corporation
Conrad International (Indonesia) Corporation
Conrad International Investment (Jakarta) Corporation
Conrad International Manage (CIS) LLC
Conrad Management LLC
Destination Resorts LLC
Doubletree DTWC LLC
Doubletree Franchise LLC
Doubletree Hotel Systems LLC
Doubletree Hotels LLC
Doubletree LLC
Doubletree Management LLC
DT Management LLC
DT Real Estate, Inc.
DTM Atlanta/Legacy, Inc.
DTM Cambridge, Inc.
DTM Coconut Grove, Inc.
DTM Largo, Inc.
DTM Maryland, Inc.
DTM Santa Clara LLC
DTM Walnut Creek, Inc.
DTR FCH Holdings, Inc.
DTR PAH Holding, Inc.
DTR San Antonio, Inc.
DTR TM Holdings, Inc.
DTWC Spokane City Center SPE, LLC
EJP Corporation
Embassy Development Corporation
Embassy Equity Development LLC
Embassy Memphis Corporation
Embassy Suites (Isla Verde), Inc.
Embassy Suites Club No. Two, Inc.
Embassy Suites Club No.1, Inc.
Embassy Suites Club No. Three, Inc.
Embassy Suites Franchise LLC
Embassy Syracuse Development LLC
EPAM Corporation
Florida Conrad International Corp.
Grand Vacations Realty, LLC
Grand Vacations Services LLC
Grand Vacations Title, LLC
Hampton Inns Franchise LLC
Hampton Inns LLC
Hampton Inns Management LLC
Hapeville Investors, LLC
HHC BC Orlando, LLC
HHC One Park Boulevard, LLC
HIC First Corporation
HIC Gaming California, Inc.
HIC Holdings Corporation
HIC Hotels U.S.A. Corporation
HIC Racing Corporation
HIC San Pablo, L.P.
HIC San Pablo Limited, Inc.
HIC Second Corporation
Hilton Beverage LLC
Hilton Chicago Beverage I LLC
Hilton Chicago Beverage II LLC
Hilton Chicago Beverage III LLC
Hilton Chicago Beverage IV LLC
Hilton Corporate Director LLC
Hilton CP Operator LLC
Hilton El Con Management LLC
Hilton El Con Operator LLC
Hilton Electronic Distribution Systems, LLC
Hilton Energy Investments, LLC
Hilton ESJ Operator LLC
Hilton Franchise Holding LLC
Hilton Franchise LLC
Hilton Garden Inns Franchise LLC
Hilton Garden Inns Management LLC
Hilton Grand Vacations Club, LLC
Hilton Grand Vacations Company, LLC
Hilton Grand Vacations Financing, LLC
Hilton Grand Vacations Management, LLC
Hilton Hawaii Corporation
Hilton HHonors Worldwide, L.L.C.
Hilton Holdings, LLC
Hilton Hospitality, LLC
Hilton Illinois Corp.
Hilton Illinois Holdings LLC
Hilton Inns LLC
Hilton International Co.
Hilton Kingsland 1, LLC
Hilton Management LLC
Hilton New Jersey Service Corp.
Hilton OPB, LLC
Hilton Orlando Partners II, LLC
Hilton Orlando Partners III, LLC
Hilton Recreation LLC
Hilton Resorts Corporation
Hilton Resorts Marketing Corp.
Hilton San Diego Corporation
Hilton Spring Corporation
Hilton Supply Management LLC
Hilton Systems Solutions, LLC
Hilton Systems, LLC
Hilton Worldwide Finance Corp.
Hilton Worldwide, Inc.
Hilton-OCCC Hotel, LLC
Hilton-OCCC Mezz Lender, LLC
HLT Audubon LLC
HLT CA Hilton LLC
HLT Conrad Domestic LLC
HLT Conrad GP LLC
HLT Domestic JV Holdings LLC
HLT Domestic Owner LLC
HLT ESP Franchise LLC
HLT ESP International Franchise LLC
HLT ESP International Franchisor Corporation
HLT ESP International Manage LLC
HLT ESP International Management Corporation
HLT ESP Manage LLC
HLT Franchise II Borrower LLC
HLT HQ SPE LLC
HLT HSM Holding LLC
HLT HSS Holding LLC
HLT JV Acquisition LLC
HLT JV I Borrower LLC
HLT Lifestyle Franchise LLC
HLT Lifestyle International Franchise LLC
HLT Lifestyle International Franchisor Corporation
HLT Lifestyle International Manage LLC
HLT Lifestyle International Management Corporation
HLT Lifestyle Manage LLC
HLT Memphis Data LLC
HLT OHare LLC
HLT Operate DTWC LLC
HLT Owned II Holding LLC
HLT Owned II-A Borrower LLC
HLT Palmer LLC
HLT Timeshare Borrower I LLC
HLT Timeshare Borrower II LLC
Homewood Suites Franchise LLC
Homewood Suites Management LLC
Hotel Clubs of Corporate Woods, Inc.
Hotels Statler Company, Inc.
HPP Hotels USA, Inc.
HPP International Corporation
HRC Islander LLC
HTGV, LLC
Innvision, LLC
International Rivercenter Lessee, L.L.C.
Lockwood Palmer House, LLC
Meritex, LLC
Peacock Alley Service Company, LLC
Potters Bar Palmer House, LLC
Promus Hotel Services, Inc.
Promus Hotels Florida LLC
Promus Hotels LLC
Promus Hotels Minneapolis, Inc.
Promus Hotels Parent LLC
Promus Operating LLC
Promus/Kingston Development Corporation
SALC, Inc.
Samantha Hotel LLC
Suite Life, Inc.
Tex Holdings, Inc.
WA Collection International, LLC
Waldorf Astoria Franchise LLC
Waldorf=Astoria Management LLC
Washington Hilton, L.L.C.
Schedule II
to the Security Agreement
PLEDGED EQUITY AND PLEDGED DEBT
1. | Pledged Equity: |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
90210 LLC |
Hilton Hospitality, LLC |
Uncertificated |
50.61 | % | 100 | % | ||||||||
Hilton Inns LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Insurance Corporation |
008 |
100,000, NPV, Common Stock |
50 | % | 100 | % | ||||||||
90210 Management Company, LLC |
90210 Biltmore Management, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
90210 Desert Resorts Management Co., LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
90210 Grand Wailea Management Co. LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Conrad International (Belgium) LLC |
Avenue Louise Hotel Partners S.N.C. |
50 | % | 65 | % | |||||||||
Destination Resorts LLC |
Hilton SPE Holding, Inc. |
02 |
80 Shares, $..01 Per Share, Par Value, Common Stock |
8 | % | 100 | % | |||||||
Doubletree DTWC LLC |
DTWC Spokane City Center SPE, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Doubletree Hotel Systems LLC |
Compris Hotel LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Doubletree Hotels LLC |
Doubletree Hotel Systems LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
DT Management LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
DT Real Estate, Inc. |
Certificated |
100 | % | 100 | % | |||||||||
Hilton Hospitality, LLC |
Uncertificated |
18.11 | % | 100 | % | |||||||||
Hotel Clubs of Corporate Woods, Inc. |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Doubletree LLC |
Doubletree DTWC LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Doubletree Hotels LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Managed Mezz XII -K LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
SALC, Inc. |
1 |
1,000 shares common stock $1 PV |
100 | % | 100 | % | ||||||||
Samantha Hotel LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
DT Management LLC |
DTM Cambridge, Inc. |
1 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | |||||||
DTM Coconut Grove, Inc. |
2 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
DTM Maryland, Inc. |
2 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
DTM Santa Clara LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
DTM Walnut Creek, Inc. |
1 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
DTM Largo, Inc. |
3 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
HLT Managed Mezz XII-K LLC |
Uncertificated |
99 | % | 100 | % | |||||||||
DT Real Estate, Inc. |
DTM Atlanta/Legacy, Inc. |
2 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | |||||||
DTR FCH Holdings, Inc. |
2 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
DTR PAH Holding, Inc. |
1 |
10 shares Common Stock, $1.00 PV |
100 | % | 100 | % | ||||||||
DTR San Antonio, Inc. |
1 |
1,000 shares Common Stock, $1.00 PV |
100 | % | 100 | % | ||||||||
DTR TM Holdings, Inc. |
2 |
6,400 Shares, NPV, Common Stock |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
EJP Corporation |
Suite Life, Inc. |
002 |
1,000 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | |||||||
Embassy Equity Development LLC |
Embassy Syracuse Development LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Grand Vacations Realty, LLC |
Grand Vacations Title, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Hampton Inns LLC |
Hilton Hospitality, LLC |
Uncertificated |
18.83 | % | 100 | % | ||||||||
Hapeville Investors, LLC |
Servicios y Recursos Administrativos Hoteleros S. de R.L. de C.V. |
1 | % | 65 | % | |||||||||
HIC First Corporation |
HIC Second Corporation |
Certificated |
||||||||||||
HIC Gaming California, Inc. |
HIC San Pablo Limited, Inc. |
1 |
501 shares common stock NPV |
100 | % | 100 | % | |||||||
HIC San Pablo, L.P. |
Uncertificated |
10 | % | 100 | % | |||||||||
HIC Holdings Corporation |
HIC Racing (Chiswick) Limited |
16 |
102,156,826 Shares, £1 Ordinary |
10.833 | % | 65 | % | |||||||
HIC Racing Corporation |
A-1 |
400 Class A Common Stock, NPV |
100 | % | 100 | % | ||||||||
4 |
100 Class B, Common Stock, NPV |
|||||||||||||
Hilton International Co. |
82 |
769,961 Shares, NPV, Common Stock |
10.83 | % | -100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
HIC Hotels U.S.A. Corporation |
HIC First Corporation |
C-6 |
161,515, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | |||||||
31 |
4,729 Shares, Preferred Stock Series A, NPV |
|||||||||||||
32 |
100 Share, Preferred Stock, Series B, NPV |
|||||||||||||
33 |
650 Shares, Preferred Stock, Series C, NPV |
|||||||||||||
34 |
7,500 Shares, Preferred Stock, Series D, NPV |
|||||||||||||
35 |
45,000 Shares, Preferred Stock, Series E, NPV |
|||||||||||||
36 |
17,426 Shares, Preferred Stock, Series F, NPV |
|||||||||||||
HIC Racing (Chiswick) Limited |
15 |
840,852,176 Shares, £1.00 Ordinary |
89.167 | % | 65 | % | ||||||||
10 |
943,009,002 £Ordinary |
|||||||||||||
Hilton International Co. |
2 |
1,426,255, NPV, Common Stock |
89.167 | % | 100 | % | ||||||||
81 |
3,911,289 Shares, NPV, Common Stock |
|||||||||||||
84 |
5,000 Shares, NPV, Common Stock |
|||||||||||||
83 |
1,000,000 Shares, NPV, Common Stock |
|||||||||||||
Hilton International Vermogensverwaltung GmbH |
100 | % | 65 | % | ||||||||||
HIC Racing Corporation |
HIC Gaming California, Inc. |
1 |
501 shares common stock $20 PV |
100 | % | 100 | % | |||||||
HIC San Pablo Limited, Inc. |
HIC San Pablo, L.P. |
Uncertificated |
90 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
HIC Second Corporation |
HIC Holdings Corporation |
C-1 |
217,423 Shares $1.00 Per Share, Par Value, Common Stock |
100 | % | 100 | % | |||||||
8,736 J Shares, Preferred Stock, NPV |
||||||||||||||
10,000 G Shares, Preferred Stock, NPV |
||||||||||||||
18,000 H Shares, Preferred Stock, NPV |
||||||||||||||
10,000 F. Shares, Preferred Stock, NPV |
||||||||||||||
19,000 E Shares, Preferred Stock, NPV |
||||||||||||||
28,000 O Shares, Preferred Stock, NPV |
||||||||||||||
340 C Shares, Preferred Stock, NPV |
||||||||||||||
300 B Shares, Preferred Stock, NPV |
||||||||||||||
9,460 A Shares, Preferred Stock, NPV |
||||||||||||||
Hilton Franchise Holding LLC |
Conrad Franchise LLC |
001 |
100% LLC interests |
100 | % | 100 | % | |||||||
Doubletree
|
001 |
100% LLC interests |
100 | % | 100 | % | ||||||||
Embassy Suites
|
001 |
100% LLC interests |
100 | % | 100 | % | ||||||||
Hampton Inns
|
001 |
100% LLC interests |
100 | % | 100 | % | ||||||||
Hilton Franchise LLC |
001 |
100% LLC interests |
100 | % | 100 | % | ||||||||
Hilton Garden
Inns
|
001 |
100% LLC interests |
100 | % | 100 | % | ||||||||
HLT ESP Franchise LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Lifestyle
|
Uncertificated |
100 | % | 100 | % | |||||||||
Homewood Suites
|
001 |
100% LLC interests |
100 | % | 100 | % | ||||||||
Waldorf Astoria
|
001 |
100% LLC interests |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Hilton Grand Vacations Management, LLC |
Hilton Grand Vacations Financing, LLC |
Uncertificated |
50 | % | 100 | % | ||||||||
Hilton Holdings, LLC |
Destination Resorts LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Hilton Recreation LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton San Diego Corporation |
7 |
50 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
Hilton Suites, Inc. |
2 |
2000 Shares, Common Stock, NPV |
100 | % | 100 | % | ||||||||
Hilton Hawaii Corporation |
C-3 |
2,500 Shares $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Hilton Illinois
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hotels Statler Company, Inc. |
2 |
100 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
Hilton Hospitality, LLC |
HHI Worldwide
|
01 |
100 Shares, Common Stock, NPV |
100 | % | 100 | % | |||||||
San Francisco Hilton, Inc. |
02 |
49.75 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
04 |
50.25 Shares, NPV, Common Stock |
|||||||||||||
Hilton Illinois Corp. |
Andiamos OHare, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Hilton Chicago Corporation |
2 |
1,000 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Hilton Michigan Avenue Corporation |
2 |
40.24 Shares, NPV, Common Stock |
40.24 | % | 100 | % | ||||||||
HLT Owned II
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Timeshare
|
Uncertificated |
100 | % | 100 | % | |||||||||
Lockwood Palmer
|
Uncertificated |
100 | % | 100 | % | |||||||||
Potters Bar
Palmer
|
Uncertificated |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Hilton Illinois Holdings LLC |
90210 Management Company, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Ballys Grand
Property
|
01 |
100 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
Hilton Illinois Corp. |
3 |
100 Shares, Common Stock, NPV |
100 | % | 100 | % | ||||||||
Hilton International Co. |
Addis Ababa Hilton
|
002 |
149 Birrs |
99.33 | % | 65 | % | |||||||
CBYH LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Chancel Service Corporation |
1 |
1,000 Shares, $1,00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
H Alliance, Inc. |
1 |
10 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
HCWW Inc. |
1 |
100 Shares, $1.00 Per Share PV, Common stock |
100 | % | 100 | % | ||||||||
HI (Maldives) Pte Limited |
90 | % | 65 | % | ||||||||||
HI US Finance LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HI US Investments Unlimited |
100 | % | 65 | % | ||||||||||
HIC Dormant Holding LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilstock Hotel Holding Corporation |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton (Hellas) Monoprosopi EPE |
100 | % | 65 | % |
44
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Hilton Argentina Srl |
95 | % | 65 | % | ||||||||||
Hilton Canada Co. |
1 |
1,000,000 Common Shares |
100 | % | 65 | % | ||||||||
2 |
1 Share, Common Shares |
|||||||||||||
3 |
516, 180 Common Shares |
|||||||||||||
Hilton Egypt Lil Tigara |
90 | % | 65 | % | ||||||||||
Hilton Hotel Management Services Private Limited |
99.99 | % | 65 | % | ||||||||||
Hilton International (Bulgaria) EAD |
100 | % | 65 | % | ||||||||||
Hilton International (France) SASU |
100 | % | 65 | % | ||||||||||
Hilton International (Switzerland) GmbH |
100 | % | 65 | % | ||||||||||
Hilton International
|
100 | % | 65 | % | ||||||||||
Hilton International Asia Pacific Pte Ltd. |
3 |
2 Ordinary Shares of SGD1.00 each |
100 | % | 65 | % | ||||||||
4 |
499,998 Ordinary Shares of SGD1.00 each |
|||||||||||||
Hilton International Australia Pty Limited |
1 |
2 Ordinary Shares |
100 | % | 65 | % | ||||||||
2 |
100,000,000 Ordinary Shares |
|||||||||||||
Hilton International Barbados Limited |
100 | % | 65 | % | ||||||||||
Hilton International Co Limited |
100 | % | 65 | % | ||||||||||
Hilton International Ecuador LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton International Holdings LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton International Hotels (U.K.) Limited |
3 |
100 A Shares of £1.00 |
100 | % | 65 | % | ||||||||
5 |
40,099,000 Preference Shares of £1.00 |
|||||||||||||
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
13 |
2 Preference Shares |
|||||||||||||
12 |
1 Preference Share |
|||||||||||||
15 |
1 Preference Share |
|||||||||||||
16 |
1 Preference Share |
|||||||||||||
17 |
1 Preference Share |
|||||||||||||
18 |
1 Preference Share |
|||||||||||||
19 |
500 A Shares |
|||||||||||||
20 |
249 A Shares of £ each |
|||||||||||||
21 |
1000,000,000 A Shares |
|||||||||||||
22 |
250,000,000 A Shares |
|||||||||||||
Hilton International Jamaica Limited |
90 | % | 65 | % | ||||||||||
Hilton International Trinidad Limited |
89.89 | % | 65 | % | ||||||||||
Hilton Malta Limited |
1 |
9,999 Ordinary Shares |
99.99 | % | 65 | % | ||||||||
2 |
1 Ordinary Share |
|||||||||||||
Hilton Mexico Promotora SA de CV |
99.80 | % | 65 | % | ||||||||||
Hilton of Panama Limited |
90 | % | 65 | % | ||||||||||
Hilton of Singapore LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Tobago Limited |
100 | % | 65 | % | ||||||||||
HLT Franchise
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT German Manage GmbH |
100 | % | 65 | % | ||||||||||
HLT German Services GmbH |
100 | % | 65 | % | ||||||||||
HLT Managed
|
Uncertificated |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
HLT Managed Holding Corporation |
001 |
1,000 Shares, $.01 Per Share, Common Stock |
100 | % | 100 | % | ||||||||
HLT Operating
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Operating
|
Uncertificated |
90 | % | 100 | % | |||||||||
HLT Owned IX Holding Limited |
1 |
1 Ordinary Share |
16 | % | 65 | % | ||||||||
2 |
49 Ordinary Shares |
|||||||||||||
HLT Owned Mezz IV-K Corporation |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Owned VI Holding LLC |
Uncertificated |
0.010 | % | 100 | % | |||||||||
HLT Secretary Limited |
1 |
1 Ordinary Share of £1.00 |
100 | % | 100 | % | ||||||||
Hotel Management
|
1 |
1 Unit |
100 | % | 100 | % | ||||||||
Inhil Co., Inc. |
1 |
10 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
2 |
90 Shares Common Stock, NPV |
|||||||||||||
Istanbul Park Hilton Enternasyonal Otelcilik Limited Sirketi |
90 | % | 65 | % | ||||||||||
Konya Hilton
Enternasyonal
|
100 | % | 65 | % | ||||||||||
Madagascar Hilton SARL |
100 | % | 65 | % | ||||||||||
Marquette Holdings LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Mayaguez Hilton Corporation |
1 |
2,500 Shares, $10.00 Per Share PV, Capital Stock |
100 | % | 100 | % | ||||||||
Milbuck Holdings, Inc |
1 |
100 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Odawara Hilton Co., Ltd. |
100 | % | 65 | % | ||||||||||
Societe Tunis Hilton SARL |
92 | % | 65 | % | ||||||||||
Stakis Limited |
100 | % | 65 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Hilton Management LLC |
Doubletree
|
001 |
100% LLC interests |
100 | % | 100 | % | |||||||
Hilton OPB, LLC |
HHC One Park Boulevard, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Hilton Resorts Corporation |
Grand Vacations
|
Uncertificated |
100 | % | 100 | % | ||||||||
Grand Vacations
|
Uncertificated |
100 | % | 100 | % | |||||||||
HGV Depositor LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Grand Vacations Club, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Grand Vacations Company, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Grand Vacations Financing, LLC |
Uncertificated |
50 | % | 100 | % | |||||||||
Hilton Grand Vacations Management, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Resorts
|
100 | % | 100 | % | ||||||||||
Hilton Resorts Marketing Korea, LLC |
100 | % | 100 | % | ||||||||||
HRC Islander LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Worldwide Holdings Inc. |
Hilton Worldwide Finance LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Hilton Worldwide, Inc. |
90210 LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Blue Bonnet
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hapeville Investors, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HHC BC Orlando, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Beverage LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Chicago
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Chicago
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Chicago
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Chicago
|
Uncertificated |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Hilton Corporate
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton CP Operator LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton El Con
|
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Electronic Distribution Systems, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Energy Investments, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton ESJ Operator LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Holdings, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton New Jersey
|
1 |
100 shares Common stock NPV |
100 | % | 100 | % | ||||||||
Hilton OPB, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Systems, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton-OCCC Hotel, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton-OCCC Mezz Lender, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Conrad GP LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Domestic JV Holdings LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Franchise
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Manage Franchise Holdco LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Operating
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Owned
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Timeshare
|
Uncertificated |
100 | % | 100 | % | |||||||||
HPP Hotels USA, Inc. |
2 |
100 Shares, Common Stock, NPV |
100 | % | 100 | % | ||||||||
HTGV, LLC |
Uncertificated |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Innvision, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Peacock Alley Service Company, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Promus Hotels
|
Uncertificated |
100 | % | 100 | % | |||||||||
PT. Conrad Management Indonesia |
1 | % | 65 | % | ||||||||||
Tex Holdings, Inc. |
1 |
100 Shares, Common Stock, NPV |
100 | % | 100 | % | ||||||||
Washington
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Domestic JV Holdings LLC |
HLT JV Mezz II-K LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
HLT JV Mezz I-K LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
HLT ESP International Franchise LLC |
HLT ESP International Franchisor Corporation |
001 |
1,000 Shares, $.01 Per Share PV, Common Stock |
100 | % | 100 | % | |||||||
HLT ESP International Manage LLC |
HLT ESP International Management Corporation |
001 |
1,000 Shares, $.01 Per Share PV, Common Stock |
100 | % | 100 | % | |||||||
HLT Franchise II Borrower LLC |
Hilton HHonors Worldwide, L.L.C. |
002 |
50% LLC interest |
50 | % | 100 | % | |||||||
Hilton Reservations Worldwide, L.L.C. |
002 |
50% LLC interest |
50 | % | 100 | % | ||||||||
HLT HSM
|
Hilton Supply Management LLC |
001 |
100% LLC interest |
100 | % | 100 | % | |||||||
HLT HSS
|
Hilton Systems
|
001 |
100% LLC interest |
100 | % | 100 | % | |||||||
HLT JV I
|
Hilton Orlando
|
Uncertificated |
100 | % | 100 | % | ||||||||
Hilton Orlando
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Lifestyle International Franchise LLC |
HLT Lifestyle International Franchisor Corporation |
001 |
1,000 Shares, $.01 Per Share PV, Common Stock |
100 | % | 100 | % | |||||||
HLT Lifestyle International Manage LLC |
HLT Lifestyle International Management Corporation |
001 |
1,000 Shares, $.01 Per Share PV, Common Stock |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
HLT Owned II Holding LLC |
HLT Owned
|
Uncertificated |
100 | % | 100 | % | ||||||||
HLT Owned II-A Borrower LLC |
HLT Palmer LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
HLT Timeshare Borrower I LLC |
Hilton Resorts Corporation |
2 |
1,500 Shares, NPV, Common Stock |
100 | % | 100 | % | |||||||
HLT Timeshare Borrower II LLC |
Hilton Kingsland 1, LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
HPP Hotels USA, Inc. |
HPP International Corporation |
3 |
1,000 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | |||||||
HPP International Corporation |
Avenue Louise Hotel Partners S.N.C. |
50 | % | 65 | % | |||||||||
Conrad International (Belgium) LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Conrad International (Egypt) Resorts Corporation |
1 |
1,000 Shares, 1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Conrad International (Indonesia) Corporation |
1 |
100 Shares $1.00PV Per Share, Common Stock |
100 | % | 100 | % | ||||||||
Conrad International Investment (Jakarta) Corporation |
1 |
1,000 Shares $1.00 PV Per Share, Common Stock |
100 | % | 100 | % | ||||||||
Florida Conrad International Corp. |
1 |
1,000 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
Hilton HIH Limited |
5 |
597,200,001 Ordinary Shares, £1.00 each |
100 | % | 100 | % | ||||||||
HLT Franchise
|
Uncertificated |
100 | % | 100 | % | |||||||||
HLT Managed VII Holding LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
PT. Conrad Management Indonesia |
99 | % | 65 | % | ||||||||||
Servicios y Recursos
Administrativos Hoteleros S.
|
99 | % | 65 | % | ||||||||||
WA Collection International, LLC |
Uncertificated |
100 | % | 100 | % |
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
Promus Hotels LLC |
ATM Hotels Pty. Limited |
100 | % | 65 | % | |||||||||
Chesterfield Village Hotel, LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
EJP Corporation |
3 |
1,000 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Embassy Development Corporation |
2 |
100 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
Embassy Equity Development LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Embassy Memphis Corporation |
2 |
100 Shares, NPV, Common Stock |
100 | % | 100 | % | ||||||||
Embassy Suites
|
2 |
1000 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Embassy Suites Club No.1, Inc. |
6 |
1000 Shares, $1.00 Per Share, PV, Common Stock |
100 | % | 100 | % | ||||||||
Embassy Suites Club
|
2 |
1000 Shares, $1.00 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Embassy Suites
Club
|
004 |
4900 Shares, $.10 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
005 |
5100 Shares, $.10 Per Share PV, Common Stock |
|||||||||||||
Record Owner | Issuer |
Certificate No. (to the extent certificated) |
No. Shares/Share Class |
Percentage
of Ownership |
Percent
Pledged |
|||||||||
EPAM Corporation |
2 |
100 Shares, $.01 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Hampton Inns LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Hilton Hospitality, LLC |
Uncertificated |
12.45 | % | 100 | % | |||||||||
Hilton MAPC, Inc. |
02 |
592 Shares, NPV, Common Stock |
59.20 | % | 100 | % | ||||||||
Promus Hotel Services, Inc. |
Certificated |
100 | % | 100 | % | |||||||||
Promus Hotels Florida LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Promus Hotels Minneapolis, Inc. |
Certificated |
100 | % | 100 | % | |||||||||
Promus/Kingston Development Corporation |
1 |
100 Shares, $.01 Per Share PV, Common Stock |
100 | % | 100 | % | ||||||||
Promus Hotels Parent LLC |
Doubletree LLC |
Uncertificated |
100 | % | 100 | % | ||||||||
Promus Operating LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Promus Operating LLC |
Hilton Insurance Corporation |
009 |
100,000 Shares, NPV, Common Stock |
50 | % | 100 | % | |||||||
Promus Hotels LLC |
Uncertificated |
100 | % | 100 | % | |||||||||
Tex Holdings, Inc. |
Meritex, LLC |
Uncertificated |
100 | % | 100 | % |
2. | Pledged Debt: |
1. Intercompany Note
2. Promissory Note, dated February 1, 2006, by Anatole Partners II, L.P. for Hilton Worldwide, Inc.
3. Promissory Note, dated April 6, 2007, by A-R HHC Orlando Convention Hotel Member, LLC for Hilton OCCC Mezz Lender, LLC.
Schedule III
to the Security Agreement
COMMERCIAL TORT CLAIMS
None
1
Exhibit 10.3
LOAN AGREEMENT
Dated as of October 25, 2013
By and Among
THE ENTITIES SET FORTH ON SCHEDULE 1.1 ATTACHED HERETO ,
collectively, as Borrower
and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, GERMAN AMERICAN CAPITAL CORPORATION, BANK OF AMERICA, N.A., GS COMMERCIAL REAL ESTATE LP and MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC ,
collectively, as Lender
TABLE OF CONTENTS
Page | ||||||
ARTICLE I | ||||||
DEFINITIONS; PRINCIPLES OF CONSTRUCTION | ||||||
Section 1.1 |
Definitions |
1 | ||||
Section 1.2 |
Principles of Construction |
47 | ||||
ARTICLE II | ||||||
GENERAL TERMS | ||||||
Section 2.1 |
Loan Commitment; Disbursement to Borrower |
47 | ||||
Section 2.2 |
Interest Rate |
48 | ||||
Section 2.3 |
Loan Payment |
53 | ||||
Section 2.4 |
Prepayments |
54 | ||||
Section 2.5 |
Release of Property |
56 | ||||
Section 2.6 |
Cash Management |
65 | ||||
Section 2.7 |
Withholding Taxes |
70 | ||||
Section 2.8 |
Extension of the Initial Maturity Date |
73 | ||||
ARTICLE III | ||||||
CONDITIONS PRECEDENT | ||||||
Section 3.1 |
Conditions Precedent to Closing |
74 | ||||
ARTICLE IV | ||||||
REPRESENTATIONS AND WARRANTIES | ||||||
Section 4.1 |
Borrower Representations |
74 | ||||
Section 4.2 |
Survival of Representations |
90 | ||||
ARTICLE V | ||||||
BORROWER COVENANTS | ||||||
Section 5.1 |
Affirmative Covenants |
90 | ||||
Section 5.2 |
Negative Covenants |
112 |
-i-
ARTICLE VI | ||||||
INSURANCE; CASUALTY; CONDEMNATION | ||||||
Section 6.1 |
Insurance |
120 | ||||
Section 6.2 |
Casualty |
125 | ||||
Section 6.3 |
Condemnation |
125 | ||||
Section 6.4 |
Restoration |
127 | ||||
ARTICLE VII | ||||||
RESERVE FUNDS | ||||||
Section 7.1 |
Required Repairs |
132 | ||||
Section 7.2 |
Tax and Insurance Escrow Fund |
132 | ||||
Section 7.3 |
Replacements and Replacement Reserve |
133 | ||||
Section 7.4 |
Ground Lease Reserve Fund |
137 | ||||
Section 7.5 |
Excess Cash Flow Reserve Fund |
138 | ||||
Section 7.6 |
Intentionally Omitted |
139 | ||||
Section 7.7 |
Intentionally Omitted |
139 | ||||
Section 7.8 |
Intentionally Omitted |
139 | ||||
Section 7.9 |
Intentionally Omitted |
139 | ||||
Section 7.10 |
Reserve Funds, Generally |
139 | ||||
ARTICLE VIII | ||||||
DEFAULTS | ||||||
Section 8.1 |
Event of Default |
140 | ||||
Section 8.2 |
Remedies |
143 | ||||
Section 8.3 |
Remedies Cumulative; Waivers |
144 | ||||
ARTICLE IX | ||||||
SPECIAL PROVISIONS | ||||||
Section 9.1 |
Securitization |
144 | ||||
Section 9.2 |
Securitization Indemnification |
148 | ||||
Section 9.3 |
Exculpation |
151 | ||||
Section 9.4 |
Matters Concerning Manager |
153 | ||||
Section 9.5 |
Servicer |
154 | ||||
Section 9.6 |
Intentionally Omitted |
155 | ||||
Section 9.7 |
Register |
155 |
-ii-
SCHEDULES
Schedule 1.1 | | List of Borrowers | ||
Schedule 1.2 | | Ground Leases | ||
Schedule 1.3 | | Condominium Documents | ||
Schedule 1.4 | | Reserved | ||
Schedule 1.5 | | Managers | ||
Schedule 1.6 | | Ratable Share | ||
Schedule 1.7 | | Release Amounts |
-iii-
Schedule 1.8 | | Reserved | ||
Schedule 1.9 | | Reserved | ||
Schedule 1.10 | | Management Agreements | ||
Schedule 1.11 | | Qualified Managers | ||
Schedule 1.12 | | Reserved | ||
Schedule 1.13 | | Reserved | ||
Schedule 2.5.5(a)(i) | | Free Release Outparcels | ||
Schedule 2.5.5(a)(ii) | | Waikoloa Outparcel | ||
Schedule 2.5.5(a)(iii) | | Hawaiian Village Taran Outparcel | ||
Schedule 2.5.5(c) | | Waikoloa Facilities Sharing Agreements | ||
Schedule 2.5.6 | | Properties Requiring RAC Upon Partial Release | ||
Schedule 2.6.1(a)(i) | | Property Accounts | ||
Schedule 2.6.1(a)(ii) | | Caribe Accounts | ||
Schedule 2.6.1(a)(iii) | | Concentration Account | ||
Schedule 2.6.1(a)(iv) | | Master Concentration Accounts | ||
Schedule 2.6.1(a)(v) | | Operating Account | ||
Schedule 2.6.1(a)(vi) | | FF&E Concentration Account | ||
Schedule 4.1.1 | | Organizational Chart of Borrower | ||
Schedule 4.1.4 | | Litigation | ||
Schedule 4.1.26 | | Rent Roll | ||
Schedule 4.1.30 | | SPE Exceptions | ||
Schedule 4.1.36 | | Mortgage Borrower Organizational Identification Numbers | ||
Schedule 4.1.39 | | Ground Lease Exceptions | ||
Schedule 4.1.43 | | Labor | ||
Schedule 4.1.44 | | Project Improvement Plans |
-iv-
Schedule 4.1.47 | | Material Property Agreements | ||
Schedule 5.1.31 | | O&M Program | ||
Schedule 7.1.1 | | Required Repairs |
EXHIBITS
Exhibit A-1 | | Reserved | ||
Exhibit B | Tax Compliance Certificates |
-v-
LOAN AGREEMENT
THIS LOAN AGREEMENT , dated as of October 25, 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this Agreement ), between JPMORGAN CHASE BANK, NATIONAL ASSOCIATION , a banking association chartered under the laws of the United States of America, having an address at 383 Madison Avenue, New York, New York 10179 and GERMAN AMERICAN CAPITAL CORPORATION , a Maryland corporation having an address at 60 Wall Street, New York, New York 10005, BANK OF AMERICA, N.A. , a national banking association having an address at One Bryant Park, New York, New York 10026 GS COMMERCIAL REAL ESTATE LP , a Delaware limited partnership having an address at 200 West Street, New York, New York 10282 and MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC , a New York limited liability company having an address at 1585 Broadway, New York, New York 10036 (together with their respective successors and assigns, each, a Co-Lender and, collectively, Lender ), and THE ENTITIES SET FORTH ON SCHEDULE 1.1 ATTACHED HERETO , each having its principal place of business at c/o Hilton Worldwide Inc., 7930 Jones Branch Drive, McLean, Virginia 22102 (each, an Individual Borrower and, collectively, Borrower ).
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined);
NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows:
ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions . For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:
Acceptable Counterparty shall mean a counterparty to the Interest Rate Cap Agreement (or the guarantor of such counterpartys obligations) that (a) has and shall maintain, until the expiration of the applicable Interest Rate Cap Agreement, (i) a long-term unsecured debt rating of not less than A+ by S&P and a short-term senior unsecured debt rating of at least A-1 from S&P, (ii) (x) if any of the Securities or any class thereof in any Securitization are
rated by Moodys, a long-term unsecured debt rating of not less than A2 from Moodys and a short-term senior unsecured debt rating of at least P1 from Moodys or (y) if no short-term debt rating exists, a long-term senior unsecured debt rating of at least A1 from Moodys, and (iii) if any of the Securities or any class thereof in any Securitization are rated by Fitch and if Fitch is rating the counterparty providing the Interest Rate Cap Agreement, a long-term unsecured debt rating of at least A by Fitch (and not on Rating Watch Negative) and a short-term unsecured debt rating of at least F1 by Fitch (and not on Rating Watch Negative, or (b) is otherwise acceptable to the Approved Rating Agencies, as evidenced by a Rating Agency Confirmation to the effect that such counterparty shall not cause a downgrade, withdrawal or qualification of the ratings assigned, or to be assigned, to the Securities or any class thereof in any Securitization.
Additional Insolvency Opinion shall mean a non-consolidation opinion letter delivered in connection with the Loan subsequent to the Closing Date reasonably satisfactory in form and substance to Lender and, following a Securitization, satisfactory in form and substance to the Approved Rating Agencies, and from counsel acceptable to Lender and, following a Securitization, the Approved Rating Agencies.
Adjusted Release Amount shall mean for any Individual Property to be released, the sum of (a) the Amortized Release Amount for such Individual Property and (b) fifteen percent (15%) of the Amortized Release Amount for such Individual Property.
Affected Property shall have the meaning set forth in Section 9.1.3 hereof.
Affiliate shall mean, as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person.
Affiliated Manager shall mean any Manager in which Borrower, Principal, or Guarantor has, directly or indirectly, more than a twenty percent (20%) legal, beneficial or economic interest therein.
Agent shall mean Northern Trust Bank, or any successor Eligible Institution acting as Agent under the Cash Management Agreement.
Aggregate Casualty/Condemnation Threshold Amount shall mean, with respect to all Casualties and Condemnations affecting the Properties at any given time $105,000,000 in the aggregate; provided , that if Net Proceeds exceed $105,000,000, but are less than $175,000,000 Borrower shall not be required to satisfy the conditions set forth in Section 6.4(b)(i)(I), (J) and (K) hereof with respect to any Individual Property for which Net Proceeds do not otherwise exceed the Individual Property Casualty/Condemnation Threshold Amount.
ALTA shall mean American Land Title Association, or any successor thereto.
Alterations Deposit shall have the meaning set forth in Section 5.1.22 hereof.
Amortized Release Amount shall mean, for any Individual Property, the original Release Amount for such Individual Property, as such amount may be reduced by
-2-
prepayments that are not made in connection with the release of any Individual Property, which payments and prepayments shall be deemed to reduce the Amortized Release Amounts of the Properties subject to the Lien of the Mortgages at the time of such payment or prepayment pro rata .
Annual Budget shall mean the operating budget, including all planned Capital Expenditures, for the Properties prepared by or on behalf of Borrower in accordance with Section 5.1.11.(d) hereof for the applicable Fiscal Year or other period.
Applicable Similar Law shall have the meaning set forth in Section 5.2.9(c) hereof.
Approved Annual Budget shall have the meaning set forth in Section 5.1.11(d) hereof.
Approved Rating Agencies shall mean each of S&P, Moodys, Fitch, and Morningstar or any other nationally recognized statistical rating agency in each case, which has been approved by Lender and designated by Lender to assign a rating to the Securities and which has assigned a rating to the Securities.
Assignment of Interest Rate Cap Agreement shall have the meaning set forth in Section 2.2.7(a) hereof.
Assignment of Management Agreement shall mean, individually and/or collectively, as the context may require, those certain Assignments of Management Agreement and Subordination of Management Agreement, dated as of the Closing Date, among Lender, Borrower and the applicable Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Assumed LIBOR shall have the meaning set forth in Section 5.1.11(d) hereof.
Award shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of any Individual Property.
Bankruptcy Action shall mean with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal, state, local or foreign bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal, state, local or foreign bankruptcy or insolvency law or soliciting or causing to be solicited petitioning creditors for any involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (d) such Person consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of any Individual Property; or (e) such Person making an assignment for the benefit of creditors.
-3-
Bankruptcy Code shall mean Title 11 of the United States Code, 11 U.S.C. § 101, et seq. , as the same may be amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors rights or any other Federal, state, local or foreign bankruptcy or insolvency law.
Base Deductible shall have the meaning set forth in Section 6.1(a)(i) hereof.
Basic Carrying Costs shall mean, with respect to each Individual Property, for any period, the sum of the following costs associated with such Individual Property: (a) Taxes, (b) Other Charges and (c) Insurance Premiums.
Borrower shall have the meaning set forth in the introductory paragraph hereto, together with its successors and permitted assigns.
Breakage Costs shall have the meaning set forth in Section 2.2.3(h) hereof.
Business Day shall mean any day other than a Saturday, Sunday or any other day on which any of (a) national banks in New York, New York, or (b) the place of business of the trustee under a Securitization (or, if no Securitization has occurred, Lender), or (c) the place of business of any Servicer or the financial institution that maintains any collection account for or on behalf of any Servicer or any Reserve Funds or (d) the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business.
Capital Expenditures shall mean, for any period, the amount expended for items capitalized under GAAP and the Uniform System of Accounts (including expenditures for building improvements or major repairs and replacements).
Caribe Account Agreement shall mean those certain account control agreements by and between Caribe Borrower, Lender and Caribe Bank.
Caribe Accounts shall have the meaning set forth in Section 2.6.1(a)(ii) .
Caribe Bank shall mean that certain bank set forth on Schedule 2.6.1(a)(ii) and any replacement Eligible Institution.
Caribe Borrower shall mean Hilton International of Puerto Rico, Inc.
Caribe Property shall mean the Individual Property located in San Juan, Puerto Rico, commonly known as the Hilton Caribe.
Cash/LC Collateral shall mean cash collateral or a Letter of Credit satisfactory to Lender in an amount equal to $175,000,000; provided , that in the event that the outstanding principal balance of the Loan is less than $1,750,000,000 at the time such Cash/LC Collateral is delivered, the amount of such Cash/LC Collateral required shall be ten percent (10%) of the then outstanding principal balance of the Loan and is subject to further reduction from time to time pursuant to Section 9.3(e) .
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Cash Management Account shall have the meaning set forth in Section 2.6.2 hereof.
Cash Management Agreement shall mean that certain Cash Management Agreement, dated as of the date hereof, by and among Borrower, Lender, Manager and Agent, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Cash Trap Event shall mean the occurrence of any one or more of the following events: (a) an Event of Default or (b) a Debt Yield Trigger Event.
Cash Trap Event Cure shall mean (a) no Event of Default shall be continuing, and in the event that the related Cash Trap Event occurred solely as a result of an Event of Default, Lender (in its sole and absolute discretion) shall have accepted a cure by Borrower of such Event of Default and (b) in the event that the related Cash Trap Event occurred as a result of a Debt Yield Trigger Event, the achievement of a Debt Yield Cure.
Cash Trap Period shall mean the period commencing on the occurrence of a Cash Trap Event and continuing until the date of a Cash Trap Event Cure.
Casualty shall have the meaning set forth in Section 6.2 hereof.
Casualty/Condemnation Threshold Amount shall mean, a collective reference to the Aggregate Casualty/Condemnation Threshold Amount and the applicable Individual Property Casualty/Condemnation Threshold Amount.
Casualty Consultant shall have the meaning set forth in Section 6.4(b)(iii) hereof.
Casualty Retainage shall have the meaning set forth in Section 6.4(b)(iv) hereof.
Cause shall mean, with respect to an Independent Director, (a) acts or omissions by such Independent Director that constitute systematic and persistent or willful disregard of such Independent Directors duties, (b) such Independent Director has been indicted or convicted for any crime or crimes of moral turpitude or dishonesty or for any violation of any Legal Requirements, (c) such Independent Director no longer satisfies the requirements set forth in the definition of Independent Director, (d) the fees charged for the services of such Independent Director are materially in excess of the fees charged by the other providers of Independent Directors listed in the definition of Independent Director or (e) any other reason for which the prior written consent of Lender shall have been obtained.
Closing Date shall mean the date of the funding of the Loan.
Code shall mean the Internal Revenue Code of 1986, as amended.
Co-Lender shall have the meaning set forth in the introductory paragraph hereto.
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Component shall mean, individually, any one of Component A, Component B-1, or Component B-2 and Components shall mean, collectively, Component A, Component B-1, and Component B-2.
Component A shall mean the component of the Loan designated as A in Section 2.1.5 hereof.
Component A Extended Maturity Date shall have the meaning set forth in Section 2.8 hereof.
Component A Extension Option shall have the meaning set forth in Section 2.8 hereof.
Component A Initial Maturity Date shall mean November 1, 2015, or such earlier date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.
Component A Maturity Date shall mean the Component A Initial Maturity Date or, following an exercise by Borrower of one (1) or more of the Extension Options described in Section 2.8 hereof, the Component A Extended Maturity Date as the case may be.
Component B shall mean, collectively, Component B-1 and Component B-2.
Component B-1 shall mean the component of the Loan designated as B-1 in Section 2.1.5 hereof.
Component B-2 shall mean the component of the Loan designated as B-2 in Section 2.1.5 hereof.
Concentration Account shall have the meaning set forth in Section 2.6.1(a)(ii) .
Concentration Account Charges shall mean (i) honoring credit card charge-backs from payments made by credit card companies into the applicable Concentration Account, (ii) adjustments for bank fees, checks that have been dishonored because of insufficient funds, stop-payment order or other customary banking adjustments relating to funds transferred into the Concentration Accounts from Property Accounts, (iii) making adjustments or refunds to customers and vendors to correct previous errors in the ordinary course of operation of the Individual Properties and (iv) electronic debits for payment of sales and use taxes.
Concentration Account Agreement shall mean those certain account control agreements by and between Borrower, Lender and the applicable Concentration Bank.
Concentration Bank shall mean those certain banks set forth on Schedule 2.6.1(a)(iii) and any replacement Eligible Institution.
Condemnation shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of
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condemnation or eminent domain, of all or any part of any Individual Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting such Individual Property or any part thereof.
Condemnation Proceeds shall have the meaning set forth in Section 6.4(b) .
Condominium shall mean (i) the condominium regime established with respect to the Individual Property located in Short Hills, New Jersey pursuant to its respective Condominium Documents, (ii) the condominium regime established with respect to the Individual Property located in New York, NY known as the NY Hilton pursuant to its respective Condominium Documents, or (iii) the condominium regime established with respect to the building known as Kalia Tower located on the Individual Property known as the Hilton Hawaiian Village pursuant to its respective Condominium Documents.
Condominium Board shall mean, with respect to any Condominium, the board of directors of the applicable condominium association or governing body.
Condominium Documents shall mean the documentation governing the condominium regimes constituting the respective Condominium as described on Schedule 1.3 hereto.
Condominium Law shall mean all applicable local, state and federal laws, rules and regulations which effect the establishment and maintenance of condominiums in the applicable State(s) where the Condominiums are located.
Connection Income Taxes shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Section 2.7 Taxes or branch profits Section 2.7 Taxes.
Consumer Price Index shall mean the Consumer Price Index as published by the United States Department of Labor, Bureau of Labor Statistics or any substitute index hereafter adopted by the Department of Labor.
Contribution Agreement shall mean that certain Contribution Agreement among the Individual Borrowers dated as of the date hereof, as the same may be amended, restated, replaced or otherwise modified from time to time.
Control or control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise.
Controlled and Controlling shall have correlative meanings.
Covered Disclosure Information shall have the meaning set forth in Section 9.2(b) hereof.
Covered Rating Agency Information shall have the meaning set forth in Section 10.13(d) hereof.
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Custodial Funds means the following funds collected by Borrower on a third partys behalf that must be paid or remitted to a third party and so are not properly considered revenue of Borrower: (i) tips, gratuities or service charges with respect to food, beverage, banquet or other guest services paid or received via credit card and owed to employees working at the Properties; (ii) payments or fees received from or on behalf of hotel guests and patrons and paid or reimbursed to tenants or other vendors or service providers of the hotels and (iii) amounts paid out to hotel guests or patrons for checks cashed, per diem expense allowances paid.
Debt shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums (including, but not limited to, any Prepayment Premium or Breakage Costs) due to Lender in respect of the Loan under the Note, this Agreement, the Mortgages or any other Loan Document.
Debt Service shall mean, with respect to any particular period of time, interest payments due under this Agreement and the Note.
Debt Service Coverage Ratio shall mean a ratio for the applicable period in which:
(a) the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly ( e.g. , Taxes and Insurance Premiums)) for the immediately preceding twelve (12) full calendar month period for those Individual Properties subject to the Lien of a Mortgage as of the date of determination as set forth in the statements required hereunder (and including, for purposes of determining Gross Income from Operations, payments made to Borrower pursuant to the Interest Rate Cap Agreement), without deduction for (i) actual management fees incurred in connection with the operation of the Property, and (ii) amounts paid to the Reserve Funds, and less (A) management fees equal to the greater of (1) assumed management fees of 3.00% of Gross Income from Operations and (2) the actual management fees incurred, and (B) Replacement Reserve Fund contributions equal to four percent (4.00%) of Gross Income from Operations; and
(b) the denominator is the aggregate amount of Debt Service for each of the Components of the Loan for such period.
Debt Yield shall mean, for any date of determination, the percentage obtained by dividing:
(a) the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly ( e.g. , Taxes and Insurance Premiums)) for the immediately preceding twelve (12) full calendar month period for those Individual Properties subject to the Lien of a Mortgage as of the date of determination as set forth in the statements required hereunder, including, for purposes of calculating the Operating Expense component of Net Operating Income, (i) Replacement Reserve Fund contributions equal to four percent (4.00%) of Gross Income from Operations and (ii) for management fees and franchise fees in an amount equal to the greater of (A) the actual amount of such fees and (B) three percent (3.00%) of Gross Income from Operations; by
(b) the sum of the outstanding principal balances of all Components of the Loan.
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Debt Yield Cure shall mean (a) no Event of Default shall be continuing and (b) the achievement of the Required Debt Yield for the two (2) consecutive calendar quarters immediately preceding the date of determination based upon the trailing twelve (12) month period immediately preceding such date of determination (which Required Debt Yield may be achieved, at Borrowers sole discretion, by making voluntary prepayments in accordance with the terms of this Agreement in amounts necessary to achieve the Required Debt Yield).
Debt Yield Trigger Event shall mean a Debt Yield of less than the applicable Required Debt Yield on any date of determination for the two consecutive calendar quarters immediately preceding the date of such determination, based upon the trailing twelve (12) month period immediately preceding such date of determination, as determined by Lender.
Debt Yield Trigger Period shall mean the period commencing on the occurrence of a Debt Yield Trigger Event and continuing until the occurrence of a Debt Yield Cure.
Declaration shall mean, individually and/or collectively, as the context requires, (i) that certain Fourth Amendment to and Restatement of Declaration of Protective Covenants, Conditions and Restrictions for Waikoloa Beach Resort Conference dated May 1, 1998, recorded in the Bureau on September 17, 1998 as Doc. No. 98-138993, and (ii) Declaration of Protective Covenants, Conditions and Restrictions for Waikoloa Beach Resort dated April 1, 1980, but effective as of April 23, 1980, recorded in the Bureau in Liber 14670 at Page 531, as each of the same has and may be further amended, restated, supplemented or otherwise modified in accordance with the terms hereof.
Deductible Guaranty shall mean that certain Deductible Guaranty delivered by Guarantor in favor of Lender, dated as of the date hereof, as the same may be amended, restated, replaced or otherwise modified from time to time.
Default shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.
Default Rate shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate or (b) three percent (3%) above the Interest Rate otherwise applicable to each Component.
Determination Date shall mean, with respect to each Interest Period with respect to Component A, the date that is two (2) London Business Days prior to the commencement date of such Interest Period.
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Disclosure Document shall mean a prospectus, prospectus supplement (including any amendment or supplement to either thereof), private placement memorandum, or similar offering memorandum, offering circular, structural and collateral term sheet, in each case in preliminary or final form and including all exhibits and annexes thereto, used in connection with a Securitization.
Discounted Payoff shall have the meaning set forth in Section 10.25 hereof.
Eligible Account shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity that has a Moodys rating of at least Baa3 and which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in either case a combined capital and surplus of at least $50,000,000.00 and subject to supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.
Eligible Institution shall mean (i) either a depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short-term unsecured debt obligations or commercial paper of which are rated at least A-1+ by S&P, P-1 by Moodys and F-1+ by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of Letters of Credit and accounts in which funds are held for more than thirty (30) days, the long-term unsecured debt obligations of which are rated at least A+ by S&P, A1 by Moodys and A+ by Fitch), (ii) Northern Trust Bank, Wells Fargo Bank, N.A., Bank of America, N.A. (solely in its capacity as a Property Account Bank or Concentration Account Bank), Bank of Hawaii, US Bank National Association, Banco Santander (solely in its capacity as the Caribe Bank) and JPMorgan Chase Bank, National Association; provided that, with respect to (ii) above, the ratings by each of the Approved Rating Agencies for the short term unsecured debt obligations or commercial paper and long term unsecured debt obligations of such institutions are at least equal to the ratings for such institutions in effect as of the date hereof.
Embargoed Person shall have the meaning set forth in Section 4.1.35 hereof.
Environmental Indemnity shall mean that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Environmental Law means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to Hazardous Substances, relating to liability for or costs of Remediation or prevention of Releases of Hazardous Substances or relating to liability for or costs of other actual or threatened danger to human health or the environment. The term Environmental Law includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated
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pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. Environmental Law also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law: (a) conditioning transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of the Properties; (b) requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Properties to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property; (c) imposing conditions or requirements in connection with environmental permits or other environmental authorization for lawful activity; (d) relating to nuisance, trespass or other causes of action related to the Properties; (e) relating to wrongful death, personal injury resulting from environmental conditions or exposure to Hazardous Substances; or (f) property or other damage in connection with any environmental condition or use of Hazardous Substances at the Properties.
Environmental Liens shall have the meaning set forth in Section 5.1.20 hereof.
Environmental Report shall have the meaning set forth in Section 4.1.37 hereof.
Equipment shall mean, with respect to each Individual Property, any equipment now owned or hereafter acquired by Borrower, which is used at or in connection with the Improvements or such Individual Property or is located thereon or therein, including (without limitation) all machinery, equipment, furnishings, and electronic data-processing and other office equipment now owned or hereafter acquired by Borrower and any and all additions, substitutions and replacements of any of the foregoing), together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.
ERISA Affiliate shall mean any Person that for purposes of Title IV of ERISA is a member of the Borrowers or Guarantors controlled group, under common control with the Borrower or Guarantor within the meaning of Section 414 of the Code.
Event of Default shall have the meaning set forth in Section 8.1(a) hereof.
Excess Cash Flow shall mean all remaining amounts on deposit in the Cash Management Account after the payment or disbursement of all escrows, reserves, Operating Expenses, Debt Service, management fees and other Manager Required Payments and amounts permitted to be paid in accordance with the Loan Documents and the Management Agreement.
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Excess Cash Flow Reserve Account shall have the meaning set forth in Section 7.6 hereof.
Excess Cash Flow Reserve Fund shall have the meaning set forth in Section 7.6 hereof.
Excess Deductible shall have the meaning set forth in Section 6.1(a)(i) hereof.
Exchange Act shall have the meaning set forth in Section 9.1.1(h) hereof.
Exchange Act Filing shall mean a filing pursuant to the Exchange Act in connection with or relating to a securitization.
Excluded Entity shall mean the direct or indirect owners of Guarantor, including, without limitation, Hilton Hotels Holdings LLC, Hilton Global Holdings LLC, Hilton Canada Co., Vista International II Inc., Vista International Illinois Inc., Hilton Worldwide Holdings, Inc., Hilton Worldwide Finance LLC, Hilton Worldwide Inc., Hilton Illinois Corp., Hilton International Co., HPP Hotels USA, Inc. and any direct or indirect legal or beneficial owner (including, without limitation, any shareholder, partner, member and/or non-member manager) of the foregoing.
Excluded Taxes shall mean any of the following Section 2.7 Taxes imposed on or with respect to a Lender or Agent: (a) Section 2.7 Taxes imposed on (or measured by) net income (however denominated), franchise Section 2.7 Taxes, and branch profits Section 2.7 Taxes, in each case, (i) imposed as a result of such Lender or Agent being organized under the laws of, or having its principal office or, in the case of any Lender, applicable lending office located in, the jurisdiction imposing such Section 2.7 Tax, or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Section 2.7 Taxes resulting from any law in effect on the date such Lender becomes a party to this Agreement or designates a new lending office, except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrower with respect to such Section 2.7 Taxes pursuant to Section 2.7 , (c) any Section 2.7 Taxes attributable to such Lenders failure to comply with Section 2.7(e) , and (d) any Section 2.7 Taxes imposed under FATCA.
Extension Strike Price shall be the greater of (a) six percent (6.00%) and (b) a strike rate that, when added to the Spread with respect to Component A and then averaged on a weighted average basis with the Interest Rate with respect to Component B, would result in a Debt Service Coverage Ratio that is no less than 1.25 to 1.00.
Extension Term shall have the meaning set forth in Section 2.8 hereof.
Extraordinary Expense shall have the meaning set forth in Section 5.1.11(e) hereof.
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Face Amount shall mean the actual principal amount of the Loan that is being prepaid pursuant to a Discounted Payoff.
FATCA shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantially comparable and not materially more onerous to comply with), any current or future regulations issued thereunder or official interpretations thereof and any intergovernmental agreements entered into pursuant to Section 1471(b)(1) of the Code, and any intergovernmental agreements entered into by the United States in connection with the implementation of such Sections of the Code (or any such amended or successor version therein).
FF&E shall mean, with respect to each Individual Property, collectively, furnishings, Fixtures and Equipment located in the guest rooms, hallways, lobbies, restaurants, lounges, meeting and banquet rooms, parking facilities, public areas or otherwise in any portion of the Properties, including (without limitation) all beds, chairs, bookcases, tables, carpeting, drapes, couches, luggage carts, luggage racks, bars, bar fixtures, radios, television sets, intercom and paging equipment, electric and electronic equipment, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, stoves, ranges, refrigerators, laundry machines, tools, machinery, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, cabinets, lockers, shelving, dishwashers, garbage disposals, washer and dryers and all other customary hotel and casino resort equipment and other tangible property owned by Borrower, or in which Borrower or has or shall have an interest, now or hereafter located at each Individual Property and useable in connection with the present or future operation and occupancy of each Individual Property; provided , however , that FF&E shall not include (a) fixed asset supplies, including, but not limited to, linen, china, glassware, tableware, uniforms, other hotel inventory and similar items, whether used in connection with public space or guest rooms, or (b) items owned by tenants or by third party operators.
FF&E Concentration Account have the meaning set forth in Section 2.6.1(a)(vi) hereof.
FF&E Concentration Account Agreement shall mean that certain account control agreements by and between Borrower, Lender and the applicable Concentration Bank with respect to the FF&E Concentration Account.
FF&E Priority Waterfall Payments shall have the meaning set forth in Section 7.3.2 hereof.
First Call Protection End Date shall mean the Business Day immediately following the Payment Date in November, 2014.
Fiscal Year shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan.
Fitch shall mean Fitch, Inc.
Fixed Interest Rate shall mean, with respect to Component B, 4.4650%.
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Fixtures shall mean, with respect to each Individual Property, all Equipment now owned, or the ownership of which is hereafter acquired, by Borrower which is so related to the Land and the Improvements forming part of the Individual Property in question that it is deemed fixtures or real property under applicable Legal Requirements, including, without limitation, all building or construction materials intended for construction, reconstruction, alteration, decoration or repair of or installation on the applicable Individual Property, construction equipment, appliances, machinery, plant equipment, fittings, apparatuses, fixtures and other items now or hereafter attached to, installed in or used in connection with (temporarily or permanently) any of the Improvements or the Land, including, but not limited to, engines, devices for the operation of pumps, pipes, plumbing, call and sprinkler systems, fire extinguishing apparatuses and equipment, heating, ventilating, incinerating, electrical, air conditioning and air cooling equipment and systems, gas and electric machinery, appurtenances and equipment, pollution control equipment, security systems, disposals, dishwashers, refrigerators and ranges, recreational equipment and facilities of all kinds, and water, electrical, storm and sanitary sewer facilities, utility lines and equipment (whether owned individually or jointly with others, and, if owned jointly, to the extent of Borrowers interest therein) and all other utilities whether or not situated in easements, all water tanks, water supply, water power sites, fuel stations, fuel tanks, fuel supply, and all other structures, together with all accessions, appurtenances, additions, replacements, betterments and substitutions or any of the foregoing and the proceeds thereof.
Floating Interest Rate shall mean a fluctuating rate per annum equal to LIBOR plus the applicable Spread for each of Component A; provided , however , in no event shall LIBOR be deemed to be less than zero.
Foreign Lender means a Lender that is not a U.S. Person.
Free Release Outparcel shall have the meaning set forth in Section 2.5.5 hereof.
GAAP shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.
Governmental Authority shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence.
Grantor Trust shall mean a grantor trust as defined in subpart E, part I of subchapter J of the Code.
Gross Income from Operations shall mean all income and proceeds (whether in cash or on credit, and computed on an accrual basis) received by Borrower or Manager on behalf of Borrower for the use, occupancy or enjoyment of the Properties, or any part thereof, or received by Borrower or Manager on behalf of Borrower for the sale of any goods, services or other items sold on or provided from the Properties in the ordinary course of the Properties operation, including without limitation: (a) all income and proceeds received from rental of rooms, Leases and commercial space, meeting, conference and/or banquet space within the
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Properties including parking revenue; (b) all income and proceeds received from food and beverage operations and from catering services conducted from the Properties even though rendered outside of the Properties; (c) all income and proceeds from business interruption, rental interruption and use and occupancy insurance with respect to the operation of the Properties (after deducting therefrom all necessary costs and expenses incurred in the adjustment or collection thereof) applicable to the period in question; (d) all Awards for temporary use (after deducting therefrom all costs incurred in the adjustment or collection thereof and in Restoration of the Properties); (e) all income and proceeds from judgments, settlements and other resolutions of disputes with respect to matters which would be includable in this definition of Gross Income from Operations if received in the ordinary course of the operation of the Properties (after deducting therefrom all necessary costs and expenses incurred in the adjustment or collection thereof); (f) interest on credit accounts, rent concessions or credits, and other required pass-throughs and interest on Reserve Funds; (g) amounts received by Borrower, Manager or any Affiliate thereof from or with respect to any Rental Management Program related to the Caribe Property; (h) all income from the operation of any golf course, spa and conference center at any Individual Property; (i) amounts received by Borrower, Manager or any Affiliate thereof from or with respect to any Property Agreement, and (j) all other income from operation of the Properties (including laundry and vending income), but excluding , (1) gross receipts received by lessees, licensees or concessionaires of the Properties; (2) consideration received at the Properties for hotel accommodations, goods and services to be provided at other hotels (which are not one of the Individual Properties), although arranged by, for or on behalf of Borrower or Manager; (3) income and proceeds from the sale or other disposition of goods, capital assets and other items not in the ordinary course of the operation of the Properties; (4) Hotel Taxes; (5) Awards (except to the extent provided in clause (d) above); (6) refunds of amounts not included in Operating Expenses at any time and uncollectible accounts; (7) gratuities collected by the Properties employees; (8) the proceeds of any permitted financing; (9) other income or proceeds resulting other than from the use or occupancy of the Properties, or any part thereof, or other than from the sale of goods, services or other items sold on or provided from the Properties in the ordinary course of business; (10) any credits or refunds made to customers, guests or patrons in the form of allowances or adjustments to previously recorded revenues; (11) payments made to Borrower pursuant to the Interest Rate Cap Agreement; and (12) without duplication of the items referenced in (1)-(12) above, Custodial Funds.
Ground Lease shall mean, individually, each lease described on Schedule 1.2 attached hereto and Ground Leases shall mean, collectively, those certain leases described on Schedule 1.2 attached hereto.
Ground Lease Property shall mean that certain real property demised by each of the Ground Leases.
Ground Lessor shall mean, the respective ground lessor under each of the Ground Leases.
Guaranteed Excess Deductible Obligations shall have the meaning set forth in Section 6.1(a)(i) hereof.
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Guarantor shall mean, individually or collectively, HLT Owned VIII Holding LLC and Hilton Domestic Property LLC, each a Delaware limited liability company, together with their respective successors and assigns.
Guarantor Bankruptcy Event shall mean if Guarantor or any guarantor or indemnitor under any guaranty or indemnity issued in connection with the Loan shall make an assignment for the benefit of creditors or if a receiver, liquidator or trustee shall be appointed for Guarantor or any guarantor or indemnitor under any guarantee or indemnity issued in connection with the Loan or if Guarantor or such other guarantor or indemnitor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Guarantor or such other guarantor or indemnitor, or if any proceeding for the dissolution or liquidation of Guarantor or such other guarantor or indemnitor shall be instituted; provided , however , if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Guarantor or such other guarantor or indemnitor, upon the same not being discharged, stayed or dismissed within ninety (90) days.
Guaranty shall mean that certain Guaranty Agreement, dated as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Guaranty Liability Cap shall have the meaning set forth in the Guaranty.
Hawaiian Village Taran Outparcel shall have the meaning set forth in Section 2.5.5 hereof.
Hawaiian Village Taran Release Price shall mean $2,000,000.00.
Hazardous Substances shall mean (i) any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws and (ii) mold, mycotoxins, microbial matter and airborne pathogens (naturally occurring or otherwise).
Holdings Borrower shall mean Hilton CMBS Holdings LLC, a Delaware limited liability company.
Hotel Taxes means all sales and occupancy taxes collected by Borrower that are required to be paid to a state or local taxing authority or similar taxing authority (including, without limitation, sales taxes, use taxes, occupancy taxes, business license taxes and special assessments by any municipality or government).
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Improvements shall have the meaning set forth in the granting clause of the related Mortgage with respect to each Individual Property.
Increased Deductible shall have the meaning set forth in Section 6.1(a)(i) hereof.
Indebtedness of a Person, at a particular date, means the sum (without duplication) at such date of (a) all indebtedness or liability of such Person; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments issued by such Persons; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed (other than the Permitted Encumbrances).
Indemnified Liabilities shall have the meaning set forth in Section 10.13(b) hereof.
Indemnified Person shall mean Lender, any Affiliate of Lender and its designee, (whether or not it is the Lender) that has filed any registration statement relating to the Securitization or has acted as the sponsor or depositor in connection with the Securitization, any Affiliate of Lender that acts as an underwriter, placement agent or initial purchaser of Securities issued in the Securitization, any other co-underwriters, co-placement agents or co-initial purchasers of Securities issued in the Securitization, and each of their respective officers, directors, partners, employees, representatives, agents and Affiliates and each Person or entity who Controls any such Person within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Exchange Act, as amended, any Person who is or will have been involved in the origination of the Loan, any Person who is or will have been involved in the servicing of the Loan on behalf of Lender, any Person in whose name the encumbrance created by the Mortgages is or will have been recorded, any Person who may hold or acquire or will have held a full or partial interest in the Loan (including, but not limited to, investors or prospective investors in the Securities, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to any successors by merger, consolidation or acquisition of all or a substantial portion of Lenders assets and business).
Indemnified Taxes shall mean (a) Section 2.7 Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by Borrower under any Loan Document and (b) to the extent not otherwise described in clause (a) above, Other Taxes.
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Indemnifying Person shall mean collectively, Borrower and Principal.
Independent Director or Independent Manager shall mean an individual who has prior experience as an independent director, independent manager or independent member with at least three years of employment experience and who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional Independent Directors, another nationally recognized company reasonably approved by Lender, in each case that is not an Affiliate of Borrower or Principal, and that provides professional Independent Directors and other corporate services in the ordinary course of its business, and which individual is duly appointed as an Independent Director or Independent Manager and is not, and has never been, and will not while serving as Independent Director or Independent Manager be, any of the following:
(a) a member, partner, equityholder, manager, director, officer or employee of Borrower, Principal or any of its equityholders or Affiliates (other than serving as an Independent Director and/or Independent Manager of Borrower, Principal or an Affiliate of Borrower that is not in the direct chain of ownership of Borrower or Principal and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such Independent Director or Independent Manager is employed by a company that routinely provides professional Independent Directors or Independent Managers in the ordinary course of its business);
(b) a creditor, supplier or service provider (including provider of professional services) to Borrower or any of its equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Directors or Independent Managers and other corporate services to Borrower or any of its Affiliates in the ordinary course of its business);
(c) a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or
(d) a Person that controls (whether directly, indirectly or otherwise) any of (a), (b) or (c) above.
A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (a) by reason of being the Independent Director of a special purpose entity affiliated with Borrower or Principal shall be qualified to serve as an Independent Director of the Borrower or Principal, provided that the fees that such individual earns from serving as an Independent Director of affiliates of Borrower or Principal in any given year constitute in the aggregate less than five percent (5%) of such individuals annual income for that year. For purposes of this paragraph, a special purpose entity is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entitys separateness that are substantially similar to those contained in the definition of Special Purpose Entity of this Agreement.
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Individual Borrower shall have the meaning set forth in the introductory paragraph hereto, together with its successors and permitted assigns.
Individual Property Casualty/Condemnation Threshold Amount shall mean (a) with respect to the Individual Property known as Hilton Hawaiian Village, $60,000,000.00, (b) with respect to the Individual Property known as Hilton New York, $60,000,000.00, (c) with respect to the Individual Property known as Hilton New Orleans, $40,000,000.00, (d) with respect to the Individual Property known as Hilton San Francisco Union Square, $40,000,000.00, (e) with respect to the Individual Property known as Hilton Chicago, $40,000,000.00 and (f) with respect to each other Individual Property, $25,000,000.
Individual Property shall mean each parcel of real property, the Improvements thereon and all personal property owned by Borrower (or leased pursuant to a Ground Lease) and encumbered by a Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the granting clauses of each Mortgage and referred to therein as the Property.
Insolvency Opinion shall mean that certain non-consolidation opinion letter dated the date hereof delivered by Richards, Layton & Finger, P.A. in connection with the Loan.
Insurance Premiums shall have the meaning set forth in Section 6.1(b) hereof.
Insurance Proceeds shall have the meaning set forth in Section 6.4(b) hereof.
Interest Period shall mean, (a) with respect to Component A, (i) the period commencing on the Closing Date and ending on (and including) November 4, 2013 and (ii) thereafter, the period commencing on the fifth (5th) day of each calendar month immediately preceding the related Payment Date and ending on (and including) the fourth (4th) day of the calendar month in which such Payment Date occurs and (b) with respect to Component B, the period commencing on and including the first (1st) day of each calendar month immediately preceding the related Payment Date during the term of the Loan and ending on and including the last day of such calendar month; provided , however , the initial Interest Period shall commence on and include the Closing Date and shall end on and include the final day of the calendar month in which the Closing Date occurs. Each Interest Period as set forth in clause (b) above shall be a full month and shall not be shortened by reason of any payment of the Loan prior to the expiration of such Interest Period.
Interest Rate shall mean with respect to Component B, the Fixed Interest Rate and with respect to Component A, the Floating Interest Rate as determined in accordance with Section 2.2.3 hereof.
Interest Rate Cap Agreement shall mean, with respect to Component A, collectively, one or more interest rate protection agreements (together with the confirmation and schedules relating thereto) between an Acceptable Counterparty and Borrower obtained by Borrower as and when required pursuant to Section 2.2.7 and Section 2.8 hereof. After delivery of a Replacement Interest Rate Cap Agreement to Lender, the term Interest Rate Cap Agreement shall be deemed to mean such Replacement Interest Rate Cap Agreement and such Replacement Interest Rate Cap Agreement shall be subject to all requirements applicable to the Interest Rate Cap Agreement.
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Lease shall mean any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect), pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any Individual Property by or on behalf of any Individual Borrower (other than ordinary course (i) short-term occupancy rights of hotel guests which are not the subject of a written agreement, (ii) occupancy agreements for groups of hotel guests for transitory periods of time, (iii) agreements for catering, business and similar special events or functions at any of the Properties and (iv) space license agreements for the installation and/or operation of in-building telecommunications equipment providing wireless frequencies to hotel guests and staff), and every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto; provided that in no event shall any Ground Lease constitute a Lease.
Legal Requirements shall mean, with respect to each Individual Property, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting Borrower, such Individual Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting Borrower, such Individual Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to such Individual Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.
Lender shall have the meaning set forth in the introductory paragraph hereto, together with their respective successors and assigns.
Lender Documents shall mean any agreement among Lender and/or any participant or any fractional owner of a beneficial interest in the Loan relating to the administration of the Loan or the Loan Documents, including without limitation any co-lender agreements.
Letter of Credit shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit in favor of Lender and entitling Lender to draw thereon based solely on a statement executed by an officer of Lender stating that it has the right to draw thereon under this Agreement, and issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution, and upon which letter of credit Lender shall have the right to draw in full: (a) if Lender has not received at least thirty (30) days prior to the date on which the then outstanding letter of credit is scheduled to expire, a notice from the issuing financial institution that it has renewed the applicable letter of credit; (b) thirty (30) days prior to the date of termination following receipt of notice from the issuing financial institution that the applicable
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letter of credit will be terminated or replaced; and (c) thirty (30) days after Lender has given notice to Borrower that the financial institution issuing the applicable letter of credit ceases to either be an Eligible Institution or meet the rating requirement set forth above.
Liabilities shall have the meaning set forth in Section 9.2(b) hereof.
LIBOR shall mean, with respect to each Interest Period for Component A, the rate (expressed as a percentage per annum and rounded up to the next nearest 1/1000 of 1%) for deposits in U.S. dollars, for a one-month period, that appears on Reuters Screen LIBOR01 Page (or the successor thereto) as of 11:00 a.m., London time, on the related Determination Date. If such rate does not appear on Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on such Determination Date, LIBOR shall be the arithmetic mean of the offered rates (expressed as a percentage per annum) for deposits in U.S. dollars for a one-month period that appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination Date, if at least two such offered rates so appear. If fewer than two such offered rates appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination Date, Lender (or Servicer, on Lenders behalf) shall request the principal London office of any four major reference banks in the London interbank market selected by Lender to provide such banks offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such Determination Date for the amounts of not less than U.S.$1,000,000. If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, Lender (or Servicer, on Lenders behalf) shall request any three major banks in New York City selected by Lender to provide such banks rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a one-month period as of approximately 11:00 a.m., New York City time on the applicable Determination Date for amounts of not less than U.S.$1,000,000. If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined conclusively by Lender or its agent and shall be conclusive absent manifest error. Notwithstanding the foregoing, in no event shall LIBOR be less than zero.
Licenses shall have the meaning set forth in Section 4.1.22 hereof.
Lien shall mean, with respect to each Individual Property, any mortgage, deed of trust, deed to secure debt, indemnity deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting any Individual Borrower, any Individual Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanics, materialmens and other similar liens and encumbrances.
Liquor License Agreement shall mean that certain Liquor License Agreement among Borrower, Lender, Manager and certain Affiliates of the Borrower party thereto, as the same may be amended, restated, replaced or otherwise modified from time to time.
Loan shall mean the loan made by Lender to Borrower pursuant to this Agreement.
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Loan Documents shall mean, collectively, this Agreement, the Note, the Mortgages, the Environmental Indemnity, the Assignment of Management Agreement, the Guaranty, the Cash Management Agreement, the Interest Rate Cap Agreement, the Assignment of Interest Rate Cap Agreement, the Contribution Agreement, the Property Account Agreements, the Liquor License Agreement, the Concentration Account Agreements, the Master Concentration Account Agreements, the Deductible Guaranty and all other documents executed in connection with the Loan.
Loan-to-Value Ratio shall mean, as of the date of its calculation, the ratio of (a) the outstanding principal amount of the Loan as of the date of such calculation to (b) the fair market value of the Properties (for purposes of the REMIC provisions, counting only real property and excluding any personal property or going concern value), as determined, in Lenders reasonable discretion, by any commercially reasonable method permitted to a REMIC Trust.
London Business Day shall mean any day other than (a) a Saturday, (b) a Sunday, or (c) any other day on which commercial banks in London, England are not open for business.
Management Agreement shall mean, with respect to each Individual Property, the applicable management agreement more particularly described on Schedule 1.10 attached hereto, between the applicable Individual Borrower, and Manager, as the same may be amended or modified from time to time in accordance with the terms and provisions of this Agreement and as supplemented and modified by the terms of the applicable Assignment of Management Agreement, or, if the context requires, the Replacement Management Agreement executed in accordance with the terms and provisions of this Agreement.
Manager shall mean, with respect to each Individual Property, the applicable manager identified on Schedule 1.5 attached hereto, or, if the context requires, a Qualified Manager who is managing the Properties or any Individual Property in accordance with the terms and provisions of this Agreement pursuant to a Replacement Management Agreement.
Manager Accounts shall mean, with respect to any Management Agreement, the segregated bank accounts maintained by the Manager thereunder in the name of and as agent for, the applicable Individual Borrower with respect to the applicable Individual Property in accordance with the terms of such Management Agreement.
Manager Required Payments shall mean all payments which the Manager is authorized to make with Rents pursuant to the Management Agreement or as confirmed in the Assignment of Management Agreement, including, without limitation: Taxes, Other Charges, Insurance Premiums, Debt Service, Ground Rent, management fees, FF&E, Capital Expenditures Operating Expenses, emergency repair costs, tenant improvement and leasing commission costs, working capital and other required reserves and Hotel Taxes and Custodial Funds.
Master Concentration Account shall have the meaning set forth in Section 2.6.1(a)(iv) .
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Master Concentration Account Agreement shall mean those certain account control agreements by and between Borrower, Lender and the applicable Master Concentration Bank.
Master Concentration Bank shall mean those certain banks set forth on Schedule 2.6.1(a)(iv) and any replacement Eligible Institution.
Material Action means, with respect to Borrower, any Bankruptcy Action.
Material Lease shall mean any Lease (other than the Ground Lease) demising a premises within any Individual Property that is more than (a) 25,000 rentable square feet or (b) during a Cash Trap Period, 10,000 rentable square feet.
Material Property Agreements shall mean those agreements set forth on Schedule 4.1.47 hereof.
Maturity Date shall mean (a) with respect to Component A, the Component A Maturity Date and (b) with respect to Component B, November 1, 2018, or in each case, such other date on which the outstanding principal balance of the Loan becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.
Maximum Legal Rate shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.
Monthly Debt Service Payment Amount shall mean, on each Payment Date, the amount equal to interest which accrues on each Component of the Loan (a) with respect to Component A, for the Interest Period in which the Payment Date occurs and (b) with respect to Component B, the immediately preceding Interest Period, in each case calculated in accordance with Section 2.2 hereof.
Moodys shall mean Moodys Investors Service, Inc.
Morningstar shall mean Morningstar Credit Ratings, LLC, or any of its successors in interest, assigns, and/or changed entity name or designation resulting from any acquisition by Morningstar, Inc. or other similar entity of Morningstar Credit Ratings, LLC.
Mortgage shall mean with respect to each Individual Property, those certain first priority fee and/or leasehold Mortgage, Assignment of Leases and Rents and Security Agreement, Deed of Trust, Deed to Secure Debt or similar agreement dated as of the Closing Date, executed and delivered by the related Individual Borrower to Lender as security for the Loan and encumbering such Individual Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
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Net Operating Income shall mean, for any period, the amount obtained by subtracting Operating Expenses for such period from Gross Income from Operations for such period.
Net Proceeds shall have the meaning set forth in Section 6.4(b) hereof.
Net Proceeds Deficiency shall have the meaning set forth in Section 6.4(b)(vi) hereof.
Net Worth shall mean an entitys market value assets minus its outstanding liabilities as determined by (x) an as-is FIRREA compliant appraisal in connection with any valuation of the initial Guarantor, ordered by Lender at Borrowers sole cost and expense; provided that Borrower shall not be required to pay for such appraisal until the second (2 nd ) anniversary of the Closing Date and in no event more than one (1) time per calendar year, or (y) GAAP in connection with any valuation of any Qualified Transferee or Qualified Public Company (other than the initial Guarantor).
New Note shall have the meaning set forth in Section 9.1.3 hereof.
New Orleans Outparcel shall have the meaning set forth in Section 2.5.5 hereof.
Note shall mean (i) that certain Promissory Note A-1, dated the date hereof, in the principal amount of Nine Hundred Sixty-Two Million Five Hundred Thousand and No/100 Dollars ($962,500,000.00), made by Borrower in favor of JPMorgan Chase Bank, National Association, (ii) that certain Promissory Note A-2, dated the date hereof, in the principal amount of Nine Hundred Sixty-Two Million Five Hundred Thousand and No/100 Dollars ($962,500,000.00) made by Borrower in favor of German American Capital Corporation, (iii) that certain Promissory Note A-3, dated the date hereof, in the principal amount of Five Hundred Twenty-Five Million and No/100 Dollars ($525,000,000.00) made by Borrower in favor of Bank of America, N.A., (iv) that certain Promissory Note A-4, dated the date hereof in the principal amount of Five Hundred Twenty-Five Million and No/100 Dollars ($525,000,000.00) made by Borrower to GS Commercial Real Estate LP, and (v) that certain Promissory Note A-5, dated the date hereof in the principal amount of Five Hundred Twenty-Five Million and No/100 Dollars ($525,000,000.00) made by Borrower to Morgan Stanley Mortgage Capital Holdings LLC, as each of the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. Each Note shall represent a pro rata portion of each Component.
O&M Program shall have the meaning set forth in Section 5.1.34 hereof.
Officers Certificate shall mean a certificate delivered to Lender by Borrower which is signed by an authorized senior officer of Borrower or the general partner, managing member or sole member of Borrower, as applicable.
Operating Account shall have the meaning set forth in Section 2.6.1(a)(v) .
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Operating Account Agreement shall mean that certain account control agreement by and between Borrower, Lender and Operating Concentration Bank.
Operating Bank shall mean that certain bank set forth in Section 2.6.1(a)(v) .
Operating Expenses shall mean, without duplication, the sum of all ordinary costs and expenses of operating, maintaining, directing, managing and supervising the Properties (excluding, (i) depreciation and amortization, (ii) any Debt Service in connection with the Loan, (iii) any Capital Expenditures in connection with the Properties, or (iv) any deposits made to the Reserve Funds, (v) leasing commissions, (vi) non-recurring items, and (vii) the costs of any other things specified to be done or provided at Borrowers or Managers (on behalf of Borrower) sole expense), incurred by Borrower or Manager (as agent for the Borrower) pursuant to the Management Agreement, including any Department Expenses and Undistributed Operating Expenses (each as defined in the Uniform System of Accounts) or as otherwise specifically provided therein, which are properly attributable to the period under consideration under Borrowers system of accounting, including without limitation: (a) the cost of all food and beverages sold or consumed and of all necessary chinaware, glassware, linens, flatware, uniforms, utensils and other items of a similar nature, including such items bearing the name or identifying characteristics of the hotels (but excluding FF&E) as Borrower and/or Manager shall reasonably consider appropriate ( Operating Equipment ) and paper supplies, cleaning materials, fuel, guest amenities, soaps, shampoos and similar consumable items ( Operating Supplies ) placed in use (other than reserve stocks thereof in storerooms). Operating Equipment and Operating Supplies shall be considered to have been placed in use when they are transferred from the storerooms of the Properties to the appropriate operating departments; (b) salaries and wages of personnel of the Properties, including costs of payroll taxes and employee benefits (which benefits may include, without limitation, a pension plan, medical insurance, life insurance, travel accident insurance and an executive bonus program), and all other expenses not otherwise specifically referred to in this definition which are referred to as Administrative and General Expenses in the Uniform System of Accounts, (c) the cost of all other goods and services obtained by Borrower or Manager in connection with its operation of the Properties including, without limitation, heat and utilities, office supplies and all services performed by third parties, including leasing expenses in connection with telephone and data processing equipment, and all existing and any future installations necessary for the operation of the Improvements for hotel purposes (including, without limitation, heating, lighting, sanitary equipment, air conditioning, laundry, refrigerating, built in kitchen equipment, telephone equipment, communications systems, computer equipment and elevators), Operating Equipment and existing and any future furniture, furnishings, wall coverings, fixtures and hotel equipment necessary for the operation of the building for hotel purposes which shall include all equipment required for the operation of kitchens, bars, laundries, (if any) and dry cleaning facilities (if any), office equipment, cleaning and engineering equipment and vehicles; (d) the cost of repairs to and maintenance of the Properties (other than of a capital nature); (e) insurance premiums for general liability insurance, workers compensation insurance or insurance required by similar employee benefits acts and such business interruption or other insurance as may be provided for protection against claims, liabilities and losses arising from the operation of the Properties (as distinguished from any property damage insurance on the Properties building or its contents) and losses incurred on any self-insured risks of the foregoing types, provided that Borrower has specifically approved in advance such self-insurance or insurance is unavailable to cover such risks
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(premiums on policies for more than one year will be pro-rated over the period of insurance and premiums under blanket policies will be allocated among properties covered); (f) all Taxes and Other Charges (other than federal, state or local income taxes and franchise taxes or the equivalent) payable by or assessed against Borrower with respect to the operation of the Properties; (g) legal fees and fees of any firm of independent certified public accounts designated from time to time by Borrower (the Independent CPA ) for services directly related to the operation of the Properties, reasonably acceptable to Lender; (h) the costs and expenses of technical consultants and specialized operational experts for specialized services in connection with non-recurring work on operational, legal, functional, decorating, design or construction problems and activities, including the reasonable fees of Guarantor or any subsidiary of Guarantor in connection therewith, provided that such employment of Guarantor or any such subsidiary of Guarantor is reasonably approved in advance by Lender; provided , further , however , that if such costs and expenses have not been included in an approved budget, then, during a Debt Yield Trigger Period, if such costs exceed $10,000 in any one instance the same shall be subject to the reasonable approval by Lender; (i) all expenses for advertising for the Properties and all expenses of sales promotion and public relations activities; (j) all out-of-pocket expenses and disbursements determined by the Independent CPA to have been reasonably, properly and specifically incurred by Borrower, Manager, Guarantor or any of their Affiliates pursuant to, in the course of and directly related to, the management and operation of the Properties under the Management Agreement (without limiting the generality of the foregoing, such charges may include all reasonable travel, telephone, telegram, radiogram, cablegram, air express and other incidental expenses, but, shall exclude costs relating to the offices maintained by Borrower, Manager, Guarantor or any of their Affiliates other than the offices maintained at the Individual Property for the management of such Individual Property and excluding transportation costs of Borrower or Manager related to meetings between Borrower and Manager with respect to administration of the Management Agreement or of the Properties involving travel away from such partys principal executive offices); (k) the cost of any reservations system, any accounting services or other group benefits, programs or services from time to time made available to properties in the Borrowers system, including, without limitation, any provided by any Manager; (l) the cost associated with any retail Leases; (m) any management fees, basic and incentive fees or other fees and reimbursables paid or payable to Manager under the Management Agreement; (n) Ground Rent payable under each Ground Lease and common area charges or assessments payable by Borrower as a member of a Condominium, Declaration or other Property Agreement; and (o) all costs and expenses of owning, maintaining, conducting and supervising the operation of the Property to the extent such costs and expenses are not included above.
Organizational Documents means as to any Person, the certificate of incorporation and by-laws with respect to a corporation; the certificate of organization and operating agreement with respect to a limited liability company; the certificate of limited partnership and partnership agreement with respect to a limited partnership, or any other organizational or governing documents of such Person.
Other Charges shall mean all Ground Rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining any Individual Property, now or hereafter levied or assessed or imposed against such Individual Property or any part thereof.
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Other Connection Taxes shall mean, with respect to any Lender or agent thereof, Section 2.7 Taxes imposed as a result of a present or former connection between such Lender or agent thereof and the jurisdiction imposing such Section 2.7 Tax (other than connections arising from such Lender or agent having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
Other Obligations shall have the meaning as set forth in the Mortgages.
Other Taxes shall mean any present or future stamp, court, documentary, intangible, recording, filing or similar excise or property Section 2.7 Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or from the registration, receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except (i) any such Section 2.7 Taxes that are Other Connection Taxes imposed with respect to an assignment and (ii) any prohibited transaction excise tax arising from any Lenders use of plan assets of any benefit plan investor within the meaning of the Plan Asset Regulations.
Outparcel shall have the meaning set forth in Section 2.5.5 hereof.
Parcel Release Price shall have the meaning set forth in Section 2.5.6 hereof.
Participant Register shall have the meaning set forth in Section 9.7 hereof.
Payment Date shall mean, with respect to any Component, the first (1st) day of each calendar month during the term of the Loan, or if such date is not a Business Day, the immediately preceding Business Day and the first Payment Date for purposes of this Agreement shall be December 1, 2013.
Permitted Assumption shall have the meaning given thereto in Section 5.2.10(e) .
Permitted Debt shall mean, collectively (a) the Note and the other obligations, indebtedness and liabilities specifically provided for in any Loan Document and secured by the Mortgages and the other Loan Documents, and (b) trade payables incurred in the ordinary course of Borrowers business, not secured by Liens on any one or more Individual Properties (other than Liens being properly contested in accordance with the provisions of this Agreement) and customary purchase money security interests of sellers of goods, provided that such trade payables and purchase money security interests in respect of each Individual Property (excluding Capital Expenditures and Basic Carrying Costs) (i) do not exceed at any one time in the aggregate three percent (3%) of the original principal amount of the Loan, (ii) are normal and reasonable under the circumstances, (iii) are payable by or on behalf of Borrower for or in respect of the operation of such Individual Property in the ordinary course of the operation of Borrowers business or the routine administration of such Borrowers business, (iv) are paid within sixty (60) days following the later of (A) the date on which such amount is incurred or (B) the date invoiced, and (v) are not evidenced by a note. Nothing contained herein shall be deemed to require Borrower to pay any trade payable, so long as Borrower is in good faith at its
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own expense, and by proper legal proceedings, diligently contesting the validity, amount or application thereof, provided that in each case, at the time of the commencement of any such action or proceeding, and during the pendency of such action or proceeding (w) no Event of Default shall exist and be continuing hereunder, (x) no Individual Property nor any part thereof or interest therein will be in material danger of being sold or forfeited, (y) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure the payment any amounts contested, together with all interest and penalties thereon, and (z) such contest operates to suspend collection or enforcement, as the case may be, of the contested amount.
Permitted Encumbrances shall mean, with respect to an Individual Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policies relating to such Individual Property or any part thereof (including liens disclosed in the title commitments for which Lender has either received affirmative coverage or for which the title insurance company has received adequate protections to remove such items as exceptions from the Title Insurance Policy and such items were so removed), (c) Liens, if any, for Section 2.7 Taxes, Taxes and Other Charges imposed by any Governmental Authority not yet due or delinquent or which are contested in good faith by appropriate proceedings and for which Borrower has set aside adequate reserves on its books, (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lenders sole discretion, (e) all immaterial easements, rights-of-way, restrictions and other similar non-monetary encumbrances recorded against and affecting such Individual Property and that do not materially and adversely affect (i) the ability of Borrower to pay any of its obligations to any Person as and when due (ii) the marketability of title to such Individual Property, (iii) the fair market value of such Individual Property, or (iv) the use or operation of such Individual Property, (f) rights of Tenants as Tenants only, (g) customary purchase money security interests of sellers of goods that satisfy the conditions set forth in the definition of Permitted Debt and (h) that certain Second Amendment to Improvement, Operation and Reciprocal Easement Agreement, dated on or about the date hereof with respect to the Individual Property known as Hilton New Orleans Riverside in substantially the form and substance provided to Lender on the Closing Date.
Permitted Equipment Transfer shall mean the Transfer of FF&E and/or Personal Property that is either being replaced or that is no longer necessary in connection with the operation of an Individual Property, provided (x) no Event of Default is continuing and (y) such Transfer will not materially and adversely affect the value, use or operation of such Individual Property.
Permitted Investments shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by Servicer, or any trustee under any Securitization or any of their respective Affiliates, payable on demand or having a maturity date not later than the Business Day immediately prior to the first Payment Date following the date of acquiring such investment and meeting one of the appropriate standards set forth below:
(a) obligations of, or obligations directly and unconditionally guaranteed as to principal and interest by, the U.S. government or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America and have maturities not in excess of one year;
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(b) federal funds, unsecured certificates of deposit, time deposits, bankers acceptances, and repurchase agreements having maturities of not more than 90 days of any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia, the short-term debt obligations of which are rated (a) A-1+ (or the equivalent) by S&P and, if it has a term in excess of three months, the long-term debt obligations of which are rated AAA (or the equivalent) by S&P, and that (1) is at least adequately capitalized (as defined in the regulations of its primary Federal banking regulator) and (2) has Tier 1 capital (as defined in such regulations) of not less than $1,000,000,000, (b) in one of the following Moodys rating categories: (1) for maturities less than one month, a long-term rating of A2 or a short-term rating of P-1, (2) for maturities between one and three months, a long-term rating of A1 and a short-term rating of P-1, (3) for maturities between three months to six months, a long-term rating of Aa3 and a short-term rating of P-1 and (4) for maturities over six months, a long-term rating of Aaa and a short-term rating of P-1, or such other ratings as confirmed in a Rating Agency Confirmation and (c) in one of the following Fitch rating categories: (1) for maturities less than three months, a long term rating of A and a short term rating of F-1 and (2) for maturities greater than three months, a long-term rating of AA- and a short term rating of F-1+;
(c) deposits that are fully insured by the Federal Deposit Insurance Corp. ( FDIC );
(d) commercial paper rated (a) A1+ (or the equivalent) by S&P and having a maturity of not more than 90 days, (b) in one of the following Moodys rating categories: (i) for maturities less than one month, a long-term rating of A2 or a short-term rating of P-1, (ii) for maturities between one and three months, a long-term rating of A1 and a short-term rating of P-1, (iii) for maturities between three months to six months, a long-term rating of Aa3 and a short-term rating of P-1 and (iv) for maturities over six months, a long-term rating of Aaa and a short-term rating of P-1 and (c) in one of the following Fitch rating categories: (1) for maturities less than three months, a long term rating of A and a short term rating of F-1 and (2) for maturities greater than three months, a long-term rating of AA- and a short term rating of F-1+;
(e) any money market funds that (a) has substantially all of its assets invested continuously in the types of investments referred to in clause (i) above, (b) has net assets of not less than $5,000,000,000, and (c) has the highest rating obtainable from S&P and Moodys; and
(f) such other investments as to which each Approved Rating Agency shall have delivered a Rating Agency Confirmation.
Notwithstanding the foregoing, Permitted Investments (i) shall exclude any security with the S&Ps r symbol (or any other Approved Rating Agencys corresponding symbol) attached to the rating (indicating high volatility or dramatic fluctuations in their expected returns because of
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market risk), as well as any mortgage-backed securities and any security of the type commonly known as strips; (ii) shall be limited to those instruments that have a predetermined fixed dollar of principal due at maturity that cannot vary or change; (iii) shall only include instruments that qualify as cash flow investments (within the meaning of Section 860G(a)(6) of the Code); and (iv) shall exclude any investment where the right to receive principal and interest derived from the underlying investment provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment. Interest may either be fixed or variable, and any variable interest must be tied to a single interest rate index plus a single fixed spread (if any), and move proportionately with that index. No investment shall be made which requires a payment above par for an obligation if the obligation may be prepaid at the option of the issuer thereof prior to its maturity. All investments shall mature or be redeemable upon the option of the holder thereof on or prior to the earlier of (x) three months from the date of their purchase and (y) the Business Day preceding the day before the date such amounts are required to be applied hereunder.
Permitted Transfe r shall mean any of the following: (a) any transfer, directly as a result of the death of a natural person, of stock, membership interests, partnership interests or other ownership interests previously held by the decedent in question to the Person or Persons lawfully entitled thereto, (b) any transfer, directly as a result of the legal incapacity of a natural person, of stock, membership interests, partnership interests or other ownership interests previously held by such natural person to the Person or Persons lawfully entitled thereto, (c) any Transfer permitted without the consent of Lender pursuant to the provisions of Section 5.2.10(d) hereof, (d) any Sale or Pledge of an Excluded Entity, (e) any Sale or Pledge of the direct interests in Guarantor so long as after giving effect to such Sale or Pledge, an Excluded Entity or Qualified Transferee continues to control and own at least 50.1% of the indirect interests in Borrower, (f) any Lease of space in any of the Improvements to Tenants in accordance with the provisions of Section 5.1.21 , (g) Permitted Encumbrances, (h) Permitted Equipment Transfers and (i) the release of any Property or portion thereof (or an Unencumbered Borrower) in connection with a release in accordance with Section 2.5 or Section 6.4 hereof.
Person shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
Personal Property shall have the meaning set forth in the granting clause of the Mortgage with respect to each Individual Property.
Phase I Environment Report shall mean those certain phase I environmental reports delivered to Lender with respect to each of the Properties.
Plan Asset Regulations shall have the meaning set forth in Section 4.1.9 hereof.
Policies shall have the meaning set forth in Section 6.1(b) hereof.
Policy shall have the meaning set forth in Section 6.1(b) hereof.
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Pre-Approved Alterations shall have the meaning set forth in Section 5.22 hereof.
Prepayment Premium shall mean:
(a) with respect to all voluntary prepayments of the Loan that in the aggregate (together with all voluntary prepayments made prior to or contemporaneously therewith) do not exceed $875,000,000.00, zero,
(b) with respect to all voluntary prepayments of the Loan that (i) in the aggregate (together with all voluntary prepayments made prior to or contemporaneously therewith) exceed $875,000,000.00, but are less than or equal to $2,187,500,000 and (ii) are made prior to the applicable First Call Protection End Date, the Yield Maintenance Premium (calculated through and including the First Call Protection End Date);
(c) with respect to all voluntary prepayments of the Loan that (i) in the aggregate (together with all voluntary prepayments made prior to or contemporaneously therewith) exceed $2,187,500,000 and (ii) are made prior to the Second Call Protection End Date, the Yield Maintenance Premium (calculated through and including the Second Call Protection End Date), and
(d) with respect to all other voluntary prepayments of the Loan, zero.
Prepayment Notice shall have the meaning specified in Section 2.4.1(a) .
Prepayment Rate shall mean the bond equivalent yield (in the secondary market) on the United States Treasury Security that as of the Prepayment Rate Determination Date has a remaining term to maturity closest to, but not exceeding, the remaining term to the Yield Maintenance End Date, as determined by Lender on the basis of Statistical Release H.15 (519), Selected Interest Rates, or any successor publication, published by the Board of Governors of the Federal Reserve System, or on the basis of such other publication or statistical guide as Lender may reasonably select. If more than one issue of United States Treasury Securities has the remaining term to the Maturity Date, the Prepayment Rate shall be the yield on such United States Treasury Security most recently issued as of the Prepayment Rate Determination Date. The rate so published shall control absent manifest error.
Prepayment Rate Determination Date shall mean the date which is five (5) Business Days prior to the date that such prepayment shall be applied in accordance with the terms and provisions of Section 2.4 hereof.
Prime Rate shall mean the annual rate of interest publicly announced by JPMorgan Chase Bank, National Association, in New York, New York, as its base rate, as such rate shall change from time to time. If JPMorgan Chase Bank, National Association, ceases to announce a base rate, Prime Rate shall mean the rate of interest published in The Wall Street Journal from time to time as the Prime Rate. If The Wall Street Journal ceases to publish the Prime Rate, the Lender shall select an equivalent publication that publishes such Prime Rate, and if such Prime Rates are no longer generally published or are limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall select a comparable interest rate index. Notwithstanding the foregoing, in no event shall the Prime Rate be less than zero.
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Prime Rate Component shall mean Component A at such time as interest thereon accrues at a rate of interest based upon the Prime Rate plus the Prime Rate Spread.
Prime Rate Spread shall mean, with respect to Component A, the difference (expressed as the number of basis points) between (a) LIBOR plus the Spread for such Component on the date LIBOR was last applicable to the Loan, minus (b) the Prime Rate on the date that LIBOR was last applicable to the Loan; provided , however , in no event shall such difference be a negative number.
Principal shall mean the Special Purpose Entity that is the general partner of an Individual Borrower, if such Individual Borrower is a partnership, or managing member of an Individual Borrower, if such Individual Borrower is a limited liability company other than a single-member Delaware limited liability company.
Priority Waterfall Payments shall mean the payment of Taxes, Insurance, Hotel Taxes and Custodial Funds and Ground Rent in accordance with Section 2.6.2(e) of this Agreement; provided , that such amounts have not previously been paid or reserved for by Manager as Manager Required Payments.
Property or Properties shall mean, collectively, each and every Individual Property which is subject to the terms of this Agreement.
Property Account shall have the meaning set forth in Section 2.6.1(a)(i) .
Property Account Agreement shall mean those certain account control agreements by and between Borrower, Lender and the applicable Property Bank.
Property Account Charges shall mean payments with respect to bank fees, change orders and returned checks due to insufficient funds with respect to the applicable Property Account.
Property Bank shall mean those certain banks set forth on Section 2.6.1(a)(i) and any replacement Eligible Institution.
Property Conditions Reports shall mean those certain property condition reports delivered to Lender with respect to each of the Individual Properties.
Property Reports shall mean the Property Condition Reports, the Phase I Environmental Reports and the PZR Reports delivered to Lender in connection with the Loan.
Provided Information shall mean any and all financial and other information provided at any time prepared by, or on behalf of, Borrower, Principal, any Affiliated Manager and/or Guarantor.
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Public Sale shall mean (a) the Sale or Pledge in one or a series of transactions, of all of the direct or indirect legal or beneficial interests in Borrower (other than an Excluded Entity) to a Qualified Public Company, (b) any event whereby Guarantor or any direct or indirect subsidiary (other than any Individual Borrower) or parent of Guarantor (other than an Excluded Entity) becomes a Qualified Public Company pursuant to an initial public offering where $200,000,000 or more of shareholder equity in such Qualified Public Company has been sold to third parties in the public market or (c) the Sale or Pledge in one or a series of transactions, through any direct or indirect owner of a legal or beneficial interest in Borrower (other than with respect to an Excluded Entity) becomes, or is merged with or into, a Qualified Public Company.
Public Vehicle shall mean a Person whose securities are listed and traded on the New York Stock Exchange, AMEX, NASDAQ, the Frankfurt Stock Exchange, the London Stock Exchange, Euronext or the Luxembourg Stock Exchange and shall include a majority owned subsidiary of any such Person or any operating partnership through which such Person conducts all or substantially all of its business.
PZR Reports shall mean those certain zoning reports delivered to Lender with respect to each of the Properties.
Qualified Manager shall mean either (a) Manager; (b) any Affiliate of Hilton Worldwide Inc., (c) any of the entities set forth on Schedule 1.11 hereto with respect to each applicable Individual Property; (d) any management company Controlled by or under common Control with any management company set forth on Schedule 1.11 ; or (e) a reputable and experienced management organization (which may be an Affiliate of Borrower) possessing experience in managing properties similar in size, scope, use and value as the Properties that is reasonably acceptable to Lender, provided , that (i) in the case of subclause (e) above if required by Lender following a Securitization, Borrower shall have obtained a Rating Agency Confirmation from the Approved Rating Agencies with respect to such Manager and its management of the Properties and (ii) in the case of subclauses (b), (c), (d) and (e) above, if such Person is an Affiliate of Borrower, if required by Lender, Borrower shall have obtained an Additional Insolvency Opinion.
Qualified Public Company shall mean a Public Vehicle with a Net Worth equal to or exceeding $500,000,000 (inclusive of its interest in the Properties) as of the date of the Public Sale.
Qualified Transferee shall mean a Person (i) with a Net Worth equal to or exceeding $500,000,000 (exclusive of its interest in the Properties) as of the date of the Public Sale or Permitted Assumption; (ii) that has not been the subject of a Bankruptcy Action or of a material governmental or regulatory investigation which resulted in a final, nonappealable conviction for criminal activity involving moral turpitude; and (iii) that is (or is Controlled by, Controlling or under common Control with an entity that is) in the management, ownership or operation of commercial real estate hospitality assets. For the avoidance of doubt, there shall be no ongoing net worth covenants for a Qualified Transferee after the date of a Public Sale or Permitted Assumption.
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Ratable Share shall mean, with respect to any Co-Lender, its share of each Component of the Loan based on the proportion of the outstanding principal of such Component of the Loan advanced by such Co-Lender to the total outstanding principal amount of the Loan. The Ratable Share of each Co-Lender on the date of this Agreement after giving effect to the funding of the Loan on the Closing Date is set forth on Schedule 1.6 attached hereto and made a part hereof.
Rating Agencies shall mean each of S&P, Moodys, Fitch and Morningstar or any other nationally recognized statistical rating agency, which has assigned a rating to the Securities.
Rating Agency Confirmation shall mean, collectively, a written affirmation from each of the Approved Rating Agencies that the credit rating of the Securities given by such Approved Rating Agency of such Securities immediately prior to the occurrence of the event with respect to which such Rating Agency Confirmation is sought will not be qualified, downgraded or withdrawn as a result of the occurrence of such event, which affirmation may be granted or withheld in such Approved Rating Agencys sole and absolute discretion. In the event that, prior to a Securitization and at any other given time, no Approved Rating Agency has elected to consider whether to grant or withhold such an affirmation and Lender does not otherwise have an approval right with respect to such event, then the term Rating Agency Confirmation shall be deemed instead to require the written reasonable approval of Lender.
Register shall have the meaning set forth in Section 9.7 hereof.
Related Entities shall have the meaning set forth in Section 5.2.10(e)(v) hereof.
Related Parties shall have the meaning set forth in the definition of Special Purpose Entity.
Related Party shall have the meaning set forth in the definition of Special Purpose Entity.
Release shall mean any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances.
Release Amount shall mean, for any Individual Property, the amount set forth on Schedule 1.7 , as the same may be reduced (a) pursuant to Section 2.4.2 hereof and/or (b) by the Parcel Release Price attributable to any Release Parcel released pursuant to Section 2.5.5 hereof.
Release Debt Yield shall have the meaning set forth in Section 2.5.2(e) hereof.
Release Parcel shall have the meaning set forth in Section 2.5.6 hereof.
Remediation and Remediate shall mean any response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise
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remediate any Hazardous Substance, any actions to prevent, cure or mitigate any Release of any Hazardous Substance, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances.
REMIC Trust shall mean a real estate mortgage investment conduit within the meaning of Section 860D of the Code that holds the Note or a portion thereof.
Rental Agent shall mean Hilton International Puerto Rico, Inc. and its successors and/or assigns.
Rental Management Agreement shall mean those certain Condado Lagoon Villas Rental Pool Agreements between Rental Agent and each owner of a timeshare unit at the Caribe Property.
Rental Management Program shall mean a rental management program managed by the Manager or an Affiliate of Manager (as agent for Borrower) for the rental of any condo-hotel units.
Rents shall mean, with respect to each Individual Property, all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, all other amounts payable as rent under any Lease or other agreement relating to such Individual Property and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or any of their respective agents or employees from any and all sources arising from or attributable to the Individual Property, and proceeds, if any, from business interruption or other loss of income insurance, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational facilities, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager of the hotel or the commercial space located in the Improvements or acquired from others (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing reservations of such space), license, lease, sublease and concession fees and rentals, health club membership fees, food and beverage wholesale and retail sales, service charges, vending machine sales proceeds, if any, from business interruption or other loss of income insurance, any distributions, dividends and/or other payments of cash or other property received by Borrower in connection with any Condominium or Property Agreement and all amounts received by Borrower, Manager or any Affiliate thereof from or with respect to any Rental Management Program.
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Replacement Guarantor shall mean:
(a) a Qualified Transferee (including any Qualified Public Company with a Net Worth equal to or in excess of $500,000,000 (exclusive of its interests in the Properties)); or
(b) a Qualified Public Company (i) with a Net Worth equal to or in excess of $500,000,000 (inclusive of its interests in the Properties); provided , that the Debt Yield as of the date of determination shall equal or exceed twelve percent (12%) or (ii) that delivers the Cash/LC Collateral.
Replacement Guaranty shall have the meaning set forth in Section 5.2.10(f) hereof.
Replacement Interest Rate Cap Agreement shall mean, collectively, one or more interest rate protection agreements, reasonably acceptable to Lender, from an Acceptable Counterparty with terms substantially similar to the Interest Rate Cap Agreement except that the same shall be effective as of the date required in Section 2.2.7(c) ; provided that to the extent any such interest rate protection agreements do not meet the foregoing requirements, a Replacement Interest Rate Cap Agreement shall be such interest rate protection agreements approved in writing by the Approved Rating Agencies with respect thereto.
Replacement Management Agreement shall mean, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, (ii) a management agreement with a Qualified Manager, which management agreement shall (A) have been entered into by Borrower and such Qualified Manager on an arms-length basis and otherwise on commercially reasonable third-party terms and (B) with economic terms and management fees comparable to existing local market rates or (iii) a management agreement with a Qualified Manager, which management agreement shall be reasonably acceptable to Lender in form and substance, provided , with respect to this subclause (iii), following a Securitization, Lender, at its option, may require that Borrower shall have obtained a Rating Agency Confirmation from the Approved Rating Agencies with respect to such management agreement and (b) an assignment of management agreement and subordination of management fees substantially in the form as the Assignment of Management Agreement (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at Borrowers expense.
Replacement Reserve Account shall have the meaning set forth in Section 7.3.1 hereof.
Replacement Reserve Fund shall have the meaning set forth in Section 7.3.1 hereof.
Replacement Reserve Monthly Deposit shall mean an amount equal to the greater of (a) four percent (4%) of aggregate Gross Income from Operations from the Properties for the calendar month that is two (2) calendar months prior to the calendar month in which the applicable deposit to the Replacement Reserve Fund is to be made and (b) the aggregate monthly
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amount required to be reserved by the Manager in the Manager Accounts for payment of the cost of Replacements under the Management Agreement for the Properties for such period. Notwithstanding the foregoing, provided that Borrower is maintaining the Property in accordance with the requirements of the Management Agreement and the Loan Documents, the amount of the Replacement Reserve Monthly Deposit shall be reduced by the aggregate amount of deposits required to be deposited by Borrower in the Manager Account for Replacements for such period, to the extent that Lender shall have received evidence reasonably satisfactory to Lender that Borrower shall have made such deposit.
Replacements shall mean, FF&E, replacements and repairs required to be made to each Individual Property or the Improvements.
Representative Borrower shall have the meaning set forth in Section 10.6 hereof.
Required Debt Yield shall mean a Debt Yield, as determined by Lender, equal to or exceeding eight and twenty-five hundredths percent (8.25%).
Required Repair Account shall have the meaning set forth in Section 7.1.1 hereof.
Required Repair Deadline shall have the meaning set forth in Section 7.1.1 hereof.
Required Repair Fund shall have the meaning set forth in Section 7.1.1 hereof.
Required Repairs shall have the meaning set forth in Section 7.1.1 hereof.
Reserve Accounts shall mean, collectively, the Tax and Insurance Reserve Account, the Replacement Reserve Account, the Required Repair Account, the Ground Lease Reserve Account, the Excess Cash Flow Reserve Account and any other escrow account established pursuant to the Loan Documents.
Reserve Funds shall mean, collectively, the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Required Repairs Fund, the Ground Lease Reserve Fund, the Excess Cash Flow Reserve Fund and any other escrow fund established by the Loan Documents.
Restoration shall mean the repair and restoration of an Individual Property after a Casualty or Condemnation as nearly as possible to the condition the Individual Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.
Restricted Party shall mean (a) Borrower, Principal and Guarantor and (b) any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Borrower, Principal, any Guarantor or any non-member manager but, with respect to this subclause (b), excluding (i) any shareholders or owners of stock or equity interest that are publicly traded on any nationally recognized stock exchange that are not Affiliates of Borrower, Principal or Guarantor (other than any Excluded Entity) and (ii) any Excluded Entity.
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S&P shall mean Standard & Poors Ratings Services.
Sale or Pledge shall mean a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial interest, whether direct or indirect.
Satisfaction Date shall have the meaning set forth in 9.3(d) hereof.
Second Call Protection End Date shall mean the Business Day immediately following the Payment Date in November, 2015.
Section 2.7 Taxes means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Securities shall have the meaning set forth in Section 9.1 hereof.
Securities Act shall have the meaning set forth in Section 9.1.1(h) hereof.
Securitization shall have the meaning set forth in Section 9.1 hereof.
Securitization Vehicle shall mean each REMIC or Grantor Trust into which all or a portion of the Loan has been transferred.
Servicer shall have the meaning set forth in Section 9.5 hereof.
Servicing Agreement shall have the meaning set forth in Section 9.5 hereof.
Severed Loan Documents shall have the meaning set forth in Section 8.2(c) hereof.
Special Purpose Entity shall mean a corporation, limited partnership, general partnership or limited liability company that complies with the following requirements from and after the date hereof unless it has received prior written consent to do otherwise from Lender or a permitted administrative agent thereof, or, while the Loan is securitized, a Rating Agency Confirmation from each of the Approved Rating Agencies, and an Additional Insolvency Opinion, in each case:
(i) is and shall be organized solely for the purpose of (A) in the case of Borrower (other than Holdings Borrower), (I) acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Properties, entering into and performing its obligations under the Loan Documents with Lender, refinancing the Properties in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary
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and appropriate to accomplish the foregoing or (B) in the case of any Principal, acting as a general partner of the limited partnership that owns the related Individual Property or as member of the limited liability company that owns the related Individual Property and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing and (II) in the case of Holdings Borrower, holding direct or indirect interests in the Individual Borrowers and Principals;
(ii) has not engaged and shall not engage in any business unrelated to the activities set forth in clause (i) of this definition;
(iii) has not owned and shall not own any real property other than in the case of Borrower, the Properties;
(iv) does not have, shall not have and at no time had any assets other than (A) in the case of each Individual Borrower (other than Holdings Borrower), the related Individual Property and personal property necessary or incidental to its ownership and operation of such Individual Property, (B) in the case of any Principal, acting as a general partner of the limited partnership that owns the related Individual Property or as member of the limited liability company that owns the related Individual Property and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing, (C) in the case of Holdings Borrower, holding direct or indirect interests in the Individual Borrowers and Principals, and (D) in the case of the Caribe Borrower, its interests in the property management agreement for the property known as the Hilton Ponce (the Prior Management Asset ).
(v) has not engaged in, sought, consented or permitted to and shall not engage in, seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or merger, (B) any sale or other transfer of all or substantially all of its assets or any sale of assets outside the ordinary course of its business, except as permitted by the Loan Documents or (C) in the case of a Principal, any transfer of its partnership or membership interest;
(vi) shall not cause, consent to or permit any amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation, operating agreement or other formation document or organizational document (as applicable) with respect to the matters set forth in this definition without the prior written consent of Lender;
(vii) if such entity is a limited partnership, has and shall have at least one general partner (or in the case of a general partnership, at least two general partners) and has and shall have, as its only general partners, Special Purpose Entities each of which (A) is a corporation or single member Delaware limited liability company, (B) has two (2) Independent Directors or Independent Managers, and (C) holds a direct interest as general partner in the limited partnership of not less than 0.5%;
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(viii) if such entity is a corporation, shall have at least two (2) Independent Directors, and shall not cause or permit the board of directors of such entity to take any Bankruptcy Action with respect to itself or, if the corporation is a Principal, with respect to Borrower;
(ix) if such entity is a limited liability company (other than a limited liability company meeting all of the requirements applicable to a single member limited liability company set forth in this definition of Special Purpose Entity), has and shall have at least one (1) member that is a Special Purpose Entity, that is a corporation or a single-member limited liability company, that has at least two (2) Independent Directors and that directly owns at least one half of one percent (0.5%) of the equity of the limited liability company;
(x) if such entity is a single member limited liability company, (A) is and shall be a Delaware limited liability company, (B) has and shall have at least two (2) Independent Directors or Independent Managers serving as managers of such company, (C) shall not take any Bankruptcy Action, either with respect to itself or, if the company is a Principal, with respect to Borrower in each case, unless two (2) Independent Directors or Independent Managers then serving as managers of the company shall have consented in writing to such action, and (D) has had and shall have two (2) natural persons or one entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the withdrawal or dissolution of the last remaining member of the company;
(xi) has not and shall not (and, if such entity is (a) a limited liability company, has and shall have a limited liability agreement or an operating agreement, as applicable, (b) a partnership, has a partnership agreement, or (c) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity shall not) (1) dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of its assets; (3) amend its organizational documents with respect to the matters set forth in this definition without the consent of Lender; or (4) without the affirmative vote of two (2) Independent Directors or Independent Managers of itself, or, if the corporation is a Principal, with respect to Borrower, take any Bankruptcy Action;
(xii) except with respect to prior financings that have been repaid or otherwise discharged or that will be repaid or discharged as of the closing of the Loan, has at all times been and shall at all times remain solvent and has paid and shall pay its debts and liabilities (including, a fairly allocated portion of any personnel and overhead expenses that it shares with any Affiliate) from its assets as the same shall become due, and has maintained and shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations (in each case, to the extent there exists sufficient cash flow from the operations of the Property to do so; provided , that the foregoing shall not require any member, partner or shareholder of a Special Purpose Entity to make any additional capital contributions to a Special Purpose Entity;
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(xiii) has not failed and shall not fail to correct any known misunderstanding regarding the separate identity of such entity;
(xiv) has maintained and shall maintain its bank accounts, books of account, books and records separate from those of any other Person and, to the extent that it is required to file income tax returns under applicable law, has filed and shall file its own income tax returns, except to the extent that it is required by law to file consolidated tax returns and, if it is a corporation, has not filed and shall not file a consolidated income tax return with any other corporation, except to the extent that it is required by law to file consolidated tax returns;
(xv) has maintained and shall maintain its own records, books, resolutions and agreements;
(xvi) except as contemplated by the Loan Documents and the Management Agreement (where Manager is acting as the agent of Borrower) with respect to each other Borrower and with respect to prior financings which have been repaid in full, has not commingled and shall not commingle its funds or assets with those of any other Person and has not participated and shall not participate in any cash management system with any other Person;
(xvii) has held and shall hold its assets in its own name;
(xviii) has conducted and shall conduct its business in its name or in a name franchised or licensed to it by Manager ( provided , Borrower may have conducted its business through an Affiliate of itself or of Borrower or an entity that acted as manager solely as an agent for the Borrower under a prior financing that has been fully repaid as of the date hereof) except for business conducted on behalf of itself by another Person under a business management services agreement that is on commercially reasonable terms, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of such Special Purpose Entity;
(xix) (A) has maintained and shall maintain its financial statements, accounting records and other entity documents separate from those of any other Person; (B) has shown and shall show, in its financial statements, its asset and liabilities separate and apart from those of any other Person; and (C) has not permitted and shall not permit its assets to be listed as assets on the financial statement of any of its Affiliates except as required by GAAP or the Uniform System of Accounts, provided , however , that any such consolidated financial statement contains a note indicating that the Special Purpose Entitys separate assets and credit are not available to pay the debts of such Affiliate and that the Special Purpose Entitys liabilities do not constitute obligations of the consolidated entity, except as provided herein with respect to each other Borrower;
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(xx) has paid and shall pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, provided there is sufficient cash flow to do so, and has maintained and shall maintain a sufficient number of employees, if any, in light of its contemplated business operations;
(xxi) has observed and shall observe all partnership, corporate or limited liability company formalities, as applicable;
(xxii) reserved;
(xxiii) following the Closing Date, (A) Borrower shall have no Indebtedness other than (I) the Loan, (II) Permitted Debt, (III) such Indebtedness as may be required pursuant to the Ground Leases, and (IV) such other liabilities that such Special Purpose Entity is expressly permitted to incur pursuant to this Agreement or as otherwise imposed by law and (B) Principals shall have no Indebtedness;
(xxiv) except as expressly permitted pursuant to the terms of any prior financing and except for guarantees or obligations, in each case, that have been released or discharged or that will be released or discharged as of the closing of the Loan, has not assumed, guaranteed or become obligated and shall not assume or guarantee or become obligated for the debts of any other Person, has not held out and shall not hold out its credit as being available to satisfy the obligations of any other Person or has not pledged and shall not pledge its assets to secure the obligations of any other Person, in each case except as permitted pursuant to this Agreement with respect to each other Borrower or, in the case of Principal or required by applicable law with respect to the liabilities of the partnership of which Principal is a general partner;
(xxv) has not acquired and shall not acquire obligations or securities of its partners, members or shareholders or any other owner or Affiliate;
(xxvi) has allocated and shall allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing (individually, a Related Party and collectively, the Related Parties ), including, but not limited to, paying for shared office space and for services performed by any employee of an Affiliate;
(xxvii) has maintained and used and shall maintain and use separate stationery, invoices and checks bearing its name and not bearing the name of any other entity unless such entity is clearly designated as being the Special Purpose Entitys agent;
(xxviii) reserved;
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(xxix) has held itself out and identified itself and shall hold itself out and identify itself as a separate and distinct entity under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of such Special Purpose Entity and not as a division or part of any other Person,
(xxx) has maintained and shall maintain its assets in such a manner that it shall not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;
(xxxi) except as expressly permitted pursuant to the terms of any prior financing and except for loans, in each case, that have been released or discharged or that will be released or discharged as of the closing of the Loan, has not made and shall not make loans to any Person and has not held and shall not hold evidence of indebtedness issued by any other Person or entity (other than cash and investment grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity;
(xxxii) has not identified and shall not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or department or part of it, and has not identified itself and shall not identify itself as a division or department of any other Person;
(xxxiii) other than capital contributions and distributions permitted under the terms of its organizational documents, has not entered into or been a party to, and shall not enter into or be a party to, any transaction with any of its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable terms comparable to those of an arms length transaction with an unrelated third party;
(xxxiv) has not had and shall not have any obligation to, and has not indemnified and shall not indemnify its partners, officers, directors or members, as the case may be, in each case unless such an obligation or indemnification is fully subordinated to the Debt and shall not constitute a claim against it in the event that its cash flow is insufficient to pay the Debt;
(xxxv) if such entity is a corporation, has considered and shall consider the interests of its creditors in connection with all corporate actions;
(xxxvi) except with respect to prior financings that have been repaid or otherwise discharged or that will be repaid or discharged as of the closing of the Loan, has not had shall not have any of its obligations guaranteed by any Affiliate except as provided by the Loan Documents with respect to (A) each other Borrower and (B) the Guaranty, the Deductible Guaranty and Environmental Indemnity;
(xxxvii) except as set forth on Schedule 4.1.30 hereof and except in the case of Holdings Borrower, with respect to its equity interests in other Individual Borrowers or Principal, has not formed, acquired or held and shall not form, acquire or hold any subsidiary; provided , that a Principal may acquire and hold its interest in the related Individual Borrower;
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(xxxviii) has complied and shall comply with all of the terms and provisions contained in its organizational documents;
(xxxix) has conducted and shall conduct its business so that each of the assumptions made about it and each of the facts stated about it in the Insolvency Opinion, or if applicable, any Additional Insolvency Opinion, are true;
(xl) has not permitted and shall not permit any Affiliate or constituent party (other than Manager, solely in its capacity as an agent of Borrower) independent access to its bank accounts, except as expressly permitted in any prior financing or as contemplated in the Loan Documents (other than Manager, solely in its capacity as an agent of Borrower);
(xli) is, has always been and shall continue to be duly formed, validly existing, and in good standing in the state of its incorporation or formation and in all other jurisdictions where it is qualified to do business;
(xlii) has paid all Section 2.7 Taxes which it owes and is not currently involved in any dispute with any taxing authority other than taxes that are being contested in good faith by appropriate proceedings;
(xliii) is not now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding that resulted in a judgment against it that has not been paid in full;
(xliv) has no judgments or Liens of any nature against it except for Section 2.7 Tax liens not yet due and the Permitted Encumbrances;
(xlv) has provided Lender with complete financial statements that reflect a fair and accurate view of the entitys financial condition; and
(xlvi) has no material contingent or actual obligations not related to the Property.
Spread shall mean with respect to Component A, 2.65%, which amount shall be increased by twenty-five (25) basis points pursuant to (but not in duplication of) Section 2.8(e) for the period beginning on the commencement of the third Extension Term and ending on the Maturity Date, effective as of the first day of the immediately succeeding Interest Period for Component A.
State shall mean, with respect to an Individual Property, the State or Commonwealth in which such Individual Property or any part thereof is located.
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Strike Price shall mean (a) for the period from the Closing Date through and including the Initial Maturity Date, a rate of not more than six percent (6.00%) and (b) for any Extension Term, the Extension Strike Price.
Survey shall mean a survey of the Individual Property in question prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Insurance Policies, and containing a certification of such surveyor satisfactory to Lender.
Tax and Insurance Escrow Fund shall have the meaning set forth in Section 7.2 hereof.
Tax and Insurance Reserve Account shall have the meaning set forth in Section 7.2 hereof.
Taxes shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against any Individual Property or part thereof.
Tenant shall mean any Person with a possessory right to all or any part of an Individual Property pursuant to a Lease.
Threshold Amount shall have the meaning set forth in Section 5.1.22 hereof.
Title Insurance Policies shall mean, with respect to each Individual Property, an ALTA mortgagee title insurance policy in the form reasonably acceptable to Lender (or, if an Individual Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and reasonably acceptable to Lender) issued with respect to such Individual Property and insuring the lien of the Mortgage encumbering such Individual Property.
Transfer shall have the meaning set forth in Section 5.2.10(b) hereof.
Transferee shall have the meaning set forth in Section 5.2.10(e)(iii) hereof.
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code as in effect in the applicable State in which an Individual Property is located.
Unencumbered Borrower shall have the meaning specified in Section 2.4.2(b) hereof.
Uniform System of Accounts shall mean the Tenth Revised Edition, 2006, of the Uniform System of Accounts for Hotels as adopted by the American Hotel and Motel Association.
U.S. Obligations shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (a) direct obligations of the United States of America for the payment of which its full faith and credit is
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pledged, or (b) to the extent acceptable to the Approved Rating Agencies, other government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended.
U.S. Person means any Person that is a United States Person as defined in Section 7701(a)(30) of the Code.
U.S. Tax Compliance Certificate shall have the meaning set forth in Section 2.7(e) .
Waikoloa Ground Lease shall mean State of Hawaii Department of Land and Natural Resources General Lease No. S-5862 made June 1, 2006, but effective as of August 15, 1997 by and between the State of Hawaii, as lessor, and Global Resort Partners, as lessee, as the same has been and may be further amended, restated, replaced or otherwise modified from time to time.
Waikoloa Outparcel shall have the meaning set forth in Section 2.5.5 hereof.
Waikoloa Outparcel Release Price shall mean $52,800,000.00
Working Capital Peg Balance shall mean the sum of (a) the estimated amount of Manager Required Payments anticipated by Manager in their reasonable business judgment to be incurred in the next thirty (30) days (other than Taxes and Insurance Premiums) and (b) amounts sufficient to pay Taxes and Insurance Premiums, each as reasonably determined by Manager in accordance with the Management Agreement (including any provisions of the Assignment of Management Agreement).
Working Funds shall have the meaning assigned thereto in the Management Agreement.
Yield Maintenance End Date shall mean the First Call Protection End Date and the Second Call Protection End Date, as applicable.
Yield Maintenance Premium shall mean, with respect to any repayment of the outstanding principal balance of Component B prior to the applicable Yield Maintenance End Date, an amount equal to the greater of (a) one percent (1%) of the outstanding principal of the applicable Component of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest to be made with respect to the portion of such Component being prepaid assuming that all scheduled payments are made timely and that the remaining outstanding principal and interest on the portion of the applicable Component being prepaid is paid on the applicable Yield Maintenance End Date with respect to such Component (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid.
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Section 1.2 Principles of Construction . All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word including shall mean including, without limitation unless the context shall indicate otherwise. Unless otherwise specified, the words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.
ARTICLE II
GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower .
2.1.1 Agreement to Lend and Borrow . Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.
2.1.2 Single Disbursement to Borrower . Borrower may request and receive only one (1) borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed. Borrower and Lender acknowledge and agree that the Loan shall be fully funded as of the Closing Date.
2.1.3 The Note, Mortgage and Loan Documents . The Loan shall be evidenced by the Note and secured by the Mortgage and the other Loan Documents.
2.1.4 Use of Proceeds . Borrower shall use the proceeds of the Loan to (a) repay and discharge any existing loans relating to the Properties, (b) pay all past due Basic Carrying Costs, if any, with respect to the Properties, (c) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, (e) fund any working capital requirements of the Properties and (f) distribute the balance, if any, to Borrower.
2.1.5 Components of the Loan . For the purpose of computing interest payable from time to time on the principal amount of the Loan and certain other computations set forth herein, the principal balance of the Loan shall be divided into Component A, Component B-1 and Component B-2. The principal amount of the Components shall be as follows:
COMPONENT |
PRINCIPAL AMOUNT |
INTEREST RATE |
||||
A | $ | 875,000,000.00 | Floating Interest Rate | |||
B-1 | $ | 1,312,500,000.00 | Fixed Interest Rate | |||
B-2 | $ | 1,312,500,000.00 | Fixed Interest Rate |
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Section 2.2 Interest Rate .
2.2.1 Interest Rate . (a) Subject to the provisions of this Section 2.2 , interest on the outstanding principal balance of Component A shall accrue from (and including) the Closing Date to the last day of the Interest Period during which the Maturity Date occurs at the Floating Interest Rate. Borrower shall pay to Lender on each Payment Date the interest accrued (or to be accrued) on the outstanding principal balance of Component A for the related Interest Period.
(b) Subject to the provisions of this Section 2.2 , interest on the outstanding principal balance of Component B shall accrue from (and including) the Closing Date to (but excluding) the Maturity Date at the applicable Fixed Interest Rate. Borrower shall pay to Lender on each Payment Date the interest accrued (or to be accrued) on the outstanding principal balance of Component B for the related Interest Period.
2.2.2 Interest Calculation . Interest on the outstanding principal balance of each Component of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate based on a three hundred sixty (360) day year by (c) the outstanding principal balance of the Loan.
2.2.3 Determination of Interest Rate . (a) Subject to the terms and conditions of this Section 2.2.3 , Component A of the Loan shall bear interest at the Floating Interest Rate. The Floating Interest Rate applicable to any related Interest Period shall be determined by Lender as set forth herein; provided , however , that LIBOR for the Interest Period commencing on the Closing Date through and including November 4, 2013 shall be 0.172%.
(b) In the event that Lender shall have reasonably determined that by reason of circumstances affecting the interbank Eurodollar market LIBOR cannot be determined as provided in the definition of LIBOR as set forth herein, then Lender shall forthwith give notice thereof by telephone of such fact, confirmed in writing, to Borrower at least one (1) Business Day prior to the Determination Date. If such notice is given, Component A of the Loan shall be converted, from and after the first day of the next succeeding Interest Period, to a Prime Rate Loan bearing interest based on the Prime Rate in effect on the related Determination Date.
(c) If, pursuant to the terms of Section 2.2.3(b) above, Component A of the Loan has been converted to a Prime Rate Loan but thereafter LIBOR can again be determined as provided in the definition of LIBOR as set forth herein, Lender may give notice thereof to Borrower and convert the Prime Rate Loan back to a Floating Interest Rate Loan by delivering to Borrower notice of such conversion no later than 11:00 a.m. (New York City Time), three (3) Business Days prior to the next succeeding Determination Date, and the Loan shall be converted to a Floating Interest Rate Loan from, after and including the first day of the next succeeding Interest Period. Notwithstanding any provision of this Agreement to the contrary, in no event shall Borrower have the right to elect to convert a Floating Interest Rate Loan to a Prime Rate Loan.
(d) Intentionally Omitted.
(e) If the adoption of any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Lender to make or
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maintain a Floating Interest Rate Loan as contemplated hereunder, (i) the obligation of Lender hereunder to make a Floating Interest Rate Loan or to convert a Prime Rate Loan to a Floating Interest Rate Loan shall be canceled forthwith and (ii) any outstanding Floating Interest Rate Loan shall be converted automatically to a Prime Rate Loan on the first day of the next succeeding Interest Period or within such earlier period as required by law. Borrower hereby agrees promptly to pay Lender, upon demand, any additional amounts necessary to compensate Lender for any costs incurred by Lender in making any conversion in accordance with this Agreement, including, without limitation, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain the Floating Interest Rate Loan hereunder. Lenders notice of such costs, as certified to Borrower, shall be conclusive absent manifest error.
(f) In the event that any change in any requirement of law or in the interpretation or application thereof, or compliance by Lender with any request or directive (whether or not having the force of law) hereafter issued from any central bank or other Governmental Authority:
(i) shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of LIBOR hereunder;
(ii) shall hereafter have the effect of reducing the rate of return on Lenders capital as a consequence of its obligations hereunder to a level below that which Lender would have under the terms of the Loan Documents achieved but for such adoption, change or compliance (taking into consideration Lenders policies with respect to capital adequacy) by any amount deemed by Lender to be material;
(iii) shall hereafter subject any Lender to any Section 2.7 Taxes (other than (A) Indemnified Taxes, (B) Section 2.7 Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iv) shall hereafter impose on Lender any other condition (other than Section 2.7 Taxes);
and the result of any of the foregoing is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder then, in any such case, Borrower shall promptly pay Lender, upon demand, any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material as determined by Lender in its reasonable discretion. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.2.3(f) , Lender shall provide Borrower with not less than thirty (30) days written notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to
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Borrower shall be conclusive in the absence of manifest error. Subject to Section 2.2.3(h) hereof, this provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under this Agreement and the Loan Documents.
(g) Lender shall not be entitled to claim compensation pursuant to this Section 2.2.3 for any increased cost or reduction in amounts received or receivable hereunder, or any reduced rate of return, which was incurred or which accrued prior to the earlier of (i) ninety (90) days before the date Lender notified Borrower of the change in law or other circumstance on which such claim for compensation is based and delivered to Borrower a written statement setting forth in reasonable detail the basis for the calculation of the additional amounts owed to Lender under this Section 2.2.3 , which statement shall be conclusive and binding on all parties absent manifest error and (ii) any earlier date provided Lender notified Borrower of such change in law or circumstance and delivered the written statement referenced in clause (i) within ninety (90) days after Lender received written notice of such change in law or circumstance.
(h) Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or expense which Lender sustains or incurs as a consequence of (i) any default by Borrower in payment of the principal of or interest on a Floating Interest Rate Loan, including, without limitation, any such loss or expense arising from interest or fees payable by Lender to third-party lenders of funds obtained by it in order to maintain a Floating Interest Rate Loan hereunder, (ii) any prepayment (whether voluntary or mandatory) of the Floating Interest Rate Loan on a day that (A) is not a Payment Date or (B) is a Payment Date if Borrower did not give the prior written notice of such prepayment required pursuant to the terms of this Agreement, including, without limitation, such loss or expense arising from interest or fees payable by Lender to third-party lenders of funds obtained by it in order to maintain the Floating Interest Rate Loan hereunder and (iii) the conversion pursuant to the terms hereof of the Floating Interest Rate Loan to the Prime Rate Loan on a date other than the Payment Date, including, without limitation, such loss or expenses arising from interest or fees payable by Lender to third-party lenders of funds obtained by it in order to maintain a Floating Interest Rate Loan hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein referred to collectively as the Breakage Costs ); provided , however , Borrower shall not indemnify Lender from any loss or expense arising from Lenders willful misconduct or gross negligence. This provision shall survive payment of the Note in full and the satisfaction of all other obligations of Borrower under this Agreement and the other Loan Documents.
2.2.4 Additional Costs . Lender will use reasonable efforts (consistent with legal and regulatory restrictions) to maintain the availability of the Floating Interest Rate Loan and to avoid or reduce any increased or additional costs payable by Borrower under Section 2.2.3 , including, if requested by Borrower, a transfer or assignment of the Loan to a branch, office or Affiliate of Lender in another jurisdiction, or a redesignation of its lending office with respect to the Loan, in order to maintain the availability of the Floating Interest Rate Loan or to avoid or reduce such increased or additional costs, provided that the transfer or assignment or redesignation (a) would not result in any additional costs, expenses or risk to Lender that are not reimbursed by Borrower and (b) would not be disadvantageous in any other respect to Lender (including the effect on any Securitization) as determined by Lender in its reasonable discretion.
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2.2.5 Default Rate . In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, all accrued and unpaid interest in respect of the Loan and any other amounts due pursuant to the Loan Documents, shall accrue interest at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein. If any Component is not repaid on the applicable Maturity Date for such Component, default interest will accrue from and after the applicable Maturity Date for such Component and will be calculated by multiplying (a) the actual number of days elapsed from the date such payment was due for which the calculation is being made by (b) a daily rate based on the applicable Default Rate and a three hundred sixty (360) day year by (c) the outstanding principal balance of each Component.
2.2.6 Usury Savings . This Agreement, the Note and the other Loan Documents are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder.
2.2.7 Interest Rate Cap Agreement . (a) Prior to or contemporaneously with the Closing Date, Borrower shall, with respect to Component A, enter into an Interest Rate Cap Agreement with a LIBOR strike price no greater than the Strike Price. The Interest Rate Cap Agreement (i) shall at all times be in a form and substance reasonably acceptable to Lender with respect to such matters not otherwise set forth in this Agreement, (ii) shall at all times be with an Acceptable Counterparty, (iii) shall direct such Acceptable Counterparty to deposit directly into the Cash Management Account any amounts due Borrower under such Interest Rate Cap Agreement so long as any portion of the Debt related to Component A exists, provided that the Debt shall be deemed to exist if the Properties are transferred by judicial or non-judicial foreclosure or deed in lieu thereof, (iv) shall be for a period equal to the then existing term of Component A of the Loan and (v) shall at all times have a notional amount equal to or greater than the then outstanding principal balance of Component A of the Loan and shall at all times provide for the applicable Strike Price. Borrower shall collaterally assign to Lender, pursuant to the Collateral Assignment of Interest Rate Cap Agreement (the Assignment of Interest Rate Cap Agreement ), all of its right, title and interest to receive any and all payments under the Interest Rate Cap Agreement, and shall deliver to Lender an executed counterpart of such Interest Rate Cap Agreement (which shall, by its terms, authorize the assignment to Lender and require that payments be deposited directly into the Cash Management Account) and shall notify the Acceptable Counterparty of such assignment.
(b) Borrower shall comply with all of its obligations under the terms and provisions of the Interest Rate Cap Agreement. All amounts paid by the Acceptable Counterparty under the Interest Rate Cap Agreement to Borrower or Lender shall be directly deposited immediately into the Cash Management Account or, during the continuance of an
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Event of Default, into such account as specified by Lender. Borrower shall take all actions reasonably requested by Lender to enforce Lenders rights under the Interest Rate Cap Agreement in the event of a default by the Acceptable Counterparty and shall not waive, amend or otherwise modify any of its rights thereunder without Lenders prior consent.
(c) In the event of any downgrade, withdrawal or qualification of the rating of the Acceptable Counterparty by any Approved Rating Agency, Borrower shall replace the Interest Rate Cap Agreement with a Replacement Interest Rate Cap Agreement not later than the period of time provided for in such Interest Rate Cap Agreement following such downgrade, withdrawal or qualification (not to exceed ten (10) Business Days).
(d) In the event that Borrower fails to purchase and deliver to Lender the Interest Rate Cap Agreement or fails to maintain the Interest Rate Cap Agreement in accordance with the terms and provisions of this Agreement, Lender may purchase the Interest Rate Cap Agreement and the cost incurred by Lender in purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost was incurred by Lender until such cost is reimbursed by Borrower to Lender.
(e) In connection with the Interest Rate Cap Agreement, Borrower shall obtain and deliver to Lender (a) a resolution/consent, as applicable, of the Acceptable Counterparty authorizing the delivery of the Interest Rate Cap Agreement acceptable to Lender, and (b) an opinion from counsel (which counsel may be in house counsel for the Acceptable Counterparty) for the Acceptable Counterparty (upon which Lender and its successors and assigns may rely) which shall provide, in relevant part, that:
(i) the Acceptable Counterparty is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or formation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Interest Rate Cap Agreement;
(ii) the execution and delivery of the Interest Rate Cap Agreement by the Acceptable Counterparty, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property;
(iii) all consents, authorizations and approvals required for the execution and delivery by the Acceptable Counterparty of the Interest Rate Cap Agreement, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and
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(iv) the Interest Rate Cap Agreement, and any other agreement which the Acceptable Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by the Acceptable Counterparty and constitutes the legal, valid and binding obligation of the Acceptable Counterparty, enforceable against the Acceptable Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(f) At such time as Component A of the Loan is repaid in full, all of Lenders right, title and interest in and to the Interest Rate Cap Agreement shall terminate and Lender shall execute and deliver such documents as may be required to evidence Lenders release of the Interest Rate Cap Agreement and to notify Acceptable Counterparty of such release.
Section 2.3 Loan Payment .
2.3.1 Monthly Debt Service Payments . Borrower shall pay to Lender (a) on the Closing Date, an amount equal to interest only on the outstanding principal balance of the Loan from the Closing Date up to and including, (i) with respect to Component A, November 4, 2013 and (ii) with respect to Component B, October 31, 2013, which interest shall be calculated in accordance with the provisions of Section 2.2 hereof and (b) commencing on the Payment Date occurring in December, 2013 and on each Payment Date thereafter up to and including the Maturity Date, Borrower shall make a payment to Lender equal to the Monthly Debt Service Payment Amount, which payments shall be applied to interest accrued (or to be accrued) for the related Interest Period.
2.3.2 Payments Generally . The first Interest Period hereunder (a) with respect to Component A, shall commence on and include the Closing Date and shall end on and include November 4, 2013 and (b) with respect to Component B, shall commence on and including the Closing Date and end on October 31, 2013. Thereafter during the term of the Loan, each Interest Period (a) with respect to Component A, shall commence on the fifth (5th) day of the calendar month preceding the calendar month in which the related Payment Date occurs and shall end on and include the fourth (4th) day of the calendar month in which the related Payment Date occurs and (b) with respect to Component B, shall commence on the first day of each calendar month and end on the last day of the calendar month immediately preceding the related Payment Date. For purposes of making payments hereunder, but not for purposes of calculating the applicable Interest Period for any Payment Date, if the day on which such payment is due is not a Business Day, then amounts due on such date shall be due on the immediately preceding Business Day and with respect to payments of principal due on the Maturity Date, interest shall be payable at the Interest Rate or the Default Rate, as the case may be, through and including the last day of the applicable Interest Period. All amounts due under this Agreement and the other Loan Documents shall be payable without setoff, counterclaim, defense or any other deduction whatsoever unless required by applicable law.
2.3.3 Payment on Maturity Date . Borrower shall pay to Lender on the applicable Maturity Date the outstanding principal balance of the Loan, all accrued (or to be accrued) and unpaid interest and all other amounts due hereunder and under the Note, the Mortgages and the other Loan Documents.
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2.3.4 Late Payment Charge . If any principal, interest or any other sums due under the Loan Documents are not paid by Borrower on or prior to the date on which it is due (other than the principal amount due on the applicable Maturity Date), Borrower shall pay to Lender upon demand an amount equal to the lesser of three percent (3%) of such unpaid sum or the Maximum Legal Rate in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such amount shall be secured by the Mortgages and the other Loan Documents to the extent permitted by applicable law.
2.3.5 Method and Place of Payment . Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 11:00 a.m., New York City time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at Lenders office or as otherwise directed by Lender, and any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day.
Section 2.4 Prepayments .
2.4.1 Voluntary Prepayments . Borrower may prepay the Loan in whole or in part provided , that (a) no Event of Default is continuing as of the date of the applicable prepayment; (b) Borrower gives Lender not less than ten (10) days prior written notice of the amount of the Loan that Borrower intends to prepay and the intended date of prepayment which notice shall be revocable by Borrower at any time (the Prepayment Notice ); and (c) Borrower pays Lender, in addition to the outstanding principal amount of the Loan to be prepaid, (i) all interest that would have accrued on the amount of the Loan to be paid through and including the last day of each applicable Interest Period related to the Payment Date following the date of such prepayment or, if such prepayment occurs on a Payment Date, any interest that would have accrued through and including the last day of each Interest Period related to such Payment Date; (ii) all other sums then due and payable under this Agreement, the Note, and the other Loan Documents, including, but not limited to the actual Breakage Costs (if any) and all of Lenders reasonable, actual out-of-pocket costs and expenses (including reasonable attorneys fees and disbursements) incurred by Lender in connection with such prepayment of the Loan and any actual out-of-pocket costs and expenses incurred in connection with a rescinded or extended Prepayment Notice and (iii) the applicable Prepayment Premium.
2.4.2 Mandatory Prepayments .
(a) On the next occurring Payment Date following the date on which Lender actually receives any Net Proceeds relating to an Individual Property, if Lender is not obligated to make such Net Proceeds available to Borrower for the Restoration of any Individual Property or otherwise remit such Net Proceeds to Borrower pursuant to Section 6.4 hereof, Borrower shall prepay or authorize Lender to apply such Net Proceeds as a prepayment of all or a portion of the outstanding principal balance of the Loan together with interest through and including the last day of each applicable Interest Period related to such Payment Date and any other sums due
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hereunder in an amount equal to one hundred percent (100%) of such Net Proceeds up to the Adjusted Release Amount for such Individual Property and any Net Proceeds in excess of the Adjusted Release Amount shall be disbursed to Borrower, it being understood that any such mandatory payments of principal in an amount up to the Adjusted Release Amount for such Individual Property made pursuant to this Section 2.4.2 shall be applied in accordance with Section 2.4.4 . After the occurrence of and during the continuance of an Event of Default, Lender may apply such Net Proceeds to the Debt (until paid in full) in any order or priority in its sole discretion. Other than during the continuance of an Event of Default, no Prepayment Premium or other premium, penalty or charge shall be due in connection with any prepayment made pursuant to this Section 2.4.2 . The Adjusted Release Amount with respect to such Individual Property shall be reduced by an amount equal to the principal portion of such prepayment applied to the Loan; provided , that nothing herein shall be construed to reduce the aggregate Adjusted Release Amount for any Individual Property required to be paid to Lender prior to obtaining a release of the applicable Individual Property. Lender shall provide to Borrower, upon ten (10) days prior notice, (i) a release of the Individual Property (and any related Collateral) if (A) at any time the Adjusted Release Amount is reduced to zero, together with such additional documents and instruments evidencing or confirming the release as the Borrower shall reasonably request, or (B) Lender is required to deliver such release pursuant to a court order issued in connection with a Condemnation or (ii) a release of the portion of an Individual Property that is subject to a Condemnation.
(b) In connection with any release under this Section 2.4.2 , in the event that such release would result in the release of all Individual Properties held by an Individual Borrower (each an Unencumbered Borrower ), such Unencumbered Borrower shall be released by Lender from the obligations of the Loan Documents, except with respect to those obligations that are expressly provided herein to survive repayment of the Loan, and shall no longer be considered an Individual Borrower for purposes of this Agreement. In connection with a release or cancellation of each Unencumbered Borrower, Lender agrees to deliver (i) a UCC-3 Financing Statement termination or amendment releasing Lenders security interest in the collateral pledged to Lender relating to each Unencumbered Borrower, and (ii) instruments executed by Lender reasonably necessary to evidence the release or cancellation of each Unencumbered Borrower from its obligations under the Loan Documents. All reasonable costs and expenses incurred by Lender in connection with such release shall be paid by Borrower.
2.4.3 Prepayments After Default . If, during the continuance of an Event of Default, payment of all or any part of the Debt is tendered by Borrower or otherwise recovered by Lender (including, without limitation, through application of any Reserve Funds), such tender or recovery shall (a) include interest at the Default Rate on the outstanding principal amount of the Loan through the last calendar day of each Interest Period within which such tender or recovery occurs and (b) be deemed a voluntary prepayment by Borrower and shall in all instances include (i) an amount equal to the Prepayment Premium, if any, and (ii) all interest which would have accrued on the amount of the Loan to be paid through the end of each related Interest Period. After the occurrence of and during the continuance of an Event of Default, Lender may apply such payment Proceeds to the Debt (until paid in full) in any order or priority in its sole discretion.
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2.4.4 Application of Principal Payments to Components . Any mandatory prepayment of principal of the Loan made pursuant to Section 2.4.2 hereof and any voluntary prepayments of the principal of the Loan pursuant to Section 2.4.1 hereof or otherwise, shall be applied as follows: (a) first, to the reduction of Component A, until reduced to zero; (b) second, to the reduction of Component B-1, until reduced to zero; and (c) third, to the reduction of the outstanding principal balance of Component B-2, until reduced to zero. After the occurrence of and during the continuance of an Event of Default, Lender may apply such payment to the Components or any other portion of the Debt (until paid in full) in any order or priority in its sole discretion.
2.4.5 Debt Yield Cure . In order to achieve the applicable Required Debt Yield to effect a Debt Yield Cure, Borrower may prepay a portion of the outstanding principal balance of the Loan in the amount necessary to cause the Debt Yield to equal or exceed the applicable Required Debt Yield (each such prepayment, a Debt Yield Cure Payment ), provided that (a) no Event of Default is then continuing, and (b) in each case, Borrower pays Lender, in addition to the outstanding principal amount of the Loan to be prepaid, (i) all interest that would have accrued on the amount of Loan to be paid through and including the last day of each applicable Interest Period related to the Payment Date, or, if such prepayment occurs on a Payment Date, for each applicable Interest Period related to such Payment Date; (ii) all other sums then due and payable under this Agreement, the Note, and the other Loan Documents, including, but not limited to the Breakage Costs and all of Lenders reasonable costs and expenses (including reasonable attorneys fees and disbursements) incurred by Lender in connection with such prepayment; (iii) if such prepayment is made prior to the First Call Protection End Date or the Second Call Protection End Date, the applicable Prepayment Premium.
Section 2.5 Release of Property . Except as set forth in this Section 2.5 or Section 2.4.2 , no repayment or prepayment of all or any portion of the Loan shall cause, give rise to a right to require, or otherwise result in, the release of any Lien of any Mortgage on any Individual Property. For the avoidance of doubt, any prepayment of the Loan in connection with a Condemnation shall be governed solely by Section 2.4.2 and Section 6.3 hereof.
2.5.1 Release of all Properties Upon Payment in Full . (a) If Borrower has elected to prepay the entire Loan and the requirements of Section 2.4 and this Section 2.5 have been satisfied or the Loan is repaid in full on the Maturity Date, all of the Properties shall be released from the Liens of their respective Mortgages.
(b) In connection with the release of the Mortgages, Borrower shall submit to Lender, not less than seven (7) Business Days prior to the Payment Date on which Borrower intends to prepay the Loan in full, a release of Lien (and related Loan Documents) for each Individual Property for execution by Lender. Such release shall be in a form appropriate in each jurisdiction in which an Individual Property is located and that would be satisfactory to a prudent lender acting reasonably. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release, together with an Officers Certificate certifying that such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such releases in accordance with the terms of this Agreement. Borrower shall pay all reasonable third-party costs and expenses incurred by Lender in connection with such release and the then current reasonable and customary fee being assessed by Servicer, if any, to effect such release.
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2.5.2 Release of Individual Property . If Borrower has elected to prepay a portion of the Loan and the requirements of Section 2.4.1 and this Section 2.5 have been satisfied, and provided that no Event of Default has occurred and is continuing, Borrower may obtain the release of such Individual Property from the Lien of the Mortgage thereon (or at Borrowers option, an assignment thereof to one or more third parties) and related Loan Documents, and the release of Borrowers obligations under the Loan Documents with respect to such Individual Property (other than those expressly stated in the Loan Documents to survive), upon the satisfaction of all of the following conditions:
(a) The amount of the outstanding principal balance of the Loan to be prepaid shall equal the Adjusted Release Amount for the applicable Individual Property, and such prepayment shall be deemed a voluntary prepayment for all purposes hereunder including, without limitation, the payment of any applicable Prepayment Premium;
(b) Subsequent to such release, each Individual Borrower shall continue to be a Special Purpose Entity pursuant to, and in accordance with, Section 4.1.30 and Section 5.1.28 hereof;
(c) If, in connection with such release, any Individual Property will be transferred to an Affiliate, an Additional Insolvency Opinion.
(d) Borrower shall submit to Lender, not less than seven (7) days prior to the date on which the prepayment will be made, a release (or assignment) of Lien (and related Loan Documents) for such Individual Property for execution by Lender. Such release (or assignment) shall be in a form appropriate in each jurisdiction in which the Individual Property is located and that would be satisfactory to a prudent lender acting reasonably and contains standard provisions, if any, protecting the rights of the releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release, together with an Officers Certificate certifying that such documentation (i) is in compliance with all Legal Requirements, (ii) will effect such release in accordance with the terms of this Agreement, and (iii) will not impair or otherwise adversely affect the Liens and security interests granted under the Loan Documents and not being released (or as to the parties to the Loan Documents and Properties subject to the Loan Documents not being released);
(e) After giving effect to such release, the Debt Yield for the Properties then remaining subject to the Liens of the Mortgages shall be equal to or greater than (i) nine and one-half percent (9.50%) or (ii) if such release is in connection with a transfer to an Affiliate, the greater of (x) the Debt Yield for all of the Properties subject to the Liens of the Mortgages immediately prior to giving effect to the applicable release or (y) nine and one-half percent (9.5%) ((i) and (ii), collectively, the Release Debt Yield ); provided , however , that Borrower shall not be required to satisfy the provisions of this Section 2.5.2(e) with respect to the Debt Yield of the Properties in connection with a release of an Individual Property which is proposed in order to cure an Event of Default caused by a default under any Ground Lease, and that was not caused by Borrower in bad faith to circumvent the requirements of this Section 2.5.2(e) ;
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(f) Intentionally Omitted;
(g) Borrower shall reimburse Lender and Servicer, if any, for any third party costs and expenses arising from such release (including reasonable attorneys fees and expenses) and Borrower shall have paid, in connection with such release, (i) all recording charges, filing fees, similar taxes or other expenses payable in connection therewith, (ii) all costs and expenses of the Rating Agencies incurred with respect to such release (to the extent such costs have not already been paid directly by Borrower), and (iii) to any Servicer, the current fee being assessed by such Servicer to effect such release;
(h) Notwithstanding anything to the contrary contained herein or in any other Loan Document, if the Loan is included in a REMIC Trust and the Loan-to-Value Ratio exceeds or would exceed 125% immediately after giving effect to the release of the applicable Individual Property, no release will be permitted unless the principal balance of the Loan is prepaid by an amount not less than the greater of (i) the Adjusted Release Amount or (ii) the least of the following amounts: (A) only if the released Individual Property is sold, the net proceeds of an arms length sale of the released Individual Property to an unrelated Person, (B) the fair market value of the released Individual Property as reasonably determined by Lender at the time of the release, or (C) an amount such that the Loan-to-Value Ratio (as so determined by Lender) after giving effect to the release of the applicable Individual Property is not greater than the Loan-to-Value Ratio immediately prior to such release, unless Lender receives an opinion of counsel that, if this clause (ii) is applicable but not followed or is no longer applicable at the time of such release, the Securitization will not fail to maintain its status as a REMIC Trust as a result of the release of the applicable Individual Property; and
(i) In connection with any release under this Section 2.5, in the event that such release would result in the release of all Individual Properties held by an Unencumbered Borrower, such Unencumbered Borrower shall be released by Lender from the obligations of the Loan Documents, except with respect to those obligations that are expressly provided herein to survive repayment of the Loan, and shall no longer be considered an Individual Borrower for purposes of this Agreement. In connection with a release or cancellation of each Unencumbered Borrower, Lender agrees to deliver (i) a UCC-3 Financing Statement termination or amendment releasing Lenders security interest in the collateral pledged to Lender relating to each Unencumbered Borrower, and (ii) instruments executed by Lender reasonably necessary to evidence the release or cancellation of each Unencumbered Borrower from its obligations under the Loan Documents. All reasonable costs and expenses incurred by Lender in connection with such release shall be paid by Borrower.
2.5.3 Release in Connection with a Sale to Third-Party . Notwithstanding the provisions of Section 2.5.2(e) , with respect to a requested release of an Individual Property in conjunction with the sale of such Individual Property in an arms length transaction to a third party purchaser (with not more than a twenty-five percent (25%) non-controlling direct or indirect interest in such Individual Property retained by Borrower, Guarantor, or any of their respective Affiliates), if the Debt Yield after giving effect to the release would not satisfy clause (i) of the definition of Release Debt Yield, Borrower shall be permitted to obtain a release (or assignment) of the Lien of the Mortgage, provided that in lieu of paying the applicable Adjusted Release Amount in connection with such release, then Borrower shall pay to Lender
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(together with all other amounts due to Lender pursuant to clauses (e), (f), (g) and (h) of Section 2.5.2 ,) an amount equal to the greater of (A) the Adjusted Release Amount applicable to such Individual Property and (B) the lesser of (I) one hundred percent (100%) of the gross cash proceeds actually received by Borrower from such Individual Property (net of any reasonable and customary closing costs associated with the sale of such Individual Property) or (II) the amount of a prepayment of the Loan that would be necessary to, after giving effect to the requested release of the applicable Individual Property, satisfy a Debt Yield of nine and one-half percent (9.50%). Any such prepayment pursuant to this Section 2.5.3 shall be deemed a voluntary prepayment for all purposes hereunder, including, without limitation, the payment of any applicable Prepayment Premium.
2.5.4 Assignment of Mortgage . Upon the request of Borrower in connection with the release of any Individual Property pursuant to the provisions of this Agreement, Lender agrees to cooperate, at Borrowers sole cost and expense (including Lenders reasonable attorneys fees and disbursements), to provide an assignment of the Mortgage with respect to such Individual Property without representation, recourse, covenant or warranty of any nature, express or implied, in lieu of the release. Notwithstanding the foregoing, Lender reserves the right to impose different requirements or procedures on such an assignment of the Mortgage to the extent (but only to the extent) necessary to accommodate any Legal Requirements enacted or interpreted in a new manner subsequent to the date hereof at the time of such release if and to the extent a reasonably prudent Lender would impose such requirements or procedures.
2.5.5 Release of Outparcels . Lender agrees to release from the Lien of the applicable Mortgages and the other Loan Documents (a) those certain parcels of real property more particularly described on Schedule 2.5.5(a)(i) hereof (the Free Release Outparcels ), (b) that certain parcel of real property particularly described on Schedule 2.5.5(a)(ii) hereof (the Waikoloa Outparcel ) and (c) the parcel set forth on Schedule 2.5.5(a)(iii) (the Hawaiian Village Taran Outparcel ), the Free Release Outparcels, the Waikoloa Outparcel and the Hawaiian Village Taran Outparcel, each an Outparcel and, collectively, the Outparcels ) upon satisfaction of the following conditions by Borrower:
(a) Not more than ninety (90) calendar days and not less than thirty (30) calendar days prior to the date of the release, Borrower delivers a notice to Lender (which Borrower shall have the right to revoke, modify or extend from time to time) setting forth (i) the date of the proposed release, (ii) the name of the proposed transferee and (iii) the legal description of the Outparcel;
(b) With respect to the release of any Free Release Outparcel and subject to and in compliance with this Section 2.5.5 , Borrower shall not be required to pay to Lender any release amount with respect to any such release. If Borrower seeks the release of the Waikoloa Outparcel, Borrower may obtain the release of such parcel upon satisfaction of each of the requirements set forth in this Section 2.5.5 and by paying to Lender the Waikoloa Outparcel Release Price. If Borrower seeks the release of the Hawaiian Village Taran Outparcel, Borrower may obtain the release of such parcel upon satisfaction of each of the requirements set forth in this Section 2.5.5 and by paying to Lender the Hawaiian Village Taran Outparcel Release Price such prepayment shall be deemed a voluntary prepayment for all purposes hereunder and the requirements of Section 2.4 hereof shall be satisfied, including, without limitation the applicable
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Prepayment Premium, if any. Any payment of the Waikoloa Outparcel Release Price or Hawaiian Village Taran Outparcel Release Price pursuant to this Section 2.5.5(b) shall be deemed a voluntary prepayment for all purposes hereunder and the requirements of Section 2.4 hereof shall be satisfied, including, without limitation the applicable Prepayment Premium, if any.
(c) In connection with and as a condition to a release of the Waikoloa Outparcel, Borrower shall deliver to Lender (i) agreements reasonably acceptable to Lender evidencing a facilities and cost sharing arrangement between Borrower and the new owner of the Waikoloa Outparcel, which may be in form and substance similar to the facilities sharing arrangements in place at the Hilton Hawaiian Village on the Closing Date, and (ii) agreements pursuant to which Borrower receives (a) 100% of all net revenues from the rental of unsold timeshare inventory located in the Waikoloa Outparcel and (b) fees for providing services to the timeshare units included in any such timeshare project, which fees shall be generally consistent with the fees reflected in agreements in place at the Hilton Hawaiian Village by which Borrower provides certain services to the timeshare projects in or adjacent to the Hilton Hawaiian Village. Notwithstanding anything to the contrary in this paragraph, Lender agrees that Borrower shall not be entitled to revenues generated by the developer of the timeshare project on the Waikoloa Outparcel (the Timeshare Developer ) or by Hilton Resorts Corporation or its Affiliates (together, the Timeshare Operator ) from (i) the sale or financing of timeshare interests or (ii) provision of management or other services by the Timeshare Operator to the Timeshare Developer, to purchasers of timeshare interests in the project, or to any property owners association formed for the governance of the timeshare project, which services shall not include the rental of the Timeshare Developers unsold timeshare intervals in the project;
(d) As of the date of the release, no Event of Default which is continuing;
(e) Borrower delivers to Lender (i) evidence which would be satisfactory to a prudent lender acting reasonably that (A) the Outparcel has been legally subdivided from the remainder of the related Individual Property (or an application therefor shall have been filed and Borrower and transferee have entered into a property tax allocation agreement with the same economic effect of a tax lot subdivision) and (B) the Outparcel (together with any appurtenant easements or other rights with respect to adjacent property) is not necessary for the related Individual Property to comply with any zoning, building, land use or parking or other similar Legal Requirements with respect to the related Individual Property or for the then current use of the related Individual Property, including without limitation for access, driveways, parking, utilities or drainage or, to the extent that the Outparcel is necessary for any such purpose, a joint development agreement, reciprocal easement agreement or other agreement has been or will be executed and recorded that would allow the owner of the related Individual Property to continue to use the Outparcel to the extent necessary for such purpose, which joint development agreement or reciprocal easement agreement shall be superior to the Mortgages and (ii) a certificate executed by an officer of Borrower stating that after giving effect to such transfer, each of the Outparcel and the balance of the related Individual Property (together with any appurtenant easements or other rights with respect to adjacent property) conforms to and is in compliance in all material respects with applicable Legal Requirements and constitutes or will constitute a separate tax lot (and Lender agrees to execute and deliver an instrument in form and substance reasonably acceptable to Lender at Borrowers sole cost and expense, confirming the subordination of the Mortgage(s) to a joint development agreement, reciprocal easement agreement or other agreement referred to in clause (i)(B) above);
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(f) Borrower shall deliver to Lender an endorsement to the Title Insurance Policy (to the extent reasonably available in the applicable State) insuring the applicable Mortgage or an updated Title Insurance Policy or similar coverage where such endorsement is not available, which endorsement or updated Title Insurance Policy (i) extends the effective date of such Title Insurance Policy to the effective date of the release, (ii) confirms no change in the priority of the Mortgage on the balance of the related Individual Property (exclusive of the Outparcel and except as expressly provided in Section 2.5.5(e)(i)(B) above)) and (iii) insures the rights and benefits under any new or amended reciprocal easement agreement or such other agreement required pursuant to Section 2.5.5(e)(i) above that has been executed and recorded, if any;
(g) Borrower shall deliver to Lender evidence in the form of a certificate executed by Borrower that Borrower has complied with any requirements applicable to the release in the Leases, reciprocal easement agreements, operating agreements, parking agreements or other similar agreements affecting the related Individual Property and that the release does not violate any of the provisions of such documents in any material respect and that any such release of an Outparcel shall not result in any right in favor of a third party of offset, abatement or reduction of rent payable to Borrower or any right in favor of a third party of termination, cancellation or surrender under any Leases, reciprocal easement agreements or other material agreement by which Borrower or the related Individual Property is bound or encumbered and the surrender of which would have a material adverse effect on the Borrower or the related Individual Property;
(h) Borrower shall deliver to Lender any other information and documents of a ministerial or administrative nature which would be required by a prudent lender acting reasonably relating to the release of the Outparcel;
(i) Borrower shall reimburse Lender and Servicer, if any, for any third party costs and expenses arising from such release (including reasonable attorneys fees and expenses) and Borrower shall have paid, in connection with such release, (i) all recording charges, filing fees, similar taxes or other expenses payable in connection therewith, (ii) all costs and expenses of the Rating Agencies incurred with respect to such release (to the extent such costs have not already been paid directly by Borrower), and (iii) to any Servicer, the current fee being assessed by such Servicer to effect such release;
(j) Borrower shall simultaneously with the release of the Outparcel transfer title to the Outparcel to a Person(s) other than Borrower;
(k) Subsequent to such release, each Individual Borrower shall continue to be hereby a Special Purpose Entity pursuant to, and in accordance with, Section 4.1.30 and Section 5.1.28 hereof;
(l) Notwithstanding anything to the contrary contained herein (including, without limitation, Section 2.5.5(b) hereof), or in any other Loan Document, if the Loan is
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included in a REMIC Trust and the Loan to Value Ratio (as determined by Lender in its reasonable discretion using any commercially reasonable method permitted to a REMIC Trust in accordance with Section 1.860G-2(b)(7) of the Treasury Regulations) exceeds 125% immediately after the release of the applicable Outparcel, no release will be permitted unless the principal balance of the Loan is paid down by a qualified amount as that term is defined in the IRS Revenue Procedure 2010-30, as the same may be amended, supplemented or modified from time to time, unless the Lender receives an opinion of counsel that the Securitization will not fail to maintain its status as a REMIC Trust as a result of the related release of the applicable Release Parcel;
(m) If the release of the Release Parcel occurs after a Securitization and the Loan is included in a Grantor Trust, Borrower shall deliver an opinion of counsel that would be acceptable to a prudent lender acting reasonably, prepared and delivered at Borrowers reasonable expense, stating that any Grantor Trust that has acquired the Loan will not fail to maintain its status as a Grantor Trust solely as a result of such release;
(n) If such Outparcel is transferred to an Affiliate, an Additional Insolvency Opinion, if such transfer to an Affiliate is not addressed in the Insolvency Opinion; and
(o) Upon the release of the Waikoloa Outparcel in accordance with this Section 2.5.5 , the Release Amount of the Waikoloa Property shall be reduced by the Waikoloa Outparcel Release Price.
2.5.6 Partial Releases . Lender agrees to release from the Lien of the applicable Mortgages and the other Loan Documents certain parcels of real property which (as set forth in clause (b) below) do not materially and adversely affect the ongoing operations of the remaining property other than the lost income associated with the parcel being released (each a Release Parcel and, collectively, the Release Parcels ) upon satisfaction of the following conditions by Borrower:
(a) Not more than ninety (90) calendar days and not less than thirty (30) calendar days prior to the date of the release, Borrower delivers a notice (which Borrower shall have the right to revoke, modify or extend from time to time) to Lender setting forth (i) the date of the proposed release, (ii) a survey of the Release Parcel in scope and substance that would be satisfactory to a prudent lender acting reasonably, and (iii) an appraisal indicating the value of the Individual Property (both inclusive and exclusive of the Release Parcel) that is (A) executed and delivered to Lender by a qualified MAI appraiser having no direct or indirect interest in such Release Parcel or any loan secured in whole or in part thereby and whose compensation is not affected by the approval or disapproval of such appraisal by Lender, (B) addressed to Lender and its successors and assigns; and (C) satisfies the requirements of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and Title XI of the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect on the date of such calculation, with respect to such appraisal and the appraiser making such appraisal;
(b) Intentionally Omitted;
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(c) As of the date of the release, no Event of Default is continuing;
(d) Borrower delivers to Lender (i) evidence which would be satisfactory to a prudent lender acting reasonably that (A) the Release Parcel has been or concurrently with the release will be legally subdivided from the remainder of the related Individual Property (or an application therefor shall have been filed and Borrower and transferee have entered into a property tax allocation agreement with the same economic effect of a tax lot subdivision), and (B) the Release Parcel (together with any appurtenant easements or other rights with respect to adjacent property) is not necessary for the related Individual Property to comply with any zoning, building, land use or parking or other similar Legal Requirements with respect to the related Individual Property or for the then current use of the related Individual Property, including without limitation for access, driveways, parking, utilities or drainage or, to the extent that the Release Parcel is necessary for any such purpose, a reciprocal easement agreement, joint development agreement or other agreement has been executed and recorded that would allow the owner of the related Individual Property to continue to use the Release Parcel to the extent necessary for such purpose, which joint development agreement or reciprocal easement agreement shall be superior to the Mortgages and (ii) a certificate executed by an officer of the applicable Individual Borrower stating that after giving effect to such transfer, each of the Release Parcel and the balance of the related Individual Property (together with any appurtenant easements or other rights with respect to adjacent property) conforms to and is in compliance in all material respects with Legal Requirements and constitutes or will constitute a separate tax lot (and Lender agrees to execute and deliver an instrument in form and substance reasonably acceptable to Lender, at Borrowers sole cost and expense, confirming the subordination of the Mortgage(s) to a joint development agreement, reciprocal easement agreement or other agreement referred to in clause (i)(B) above);
(e) Borrower shall deliver to Lender an endorsement to the Title Insurance Policy (to the extent reasonably available in the applicable State) insuring the applicable Mortgage, which endorsement (i) extends the effective date of such Title Insurance Policy to the effective date of the release, (ii) confirms no change in the priority of the Mortgage on the balance of the related Individual Property (exclusive of the Release Parcel and except as expressly provided in Section 2.5.6(d)(B)(i) above); and (iii) insures the rights and benefits under any new or amended reciprocal easement agreement or such other agreement required pursuant to Section 2.5.6(d)(i) above that has been executed and recorded, if any;
(f) The applicable Individual Borrower delivers evidence in the form of a certificate executed by such Individual Borrower that such Individual Borrower has complied with any requirements applicable to the release in the Leases, reciprocal easement agreements, operating agreements, parking agreements or other similar agreements affecting the related Individual Property and that the release does not violate any of the provisions of such documents in any material respect and that any such release of a Release Parcel shall not result in any right in favor of a third party of offset, abatement or reduction of rent payable to such Individual Borrower or any right in favor of a third party of termination, cancellation or surrender under any Leases, reciprocal easement agreements or other material agreement by which such Individual Borrower or the related Individual Property is bound or encumbered and the surrender of which would have a material adverse effect on the Borrower or the related Individual Property;
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(g) Borrower pays all of Lenders reasonable out-of-pocket expenses relating to the release of the Release Parcel;
(h) Borrower shall simultaneously with the release of the Release Parcel transfer title to the Release Parcel to a Person(s) other than Borrower;
(i) If the release of the Release Parcel occurs after a Securitization and the Loan is included in a Grantor Trust, Borrower shall deliver an opinion of counsel that would be acceptable to a prudent lender acting reasonably, prepared and delivered at Borrowers reasonable expense, stating that any Grantor Trust that has acquired the Loan will not fail to maintain its status as a Grantor Trust solely as a result of such release;
(j) Borrower pays to Lender the product of (i) one hundred and fifteen percent (115%) and (ii) the product of (A) one hundred percent (100%) of the difference in the value of the related Individual Property including the Release Parcel, and excluding the Release Parcel, as set forth in the appraisal obtained pursuant to Section 2.5.6(a)(iii) and (ii) 51.2% (such amount, the Parcel Release Price ) and such prepayment shall be deemed a voluntary prepayment for all purposes hereunder and the requirements of Section 2.4 . hereof shall be satisfied, including, without limitation the applicable Prepayment Premium, if any;
(k) Notwithstanding anything to the contrary contained herein (including, without limitation, Section 2.5.5(b) hereof), or in any other Loan Document, if the Loan is included in a REMIC Trust and the Loan to Value Ratio (as determined by Lender in its reasonable discretion using any commercially reasonable method permitted to a REMIC Trust in accordance with Section 1.860G-2(b)(7) of the Treasury Regulations) exceeds 125% immediately after the release of the applicable Release Parcel, no release will be permitted unless the principal balance of the Loan is paid down by a qualified amount as that term is defined in the IRS Revenue Procedure 2010-30, as the same may be amended, supplemented or modified from time to time, unless the Lender receives an opinion of counsel that the Securitization will not fail to maintain its status as a REMIC Trust as a result of the related release of the applicable Release Parcel;
(l) In the event that the Release Parcel encompasses more than fifteen percent (15%) of the hotel rooms in the applicable Individual Property or relates to more than fifteen percent (15%) of the Adjusted Release Amount for such Individual Property, such release shall only be permitted if (i) the Debt Yield after giving effect to the release of such Release Parcel shall be equal to or exceed the Release Debt Yield or (ii) following a Securitization, the applicable Approved Rating Agencies have provided a Rating Agency Confirmation with respect to such release of the Release Parcel; provided , that with respect to any Release Parcel related to the Properties set forth on Schedule 2.5.6 hereof, such release shall only be permitted if Lender shall have received a Rating Agency Confirmation regardless of whether Borrower is able to satisfy the Debt Yield set forth in clause (i) above;
(m) In the event that the Release Parcel encompasses more than thirty percent (30%) of the hotel rooms in the applicable Individual Property or relates to more than thirty percent (30%) of the Adjusted Release Amount for such Individual Property, such release shall only be permitted if, following a Securitization, the applicable Approved Rating Agencies have provided a Rating Agency Confirmation with respect to such release of the Release Parcel;
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(n) Subsequent to such release, each Individual Borrower shall continue to be hereby a Special Purpose Entity pursuant to, and in accordance with, Section 4.1.30 and Section 5.1.28 hereof; and
(o) If, the Release Parcel will be transferred to an Affiliate, an Additional Insolvency Opinion.
Upon the release of any Release Parcel in accordance with this Section 2.5.6 , the Adjusted Release Amount of the related Individual Property shall be reduced by the Parcel Release Price. In connection with Borrower effectuating the release of a Release Parcel, Lender agrees to reasonably cooperate with Borrower (at Borrowers sole cost and expense) in filing necessary applications for condominium declarations, re-subdivision or other land use changes; provided , that such declarations, subdivisions or land use changes do not have a Material Adverse Effect on the remaining Individual Property.
Section 2.6 Cash Management .
2.6.1 Property Accounts/Concentration Accounts/FF&E Concentration Account . (a) During the term of the Loan, Borrower shall maintain the following:
(i) With respect to each Individual Property (other than the Caribe Property), an account (each, a Property Account , and collectively, the Property Accounts ) with the Property Bank which shall be held in the applicable Borrowers name in trust for the benefit of Lender, which Property Accounts shall be under the sole dominion and control of Lender and entitled as set forth in the applicable Property Account Agreement. Borrower has established or shall establish the Property Accounts set forth on Schedule 2.6.1(a)(i) hereof.
(ii) With respect to the Caribe Property accounts with the Caribe Bank (the Caribe Accounts ) in the name of the Caribe Borrower, as more particularly described on Schedule 2.6.1(a)(ii) .
(iii) The accounts (each a Concentration Account and collectively, the Concentration Accounts ) set forth on Schedule 2.6.1(a)(iii) with Concentration Bank which shall be in the name of the applicable Borrower in trust for the benefit of Lender, which Concentration Accounts shall be under the sole dominion and control of Lender and entitled as set forth in the Concentration Account Agreement. Borrower has established or shall establish the Concentration Accounts set forth on Schedule 2.6.1(a)(iii) hereof.
(iv) The accounts (the Master Concentration Accounts ) set forth on Schedule 2.6.1(a)(iv) with Master Concentration Bank which shall be in the name of the Holdings Borrower in trust for the benefit of Lender, which Master Concentration Account shall be under the sole dominion and control of Lender and entitled as set forth in the Master Concentration Account Agreement. Borrower has established or shall establish the Master Concentration Accounts set forth on Schedule 2.6.1(a)(iv) hereof.
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(v) The account (the Operating Account ) set forth on Schedule 2.6.1(a)(v) with Operating Account Bank in trust for the benefit of Lender, which Operating Account shall be under the sole dominion and control of Lender and entitled as set forth in the Operating Account Agreement. Borrower has established or shall establish the Operating Account set forth on Schedule 2.6.1(a)(v) hereof.
(vi) The account (the FF&E Concentration Account ) set forth on Schedule 2.6.1(a)(vi) with Cash Management Bank which shall be in the name of the applicable Borrower in trust for the benefit of Lender, which FF&E Concentration Account shall be under the sole dominion and control of Lender and entitled as set forth in the FF&E Concentration Account Agreement. Borrower has established or shall establish the FF&E Concentration Account set forth on Schedule 2.6.1(a)(vi) hereof.
(b) Borrower has caused or shall cause the delivery of irrevocable written instructions to each of the credit card companies or credit card clearing banks with which Borrower or Manager has entered into merchants agreements to deliver all receipts payable with respect to the Properties (other than the Caribe Property) directly to the applicable Concentration Accounts. Borrower shall, and shall cause Manager to, deposit all amounts received by Borrower or Manager constituting Rents into the applicable Property Account or Concentration Account (or in the case of the Caribe Borrower, the applicable Caribe Account), not less than once every Business Day during the term of the Loan.
(c) Borrower hereby grants to Lender a first priority security interest in (i) each Property Account and all deposits at any time contained therein and the proceeds thereof, (ii) each Concentration Account and all deposits at any time contained therein and the proceeds thereof, (iii) each Master Concentration Account and all deposits at any time contained therein and the proceeds thereof, (iv) the Caribe Account and all deposits at any time contained therein, and (v) the FF&E Concentration Account and all deposits at any time contained therein and the proceeds thereof, in each case, will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in each Property Account, FF&E Concentration Account, Concentration Account, Master Concentration Account and the Caribe Account, including, without limitation, filing UCC-1 Financing Statements and continuations thereof. Lender and Servicer shall have the sole right to make withdrawals from each Property Account, FF&E Concentration Account, each Concentration Account, each Master Concentration Account and the Operating Account; provided , that Lender shall instruct the Operating Bank to (A) make disbursements to Manager, at Managers request for payment of Manager Required Payments (B) to disburse amounts for Concentration Account Charges to the Concentration Accounts and (C) to disburse amounts for FF&E from the FF&E Concentration Account. Notwithstanding Lenders sole dominion and control over the Operating Account, Lender hereby agrees that it will exercise its rights in the Operating Account in a manner that is consistent with the provisions of this Agreement and shall make funds available, as provided herein, for Manager Required Payments. All costs and expenses for establishing and maintaining each Property Account, each Concentration Account, each Master Concentration Account, the Caribe Account, the FF&E Concentration Account and the Operating Account shall be paid by Borrower. All monies now
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or hereafter deposited into each Property Account, each Concentration Account, each Master Concentration Account, the FF&E Concentration Account, the Caribe Account and the Operating Account shall be deemed additional security for the Debt.
(d) Borrower has obtained from each Property Bank, its agreement to transfer to one or more Concentration Accounts (other than reasonable fees of the Property Bank as more particularly described in the applicable Property Account Agreement), in immediately available funds by federal wire transfer or ACH transfer, all amounts on deposit in each Property Account less a peg balance of $10,000.00 (which peg balance shall be applied from time to time at the request of Manager to Property Account Charges) no less frequently than daily (and more frequently as requested by Manager) throughout the term of the Loan.
(e) Borrower has obtained from each Concentration Bank, its agreement to transfer in immediately available funds by federal wire transfer or ACH transfer no less frequently than daily (and more frequently as requested by Manager), all amounts on deposit in the Concentration Accounts less any amounts for Concentration Account Charges (which amounts shall be disbursed from time to time to Manager, at Managers request for the payment of Concentration Account Charges) to either (i) the Operating Account (other than the reasonable fees of the Concentration Bank as more particularly described in the applicable Concentration Account Agreement) or (ii) a Master Concentration Account (other than the reasonable fees of the Master Concentration Bank, as more particularly described in the Master Concentration Account Agreement). Borrower has obtained from each Master Concentration Bank, its agreement to transfer to the Operating Account in immediately available funds by federal wire transfer or ACH transfer no less frequently than daily (and more frequently as requested by Manager) , all amounts on deposit in the Master Concentration Accounts throughout the term of the Loan.
(f) Holdings Borrower, Lender, Manager, Operating Bank and Cash Management Bank entered into the Cash Management Agreement, pursuant to which Operating Bank has agreed to transfer to the Cash Management Account (other than the reasonable fees of the Operating Bank as more particularly described in the Operating Account Agreement), in immediately available funds by federal wire transfer or ACH transfer, all amounts on deposit in the Operating Account not otherwise disbursed to, or at the direction of, Manager for payment of Manager Required Payments which exceed the Working Capital Peg Balance, not less than daily throughout the term of the Loan.
(g) Caribe Borrower shall transfer to the Cash Management Account, all amounts in the Caribe Account after payment of Manager Required Payments related to the Caribe Property not less frequently than monthly.
(h) Subject to Priority Waterfall Payments made pursuant to Section 3.4 of the Cash Management Agreement and Section 2.6.2(e) hereof, upon the occurrence and during the continuance of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in the Cash Management Account to the payment of the Debt in any order in its sole discretion, subject to the terms of Section 7.10 of this Agreement.
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(i) Each Property Account, Concentration Account, Master Concentration Account, the FF&E Concentration Account, the Operating Account, the Caribe Accounts and the Cash Management Account shall be an Eligible Account and shall not be commingled with other monies held by Borrower, Manager, Property Bank, Agent, Operating Bank or Concentration Bank, as applicable; provided that the monies of the Borrowers held in such accounts may be commingled with the monies of the other Borrowers in such accounts.
(j) Borrower shall not further pledge, assign or grant any security interest in any Property Accounts, the Caribe Accounts, the FF&E Concentration Account the Concentration Accounts, the Master Operating Account, the Operating Account or the Cash Management Account or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.
(k) Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with any Property Account and/or each Property Account Agreement or with any Concentration Account and/or each Concentration Account Agreement or with any Master Concentration Account and/or each Master Concentration Account Agreement or with the Operating Account and/or the Operating Account Agreement (unless arising from the gross negligence or willful misconduct of Lender) or with any Caribe Account or Caribe Account Agreement, the FF&E Concentration Account and/the applicable FF&E Concentration Account Agreement Account or the performance of the obligations for which the Property Accounts, the Concentration Accounts, the Master Concentration Accounts, the FF&E Concentration Account or the Operating Account were established.
2.6.2 Cash Management Account .
(a) Borrower shall establish and maintain a segregated Eligible Account (the Cash Management Account ) to be held by Agent in trust and for the benefit of Lender, which Cash Management Account shall be under the sole dominion and control of Lender. The Cash Management Account shall be entitled as set forth in the Cash Management Agreement. Borrower hereby grants to Lender a first priority security interest in the Cash Management Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Cash Management Account, including, without limitation, filing UCC-1 Financing Statements and continuations thereof. Borrower will not in any way alter or modify the Cash Management Account and will notify Lender of the account number thereof. Lender and Servicer shall have the sole right to make withdrawals from the Cash Management Account and all costs and expenses for establishing and maintaining the Cash Management Account shall be paid by Borrower.
(b) The insufficiency of funds on deposit in the Cash Management Account shall not relieve Borrower from the obligation to make any payments, as and when due pursuant to this Agreement and the other Loan Documents, and such obligations shall be separate and independent, and not conditioned on any event or circumstance whatsoever.
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(c) All funds on deposit in the Cash Management Account following the occurrence and during the continuance of an Event of Default may be applied by Lender pursuant to the terms of any Loan Document in such order and priority as Lender shall determine, subject to the terms of Sections 2.6.2(e) and 7.10 of this Agreement and subject to payment of Priority Waterfall Payments.
(d) Borrower hereby agrees that Lender may modify the Cash Management Agreement for the purpose of establishing additional sub accounts in connection with any payments otherwise required under this Agreement and the other Loan Documents and Lender shall provide prior written notice thereof to Borrower no less than five (5) Business Days prior to such modification.
(e) Notwithstanding anything contained herein or in the other Loan Documents to the contrary, Lender agrees that, notwithstanding the existence of an Event of Default, Lender shall at all times (i) instruct Property Banks to transfer to the applicable Concentration Account (other than reasonable fees of the Property Bank as more particularly described in the applicable Property Account Agreement) in immediately available funds by federal wire transfer or ACH transfer all amounts on deposit in each Property Account not less than once every Business Day, (ii) instruct Concentration Banks to transfer to either (x) the applicable Operating Account (other than reasonable fees of the Concentration Bank as more particularly described in the applicable Concentration Account Agreement) in immediately available funds by federal wire transfer or ACH transfer all amounts on deposit in each Concentration Account not less than once every Business Day or (y) the applicable Master Concentration Account (which will in turn deposit to the Operating Account) (other than reasonable fees of the Master Concentration Bank as more particularly described in the applicable Master Account Agreement) in immediately available funds by federal wire transfer or ACH transfer all amounts on deposit in each Master Concentration Account not less than once every Business Day, (iii) instruct Operating Account Bank to (A) permit Manager (without further notice or direction required from Lender) to access and draw upon the Operating Account for the payment of Manager Required Payments and to maintain amounts in the Operating Account equal to the then applicable Working Capital Peg Balance, (B) instruct the Operating Bank to disburse funds to the FF&E Concentration Account for FF&E and (C) transfer to the Cash Management Account all amounts on deposit in the Operating Account not otherwise disbursed to Manager which exceed the Working Capital Peg Balance not less than once every Business Day and (iv) apply amounts on deposit in the Cash Management Account to payment of the Priority Waterfall Payments. Any amounts remaining in the Cash Management Account after payment of the Priority Waterfall Payments shall be deposited in the Excess Cash Flow Reserve and applied in accordance with Section 7.5 hereof.
2.6.3 Payments Received Under the Cash Management Agreement . Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, Borrowers obligations with respect to the payment of the Monthly Debt Service Payment Amount and amounts required to be deposited into the Reserve Funds, if any, shall be deemed satisfied to the extent sufficient amounts are deposited in the Cash Management Account to satisfy such obligations pursuant to this Agreement and the Cash Management Agreement on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender.
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Section 2.7 Withholding Taxes .
(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of the Borrower under any Loan Document shall be made without deduction or withholding for any Section 2.7 Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of the Borrower) requires the deduction or withholding of any Section 2.7 Tax from any such payment by the Borrower, then the Borrower shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Section 2.7 Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.7(a) ) the Lender receives an amount equal to the sum it would have received had no such deduction or withholding been made. For the purposes of this Section 2.7 , the term Loan Documents shall not include the Interest Rate Cap Agreement, the Assignment of Interest Rate Cap Agreement or any other document with respect thereto, and the term applicable law shall include FATCA.
(b) Payment of Other Taxes by the Borrower . The Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law any Other Taxes.
(c) Indemnification by the Borrower . The Borrower shall indemnify Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Lender or required to be withheld or deducted from a payment to such Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender shall be conclusive absent manifest error.
(d) Evidence of Payments . As soon as practicable after any payment of Section 2.7 Taxes by the Borrower to a Governmental Authority pursuant to this Section 2.7 , the Borrower shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.
(e) Status of Lenders . (i) Any Lender that is entitled to an exemption from or reduction of withholding Section 2.7 Tax with respect to payments made under any Loan Document shall deliver to the Borrower, at the time or times reasonably requested by the Borrower, such properly completed and executed documentation reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower as will enable the Borrower to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.7(e)(ii)(A) , (ii)(B) and (ii)(D) below) shall
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not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing,
(A) any Lender that is a U.S. Person shall deliver to the Borrower on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Section 2.7 Tax pursuant to the interest article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Section 2.7 Tax pursuant to the business profits or other income article of such tax treaty;
(2) executed originals of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit B-1 to the effect that such Foreign Lender is not a bank within the meaning of Section 881(c)(3)(A) of the Code, a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a controlled foreign corporation described in Section 881(c)(3)(C) of the Code (a U.S. Tax Compliance Certificate ) and (y) executed originals of IRS Form W-8BEN; or
(4) to the extent a Foreign Lender is a partnership or is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit B-2 or Exhibit B-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are
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claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit B 4 on behalf of each such direct and indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Section 2.7 Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Section 2.7 Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower at the time or times prescribed by law and at such time or times reasonably requested by the Borrower such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower as may be necessary for the Borrower to comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), FATCA shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower in writing of its legal inability to do so. If a Servicer is appointed pursuant to Section 9.5 , such Servicer shall deliver to the Borrower a W-9 to establish exemption from backup withholding or, if the Servicer is a U.S. branch of a foreign bank, a W-8IMY electing to be treated as a U.S. person.
(f) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Section 2.7 Taxes as to which it has been indemnified pursuant to this Section 2.7 (including by the payment of additional amounts pursuant to this Section 2.7 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Section 2.7 Taxes giving rise to such refund), net of all out-of-pocket expenses (including Section 2.7 Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (f) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified
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party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (f), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (f) the payment of which would place the indemnified party in a less favorable net after-tax position than the indemnified party would have been in if the Section 2.7 Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Section 2.7 Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its tax returns (or any other information relating to its Section 2.7 Taxes that it deems confidential) to the indemnifying party or any other Person.
(g) Survival . Each partys obligations under this Section 2.7 shall survive any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all obligations under any Loan Document. Notwithstanding the foregoing or anything to the contrary set forth in this Section 2.7 , Borrower shall not be obligated to pay pursuant to this Section 2.7 , and Lender shall not be entitled to claim compensation pursuant to this Section 2.7 for any amounts which were incurred or which accrued more than ninety (90) days before the date Lender notified Borrower of the circumstance on which such claim of compensation is based and delivered to Borrower a written statement setting forth in reasonable detail the basis for calculating the amounts payable by Borrower under this Section 2.7 .
(h) Lender hereby agrees that, upon the occurrence of any circumstances entitling Lender to additional amounts pursuant to this Section 2.7 , Lender shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different applicable lending office for the receipt of payments with respect to, or the funding or booking of, its Loan hereunder, if, in the reasonable judgment of such Lender, such designation (i) would eliminate or reduce such additional amounts payable pursuant to Section 2.7 in the future, and (ii) would not subject such lender to any material unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with such designation.
Section 2.8 Extension of the Initial Maturity Date . Borrower shall have the option to extend the Component A Initial Maturity Date of the Loan for three (3) successive terms (each such option, a Component A Extension Option and each such successive term, an Extension Term ) of one (1) year each (the Component A Initial Maturity Date following the exercise of each such option is hereinafter the Component A Extended Maturity Date ) upon satisfaction of the following terms and conditions:
(a) no Event of Default shall have occurred and be continuing at the commencement of the applicable Extension Term;
(b) Borrower shall provide Lender with written revocable notice of its election to extend the Component A Initial Maturity Date as aforesaid not later than thirty (30) days and not earlier than one hundred twenty (120) days prior to the date the Loan is then scheduled to mature ( provided that if Borrower shall subsequently revoke such notice, Borrower shall be responsible for Lenders costs and expenses incurred in connection with same);
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(c) Borrower shall obtain and deliver to Lender on the first day of each Component A Extension Option, one or more Interest Rate Cap Agreements in form substantially identical to the Interest Rate Cap Agreements delivered to Lender in connection with the closing of the Loan or in a form otherwise reasonably approved by Lender from an Acceptable Counterparty in a notional amount equal to the then outstanding principal balance of Component A of the Loan, which Interest Rate Cap Agreement shall have a LIBOR strike price that is not greater than the Extension Strike Price and be effective commencing on the first date of such Extension Term and shall have a maturity date not earlier than the applicable Component A Extended Maturity Date after giving effect to the option then being exercised;
(d) Intentionally Omitted; and
(e) Immediately prior to the commencement of the third Extension Term, the Spread shall be increased by twenty-five (25) basis points which increase shall be effective as of the immediately succeeding Interest Period for Component A.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Closing . The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of all of the conditions precedent to closing set forth in the application or term sheet for the Loan delivered by Borrower to Lender and the commitment or commitment rider, if any, to the application or term sheet for the Loan issued by Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations . Each Individual Borrower represents and warrants as of the Closing Date that:
4.1.1 Organization . Each Borrower has been duly organized and is validly existing and in good standing with requisite power and authority to own or lease the applicable Individual Property and to transact the businesses in which it is now engaged. Each Borrower is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its businesses and operations. Each Borrower possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own the applicable Individual Property and to transact the businesses in which it is now engaged. The sole business of Borrower is the ownership, management and operation of the Properties. The ownership interests in Borrower are as set forth on the organizational chart attached hereto as Schedule 4.1.1 .
4.1.2 Proceedings . Borrower have each taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents. This Agreement and such other Loan Documents have been duly executed and delivered by or on
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behalf of Borrower and constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
4.1.3 No Conflicts . The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which Borrower is a party or by which any of Borrowers property or assets are subject (unless consents from all applicable parties thereto have been obtained), nor will such action, to Borrowers knowledge, result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any of Borrowers properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any court or any such Governmental Authority required for the execution, delivery and performance by Borrower of this Agreement or any other Loan Documents has been obtained and is in full force and effect.
4.1.4 Litigation . Except as set forth on Schedule 4.1.4 attached hereto, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or to Borrowers knowledge, threatened against or affecting Borrower, Principal or any Individual Property, which actions, suits or proceedings, if determined against Borrower, Principal or any Individual Property, would reasonably be expected to have a material adverse effect on the condition (financial or otherwise) or business of Borrower, Principal or the condition or ownership of any Individual Property.
4.1.5 Agreements . Borrower is not a party to any agreement or instrument or subject to any restriction which would reasonably be expected to materially and adversely affect Borrower or any Individual Property, or Borrowers business, properties or assets, operations or condition, financial or otherwise. Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material agreement or instrument to which it is a party or by which Borrower or any of the Properties is bound. Borrower has no material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a party or by which Borrower or the Properties are otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Properties as permitted pursuant to clause (xxiii) of the definition of Special Purpose Entity set forth in Section 1.1 hereof. (b) obligations under the Loan Documents and (c) Permitted Encumbrances.
4.1.6 Title . Borrower has good, marketable and insurable title to the real property (or a leasehold estate as it relates to the Ground Leased Properties) comprising part of each Individual Property and good title to the personal property and Improvements that constitute the balance of such Individual Property, free and clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
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and the Liens created by the Loan Documents. The Permitted Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of the applicable Individual Property (as currently used) or Borrowers ability to repay the Loan. Each Mortgage, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on Borrowers interests in the applicable Individual Property, subject only to Permitted Encumbrances and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), to the extent a security interest may be perfected therein by the recording of the applicable Mortgage or the filing of financing statements under the Uniform Commercial Code, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. Except as set forth in Schedule 4.1.6 , to Borrowers knowledge, there are no claims for payment for work, labor or materials affecting the Properties which are a Lien prior to, or of equal priority with, the Liens created by the Loan Documents and as to which Lender has not otherwise received affirmative insurance in the applicable Title Insurance Policy (in form and substance satisfactory to Lender in all respects).
4.1.7 Solvency . Borrower has not entered into this transaction or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and Borrower has received reasonably equivalent value in exchange for its obligations under such Loan Documents. After giving effect to the Loan, the fair saleable value of Borrowers assets exceeds and will, immediately following the making of the Loan, exceed Borrowers total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrowers assets is and will, immediately following the making of the Loan, be greater than Borrowers probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured. Borrowers assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower). No petition in bankruptcy has been filed against Borrower, or any of its constituent Persons in the last seven (7) years, and neither Borrower nor any constituent Person in the last seven (7) years has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors. Neither Borrower nor any of its constituent Persons are contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of Borrowers assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or such constituent Persons.
4.1.8 Full and Accurate Disclosure . No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no material fact presently known to Borrower which has not been disclosed to Lender which adversely affects, nor as far as Borrower can reasonably foresee, would be reasonably likely to materially and adversely affect, any Individual Property or the business, operations or condition (financial or otherwise) of Borrower.
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4.1.9 No Plan Assets . As of the date of this Agreement, neither Borrower nor Guarantor is an employee benefit plan, as defined in Section 3(3) of ERISA, whether or not subject to Title I of ERISA, and none of the respective assets of Borrower or Guarantor constitute or will constitute plan assets of any benefit plan investor within the meaning of 29 C.F.R. Section 2510.3-101 as modified by Section 3(42) of ERISA (the Plan Asset Regulations ). Except as could not reasonably be expected, individually or in the aggregate to have a material adverse effect on Borrower, neither Borrower nor Guarantor nor any ERISA Affiliate is obligated to contribute to any employee benefit plan (as so defined) subject to Title IV of ERISA. Transactions contemplated hereunder by or with Borrower or Guarantor are not subject to any state or other statute or regulation with respect to governmental plans within the meaning of Section 3(32) of ERISA which are substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect and which prohibit the transactions contemplated by this Agreement, including, but not limited to the exercise by Lender of any of its rights under the Loan Documents.
4.1.10 Compliance . Borrower and the Properties and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances and codes. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority. There has not been committed by Borrower or to the best of Borrowers knowledge, any other Person in occupancy of or involved with the operation or use of the Properties any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against any Individual Property or any part thereof or any monies paid in performance of Borrowers obligations under any of the Loan Documents.
4.1.11 Financial Information . All financial data, including, without limitation, the statements of cash flow and income and operating expense, that have been delivered to Lender in connection with the Loan (i) are true, complete and correct in all material respects (or to the extent that any such financial data was incorrect in any material respect when delivered, the same have been corrected by financial data subsequently delivered to Lender prior to the Closing Date in writing and containing an express reference to any and all such concerns), (ii) fairly represent the financial condition of Borrower and the Properties, as applicable, as of the date of such reports, and (iii) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein. The foregoing representation shall not apply to any such financial data that constitutes projections, provided that Borrower represents and warrants that such projections were made in good faith and that Borrower has no reason to believe that such projections are materially inaccurate. Except for Permitted Encumbrances, Borrower has no contingent liabilities, liabilities for taxes, unusual forward or long term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and are reasonably likely to have a material adverse effect on any Individual Property or the current operation thereof as a hotel, except as referred to or reflected in said financial statements. Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower, from that set forth in said financial statements.
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4.1.12 Condemnation . No Condemnation or other proceeding has been commenced or, to the best of Borrowers knowledge, is threatened or contemplated with respect to all or any portion of any Individual Property or for the relocation of roadways providing access to any Individual Property, other than to the extent the same would not reasonably be expected to have a material adverse effect on the Individual Property affected thereby.
4.1.13 Federal Reserve Regulations . No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents.
4.1.14 Utilities and Public Access . Except as set forth in the Title Insurance Policies or except to the extent that there is no material adverse effect on any Individual Property, (i) each Individual Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service such Individual Property for its respective intended uses; (ii) all public utilities necessary or convenient to the full use and enjoyment of each Individual Property are located either in the public right of way abutting such Individual Property (which are connected so as to serve such Individual Property without passing over other property) or in recorded easements serving such Individual Property and such easements are set forth in and insured by the Title Insurance Policies; and (iii) all roads necessary for the use of each Individual Property for their current respective purposes have been completed and dedicated to public use and accepted by all Governmental Authorities.
4.1.15 Not a Foreign Person . Borrower (or if such entity is a disregarded entity for U.S. federal income tax purposes, such entitys beneficial owner) is not a foreign person within the meaning of § 1445(f)(3) of the Code.
4.1.16 Separate Lots . Except as set forth in the Title Insurance Policies, each Individual Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of such Individual Property.
4.1.17 Assessments . Except as set forth in the Title Insurance Policies, to Borrowers knowledge, there are no pending or proposed special or other assessments for public improvements or otherwise affecting any Individual Property, nor are there any contemplated improvements to any Individual Property that may result in such special or other assessments.
4.1.18 Enforceability . The Loan Documents are enforceable by Lender (or any subsequent holder thereof) in accordance with their respective terms, subject to principles of equity and bankruptcy, insolvency and other laws generally applicable to creditors rights and the enforcement of debtors obligations. The Loan Documents are not subject to any right of rescission, set off, counterclaim or defense by Borrower or Guarantor, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any
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right thereunder, render the Loan Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors rights and the enforcement of debtors obligations), and neither Borrower nor Guarantor has asserted any right of rescission, set off, counterclaim or defense with respect thereto.
4.1.19 No Prior Assignment . There are no prior assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding.
4.1.20 Insurance . Borrower has obtained and has delivered to Lender certified copies of the Policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement. No claims have been made or are currently pending, outstanding or otherwise remain unsatisfied under any such Policy and would reasonably be expected to have a materially adverse effect with respect to any Individual Property, Borrowers ability to perform its obligations under the Loan Documents and/or Lenders security interest in such Individual Property, and neither Borrower nor any other Person, has done, by act or omission, anything which would impair the coverage of any such Policy.
4.1.21 Use of Property . Each Individual Property is used exclusively for hotel and other appurtenant and related uses.
4.1.22 Certificate of Occupancy; Licenses . All certifications, permits, licenses and approvals, including without limitation, certificates of completion and occupancy permits and any applicable liquor license required for the legal use, occupancy and operation of each Individual Property as a hotel (collectively, the Licenses ), have been obtained and are in full force and effect, except for where the failure to obtain such licenses or for such licenses to not be in full force and effect does not have a material adverse effect on any Individual Borrower or any Individual Property. Borrower or Manager shall keep and maintain all Licenses necessary for the operation of each Individual Property as a hotel to the extent the failure to have such licenses would reasonably be expected to result in a material adverse effect with respect to the Individual Property to which it relates. The use being made of each Individual Property is in conformity in all material respects with the certificate of occupancy, if any, issued for such Individual Property.
4.1.23 Flood Zone . Except as set forth in the Surveys or the flood determinations obtained by Lender, none of the Improvements on any Individual Property are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards and, if so located, the flood insurance required pursuant to Section 6.1(a)(i) is in full force and effect with respect to each such Individual Property.
4.1.24 Physical Condition . Except if the same do not, in the aggregate in respect of the Individual Property affected thereby, have a material adverse effect on such Individual Property, and except as disclosed in the Property Reports, to Borrowers knowledge, (i) each Individual Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects; and (ii) there exists no structural or other material defects or damages in any
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Individual Property, whether latent or otherwise, and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in any Individual Property, or any part thereof, which have not been remedied prior to the Closing Date and would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.
4.1.25 Boundaries . Except as set forth in the Surveys, all of the improvements which were included in determining the appraised value of each Individual Property lie wholly within the boundaries and building restriction lines of such Individual Property, and no improvements on adjoining properties encroach upon any Individual Property, and no easements or other encumbrances upon any Individual Property encroach upon any of the Improvements, so as to materially affect the value or marketability of the applicable Individual Property except those which are insured against by the applicable Title Insurance Policy.
4.1.26 Leases . To Borrowers knowledge, the Properties are not subject to any Material Leases other than the Material Leases described in the rent roll attached hereto as Schedule 4.1.26 and made a part hereof and, to Borrowers knowledge, is true, complete and accurate in all material respects as of the Closing Date. Borrower is the owner and lessor of landlords interest in the Leases. To Borrowers knowledge, (i) with the exception of hotel guests and patrons, no Person has any possessory interest in any Individual Property or right to occupy the same except under and pursuant to the provisions of the Leases, (ii) the current Material Leases are in full force and effect and Borrower has not received or delivered written notice that either party is in default under a Material Lease except for (A) defaults which have been cured and (B) defaults that do not, in the aggregate for any Individual Property, have a materially adverse effect. No Rent has been paid more than one (1) month in advance of its due date (except with respect to provision of rooms and banquet and meeting space and services in the ordinary course of business). All work to be performed by Borrower under each Material Lease has been performed as required in all material respects and has been accepted by the applicable Tenant, and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Borrower to any Tenant has already been received by such Tenant. To Borrowers knowledge, except as described on Schedule 4.1.26 , no Tenant under a Material Lease has assigned its Lease or sublet all or any portion of the premises demised thereby, no such Tenant holds its leased premises under assignment or sublease, nor does anyone except such Tenant and its employees occupy such leased premises. No Tenant under any Lease has a right or option pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are a part and no tenant under any Lease has any right or option for additional space in the Improvements.
4.1.27 Survey . To Borrowers knowledge, the Survey for each Individual Property delivered to Lender in connection with this Agreement does not fail to reflect any material matter affecting such Individual Property or the title thereto.
4.1.28 Inventory . Borrower is the owner of all of the Equipment, Fixtures and Personal Property (as such terms are defined in the Mortgages) located on or at each Individual Property. All of the Equipment, Fixtures and Personal Property are sufficient to operate the Properties in the manner required hereunder and in the manner in which they are currently operated.
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4.1.29 Filing and Recording Taxes . All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgages, have been paid, and, under current Legal Requirements, each of the Mortgages are enforceable in accordance with their respective terms by Lender (or any subsequent holder thereof), subject to principles of equity and bankruptcy, insolvency and other laws generally applicable to creditors rights and the enforcement of debtors obligations.
4.1.30 Special Purpose Entity/Separateness . (a) Each Borrower and each Principal has at all times been and is a Special Purpose Entity.
(b) The representations, warranties set forth in Section 4.1.30 shall survive for so long as any amount remains payable to Lender under this Agreement or any other Loan Document.
(c) Any and all of the stated facts and assumptions made in any Insolvency Opinion, including, but not limited to, any exhibits attached thereto, will have been true and correct in all respects, and Borrower and Principal, will have complied with all of the stated facts and assumptions made with respect to it in any Insolvency Opinion, in each case as of the date of such Insolvency Opinion. To Borrowers knowledge, each entity other than Borrower and Principal with respect to which an assumption is made or a fact stated in any Insolvency Opinion will have complied with all of the assumptions made and facts stated with respect to it in any such Insolvency Opinion, in each case as of the date of such Insolvency Opinion.
(d) Borrower hereby represents with respect to itself and Principal that any amendment or restatement of any organizational document has been accomplished in accordance with, and was permitted by, the relevant provisions of such document prior to its amendment or restatement from time to time.
(e) Borrower and Principal each hereby represents as follows:
(i) its business has been limited solely to (A) in the case of Borrower (other than Holdings Borrower), acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Properties, entering into and performing its obligations under the Loan Documents with Lender, refinancing the Properties in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing, (B) in the case of Caribe Borrower, managing the Prior Management Asset , (C) in the case of any Principal, acting as a general partner of the limited partnership that owns the related Individual Property or as member of the limited liability company that owns the related Individual Property and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing and (D) in the case of Holdings Borrower, holding direct and indirect interests in the Individual Borrowers and Principals;
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(ii) intentionally omitted;
(iii) it has not engaged in any business other than as set forth in (i) above, except that the Caribe Borrower previously owned the Prior Management Asset;
(iv) it has not entered into any contract or agreement with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing of Borrower, except upon terms and conditions that are commercially reasonable and substantially similar to those available in an arms length transaction with an unrelated party, except as may have been expressly permitted pursuant to any prior financings;
(v) except as expressly permitted pursuant to the terms of any prior financing and except for guarantees or obligations, in each case, that have been released or discharged or that will be released or discharged as of the closing of the Loan, it has not (a) made any loans or other extensions of credit to any Person or (b) acquired or held evidence of indebtedness issued by any other Person or entity, in either of the case of (a) or (b), other than (1) extensions of credit such as security deposits made in the ordinary course of business relating to the ownership and operation of an Individual Property made to an entity that is not an Affiliate of or subject to common ownership with such entity or (2) cash and investment grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity;
(vi) it has paid its debts and liabilities from its assets as the same have become due or such debts and liabilities have been repaid or discharged as of the date hereof;
(vii) it has done or caused to be done all things necessary to observe organizational formalities and preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises;
(viii) except as expressly permitted under the Loan Documents and except as expressly permitted pursuant to the terms of any prior financing, it has maintained all of its books, records, financial statements and bank accounts separate from those of any other Person and Borrowers, to the extent applicable, assets have not been listed as assets on the financial statement of any other Person. Borrower has filed its own tax returns (except to the extent that it has been a tax disregarded entity not required to file tax returns under applicable law). Borrower has maintained its books, records, resolutions and agreements as official records;
(ix) it has been, and at all times has held itself out to the public as, a legal entity separate and distinct from any other Person (including any Affiliate or other constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing), has corrected any known misunderstanding regarding its status as a separate entity, has conducted its business in its own name, has not identified itself or any of its Affiliates as a division or part of the other and has maintained and utilized separate stationery, invoices and checks;
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(x) except as expressly permitted under the Loan Documents and except as expressly permitted pursuant to the terms of any prior financing, it has not commingled its assets with those of any other Person and has held all of its assets in its own name;
(xi) except as expressly permitted pursuant to the terms of any prior financing, and except as expressly permitted under the Loan Documents and except for guarantees or obligations that have been released or discharged or that will be released or discharged as of the closing of the Loan, it has not guaranteed or become obligated for the debts of any other Person and has not held itself out as being responsible for the debts or obligations of any other Person;
(xii) it has allocated fairly and reasonably any overhead expenses that have been shared with an Affiliate, including paying for office space and services performed by any employee of an Affiliate or any of constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing;
(xiii) except pursuant to prior financings that have been repaid or otherwise discharged, it has not granted a security interest or lien in, to or upon, or pledged or otherwise encumbered any of its assets to secure the obligations for the benefit of any other Person other than with respect to loans secured by the Properties and no such security interest, lien, pledge or other encumbrance remains outstanding except in connection with the Loan with respect to the obligations or the other Borrowers;
(xiv) it has maintained adequate capital in light of its contemplated business operations;
(xv) it has maintained a sufficient number of employees in light of its contemplated business operations and has paid the salaries of its own employees from its own funds;
(xvi) except as set forth on Schedule 4.1.30 , it has not owned any subsidiary or any equity interest in any other Person;
(xvii) it has not made loans to any other person that have not been released or discharged nor has it bought or held evidence of indebtedness issued by any other person or entity;
(xviii) reserved;
(xix) it has not incurred any Indebtedness that is still outstanding other than Indebtedness that is permitted under the Loan Documents;
(xx) it is not now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding that resulted in a judgment against it that has not been paid in full;
(xxi) reserved;
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(xxii) it is and has since its formation been duly formed, validly existing, and in good standing in the state of its formation and in all other jurisdictions where it is qualified to do business;
(xxiii) it has not had any of its obligations guaranteed by an Affiliate, except pursuant to prior financings that have been repaid or otherwise defeased and guarantees that have been either released or discharged (or that will be discharged as a result of the closing of the Loan);
(xxiv) except as set forth on Schedule 4.1.30 , none of the Tenants holding leasehold interests with respect to the Property is Affiliated with Borrower;
(xxv) to Borrowers knowledge, except as set forth in the Title Insurance Policies, Borrower has no judgments or liens of any nature against it except for Permitted Encumbrances and tax liens not yet due or delinquent or which are contested in good faith by appropriate proceedings;
(xxvi) is in compliance in all material respects with all laws, regulations, and orders applicable to it and, except as otherwise disclosed in this Agreement, has received all material permits necessary for it to operate;
(xxvii) is not involved in any material dispute with any taxing authority other than any disputes for taxes that are being contested in good faith by appropriate proceedings;
(xxviii) except as set forth in the Title Insurance Policies, has paid all taxes which it owes except as permitted pursuant to this Agreement other than any taxes that are being contested in good faith by appropriate proceedings;
(xxix) has no material contingent or actual obligations not related to the Properties owned directly or indirectly by such entity; and
(xxx) has no material continuing obligations or other liabilities with respect to the Prior Management Asset.
(f) Any assignment of limited liability company interests in Borrower and Principal and the admission of the assignee as a member of Borrower or Principal, as applicable was accomplished in accordance with, and was permitted by, the limited liability company agreement of Borrower or Principal, as in effect at such time.
(g) Intentionally Omitted.
(h) (I) any consents, waivers or amendments to the limited liability company agreement of any Borrower or Principal that is a Delaware limited liability company (each a Company ), or limited partnership agreement of any Borrower or Principal that is a Delaware limited partnership (each a Partnership ), that were required to effect any assignment of a limited liability company interest in such Company or assignment of a partnership interest in such Partnership, as the case may be, or for the admission of an assignee as a member of a Company, or as a partner of a Partnership, were obtained or accomplished in accordance with
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such limited liability company agreement or partnership agreement, as applicable, as in effect at the time of such assignment, and that any conditions to assignment of any limited liability company interest in a Company or any partnership interest in a Partnership, as the case may be, or for the admission of an assignee as a member of a Company or as a partner of a Partnership, as applicable, have been satisfied or waived, (II) there have been at all times at least one member of each Company, and (III) that have been at all times at least one general partner and one additional general or limited partner of each Partnership that were different Persons.
4.1.31 Management Agreement . Each Management Agreement is in full force and effect and, to Borrowers knowledge, there is no material default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a material default thereunder. Each Management Agreement was entered into on commercially reasonable terms.
4.1.32 Illegal Activity . No portion of any Individual Property has been or will be purchased with proceeds of any illegal activity.
4.1.33 No Change in Facts or Circumstances; Disclosure . To Borrowers knowledge, all information submitted by and on behalf of Borrower to Lender and in all financial statements, rent rolls (including the rent roll attached hereto as Schedule 4.1.26 ), reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are true, complete and correct in all material respects. The foregoing representation shall not apply to any such financial information that constitutes projections, provided that Borrower represents and warrants that it has no reason to believe that such projections are materially inaccurate. There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or would be reasonably likely to materially and adversely affect the use, operation or value of the Properties or the business operations or the financial condition of Borrower. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any Provided Information or representation or warranty made herein to be materially misleading.
4.1.34 Investment Company Act . Borrower is not (a) an investment company or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended; (b) a holding company or a subsidiary company of a holding company or an affiliate of either a holding company or a subsidiary company within the meaning of the Public Utility Holding Company Act of 2005, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.
4.1.35 Embargoed Person . As of the date hereof, (a) none of the funds or other assets of Borrower constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the USA PATRIOT Act (including anti-terrorism provisions thereof), the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq. , The Trading with the
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Enemy Act, 50 U.S.C. App. 1 et seq. , and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower (whether directly or indirectly), is prohibited by law or the Loan made by the Lender is in violation of law ( Embargoed Person ); (b) none of the funds or other assets of Borrower constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person; (c) no Embargoed Person has any interest of any nature whatsoever in Borrower with the result that the investment in Borrower (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (d) none of the funds of Borrower have been derived from or are the proceeds of, any unlawful activity with the result that the investment in Borrower (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.
4.1.36 Principal Place of Business; State of Organization . Borrowers principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Agreement. Each Individual Borrower is organized under the laws of the State listed opposite of each Borrower on Schedule 4.1.36 and its organizational identification number is listed in Schedule 4.1.36 .
4.1.37 Environmental Representations and Warranties . (a) Except as otherwise disclosed by the Phase I Environmental Reports (or Phase II environmental report, if required) delivered to Lender by Borrower in connection with the origination of the Loan (such report is referred to below as the Environmental Report ), to Borrowers knowledge (a) there are no Hazardous Substances or underground storage tanks in, on, or under the Properties, except those that are (i) in compliance in all material respects with Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required under Environmental Law), (ii) de-minimis amounts necessary to operate the Properties for the purposes set forth in this Agreement which will not result in an environmental condition in, on or under the Properties and which are otherwise permitted under and used in compliance with Environmental Law and (iii) fully disclosed to Lender in writing pursuant to the Environmental Report; (b) there are no past or present Releases of Hazardous Substances in violation of Environmental Law, on, under or from the Properties which have not been fully remediated in accordance with Environmental Law; (c) Borrower has not received any written notice or other communication from any Person (including, but not limited to, a Governmental Authority) relating to an existing threat of any Release of Hazardous Substances migrating to the Properties or possible liability of any Person pursuant to any Environmental Law or other environmental conditions in connection with the Properties; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Properties which has not been fully remediated in accordance with Environmental Law; (e) Borrower does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a Governmental Authority) relating to Hazardous Substances or Remediation thereof, of possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Properties, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Borrower has provided to Lender, in writing, any and all information relating to environmental conditions in, on, under or from the Properties that are known to Borrower and has provided to Lender all information that is contained in Borrowers files and records, including, but not limited to, any reports relating to Hazardous Substances in, on, under or from the Properties and/or to the environmental condition of the Properties.
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4.1.38 Mortgage Taxes . As of the date hereof, Borrower represents that they have paid (or escrowed sufficient funds with the Escrow Agent for payment of) all state, county and municipal recording and all other similar taxes imposed upon the execution and recordation of the Mortgages.
4.1.39 Ground Lease . Except as set forth in Schedule 4.1.39 attached hereto, Borrower hereby represents and warrants to Lender the following with respect to each Ground Lease:
(a) The Ground Lease or a memorandum of the Ground Lease has been duly recorded. The Ground Lease permits the interest of Borrower to be encumbered by a mortgage or the Ground Lessor has approved and consented to the encumbrance of the Ground Lease Property by the applicable Mortgage. There have not been amendments or modifications to the terms of the Ground Lease since recordation of the Ground Lease (or a memorandum thereof), with the exception of written instruments which have been recorded or as disclosed to Lender in this Agreement.
(b) The Ground Lease may not be terminated, surrendered or amended without the prior written consent of Lender; provided that the Ground Lessor shall not be prevented from exercising its remedies in accordance with the Ground Lease if the obligations of Borrower under the Ground Lease are not performed as provided in the Ground Lease.
(c) Except for the Permitted Encumbrances and other encumbrances of record, Borrowers interest in the Ground Lease is not subject to any Liens or encumbrances superior to, or of equal priority with, the applicable Mortgage other than the Ground Lessors related fee interest.
(d) Borrowers interest in the Ground Lease is assignable without the consent of the Ground Lessor to Lender, the purchaser at any foreclosure sale or the transferee under a deed or assignment in lieu of foreclosure in connection with the foreclosure of the Lien of the Mortgage or transfer of Borrowers leasehold estate by deed or assignment in lieu of foreclosure. Thereafter, the Ground Lease is further assignable by such transferee and its successors and assigns without the consent of the Ground Lessor.
(e) As of the date hereof, the Ground Lease is in full force and effect and no default has occurred on the part of the Borrower under the Ground Lease, nor to Borrowers knowledge has any default occurred by the Ground Lessor under such Ground Lease (except in each case, any such default that has been previously cured). There is no existing condition which, but for the passage of time or the giving of notice, could result in (i) a default by the Borrower under the terms of the Ground Lease or (ii) to Borrowers knowledge, a default by Ground Lessor under the terms of such Ground Lease.
(f) Under the terms of the Ground Lease and the Loan Documents, taken together, any related insurance and condemnation proceeds that are paid or awarded to Borrower with respect to the leasehold interest will be applied either to the repair or restoration of all or part of the Ground Lease Property, with Lender having the right subject to the terms of the Loan Documents to hold and disburse the proceeds as the repair or restoration progresses, or to the payment of the outstanding principal balance of the Loan together with any accrued interest thereon.
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(g) The Ground Lease requires the Ground Lessor to give notice of any default by Borrower to Lender prior to exercising its remedies thereunder.
(h) Lender is permitted the opportunity to cure any default under the Ground Lease, which is curable after the receipt of notice of the default before the Ground Lessor thereunder may terminate the Ground Lease.
(i) The Ground Lease has a term which extends not less than twenty (20) years beyond the Maturity Date (including any unexercised option periods and automatic renewal periods).
(j) The Ground Lease requires the Ground Lessor to enter into a new lease upon termination (prior to expiration of the term thereof) of the Ground Lease for any reason, including rejection or disaffirmation of the Ground Lease in a bankruptcy proceeding.
4.1.40 Cash Management Account . Borrower hereby represents and warrants to Lender that:
(a) The Cash Management Agreement, and this Agreement create a valid and continuing security interest (as defined in the Uniform Commercial Code of the State of New York) in the Cash Management Account in favor of Lender, which security interest is prior to all other Liens, other than Permitted Encumbrances, and is enforceable as such against creditors of and purchasers from Borrower. Other than in connection with the Loan Documents and except for Permitted Encumbrances, Borrower has not sold, pledged, transferred or otherwise conveyed the Cash Management Account;
(b) The Cash Management Account constitutes a deposit account and/or securities account within the meaning of the Uniform Commercial Code of the State of New York;
(c) Pursuant and subject to the terms hereof and the other applicable Loan Documents, Agent has agreed to comply with all instructions originated by Lender, without further consent by Borrower, directing disposition of the Cash Management Account and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities; and
(d) The Cash Management Account are not in the name of any Person other than Borrower, as pledgor, or Lender, as pledgee. Borrower has not consented to Agent complying with instructions with respect to the Cash Management Account from any Person other than Lender.
4.1.41 Intentionally Omitted .
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4.1.42 Taxes . Except with respect to the NORC Riparian Property Inc., each Individual Borrower is treated as a partnership or a disregarded entity for U.S. federal income tax purposes. Borrower has timely filed or caused to be filed all federal income and other material Section 2.7 Tax, returns and reports required to have been filed by it and has paid or caused to be paid all federal income and other material Section 2.7 Taxes and related liabilities required to have been paid by it, except taxes that are being contested in good faith by appropriate proceedings and for which Borrower has set aside on its books adequate reserves. There are no Liens for Section 2.7 Taxes on or with respect to any of Borrowers income or assets, other than Liens for Section 2.7 Taxes not yet due or delinquent or which are contested in good faith by appropriate proceedings and for which Borrower has set aside on its books adequate reserves.
4.1.43 Labor . No work stoppage, labor strike, slowdown or lockout is pending or threatened by employees and other laborers at the Properties. Except as described on Schedule 4.1.43 , neither Borrower nor, to Borrowers knowledge without inquiry, Manager (i) is not involved in or, to the best of Borrowers Knowledge, threatened with any material labor dispute, material grievance or litigation relating to labor matters involving any employees and other laborers at the Properties, including, without limitation, violation of any federal, state or local labor, safety or employment laws (domestic or foreign) and/or charges of unfair labor practices or discrimination complaints, (ii) to the best of Borrowers Knowledge, has not engaged with respect to the Properties, in any unfair labor practices within the meaning of the National Labor Relations Act or the Railway Labor Act, or (iii) is not a party to, or bound by, any existing collective bargaining agreement or union contract with respect to employees and other laborers at the Properties. As of the Closing Date, Borrower has received no notice that any payments that are required to be paid under any collective bargaining agreement have not been paid.
4.1.44 Project Improvement Plans . There are no Project Improvement Plans applicable to the Properties other than the Project Improvement Plans set forth on Schedule 4.1.44 hereto.
4.1.45 Condominium . Borrower is a party (either directly, or as a successor-in-interest) to the Condominium Documents and the Condominium Documents are in full force and effect and have not been amended or modified and Borrowers interest therein has not been assigned pursuant to any assignment that has not otherwise been disclosed to Lender as of the date hereof. There are no set-offs, claims, counterclaims or defenses being asserted or, after giving the requisite notice, if any, required under the Condominium Documents, capable of being asserted, for the enforcement of the obligations of any party under the Condominium Documents. No party to any Condominium Document has the right to file a Lien for amounts due under the provisions of such Condominium Document which, if unpaid, may be asserted as a Lien prior to the Lien of the Mortgage. All common charges and other sums due from Borrower, if any, under the Condominium Documents have been paid to the extent they are payable on or prior to the date hereof.
4.1.46 Declarations . Borrower is a party (either directly, or as a successor-in-interest) to the Declarations and the Declarations are is in full force and effect and has not been amended or modified and Borrowers interest therein has not been assigned pursuant to any assignment. There are no set-offs, claims, counterclaims or defenses being asserted or, after
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giving the requisite notice, if any, required under the Declarations, capable of being asserted, for the enforcement of the obligations of any party under the Declarations. No party to any Declaration has the right to file a Lien for amounts due under the provisions of such Declaration which, if unpaid, may be asserted as a Lien prior to the Lien of the Mortgage. All common charges and other sums due from Borrower, if any, under the Declarations have been paid to the extent they are payable on or prior to the date hereof.
4.1.47 Material Property Agreements .
(a) Each Material Property Agreement is in full force and effect, and except as set forth on Schedule 4.1.47 hereof, there are no material defaults by Borrower thereunder or, to Borrowers knowledge, any material defaults thereunder by any other party thereto. Borrower has not given or received any notice of default under any of the Material Property Agreements that remains uncured or in dispute.
(b) Borrower has delivered true, correct and complete copies of the Material Property Agreements (including all amendments and supplements thereto) to Lender.
(c) All fees and other compensation for services previously performed under the Property Agreement have been paid in full or are not yet due and payable as of the date hereof.
Section 4.2 Survival of Representations . Borrower agrees that all of the representations and warranties of Borrower set forth in Section 4.1 hereof and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents by Borrower but shall be deemed to have been given on the date hereof. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.
ARTICLE V
BORROWER COVENANTS
Section 5.1 Affirmative Covenants . From the date hereof and until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Liens of the Mortgages encumbering the Properties (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower hereby covenants and agrees with Lender to comply with the following covenants, and in connection therewith:
5.1.1 Existence; Compliance with Legal Requirements . Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply in all material respects with all Legal Requirements applicable to Borrower and the Properties, including, without limitation, building and zoning codes and certificates of occupancy and the procurement of all necessary
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and required hospitality, liquor, gaming or innkeepers licenses. There shall never be committed by Borrower, and Borrower shall not permit any other Person in occupancy of or involved with the operation or use of the Properties to commit any act or omission affording the federal government or any state or local government the right of forfeiture against any Individual Property or any part thereof or any monies paid in performance of Borrowers obligations under any of the Loan Documents. Borrower hereby, covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture. Borrower shall at all times maintain, preserve and protect all rights it has in necessary franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and shall keep the Properties in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided in the Loan Documents. Borrower shall keep the Properties insured at all times by financially sound and reputable insurers, to such extent and against such risks, and maintain liability and such other insurance, as is more fully provided in this Agreement. After prior written notice to Lender, Borrower, at Borrowers own expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or any Individual Property or any alleged violation of any Legal Requirement, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost during the pendency of such dispute; (iv) Borrower shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (v) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or any Individual Property during the pendency of such dispute; and (vi) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith. Lender may apply any such security, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or any Individual Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost.
5.1.2 Taxes and Other Charges . Except as otherwise provided in this Section 5.1.2 , Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Properties or any part thereof prior to delinquency; provided , however , Borrowers obligation to directly pay Taxes and Other Charges shall be suspended for so long as Borrower complies with the terms and provisions of Section 7.2 hereof. Except as otherwise provided in this Section 5.1.2 , Borrower shall not later than five (5) Business Days after receipt of a written request from Lender, deliver to Lender receipts for payment or other evidence satisfactory to Lender that the Taxes and Other Charges have been so paid or are not then delinquent no later than ten (10) days prior to the date on which the Taxes and/or Other Charges would otherwise be delinquent if not paid ( provided , however , Borrower shall not be required to furnish such receipts for payment of such Taxes and Other Charges during any period
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that Taxes and Other Charges have been paid by Lender pursuant to Section 7.2 hereof or by Manager pursuant to a Management Agreement). Except as otherwise provided in the following sentence, Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien (other than Permitted Encumbrances) or charge whatsoever which may be or become a Lien or charge against the Properties, and shall promptly pay for all utility services provided to the Properties. Borrower, at Borrowers own expense, may contest, by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) no Default or Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost during the pendency thereof; (iv) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the applicable Individual Property during the pendency thereof; (vi) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon. Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the reasonable judgment of Lender, the entitlement of such claimant is established or any Individual Property (or part thereof or interest therein) shall be in imminent danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of any Mortgage being primed by any related Lien; and (vii) Borrower shall deliver written notice of such contest to Lender.
5.1.3 Litigation . Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened against Borrower which might materially adversely affect Borrowers condition (financial or otherwise) or business or any Individual Property.
5.1.4 Access to Properties . Subject to the rights of Tenants, guests, patrons and the rights of any landlord under any Ground Lease, Borrower shall permit agents, representatives and employees of Lender to inspect the Properties or any part thereof at reasonable hours upon reasonable advance notice.
5.1.5 Notice of Default . Borrower shall promptly advise Lender of any material adverse change in Borrowers, or Guarantors condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which Borrower has knowledge.
5.1.6 Cooperate in Legal Proceedings . Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way materially and adversely affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.
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5.1.7 Perform Loan Documents . Borrower shall in a timely manner observe, perform and satisfy all the terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and expenses to the extent required under the Loan Documents executed and delivered by, or applicable to, Borrower. Borrower shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Loan Document executed and delivered by, or applicable to, Borrower without the prior written consent of Lender.
5.1.8 Award and Insurance Benefits . Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with any Individual Property, and Lender shall be reimbursed for any expenses incurred in connection therewith (including reasonable attorneys fees and disbursements, and the payment by Borrower of the expense of an appraisal on behalf of Lender in case of Casualty or Condemnation affecting any Individual Property or any part thereof) out of such Insurance Proceeds.
5.1.9 Further Assurances . Borrower shall, at Borrowers sole cost and expense:
(a) without limiting any other obligation of Borrower hereunder, upon the written request of Lender, furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents or which are reasonably requested by Lender in connection therewith, provided, that, so long as no Event of Default has occurred and is continuing, the foregoing shall not require Borrower to obtain updated appraisals after the Closing Date, unless specifically required by the terms of this Agreement;
(b) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts reasonably necessary, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require including, without limitation, the execution and delivery of all writings necessary to transfer any hospitality, liquor and other licenses required for the continued operation of the Properties into the name of Lender or its designee after the occurrence and during the continuance of an Event of Default to the extent such transfer is permitted by applicable law or, to the extent such transfer is not permitted by applicable law, reasonably cooperate with Lender in obtaining new hospitality, liquor or other licenses required for the continued operation of an Individual Property and terminating existing licenses, in each case solely at the direction of Lender; and
(c) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time including, without limitation, the execution and delivery of all such writings necessary to transfer any liquor licenses with respect to the Property into the name of Lender or its designee after the occurrence and during the continuance of an Event of Default to the extent such transfer is permitted by applicable law or, to the extent such transfer is not permitted by
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applicable law, reasonably cooperate with Lender in obtaining new hospitality, liquor or other licenses required for the continued operation of an Individual Property and terminating existing licenses, in each case solely at the direction of Lender.
5.1.10 Principal Place of Business, State of Organization . Borrower shall not cause or permit any change to be made in its name, identity (including its trade name or names), place of organization or formation (as set forth in Section 4.1.36 hereof) or, except as permitted pursuant to Section 5.2 hereof, Borrowers corporate or partnership or other structure unless Borrower shall have first notified Lender in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action required by Lender for the purpose of perfecting or protecting the lien and security interests of Lender pursuant to this Agreement and the other Loan Documents and, in the case of a change in Borrowers structure, except as permitted pursuant to Section 5.2 hereof, without first obtaining the prior written consent of Lender. Upon Lenders request, Borrower shall, at Borrowers sole cost and expense, execute and deliver additional financing statements, security agreements and other instruments which may be necessary to effectively evidence or perfect Lenders security interest in the Properties as a result of such change of principal place of business or place of organization. Borrowers principal place of business and chief executive office has been for the preceding four months (or, if less, the entire period of the existence of Borrower) and will continue to be the address of Borrower set forth at the introductory paragraph of this Agreement (unless Borrower notifies Lender in writing at least thirty (30) days prior to the date of such change). Borrower shall promptly notify Lender of any change in their organizational identification number. Upon receipt of a written request from Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names under which Borrower intends to operate each Individual Property, and representing and warranting that Borrower do business under no other trade name with respect to such Properties.
5.1.11 Financial Reporting . (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with the Uniform System of Accounts and reconciled in accordance with GAAP (or such other accounting basis acceptable to Lender), proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense in connection with the operation on an individual basis of the Properties. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice (and, in any event, not more than two (2) times in any calendar year unless an Event of Default is continuing, in which case no such restriction shall apply) to examine such books, records and accounts at the office of Borrower or any other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence and during the continuance of an Event of Default, Borrower shall pay any reasonable and actual costs and expenses incurred by Lender to examine Borrowers accounting records with respect to the Properties, as Lender shall reasonably determine to be necessary or appropriate in the protection of Lenders interest.
(b) Borrower will furnish to Lender annually, within seventy-five (75) days following the end of each Fiscal Year, a copy of Borrowers unaudited financial statements covering the Properties on a combined basis for such Fiscal Year and containing statements of profit and loss for Borrower and the Properties and a balance sheet for Borrower. Such statements shall set forth the financial condition and the results of operations for the Properties
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(on a combined basis) for such Fiscal Year, and shall include, but not be limited to, amounts representing annual Net Cash Flow, Net Operating Income, Gross Income from Operations and Operating Expenses (not including any contributions to the Replacement Reserve Fund and the Required Repair Fund). Borrowers annual financial statements shall be accompanied by (i) an Officers Certificate stating that each such annual financial statement presents fairly the financial condition and the results of operations of Borrower and the Properties being reported upon as of such date and has been prepared in accordance with the Uniform System of Accounts and reconciled in accordance with GAAP (or such other accounting basis acceptable to Lender) and (ii) occupancy statistics including revenue per available room and average daily rates for the Properties on a combined basis as well as for each Individual Property. Together with Borrowers annual financial statements, Borrower shall furnish to Lender an Officers Certificate certifying as of the date thereof whether there exists, to Borrowers knowledge, an event or circumstance which constitutes a Default or Event of Default under the Loan Documents executed and delivered by, or applicable to, Borrower, and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same.
(c) Borrower shall cause Guarantor to furnish to Lender annually, within one-hundred twenty (120) days following the end of each Fiscal Year of guarantor, financial statements audited by a Big Four accounting firm or other independent certified public accountant acceptable to Lender in accordance with the Uniform System of Accounts and reconciled in accordance with GAAP, redacted to exclude information with respect to individual limited partners and individual investor information accompanied by an unqualified opinion of a Big Four accounting firm or other independent certified public accountant reasonably acceptable to Lender.
(d) Borrower will furnish, or cause to be furnished, to Lender on or before forty (40) days after the end of (i) prior to a Securitization, each calendar month and (ii) after a Securitization, each calendar quarter, each the following items, accompanied by an Officers Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Properties on a combined basis as well as each Individual Property (subject to normal year-end adjustments) as of the relevant date as applicable: (i) an occupancy report for the subject month, including an average daily rate and revenue per available room; (ii) monthly and year to date operating statements prepared for each calendar month, noting EBITDA, Gross Income from Operations, and Operating Expenses (not including any contributions to the Replacement Reserve Fund and the Required Repair Fund), and other information necessary and sufficient to fairly represent the financial position and results of operation of the Properties during such calendar month, and containing a comparison of budgeted income and expenses and the actual income and expenses, all in form satisfactory to Lender and (iii) during a Cash Trap Period, upon the written request of Lender, a detailed explanation of any variances of ten percent (10%) or more between budgeted and actual amounts for such periods. In addition, such certificate shall also be accompanied by an Officers Certificate stating that the representations and warranties of Borrower set forth in subsection (xxiii) of the definition of Special Purpose Entity are true and correct as of the date of such certificate. On or before forty (40) days after the end of (i) prior to Securitization, each calendar month and (ii) after a Securitization, each calendar quarter, Borrower also will furnish, or cause to be furnished, to Lender the most current Smith Travel Research Reports then available to Borrower reflecting market penetration and relevant hotel properties competing with the Properties.
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(e) Lender hereby acknowledges receipt of the Annual Budget for the remainder of the Fiscal Year-ending on December 31, 2013. Borrower shall submit to Lender an Annual Budget not later than thirty (30) days prior to the commencement of Fiscal Year (which, subject to the immediately succeeding sentence shall be for informational purposes only). If an Event of Default is continuing, a Bankruptcy Action of Manager has occurred and such Manager has not been replaced with a Qualified Manager in accordance with the terms of this Agreement or a Debt Yield Trigger Period is continuing the Annual Budget shall be subject to Lenders reasonable written approval, which approval shall not be unreasonably withheld, conditioned or delayed (each such Annual Budget, an Approved Annual Budget ); provided , however, that Lender shall not withhold its consent with respect to (i) expenditures necessary to comply with life, health or safety matters and (ii) Employment Costs (as such term is defined in the Management Agreement). So long as neither a Debt Yield Trigger Period exists nor an Event of Default has occurred and is continuing, any Annual Budget, and any amendments or modifications thereto shall be deemed an Approved Annual Budget and Lender shall have no approval right with respect thereto. In the event that Borrower is required to submit an Annual Budget for approval pursuant to this Section 5.1.11(d) , each such request for approval of an Annual Budget shall contain the following legend in prominently displayed in bold, all caps and fourteen (14) point or larger font in the transmittal letter requesting approval: THIS IS A REQUEST FOR APPROVAL OF AN ANNUAL BUDGET. LENDERS RESPONSE IS REQUESTED WITHIN TEN (10) DAYS . In the event that Lender fails to grant or withhold its approval to such Annual Budget within such ten (10) day period, Borrower shall deliver to Lender a second request for approval containing the following legend in prominently displayed in bold, all caps and fourteen (14) point or larger font in the transmittal letter requesting approval: THIS IS A SECOND REQUEST FOR APPROVAL OF AN ANNUAL BUDGET. LENDERS RESPONSE IS REQUESTED WITHIN TEN (10) DAYS. LENDERS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN LENDERS APPROVAL BEING DEEMED TO HAVE BEEN GRANTED . In the event that Lender fails to grant or withhold its approval to such Annual Budget within such ten (10) day period, then Lenders approval shall be deemed to have been granted. In the event that Lender timely disapproves a proposed Annual Budget in accordance with the foregoing, Borrower shall promptly revise such Annual Budget and resubmit the same to Lender (and each such resubmittal shall be subject to the provisions of this Section 5.1.11(d) as if the applicable proposed Annual Budget were being submitted to Lender for its initial review of the same, provided that the aforesaid ten (10) day periods shall each be five (5) days in connection with any such resubmittal). Borrower shall promptly revise each proposed Annual Budget and resubmit the same to Lender in accordance with the foregoing until Lender approves the proposed Annual Budget. Until such time that Lender approves a proposed Annual Budget, the most recently Approved Annual Budget shall apply; provided that, each line item of such Approved Annual Budget shall be increased by the amount of the increase, if any, in the Consumer Price Index for the immediately preceding calendar year (other than the line items in respect of Taxes, Insurance Premiums, union wages, utilities expenses and Other Charges, which line items shall be adjusted to reflect actual increases in such expenses).
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(f) In the event that, during any Cash Trap Period, Borrower must incur a capital expense not set forth in the Approved Annual Budget (each an Extraordinary Expense ), then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for Lenders approval, which approval shall not be unreasonably withheld, conditioned, or delayed; provided , that Lenders consent shall not be required in connection with: (i) (A) expenditures necessary to comply with life, health or safety matters and Legal Requirements, (B) Employment Costs (as such term is defined in the Management Agreement) and (C) variable expense (as such term is used in the Management Agreement), in each case to the extent Borrower is not permitted to consent to such items pursuant to the Management Agreement, and (ii) matters which Borrower is permitted to use Excess Cash Flow Reserve Funds for, to the extent that there are sufficient funds available.
(g) During the continuance of a Cash Trap Period, Borrower shall not approve (to the extent Borrower is permitted to approve or reject such operating budget pursuant to the terms of the Management Agreement) any operating budget pursuant to any Management Agreement with Manager without the prior written consent of Lender (such consent not to be unreasonably withheld, conditioned or delayed). Lender shall cooperate with Borrower to follow the procedures for budget approval set forth in the Management Agreement to the extent Borrower notifies Lender thereof.
(h) Intentionally Omitted.
(i) Any reports, statements or other information required to be delivered under this Agreement may be delivered via email, with report files in electronic form of Microsoft Word, Microsoft Excel or .pdf format, (i) in paper form, (ii) on a diskette, and (iii) if requested by Lender and within the capabilities of Borrowers data systems without change or modification thereto, in electronic form and prepared using Microsoft Word for Windows files (which files may be prepared using a spreadsheet program and saved as word processing files). Borrower agrees that Lender may disclose information regarding the Properties and Borrower that is provided to Lender pursuant to this Section 5.1.11(h) in connection with the Securitization to such parties requesting such information in connection with such Securitization.
5.1.12 Business and Operations . Borrower shall continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management, leasing and operation of the Properties. Each Individual Borrower shall qualify to do business and will remain in good standing under the laws of each jurisdiction of its formation as and to the extent the same are required for the ownership, maintenance, management and operation of its respective Individual Properties. Each Individual Borrower shall at all times during the term of the Loan, continue to own or lease all of Equipment, Fixtures and Personal Property which are necessary to operate its respective Individual Properties in the manner required hereunder and in the manner in which it is currently operated.
5.1.13 Title to the Properties . Borrower shall warrant and defend (a) the title to each Individual Property and every part thereof, subject only to Liens permitted hereunder (including Permitted Encumbrances) and (b) the validity and priority of the Liens of the Mortgages on the Properties, subject only to Liens permitted hereunder (including Permitted
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Encumbrances), in each case against the claims of all Persons whomsoever. Borrower shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys fees and court costs) incurred by Lender if an interest in any Individual Property, other than as permitted hereunder, is claimed by another Person.
5.1.14 Costs of Enforcement . In the event (a) that any Mortgage encumbering any Individual Property is foreclosed in whole or in part or that any such Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage encumbering such Individual Property prior to or subsequent to any Mortgage encumbering any Individual Property in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower and its successors or assigns, shall be chargeable with and agrees to pay all out-of-pocket costs of collection and defense, including reasonable third party attorneys fees and expenses, incurred by Lender or Borrower in connection therewith, but excluding regular servicing fees and in connection with any appellate proceeding or post judgment action involved therein, together with all required service or use taxes.
5.1.15 Estoppel Statement . (a) After request by Lender, Borrower shall within ten (10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, claimed by Borrower, and (vi) that the Note, this Agreement, the Mortgages and the other Loan Documents are valid, legal and binding obligations (subject to bankruptcy, insolvency or other similar laws and general principles of equity) and have not been modified or if modified, giving particulars of such modification; provided , however , that so long as no Event of Default has occurred and is continuing, Borrower shall not be required to provide such statement more than one (1) time in any calendar year.
(b) Borrower shall use commercially reasonable efforts to deliver to Lender upon request, (i) tenant estoppel certificates from each commercial Tenant party to a Material Lease at the Properties, (ii) estoppel certificates from any board with respect to a Condominium and (iii) estoppel certificates from each party under any Material Property Agreements, in each case, in form and substance reasonably satisfactory to Lender; provided , however , that so long as no Event of Default has occurred and is continuing, Borrower shall not be required to seek such statement more than one (1) time in any calendar year.
5.1.16 Loan Proceeds . Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section 2.1.4 hereof.
5.1.17 Intentionally Omitted .
5.1.18 Confirmation of Representations . Borrower shall deliver, upon written request from Lender in connection with any Securitization, (a) one (1) or more Officers Certificates certifying as to the accuracy of all representations in all material respects made by Borrower in the Loan Documents as of the date of the closing of such Securitization in all
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relevant jurisdictions or, if any such representations require qualification on such date, setting forth such qualifications in reasonable detail, and (b) certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower, Principal and Guarantor as of the date that is within thirty (30) days of the Securitization.
5.1.19 No Joint Assessment . Borrower shall not suffer, permit or initiate the joint assessment of any Individual Property (a) with any other real property constituting a tax lot separate from such Individual Property, and (b) which constitutes real property with any portion of such Individual Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of the Individual Property.
5.1.20 Environmental Covenants . (a) Borrower covenants and agrees that: (i) all uses and operations on or of the Properties, whether by Borrower or any other Person, shall be in material compliance with all Environmental Laws and permits issued pursuant thereto except to the extent that (A) any Environmental Law or order or directive of a Governmental Authority with respect thereto is being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a material adverse effect on the condition (financial or otherwise) or business of Borrower or the condition or ownership of the Property, or (B) Borrower has determined in good faith that contesting the same is not in the best interests of Borrower and the failure to contest the same could not be reasonably expected to have a material adverse effect on the condition (financial or otherwise) or business of Borrower or the condition or ownership of the Property; (ii) Borrower shall not cause, and shall use commercially reasonably efforts to ensure that no Person causes any Releases of Hazardous Substances in, on, under or from the Properties, except those that are both (A) in compliance with all applicable Environmental Laws and with permits issued pursuant thereto and (B) fully disclosed to Lender in writing; (iii) Borrower shall not place and shall use commercially reasonable efforts to ensure no other Person places Hazardous Substances in, on, or under the Properties, except those that are (A) in compliance with all applicable Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required by applicable Environmental Law), (B) de-minimis amounts necessary to operate the Properties for the purposes set forth in the Loan Agreement which will not result in an environmental hazard in, on or under the Properties and which are otherwise permitted under and used in compliance with Environmental Law or (C) fully disclosed to Lender in writing; (iv) Borrower shall keep the Properties free and clear of all liens and other encumbrances imposed pursuant to any applicable Environmental Law due to any act or omission of Borrower (the Environmental Liens ) and shall use commercially reasonable efforts to keep the Properties free and clear from any Environmental Liens due to any act or omission of any other Person; (v) Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to subsection (b) below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews at reasonable times upon reasonable notice; (vi) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Lender made in the event that Lender has reason to believe that an environmental hazard exists on the Properties to (A) reasonably effectuate Remediation of any Release of a Hazardous Substance in, on, under or from the Properties to the extent required under Environmental Law; (B) comply with any applicable Environmental Law; (C) comply with any directive from any
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Governmental Authority; and (D) take any other reasonable action necessary or appropriate for protection of human health or the environment; (vii) Borrower shall not do and shall use commercially reasonable efforts not to allow any Tenant or other user of the Properties to do any act relating to environmental matters that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Properties), impairs or may impair the value of the Properties, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Properties; and (viii) Borrower shall notify Lender in writing promptly upon Borrower obtaining knowledge of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Properties; (B) any non-compliance with any Environmental Laws related in any way to the Properties; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Properties; and (E) any written notice to Borrower from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to the release or potential release of Hazardous Substances or Remediation thereof, likely to result in liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Properties, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Section 5.1.20 .
(b) In the event that Lender has a reasonable basis to believe that an environmental hazard exists on the Properties that, in Lenders sole discretion, endangers any Tenants or other occupants of the Properties or their guests or the general public or materially and adversely affects the value of the Properties, (i) upon reasonable notice from Lender, Borrower shall (subject to the rights of Tenants under Leases, guests, patrons and the rights of any landlord under the Ground Leases and any Submerged Land Lease), at Borrowers expense, promptly cause an engineer or consultant reasonably satisfactory to Lender to conduct an environmental assessment or audit (the scope of which shall be determined in Lenders reasonable discretion) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Lender and promptly deliver to Lender the results of any such assessment, audit, sampling or other testing after Lender shall have delivered the notice referenced above; and (ii) upon reasonable notice to Borrower, Lender and any other Person designated by Lender, including but not limited to any receiver, any representative of a Governmental Authority, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Properties at all reasonable times, and upon reasonable prior notice to Borrower, to assess any and all aspects of the environmental condition of the Properties and its use with respect to such environmental hazard, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lenders reasonable discretion) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing. Borrower shall cooperate with and provide Lender and any such Person designated by Lender with access to the Properties.
5.1.21 Leasing Matters . (a) Subject to subsection (b) below, Borrower may enter into any Lease or other rental arrangement, exercise all extensions and renewals and enter into any modification, amendments and supplements to any Leases without the prior approval of Lender, provided that, any new Lease entered into after the date hereof shall (i) have rental rates comparable to existing local market rates in all material respects, provided, however, so long as
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no Cash Trap Period is in effect, a Lease of commercial space demising less than 5,000 square feet, with a term of less than five (5) years may be made on lower than market rate terms with a tenant who is not an Affiliate if Borrower reasonably determines in its prudent business judgment that such Lease will provide additional incremental revenue to the applicable Property in excess of its stated rent, (ii) be on commercially reasonable terms and shall not contain any terms which would materially adversely affect lenders rights under the Loan Documents and (iii) be subordinate to the Mortgage encumbering the applicable Individual Property and shall provide that the lessee agrees to attorn to Lender or any purchaser at a sale by foreclosure or power of sale; provided , that with respect to any approval (or deemed approval) by Lender (or with respect to any Lease that does not require Lenders approval), Lender shall, upon request of Borrower, enter into a subordination, non-disturbance and attornment agreement with any lessee entering into such Lease on Lenders then standard form, subject to such commercially reasonable changes thereto as such lessee and Lender shall mutually agree (each acting reasonably).
(b) Any Material Leases with respect to an Individual Property written after the date hereof shall be subject to the prior written approval of Lender, which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, the Material Leases listed on Schedule 5.1.21 attached hereto and previously delivered to Lender are hereby approved by Lender. Upon written request of Lender, Borrower shall furnish Lender with executed copies of all Leases; provided that so long as no Event of Default has occurred and is continuing, Borrower shall not be required to deliver copies of all Leases more frequently than two (2) times per calendar year and, where Leases have been previously delivered to Lender, Borrower may, in lieu of delivering new copies thereof to Lender, deliver an Officers Certificate stating that such Leases remain unchanged (or, if terminated or expired, that such Leases have been terminated or expired, or, where Leases have been modified, supplemented or extended, deliver copies of the documents modifying, supplementing or extending the Leases without delivering copies of the documents previously provided. All renewals of Leases (other than with respect to renewal or extension rights set forth in the Lease in effect as of the Closing Date) and all proposed Leases shall provide for rental rates comparable to existing local market rates in all material respects, provided, however, so long as no Cash Trap Period is in effect, a Lease of commercial space demising less than 5,000 square feet, with a term of less than five (5) years may be made on materially lower than local market rate terms with a tenant who is not an Affiliate if Borrower reasonably determines in its prudent business judgment that such Lease will provide additional incremental revenue to the applicable Property in excess of its stated rent. Borrower, (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend or terminate the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner not to impair the value of the Individual Property involved except that no termination by Borrower or acceptance of surrender by a Tenant of any Material Leases (regardless of when any such Material Lease was entered into) shall be permitted unless (A) by reason of a tenant default and then only in a commercially reasonable manner to preserve and protect the Individual Property; or (B) the exercise by a Tenant of any termination right expressly provided in any existing Material Lease or any Material Lease hereafter entered into in compliance with the conditions set forth in this Section 5.1.21; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits, payments of the first months rent upon signing of the
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Lease, and rent for providing rooms and banquet and meeting space and services in the ordinary course of business); (iv) shall not execute any other assignment of lessors interest in the Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent with the provisions of the Loan Documents; (vi) shall not alter, modify or change the terms of any Material Lease (regardless of when any such material Lease was entered into) without the prior written consent of Lender, which approval shall not be unreasonably withheld, conditioned or delayed, which consent shall be subject to the deemed approval provisions set forth in this Section; and (vii) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Leases as Lender shall from time to time reasonably require. Notwithstanding anything to the contrary contained herein, Borrower shall not enter into a lease of all or substantially all of any Individual Property without Lenders prior written consent. Each such request for approval of a Lease shall contain the following legend in prominently displayed in bold, all caps and fourteen (14) point or larger font in the transmittal letter requesting approval: THIS IS A REQUEST FOR APPROVAL OF A LEASE. LENDERS RESPONSE IS REQUESTED WITHIN TEN (10) DAYS. In the event that Lender fails to grant or withhold its approval to such Lease within such ten (10) day period, Borrower shall deliver to Lender a second request for approval containing the following legend in prominently displayed in bold, all caps and fourteen (14) point or larger font in the transmittal letter requesting approval: THIS IS A SECOND REQUEST FOR APPROVAL OF A LEASE. LENDERS RESPONSE IS REQUESTED WITHIN FIVE (5) DAYS. LENDERS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN LENDERS APPROVAL BEING DEEMED TO HAVE BEEN GRANTED. In the event that Lender fails to grant or withhold its approval to such Lease within such five (5) day period, then Lenders approval shall be deemed to have been granted. Notwithstanding the foregoing, Lender consent shall not be required in connection with (i) any Lease (or amendment, modification or termination thereof) that is not a Material Lease or a lease to an Affiliate, (ii) renewals, expansions or extensions of any Lease (including a Material Lease) by a tenant that is a party to such lease as of the Closing so long as the rental terms are on market terms (or on terms contemplated in the Lease in place on the Closing Date or any new Lease entered into in accordance with this Agreement), (iii) any de minimis modifications of any Material Lease, (iv) a commercially reasonable termination of any Material Lease arising from a default by the tenant thereunder or (v) an assignment of any Lease by the tenant thereunder for which Borrowers has a consent right which is not to be unreasonably withheld, pursuant to the terms of such Lease.
5.1.22 Alterations . Borrower shall obtain Lenders prior written consent to any alterations to any Improvements, which consent shall not be unreasonably withheld or delayed except with respect to alterations that would be reasonably likely to have a material adverse effect on Borrowers financial condition, the value of the applicable Individual Property or the Net Operating Income. Notwithstanding the foregoing, Lenders consent shall not be required in connection with any alterations (a) for Required Repairs, (b) that will not have a material adverse effect on Borrowers financial condition or the value of the applicable Individual Property upon completion of such alterations, and such alterations shall (i) with respect to the aggregate for all
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Individual Properties then subject to any alterations being performed in any calendar year, be subject to contracts, the aggregate remaining cost of which are no more than an amount equal to three percent (3%) of the outstanding principal balance of the Loan and (ii) with respect to any Individual Property subject to any alterations being performed at such time, be subject to contracts, the aggregate remaining cost of which is no more than ten percent (10%) of the Adjusted Release Amount for such Individual Property (the Threshold Amount ), (c) are specifically provided for in the Approved Annual Budget, are a permitted variance for health, life and safety items under the Management Agreement or otherwise consented to by Lender and shall be funded from the Reserve Funds or the Borrower Remainder Account (as defined in the Cash Management Agreement) in accordance with this Agreement, (d) that are related to a tenant improvement the cost of which is to be paid by the tenant or Borrower pursuant to a Lease entered into in accordance with the terms of this Agreement, (e) are performed in connection with the Restoration of an Individual Property after the occurrence of a Casualty in accordance with the terms and provisions of this Agreement, (f) for Replacements if there are sufficient reserves on deposit in the Replacement Reserve Fund (or any Manager Account for such amounts) to pay for such obligations or (g) constitute decorative work performed in the ordinary course of business that are paid out of the Manager Accounts for FF&E. If the total unpaid amounts due and payable with respect to alterations to the Improvements being conducted at any Individual Property (excluding Required Repairs, Pre-Approved Alterations and alterations of the kind described in clauses (i) through (iv) of the preceding sentence) shall at any time exceed five percent (5%) of the Release Amount for an Individual Property, Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrowers obligations under the Loan Documents any of the following in any amount sufficient to cover the excess of the aggregate cost of such alterations over the Individual Property Threshold Amount (the Alterations Deposit ): (A) cash, (B) U.S. Obligations, (C) other securities having a rating reasonably acceptable to Lender and, after a Securitization, that, at Lenders option, the applicable Approved Rating Agencies have provided a Rating Agency Confirmation with respect to such securities or (D) a Letter of Credit. The Alterations Deposit shall be disbursed from time to time by Lender to Borrower for completion of the Alterations at the applicable Individual Property upon the satisfaction of the following conditions: (1) Borrower shall submit a request for payment to Lender at least five (5) Business Days prior to the date on which Borrower requests that such payment be made, which request for payment shall specify the Alterations for which payment is requested, (2) on the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall be continuing, and (3) such request shall be accompanied by an Officers Certificate (x) stating that the applicable portion of the Alterations at the applicable Individual Property to be funded by the requested disbursement have been completed in good and workmanlike manner and in accordance with all applicable Legal Requirements, such Officers Certificate to be accompanied by copies of paid invoices or copies of invoices to be paid, and with respect to any invoices in excess of $25,000, copies of any licenses, permits or other approvals by any Governmental Authority required in connection with the applicable portion of the alterations, (y) identifying each contractor that supplied materials or labor in connection with the applicable portion of the alterations to be funded by the requested disbursement and (z) stating that, upon such disbursement, each such contractor has been paid or will have been paid in full for all amounts then due and owing to such contractor. Each Alterations Deposit shall be held by Lender in an interest-bearing account and, until disbursed in accordance with the provisions of this
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Section 5.1.22 , shall constitute additional security for the Debt and other obligations under the Loan Documents. Upon the completion of the Alterations in respect of which any Alteration Deposit is being held, Lender shall promptly return to Borrower any remaining portion of the Alterations Deposit upon the request of Borrower, provided that (1) on the date such request is received by Lender and on the date such disbursement is to be made, no Event of Default shall be continuing and (2) such request shall be accompanied by an Officers Certificate stating that the Alterations have been fully completed in good and workmanlike manner and in accordance with all applicable Legal Requirements, such Officers Certificate to be accompanied by copies of paid invoices or copies of invoices to be paid, as applicable, and, with respect to any invoices in excess of $25,000, copies of any licenses, permits or other approvals by any Governmental Authority required in connection with Alterations (to the extent not received by Lender in connection with prior disbursement requests) and stating that each contractor providing services in connection with the Alterations has been paid in full or will have been paid in full upon such disbursement.
5.1.23 Operation of Property . (a) Borrower and Manager shall cause the Properties to be operated, in all material respects, in accordance with the Management Agreement (or Replacement Management Agreement) as applicable and in accordance with all applicable Legal Requirements. In the event that the Management Agreement expires or is terminated (without limiting any obligation of Borrower to obtain Lenders consent to any termination or modification of the Management Agreement in accordance with the terms and provisions of this Agreement), Borrower shall promptly enter into a Replacement Management Agreement with Manager or another Qualified Manager, as applicable.
(b) Borrower shall: (i) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly after they become aware, notify Lender of any material default under the Management Agreement; (iii) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, written notice, written report and written estimate received by it under the Management Agreement; and (iv) enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Manager under the Management Agreement, in a commercially reasonable manner.
(c) Any Replacement Management Agreement shall (i) be with a Qualified Manager and shall either (A) include franchise and intellectual property rights substantially similar to those set forth in the Management Agreement in effect as of the Closing Date or (B) Borrower shall enter into a franchise agreement reasonably acceptable to Lender on third-party market rate terms with a Qualified Manager. Borrower shall not permit Manager or any Affiliate of Hilton Worldwide Inc. to rebrand any Property to a lower category based on the annual chain scale published by Smith Travel Reports without the consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. At no time shall the Properties be operated as unbranded hotels.
5.1.24 Intentionally Omitted .
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5.1.25 Embargoed Person . Borrower and Principal have performed and shall perform reasonable due diligence to insure that at all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person; (b) no Embargoed Person has any interest of any nature whatsoever in Borrower, Principal or Guarantor, as applicable, with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower, Principal or Guarantor, as applicable, have been derived from, or are the proceeds of, any unlawful activity, including money laundering, terrorism or terrorism activities, with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law, or may cause the Property to be subject to forfeiture or seizure.
5.1.26 Ground Leases . (a) Borrower shall, at its sole cost and expense, promptly and timely perform and observe all the material terms, covenants and conditions required to be performed and observed by Borrower as lessee under each Ground Lease (including, but not limited to, the payment of all rent, additional rent, percentage rent and other charges required to be paid under each Ground Lease).
(b) If Borrower shall be in default under any Ground Lease, then, subject to the terms of the applicable Ground Lease, Borrower shall grant Lender the right (but not the obligation), to cause the default or defaults under such Ground Lease to be remedied and otherwise exercise any and all rights of Borrower under the Ground Lease, as may be necessary to prevent or cure any default, provided such actions are necessary to protect Lenders interest in the Individual Property under the Loan Documents and Lender shall, subject to the rights of Tenants, Permitted Encumbrances and hotel guests and patrons, have the right to enter all or any portion of the related Ground Lease Property at such times and in such manner as Lender deems necessary, to prevent or to cure any such default, provided that in each case, such actions are necessary to protect Lenders interest in the Individual Property under the Loan Documents.
(c) The actions or payments of Lender to cure any default by Borrower under each Ground Lease shall not remove or waive, as between Borrower and Lender, the default that occurred under this Agreement by virtue of the default by Borrower under any Ground Lease unless and until Borrower shall have reimbursed Lender for all sums referenced in the immediately succeeding sentence and the applicable default shall have been cured. All sums expended by Lender to cure any such default shall be paid by Borrower to Lender, upon demand, with interest on such sum at the rate set forth in this Agreement from the date such sum is expended to and including the date the reimbursement payment is made to Lender. All such indebtedness shall be deemed to be secured by the related Security Instrument.
(d) Borrower shall notify Lender promptly in writing of the occurrence of any material default by Ground Lessor under any Ground Lease or following the receipt by Borrower of any written notice from Ground Lessor under any Ground Lease noting or claiming the occurrence of any default by Borrower under any Ground Lease or the occurrence of any event that, with the passage of time or service of notice, or both, would constitute a default by Borrower under any Ground Lease. Borrower shall promptly deliver to Lender a copy of any such written notice of default.
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(e) Borrower shall use commercially reasonable efforts to obtain from Ground Lessor under each Ground Lease and furnish to Lender the estoppel certificate of Ground Lessor stating the date through which rent has been paid and whether or not there are any defaults thereunder and specifying the nature of such claimed defaults, if any, but in no event (so long as no Event of Default has occurred and is continuing) more than one (1) time in any Fiscal Year.
(f) Borrower shall promptly execute, acknowledge and deliver to Lender such instruments as may reasonably be required to permit Lender to cure any default under any Ground Lease or permit Lender to take such other action required to enable Lender to cure or remedy the matter in default and preserve the security interest of Lender under the Loan Documents with respect to each Ground Lease Property. Borrower irrevocably appoints Lender as its true and lawful attorney-in-fact to do, in its name or otherwise, after the occurrence and during the continuation of an Event of Default, any and all acts and to execute any and all documents that are necessary to preserve any rights of Borrower under or with respect to each Ground Lease, including, without limitation, the right to effectuate any extension or renewal of each Ground Lease, or to preserve any rights of Borrower whatsoever in respect of any part of each Ground Lease (and the above powers granted to Lender are coupled with an interest and shall be irrevocable).
(g) Notwithstanding anything to the contrary contained in this Agreement with respect to each Ground Lease:
(i) The lien of the related Security Instrument attaches to all of Borrowers rights and remedies at any time arising under or pursuant to Subsection 365(h) of the Bankruptcy Code, 11 U.S.C. Sections 101 et seq ., including, without limitation, all of Borrowers rights, as debtor, to remain in possession of the related Ground Lease Property.
(ii) Borrower shall not, without Lenders written consent, elect to treat the Ground Lease as terminated under Subsection 365(h)(l) of the Bankruptcy Code. Any such election made without Lenders prior written consent shall be void.
(iii) As security for the Debt, Borrower unconditionally assigns, transfers and sets over to Lender all of Borrowers claims and rights to the payment of damages arising from any rejection by the lessor under the Ground Lease under the Bankruptcy Code. Lender and Borrower shall proceed jointly or in the name of Borrower in respect of any claim, suit, action or proceeding relating to the rejection of the Ground Lease, including, without limitation, the right to file and prosecute any proofs of claim, complaints, motions, applications, notices and other documents in any case in respect of lessor under the Bankruptcy Code. This assignment constitutes a present, irrevocable and unconditional assignment of the foregoing claims, rights and remedies, and shall continue in effect until all of the Debt shall have been satisfied and discharged in full. Any amounts received by Lender or Borrower as damages arising out of the rejection of the Ground Lease as aforesaid shall be applied to all costs and expenses of Lender
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(including, without limitation, attorneys fees and costs) incurred in connection with the exercise of any of its rights or remedies in accordance with the applicable provisions of this Agreement.
(iv) If, pursuant to Subsection 365(h) of the Bankruptcy Code, Borrower seeks to offset, against the rent reserved in the Ground Lease, the amount of any damages caused by the nonperformance by the lessor of any of its obligations thereunder after the rejection by lessor of the Ground Lease under the Bankruptcy Code, then Borrower shall not affect any offset of such amounts unless it shall have provided written notice to Lender of its intent to do so and Lender shall have consented thereto (provided Lender shall be deemed to have consented thereto if it shall fail to object to the same in written notice to Borrower within ten (10) Business Days after receipt of the aforementioned notice, in which case Borrower may proceed to offset the amounts set forth in Borrowers notice.
(v) If any action, proceeding, motion or notice shall be commenced or filed in respect of any lessor of all or any part of the Ground Lease Property in connection with any case under the Bankruptcy Code, Lender and Borrower shall cooperatively conduct and control any such litigation with counsel agreed upon between Borrower and Lender in connection with such litigation. Borrower shall, upon demand, pay to Lender all reasonable actual out of pocket costs and expenses (including reasonable attorneys fees and costs) actually paid or actually incurred by Lender in connection with the cooperative prosecution or conduct of any such proceedings. All such costs and expenses shall be secured by the lien of the related Security Instrument.
(vi) Borrower shall notify Lender of any filing by or against the lessor under the Ground Lease of a petition under the Bankruptcy Code, setting forth any information available to Borrower as to the date of such filing, the court in which such petition was filed, and the relief sought in such filing. Borrower shall deliver to Lender any and all notices, summonses, pleadings, applications and other documents received by Borrower in connection with any such petition and any proceedings relating to such petition.
(h) if Lender, its nominee, designee, successor, or assignee acquires title and/or rights of Borrower under the Ground Lease by reason of foreclosure of the applicable Security Instrument, deed in lieu of foreclosure or otherwise, such party shall (x) succeed to all of the rights of and benefits accruing to Borrower under the Ground Lease, and (y) be entitled to exercise all of the rights and benefits accruing to Borrower under the Ground Lease. At such time as Lender shall request, Borrower agrees to execute and deliver and use commercially reasonable efforts to cause any third party to execute and deliver to Lender such documents as Lender and its counsel may reasonably require in order to insure that the provisions of this section will be validly and legally enforceable and effective against Borrower and all parties claiming by, through, under or against Borrower.
5.1.27 Payment of Obligations . Borrower will pay its obligations, including tax liabilities, that, if not paid, could result in a material adverse effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Borrower has set aside on its books adequate reserves
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with respect thereto in accordance with GAAP, or (c) the failure to make payment pending such contest could not reasonably be expected to result in a material adverse effect, and provided that the foregoing shall not require any partners, members, shareholders or other owners of Borrower to make additional capital contributions to Borrower.
5.1.28 Special Purpose Entity Covenants . (a) Borrower (other than Holdings Borrower) shall not engage in any business other than (i) acquiring, owning, holding, leasing, financing, operating and managing the Properties and in the case of Holdings Borrower, owing its equity interest in another Individual Borrower or Principal, (ii) entering into financings and refinancings of the Properties as permitted by this Agreement and (iii) transacting any and all lawful business that was incident, necessary and appropriate to accomplish the foregoing. Principal shall not engage in any business other than (i) owing its interests in each Individual Borrower and (ii) transacting any and all lawful business that was incident, necessary and appropriate to accomplish the foregoing, and provided that the foregoing shall not require any partners, members, shareholders or other owners of Borrower to make additional capital contributions to Borrower.
(b) Borrower shall not have any Indebtedness other than (i) the Loan, (ii) Permitted Debt, (iii) as may be required pursuant to the Ground Leases, and (iv) such other liabilities that are permitted pursuant to the terms of the Loan Documents; provided , however , that this covenant shall not require any shareholder, partner or member of Borrower to make additional capital contributions to any such entity. Principal shall not have any Indebtedness.
(c) Neither Borrower nor Principal shall assume or guarantee or become obligated for the debts of any other Person, shall not hold out its credit as being available to satisfy the obligations of any other Person and shall not pledge its assets to secure the obligations of any other Person, in each case except as permitted pursuant to this Agreement with respect to co-borrowers or as required by applicable law with respect to general partners.
(d) Until the Debt has been paid in full, Borrower shall remain a Special Purpose Entity.
(e) Borrower and Principal will comply with all of the stated facts and assumptions made with respect to it in any Insolvency Opinion or any Additional Insolvency Opinion. Each Affiliate of Borrower or Principal with respect to which an assumption is made or a fact stated in any Insolvency Opinion will comply with all of the assumptions made and facts stated with respect to it in any such Insolvency Opinion. Borrower and Principal covenant that in connection with any Additional Insolvency Opinion delivered in connection with this Agreement it shall provide an updated certification regarding compliance with the facts and assumptions made therein.
(f) Borrower or Principal shall provide Lender with five (5) Business Days written notice prior to the removal of an Independent Director of Borrower or Principal and no Independent Director shall be removed other than for Cause.
5.1.29 Taxes . Except for NORC Riparian Property, Inc., each Individual Borrower will be treated as a partnership or a disregarded entity for U.S. federal income tax
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purposes. The Borrower will timely file or cause to be filed all federal income and other material Section 2.7 Tax returns and reports required to be filed by it and will pay or cause to be paid all federal income and other material Section 2.7 Taxes and related liabilities required to be paid by it, except Section 2.7 Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower sets aside on its books adequate reserves in accordance with GAAP. Borrower will not permit any Liens for Section 2.7 Taxes to be imposed on or with respect to any of its income or assets, other than Liens for Section 2.7 Taxes not yet due or delinquent or which are contested in good faith by appropriate proceedings and for which Borrower sets aside on its books adequate reserves in accordance with GAAP.
5.1.30 Condominium . (a) Borrower hereby covenants and agrees with respect to each Condominium that:
(i) it will not, without Lenders prior written consent, vote to amend, modify, supplement or terminate, or consent to (1) the termination of any of the Condominium Documents or (2) the amendment, modification or supplementation of any of the Condominium Documents, in each case, in any material respect which would materially and adversely affect the applicable Individual Borrower, the applicable Individual Property or Lenders rights under the Condominium Documents;
(ii) it will pay all assessments for common charges and expenses made against those condominium units then owned by it pursuant to the applicable Condominium Documents prior to delinquency, other than assessments or common charges that are being contested in good faith pursuant to the applicable Condominium Documents;
(iii) it will comply in all material respects with all of the terms, covenants and conditions on its part to be complied with, pursuant to the applicable Condominium Documents and any rules and regulations that may be adopted for the Condominium, as applicable, as the same shall be in force and effect from time to time;
(iv) it will take all commercially reasonable actions as may be necessary from time to time to preserve and maintain the Condominium in accordance with the applicable Condominium Law;
(v) it will not, without the prior written consent of Lender, take (and hereby assigns to Lender any right it may have to take) any action to terminate the Condominium, withdraw the Condominium from the Condominium Law, or cause a partition of the Condominium; and
(vi) it will not, without Lenders prior written consent, which shall not be unreasonably conditioned, withheld or delayed, exercise any right it may have to vote for, (A) any additions or improvements to the Common Elements of the Condominium, except as such additions or improvements are completed in accordance hereof, (B) any borrowing on behalf of the Condominium or (C) the expenditure of any insurance proceeds or condemnation awards for the repair or restoration of the related Improvements other than in accordance with Article VI hereof.
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(b) The provisions of Article VI hereof shall apply to the entirety of any Individual Property that is a Condominium as provided herein, notwithstanding the submission of any portion of such Individual Property to the Condominium Law. Without limiting the generality of the foregoing, Borrower, for and on behalf of itself and its direct and indirect successors and assigns as owner(s) of condominium units in the Condominium or any of them, (i) irrevocably waives, to the extent permitted by law, any applicable law which grants to the trustees of the Condominium and/or the owners of the condominium units rights in the event of a casualty or a condemnation which are inconsistent with the provisions of Article VI hereof and (ii) expressly agrees to the application of the insurance proceeds and condemnation awards in accordance with Article VI hereof to the extent permitted by applicable law.
(c) Lender shall have the right, subject to any required consent of the unit owners, at reasonable times and upon reasonable notice, to inspect the records of the Condominium as provided in the Condominium Documents until such time as the Debt is paid in full.
(d) Upon written request from Lender, Borrower will use commercially reasonable efforts to obtain and deliver to the Lender, a true and correct copy of: (A) each notice of any meeting of the association of owners of the Condominium; (B) the minutes of any such meeting; (C) any statement of financial condition of said association, audited or otherwise, furnished to or available to an owner; (D) any statement showing the allocation of expenses and any other assessments against the owners; (E) any statements issued to Borrower calling for payment of expenses other than the regular monthly maintenance statements; and (F) any notice of default given to Borrower in respect of the observance of the Condominium Documents or any of them.
5.1.31 O&M Program . Borrower hereby represents and warrants that the operations and maintenance plan(s) described on Schedule 5.1.31 hereto (as the same may be amended, restated or replaced from time to time, each an O&M Program ) are true and complete descriptions of the O&M Programs in place with respect to the applicable Properties, and (b) the applicable Individual Borrower has as of the date hereof complied in all material respects with each Individual Propertys O&M Program. Borrower hereby covenants and agrees that, during the term of the Loan, including any extension or renewal thereof, the applicable Individual Borrower shall comply in all material respects with the terms and conditions of its Individual Propertys O&M Program.
5.1.32 Material Property Agreements . Borrower shall at all times comply in all material respects with all Material Property Agreements. Borrower agrees that without the prior written consent of Lender, Borrower will not amend, modify or terminate any of the Material Property Agreements in any material and adverse respect.
5.1.33 Declarations. The Borrower hereby covenants and agrees with Lender with respect to each Declaration as follows:
(a) Borrower shall not, without Lenders prior written consent, materially amend, modify or supplement, or exercise its consent rights under any Declaration (subject to the limitations of Borrowers rights to withhold consent under the Declaration) with respect to the
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material amendment, modification or supplementation of any Declaration except that Lender shall not unreasonably withhold its consent to any amendment or modification which will not be deemed to have a material adverse effect on the use, value or operation of the Property or Borrowers ability to pay the Monthly Debt Service Payment Amount including the payment due on the Maturity Date;
(b) Borrower shall pay all charges and other sums to be paid by Borrower pursuant to the terms of the Declarations as the same shall become due and payable and prior to the expiration of any applicable grace period therein provided. After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any charges required to be paid by Borrower pursuant to the Declarations, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of the Declarations and any other instrument to which Borrower is subject or by which the Property is bound and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) the Property and no part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost during the pendency of any such dispute; (iv) the Declarations will not be in danger of being terminated; (v) Borrower shall promptly upon final determination thereof pay the amount of any such charges, together with all costs, interest and penalties which may be payable in connection therewith; (vi) such proceeding shall suspend the collection of such charges from Borrower and the Property during the pendency thereof; and (vii) Borrower shall furnish such security as may be required in the proceeding to insure the payment of any such charges, together with all interest and penalties thereon;
(c) Borrower shall comply, in all material respects, with all of the terms, covenants and conditions on the Borrowers part to be complied with pursuant to terms of the Declarations;
(d) Borrower shall take all actions as may be necessary from time to time to preserve and maintain the Declarations in accordance with applicable laws, rules and regulations;
(e) Borrower shall not, without the prior written consent of Lender, as determined in its sole discretion, take (and hereby assigns to Lender any right it may have to take) any action to terminate, surrender, or accept any termination or surrender of, the Declarations;
(f) Borrower shall enforce, in a commercially reasonably manner, the obligations to be performed by the parties to the Declarations (other than Borrower);
(g) Borrower shall promptly furnish to Lender any notice of default or other communication delivered in connection with the Declarations by any party to the Declarations or any third-party other than routine correspondence and invoices;
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(h) Borrower shall not assign (other than to Lender) or encumber its rights under the Declarations;, except in connection with a release of the Waikoloa Outparcel or a Release Parcel;
(i) At such time as Lender shall request, Borrower agrees to execute and deliver to Lender such documents as Lender and its counsel may require in order to insure that if Lender, its nominee, designee, successor, or assignee acquires title and/or rights of Borrower under the Declarations by reason of foreclosure of the Mortgage, deed-in-lieu of foreclosure or otherwise, such party shall (x) succeed to all of the rights of and benefits accruing to Borrower under the Declarations, and (y) be entitled to exercise all of the rights and benefits accruing to Borrower under the Declarations.
Section 5.2 Negative Covenants . From the Closing Date until payment and performance in full of all Obligations of Borrower under the Loan Documents or the earlier release of the Liens of all Mortgages encumbering the Properties and any other collateral in accordance with the terms of this Agreement and the other Loan Documents, each of Borrower hereby covenant and agree with Lender that it will not do, or permit to be done, directly or indirectly, any of the following:
5.2.1 Operation of Property . (a) Borrower shall not, without Lenders prior written consent (which consent shall not be unreasonably withheld): (i) surrender, terminate, or cancel the Management Agreement; provided , that Borrower may, without Lenders consent, replace the Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement; (ii) reduce or consent to the reduction of the term of the Management Agreement; (iii) increase or consent to the increase of the amount of any charges or fees under the Management Agreement; or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.
(b) Following receipt of written notice from Lender of the occurrence and during the continuance of an Event of Default, Borrower shall not exercise any rights, make any material decisions, grant any material approvals or otherwise take any material action under the Management Agreement without the prior written consent of Lender, which consent may be granted, conditioned or withheld in Lenders sole discretion.
(c) Borrower shall use commercially reasonable efforts to cause any Manager Accounts to be an Eligible Account.
5.2.2 Liens . Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of any Individual Property or permit any such action to be taken, except for (a) Permitted Encumbrances; (b) Liens created by or permitted pursuant to the Loan Documents; (c) Liens for Taxes or Other Charges not yet due and payable which are contested in good faith by appropriate proceedings and for which Borrower has set aside adequate reserves on its books; and (d) easements and other similar encumbrances entered into by Borrower in the ordinary course of business for use, access, parking, water and sewer lines, telephones and telegraph lines, electric lines or other utilities or for other similar purposes, provided that no such easement or other similar encumbrance shall materially impair the utility and operation of the Property or materially and adversely affect the value of the Property or Borrowers condition (financial or otherwise) or business.
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5.2.3 Dissolution . Borrower shall not (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership and operation of the Properties, (c) transfer, lease or sell, in one transaction or any combination of transactions, all or substantially all of the properties or assets of Borrower except to the extent permitted by the Loan Documents, (d) modify or amend in any material respect, waive or terminate its Organizational Documents or its qualification and good standing in any jurisdiction, in each case, without obtaining the prior written consent of Lender or Lenders designee or (e) cause the Principal to (i) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which the Principal would be dissolved, wound up or liquidated in whole or in part, or (ii) amend, modify, waive or terminate the organizational documents of the Principal, in each case, without obtaining the prior written consent of Lender or Lenders designee.
5.2.4 Change in Business . Borrower shall not enter into any line of business other than the ownership, leasing, management, maintenance and operation of the Properties (and any ancillary business related to such ownership, leasing, management, maintenance and operation), or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business. Nothing contained in this Section 5.2.4 is intended to expand the rights of Borrower contained in Section 5.2.10 hereof, and for the avoidance of doubt, the rights of Borrower to effectuate Transfers is governed solely by Section 5.2.10 hereof.
5.2.5 Debt Cancellation . Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith or the forgiveness in the ordinary course of Borrowers business of Rent in arrears in connection with a settlement with a Tenant under a Lease, provided that in the case of a Material Lease, the amount of Rent so forgiven is less than the aggregate amount of two (2) months basic Rent under such Material Lease)) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrowers business.
5.2.6 Zoning . Borrower shall not initiate or consent to any zoning reclassification of any portion of any Individual Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Individual Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior written consent of Lender.
5.2.7 No Joint Assessment . Borrower shall not suffer, permit or initiate the joint assessment of any Individual Property (a) with any other real property constituting a tax lot separate from such Individual Property, and (b) which constitutes real property with any portion of such Individual Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of such Individual Property.
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5.2.8 Intentionally Omitted .
5.2.9 ERISA . (a) Assuming compliance by the Lender with paragraph (d) of this Section 5.2.9 , Borrower shall not engage in any transactions contemplated under this Agreement which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under Section 406(a) of ERISA.
(b) Intentionally omitted.
(c) Borrower further covenants and agrees if at such time any employee benefit plan, whether or not subject to Title I of ERISA, holds an equity investment in Borrower or Guarantor, Borrower shall, deliver to lender such certifications from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, but not more frequently than once per calendar year, and on no less than thirty (30) Business Days advance written notice (but in no event shall Borrowers failure to perform this Section 5.2.9(c) constitute an Event of Default), that neither Borrower is not (i) is subject to any state statutes regulating investments and fiduciary obligations with respect to governmental plans and (ii) one or more of the following circumstances with respect to each of Borrower, is true:
(i) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);
(ii) Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by benefit plan investors within the meaning of 29 C.F.R. §2510.3-101(b)(2), as modified by Section 3(42) of ERISA; or
(iii) Borrower qualifies as an operating company or a real estate operating company within the meaning of 29 C.F.R. §2510.3-101(c) or (e) or another exception to ERISA applies such that Borrowers assets should not constitute plan assets of any benefit plan investor within the meaning of Section 3(42) of ERISA and the regulations promulgated thereunder.
(d) Lender represents and warrants that, throughout the term of the Loan, no portion of the assets used by any Lender in connection with the transactions contemplated under this Agreement and the other Loan Documents constitutes assets of a (i) benefit plan investor within the meaning of the Plan Asset Regulations unless the applicable Lender is relying on an available prohibited transaction exemption, all of the conditions of which are and continue to be satisfied or (ii) governmental plan (as defined in Section 3(32) of ERISA) which is subject to any provision which is substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code ( Applicable Similar Law ), unless the acquisition and holding of the Loan or any interest therein will not give rise to a violation of any such Applicable Similar Law.
5.2.10 Transfers . (a) Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its stockholders, general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the
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Properties in agreeing to make the Loan, and will continue to rely on Borrowers ownership of the Properties as a means of maintaining the value of the Properties as security for repayment of the Debt and the performance of the Other Obligations. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Properties so as to ensure that, should Borrower default in the repayment of the Debt or the performance of the Other Obligations, Lender can recover the Debt by a sale of the Properties.
(b) Without the prior written consent of Lender and except to the extent otherwise set forth in this Section 5.2.10 , Borrower shall not, and shall not permit any Restricted Party to do any of the following (collectively, a Transfer ): (i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Properties or any part thereof or any legal or beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party, other than (A) pursuant to Leases of space in the Improvements to Tenants in accordance with the provisions of Section 5.1.21 , (B) Permitted Transfers and Permitted Debt.
(c) A Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Borrower agrees to sell the Properties or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of any Individual Property for other than actual occupancy by a space Tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrowers right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporations stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests or (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests.
(d) Notwithstanding the provisions of this Section 5.2.10, the following shall not be deemed to be a Transfer:
(i) A Public Sale; provided , that (A) if after giving effect to any such Public Sale, more than forty-nine percent (49%) in the aggregate of direct or indirect interests in a Restricted Party is owned by any Person and its Affiliates that owned less than forty-nine percent (49%) direct or indirect interest in such Restricted Party as of the Closing Date, Borrower shall deliver to Lender an Additional Insolvency Opinion reasonably acceptable to Lender and the Approved Rating Agencies and (B) no Individual Borrower or Principal shall fail to be a Special Purpose Entity by reason of such Public Sale.
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(ii) The Sale (but not a Pledge nor the issuance of preferred equity interests), in one or a series of transactions, of the direct or indirect equity interests in Borrower and or direct or indirect interests in any Restricted Party; provided , that, (A) after giving effect to such Sale, Guarantor (x) shall own not less than fifty and one tenths percent (50.1%) of the economic and direct or indirect legal and beneficial interests in Borrower (on an unencumbered and look-through basis) and (y) Control Borrower, (B) any Excluded Entity or Qualified Transferee (x) shall own not less than 50.1% of the economic and direct or indirect legal and beneficial interests in Guarantor (on an unencumbered and look through basis) and (y) Control Guarantor, (C) upon the written request of Lender, Borrower shall deliver to Lender notice of each sale described in this Section 5.2.10(d)(ii) not less than ten (10) days following such request, (D) no Sale or Pledge of any direct interest in any Borrower shall be permitted and (E) no Individual Borrower shall fail to be a Special Purpose Entity by reason of such Sale. If after giving effect to any such Sale, more than forty-nine percent (49%) in the aggregate of direct or indirect interests in a Restricted Party are owned by any Person and its Affiliates that owned less than forty-nine percent (49%) direct or indirect interest in such Restricted Party as of the Closing Date, Borrower shall deliver to Lender an Additional Insolvency Opinion reasonably acceptable to Lender and the Approved Rating Agencies.
Notwithstanding anything to the contrary contained in this Agreement (including Section 5.2.10 ), no notice to, or consent of, or deliveries to, or payments to Lender shall be required in connection with any Sale or Pledge (including as a result of a merger or issuance of shares) of direct or indirect interests in any Excluded Entity.
(e) No Transfer and assumption of the Loan shall occur during the period that is forty-five (45) days prior to and sixty (60) days after a Securitization. Otherwise a one (1) time (a) Transfer of a greater than fifty-one percent (51%) legal or beneficial direct or indirect interest in the Properties or Borrower and/or (b) a transfer of Control of Borrower in each case, accompanied by an assumption of the entire Loan, shall be permitted without Lenders consent (a Permitted Assumption ), provided that Lender receives thirty (30) days prior written notice of such Permitted Assumption and no Event of Default has occurred and is continuing at the time such Permitted Assumption is consummated, and further provided that the following additional requirements are satisfied:
(i) Borrower shall pay Lender a transfer fee equal to $500,000.00;
(ii) Borrower shall pay any and all reasonable out-of-pocket costs incurred in connection with such Permitted Assumption (including, without limitation, Lenders reasonable counsel fees and disbursements and all recording fees, title insurance premiums and mortgage and intangible taxes and the fees and expenses of the Approved Rating Agencies pursuant to clause (vi) below);
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(iii) The proposed transferee (the Transferee ) must be at least fifty-one percent (51%) owned (directly or indirectly) and Controlled by a Qualified Transferee or Qualified Public Company;
(iv) With respect to a Transfer of the Property, if applicable, the Transferee entity to which the Property is conveyed shall assume all of the obligations of Borrower under the Loan Documents in a manner reasonably satisfactory to Lender, including, without limitation, by entering into an assumption agreement in form and substance satisfactory to Lender;
(v) Transferee and Transferees principals that Control Transferee ( Related Entities ) must be able to satisfy all the representations and covenants set forth in Sections 4.1.35 , 5.1.25 and 5.2.9 of this Agreement, and Transferee and the Related Entities shall deliver (A) all organizational documentation reasonably requested by Lender, which shall be reasonably satisfactory to Lender and, following a Securitization, satisfactory to the Approved Rating Agencies (B) all certificates, agreements necessary to evidence the Permitted Assumption and an Additional Insolvency Opinion and a due authority, execution and enforceability opinion reasonably acceptable to Lender;
(vi) Intentionally omitted;
(vii) Borrower or Transferee, at its sole cost and expense, shall deliver to Lender an Additional Insolvency Opinion reflecting such Transfer reasonably satisfactory in form and substance to Lender;
(viii) There shall be no material litigation relating to the creditworthiness of Transferee or any Related Entities or any regulatory action pending against Transferee or any Related Entities in each case, which could be reasonably expected to have a material adverse effect on the financial condition of such Transferee or Related Entity;
(ix) One (1) or more Replacement Guarantors shall have assumed all of the liabilities and obligations of Guarantor under the Guaranty executed by Guarantor or execute a Replacement Guaranty substantially similar to the Guaranty; provided that the Replacement Guarantor shall not be subject to an ongoing net worth covenant;
(x) If the Permitted Assumption is accomplished by deed or conveyance of the Properties rather than by assignment of all of Guarantors or a Restricted Partys interests in Borrower, Borrower shall deliver, at its sole cost and expense, an endorsement to the Title Insurance Policies, as modified by the assumption agreement, as a valid first lien on the Properties and naming the Transferee as owner of the Properties, which endorsement shall insure that, as of the date of the recording of the assumption agreement, the Properties shall not be subject to any additional exceptions or liens other than those contained in the relevant Title Insurance Policy issued on the date hereof and any other Permitted Encumbrances; and
(xi) Each Individual Property shall be managed by a Qualified Manager pursuant to a Management Agreement.
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Immediately upon a Transfer to such Transferee and the satisfaction of all of the above requirements, the named Borrower and Guarantor herein shall be released from all liability under this Agreement, the Note, the Mortgage and the other Loan Documents for acts or omissions occurring after such Transfer. The foregoing release shall be effective upon the date such Permitted Assumption is consummated, but Lender agrees to provide written evidence thereof reasonably requested by Borrower.
(f) In the case of a Transfer that is a Public Sale pursuant to Section 5.2.10(d)(i) or a Permitted Assumption pursuant to Section 5.2.10(e) Guarantor shall be released from the Guaranty for all liability arising after the date of such Transfer if one of the following conditions are met: (i) a Replacement Guarantor shall execute a replacement guaranty in form and substance the same as the Guaranty covering all liability arising after the date of such Transfer (but not any which may have accrued prior thereto) (a Replacement Guaranty ); provided , that such Replacement Guarantor shall not be subject to an ongoing Net Worth covenant; or (ii) Borrower delivers to Lender the Cash/LC Collateral.
(g) Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrowers Transfer without Lenders consent. This provision shall apply to every Transfer regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.
5.2.11 Ground Lease . (a) Borrower shall not, without Lenders written consent, fail to exercise any option or right to renew or extend the term of any Ground Lease in accordance with the terms of the related Ground Lease, and shall give immediate written notice to Lender and shall execute, acknowledge, deliver and record any document requested by Lender to evidence the lien of the related Security Instrument on such extended or renewed lease term; provided , however , Borrower shall not be required to exercise any particular such option or right to renew or extend (or to permit the term of any Ground Lease to renew or extend automatically) to the extent Borrower shall have received the prior written consent of Lender (which consent may not be unreasonably withheld, delayed or conditioned) allowing Borrower to forego exercising such option or right to renew or extend. If Borrower shall fail to exercise any such option or right as aforesaid within thirty days prior to the date when required, Lender may exercise the option or right as Borrowers agent and attorney in fact as provided above in Lenders own name or in the name of and on behalf of a nominee of Lender, as Lender may determine in the exercise of its sole and absolute discretion.
(b) Borrower shall not waive, excuse, condone or in any way release or discharge any Ground Lessor under any Ground Lease of or from such Ground Lessors material obligations, covenant and/or conditions under the related Ground Lease without the prior written consent of Lender (which consent will not be unreasonably withheld, delayed or conditioned).
(c) Borrower shall not, without Lenders prior written consent, surrender, terminate, forfeit, or suffer or permit the surrender, termination or forfeiture of, or change, modify or amend in a material adverse manner, any Ground Lease, other than an expiration of the Ground Lease pursuant to its terms. Consent to one amendment, change, agreement or modification shall not be deemed to be a waiver of the right to require consent to other, future or
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successive amendments, changes, agreements or modifications. Any acquisition of Ground Lessors interest in any Ground Lease by Borrower or any Affiliate of Borrower shall be accomplished by Borrower in such a manner so as to avoid a merger of the interests of lessor and lessee in such Ground Lease, unless consent to such merger is granted by Lender.
5.2.12 Condominium Documents . Borrower shall not, without Lenders prior written consent, vote to amend, modify, supplement or terminate, or consent to (a) the termination of any of the Condominium Documents or (b) the amendment, modification or supplementation of any of the Condominium Documents in any material respect which would materially and adversely affect the applicable Individual Borrower, the applicable Individual Property or Lenders rights under the Condominium Documents. Without the prior written consent of the Lender, Borrower shall not vote to approve any of the following matters in connection with any Condominium (unless expressly required under the Condominium Documents): (i) any material and adverse change in the nature and amount of any insurance covering all or a part of the Condominium and the disposition of any proceeds thereof, but only to the extent any of the foregoing violates the Loan Documents; (ii) the manner in which any condemnation or threat of condemnation of all or a part of the applicable Individual Property shall be defended or settled and the disposition of any award or settlement in connection therewith, but only to the extent the foregoing violates the Loan Documents; (iii) any amendment to the Condominium Documents which by its terms requires the consent of Lender and any removal of any portion of the applicable Individual Property from the provisions of the Condominium Law; (iv) the creation of, or any change in, any private restrictive covenant, zoning ordinance, or other public or private restrictions, now or hereafter limiting or defining the uses which may be made of the applicable Individual Property or any part thereof or (v) any material relocation of the boundaries of the applicable Individual Property.
5.2.13 Affiliate Transactions . Neither Borrower nor Principal may enter into or be a party to, and will not enter into or be a party to, any transaction with its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable and are no less favorable to it than would be obtained in a comparable arms length transaction with an unrelated third party.
5.2.14 Rental Management Agreement . Borrower shall not, without Lenders prior written consent (which consent may not be unreasonably withheld, conditioned or delayed), (a) terminate, or consent to the termination of any Rental Management Agreement (except by reason of default of the other party to the Rental Management Agreement) if such termination would materially and adversely affect the Borrower, the Property or Lenders rights thereunder, or (b) amend, modify, supplement or consent to the amendment, modification or supplementation of any Rental Management Agreement in any material respect which would materially and adversely affect the Borrower, the Property or Lenders rights thereunder.
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ARTICLE VI
INSURANCE; CASUALTY; CONDEMNATION
Section 6.1 Insurance . (a) Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Properties providing at least the following coverages:
(i) comprehensive all risk special form insurance ( Special Form ) including, but not limited to, loss caused by any type of windstorm or hail, on the Improvements and the Personal Property, (A) in an amount equal to one hundred percent (100%) of the Full Replacement Cost , which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) waiving all co insurance provisions or to be written on a no co insurance form; (C) providing no deductible greater than $500,000 per occurrence; Borrower may utilize a $5,000,000 aggregate deductible (basket aggregate) in conjunction with a per occurrence deductible which will not exceed $500,000 per occurrence except with respect to flood, windstorm and earthquake coverage, providing for a deductible not to exceed five percent (5%) of the total insurable value of the Property (the Base Deductible ), subject to a $1,000,000 minimum; provided , however , that Borrower shall be permitted to maintain (x) with respect to the Hilton New Orleans Airport Property, a deductible for flood insurance not to exceed $10,000,000 and (y) a maximum deductible with respect to flood, windstorm and earthquake coverage of fifteen percent (15%) of the total insurable value of the Property (the Increased Deductible ) if Guarantor delivers the Deductible Guaranty, guaranteeing any failure by Borrower to pay its obligations (the Guaranteed Excess Deductible Obligations ) actually incurred with respect to that portion of the Increased Deductible which exceeds the Base Deductible and not otherwise insured by a third-party provider (such difference, the Excess Deductible ); provided , that the amount of such Excess Deductible shall be capped at $150,000,000 for the Hilton Hawaiian Village and (D) if any of the Improvements or the use of the Individual Property shall at any time constitute legal non-conforming structures or uses, coverage for loss to the undamaged portion in an amount equal to the full Replacement Cost for the undamaged portion and for coverage for demolition costs and coverage for increased costs of construction provide a combined minimum limit of $250,000,000 per occurrence with respect to each of the Individual Properties known as Hilton Hawaiian Village, Hilton San Francisco Union Square and Hilton New York and $100,000,000 for each of the other Individual Properties per occurrence. In addition, Borrower shall obtain: (y) flood insurance, including tsunami, in amounts acceptable to Lender, except for any Individual Property where any portion of the Improvements is currently or at any time in the future located in a federally designated special flood hazard area, flood insurance in an amount equal to (1) the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended plus (2) additional flood insurance in an amount not less than $300,000,000, which shall be dedicated to those Individual Properties known as Hilton Hawaiian Village, Hilton Waikoloa Village, Hilton Caribe, Hilton Miami Airport, Doubletree San Jose and Hilton New Orleans Airport.
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Notwithstanding the foregoing, in the event the limits provided with respect to flood are eroded by five percent (5%) or more due to claims, Borrower shall reinstate the available flood limits within ninety (90) days to the limits in place as of the Closing Date, and (z) earthquake insurance, including earth movement due to volcanic eruption, in an amount equal to the Probable Maximum Loss as indicated in a portfolio seismic risk analysis for a 475-year return period, 90 th centile confidence level with a separate assessment for California (such analysis to be approved by Lender and Rating Agencies and secured by the applicable Borrower utilizing a third-party engineering firm qualified to perform such seismic risk analysis using the most current RMS software, or its equivalent, to include consideration of loss amplification, at the expense of the applicable Individual Borrower); provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i) . Notwithstanding the foregoing, subject to Rating Agency approval, Borrower shall be permitted to provide coverage for named windstorm in an amount equal to the 1,000-year Probable Maximum Loss (PML) as indicated in a risk analysis for all high risk locations under the Policy (such analysis to be approved by Lender and Rating Agencies and secured by the applicable Borrower utilizing a third-party engineering firm qualified to perform such risk analysis using the most current RMS software, or its equivalent, to include consideration of storm surge and loss amplification, at the expense of the applicable Individual Borrower). The risk analyses for earthquake and windstorm required pursuant to this subsection (i) shall be referred to herein individually as an Acceptable Risk Analysis and collectively as Acceptable Risk Analyses;
(ii) business income or rental loss insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) in an amount equal to one hundred percent (100%) of the projected gross revenues from the operation of the Properties (as reduced to reflect expenses not incurred during a period of Restoration) on an actual loss sustained basis for the entire period of Restoration or for a twenty-four (24) month period of indemnity; and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that the applicable Individual Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period. The amount of such business income or rental loss insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrowers reasonable estimate of the gross revenues from each Individual Property (as reduced to reflect expenses not incurred during a period of Restoration) for the succeeding twelve (12) month period. All proceeds payable to Lender pursuant to this subsection shall be held by Lender and nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in this Agreement and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;
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(iii) at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Individual Property coverage form does not otherwise apply, (A) owners contingent or protective liability insurance (or an equivalent) covering claims not covered by or under the terms or provisions of the below mentioned commercial general liability insurance policy and (B) the insurance provided for in subsection (i) above written in a so called builders risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the Individual Property and (4) with an agreed amount endorsement waiving co insurance provisions;
(iv) comprehensive boiler and machinery insurance, if steam boilers or other pressure fixed vessels are in operation, in an amount not less than $50,000,000 on terms consistent with the commercial property insurance policy required under subsection (i) above;
(v) commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Individual Property and foreign liability for the Hilton Caribe Property, if applicable, such insurance (A) to be on the so called occurrence form with a combined limit of not less than $1,500,000.00 in the aggregate and $1,000,000.00 per occurrence; including a self-insured retention of not greater than $500,000.00; (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an if any basis; (3) independent contractors; (4) contractual liability for all insured contracts and (5) contractual liability covering the indemnities contained in Section 9 of the Mortgages to the extent the same is insurable;
(vi) if applicable, automobile liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of $1,000,000.00;
(vii) if applicable, workers compensation and employers liability subject to the workers compensation laws of the applicable state;
(viii) umbrella/excess liability insurance in an amount not less than $100,000,000.00 per occurrence and in the aggregate on terms consistent with the commercial general liability insurance policy required under subsection (v) above, including, but not limited to, supplemental coverage for employers liability, liquor liability and automobile liability, which umbrella liability coverage shall apply in excess of such supplemental coverage;
(ix) the insurance required under this Section 6.1(a)(i), (ii), (v) and (viii) above shall cover perils of terrorism and acts of terrorism or, if excluded from such insurance, coverage for perils of terrorism and acts of terrorism shall be provided through a separate policy acceptable to Lender and Borrower shall maintain insurance for loss resulting from perils and acts of terrorism on terms (including amounts) consistent with those required
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under Section 6.1(a)(i), (ii), (v) and (viii) above at all times during the term of the Loan. Notwithstanding the foregoing, the amount of terrorism coverage that shall be required for the Policies required in Section 6.1(a)(i) and (ii) above shall be in an amount equal to the lesser of (1) the Full Replacement Cost of the Individual Property and (2) the allocated loan amount for the Individual Property. If the Terrorism Risk Insurance Program Reauthorization Act of 2007 or a similar or subsequent statute ( TRIPRA ) is not in effect, then provided that terrorism insurance is commercially available, Borrower shall be required to carry terrorism insurance throughout the term of the Loan as required by the preceding sentence, but in such event Borrower shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable at such time in respect of the property and business interruption/rental loss insurance required hereunder (without giving effect to the cost of the terrorism, earthquake and windstorm components of such casualty and business interruption/rental loss insurance), and if the cost of terrorism insurance exceeds such amount, Borrower shall purchase the maximum amount of terrorism insurance available with funds equal to such amount;
(x) Employment Practices Liability, including third party coverage, in an amount not less than $5,000,000:
(xi) Crime coverage in amounts not less than $5,000,000;
(xii) Liquor Liability in amounts not less than $1,000,000 per occurrence and to be included in the umbrella/excess liability insurance required in subsection (viii) above;
(xiii) environmental insurance against claims for pollution and remediation legal liability related to each Individual Property ( PLL Policy ), such insurance: (A) to be a claims made and reported policy for an initial term of seven years; (B) with limits of liability of $10,000,000 for each Pollution Condition and $25,000,000 in the aggregate; (C) with a self-insured retention amount of $50,000 for each Pollution Condition; (D) shall name the Lender as an additional named insured per Mortgagee Assignment endorsements providing automatic rights of assignment in the event of defaults; (E) shall be dedicated solely to the Properties and Borrower shall not be permitted to add any additional locations during the PLL Policy term; and (F) shall, throughout the PLL Policy term, include the same coverages, terms, conditions and endorsements (and shall not be amended in any way without the prior written consent of Lender) as the PLL Policy approved at Closing; and
(xiv) upon sixty (60) days written notice, such other reasonable insurance and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Individual Property located in or around the region in which the Individual Property is located.
(b) All insurance provided for in Section 6.1(a) hereof, shall be obtained under valid and enforceable policies (collectively, the Policies or in the singular, the Policy ), and shall be subject to the approval of Lender as to insurance companies, amounts, deductibles,
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loss payees and insureds. The Policies shall be issued by financially sound and responsible insurance companies having a rating of A or better by S&P provided , however , that if Borrower elects to have its insurance coverage provided by a syndicate of insurers, then, if such syndicate consists of five (5) or more members, (A) at least sixty percent (60%) of the insurance coverage (or seventy-five percent (75%) if such syndicate consists of four (4) or fewer members) and one hundred percent (100%) of the first layer of insurance coverage shall be provided by insurance companies having a claims paying ability rating of A or better (or its equivalent) by S&P, Fitch (if Fitch is rating the Securitization and is rating the insurance company) and Moodys (if Moodys is rating the Securitization and is rating the insurance company) and (B) the remaining forty percent (40%) of the insurance coverage (or the remaining twenty-five percent (25%) if such syndicate consists of four (4) or fewer members) shall be provided by insurance companies having a claims paying ability rating of BBB+ or better (or its equivalent) by S&P, Fitch (if Fitch is rating the Securitization and is rating the insurance company) and Moodys (if Moodys is rating the Securitization and is rating the insurance company). Notwithstanding the foregoing, Factory Mutual Insurance Company and Affiliated FM Insurance Company shall be acceptable insurance companies provided they maintain a rating of Api or better by S&P and a rating of A or better by Fitch. The Policies described in Section 6.1 hereof (other than those strictly limited to liability protection) shall designate Lender as loss payee. Prior to the expiration dates of the Policies theretofore furnished to Lender, evidence that the Policies shall continue in force uninterrupted, to be followed by evidence satisfactory to Lender of payment of the premiums due thereunder (the Insurance Premiums ) as such Insurance Premiums shall become due and payable, shall be delivered by Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to the Individual Property the amount of coverage from time to time required hereunder or shall otherwise provide the same protection as would a separate Policy insuring only the Properties in compliance with the provisions of Section 6.1(a) hereof. In the event Borrower adds any locations to the Policy that are subject to the perils of earthquake, flood or wind/named storm, Borrower shall notify Lender and provide updated Acceptable Risk Analyses as applicable and the limits provided for such perils shall be increased as necessary so as to be in compliance with the requirements of Section 6.1. In the event Borrower adds any locations to the Policy providing coverage for terrorism which is within a 1,000 foot radius (the Radius) of an Individual Property, Borrower shall (1) increase the limits of any such Policy so that it shall be adequate to maintain the coverage set forth in this Section 6.1 for each property in the aggregate within the Radius that is covered by such blanket policy calculated on a total insured value basis or (2) provide the required coverage on a separate policy in compliance with the requirements of this Section 6.1.
(d) All Policies provided for or contemplated by Section 6.1(a) hereof shall name Borrower as a named insured and, in the case of liability policies, except for the Policy referenced in Section 6.1(a)(vii) of this Agreement, shall name Lender as the additional insured, as its interests may appear, and in the case of property damage, including but not limited to terrorism, boiler and machinery, flood and earthquake insurance, shall contain a standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender and guaranteeing thirty (30) days notice of cancellation to Lender except ten (10) days notice for non-payment of premium.
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(e) All Policies shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days written notice to Lender and any other party named therein as an additional insured; provided , that ten (10) days notice will be required for non-payment of premium or; if issuer will not or cannot provide the notices required herein, Borrower shall be obligated to provide such notice;
(iii) the issuers thereof shall give ten (10) days written notice to Lender if the issuers of such Policy elect not to renew the Policy prior to its expiration or, if the issuers will not or cannot provide the notices required herein, Borrower shall be obligated to provide such notice; and
(iv) Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.
If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right to take such action as Lender deems necessary to protect its interest in the Properties, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate after ten (10) Business Days notice to Borrower if prior to the date upon which any such coverage will lapse or at any time Lender deems necessary (regardless of prior notice to Borrower) to avoid the lapse of any such coverage. All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Mortgages and shall bear interest at the Default Rate.
Section 6.2 Casualty . If any Individual Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a Casualty ), Borrower shall give prompt written notice of such damage to Lender (provided that no notice shall be required in connection with a Casualty that is de minimis) and shall promptly commence and diligently prosecute the completion of the Restoration of the Individual Property pursuant to Section 6.4 hereof as nearly as possible to the condition the Individual Property was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Lender and otherwise in accordance with Section 6.4 hereof. Borrower shall pay all costs of such Restoration whether or not such costs are covered by insurance. Lender may, but shall not be obligated to make proof of loss if not made promptly by Borrower. In addition, Lender may participate in any settlement discussions with any insurance companies with respect to any Casualty in which the Net Proceeds or the costs of completing the Restoration are equal to or greater than the Casualty/Condemnation Threshold Amount and Borrower, as applicable, shall deliver to Lender all instruments required by Lender to permit such participation.
Section 6.3 Condemnation . (a) Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of any
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Individual Property and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender may participate in any such proceedings, and Borrower, as applicable, shall from time to time deliver to Lender all instruments requested by it to permit such participation. Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings. Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt. Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note. If any Individual Property or any portion thereof is taken by a condemning authority, (a) if Restoration of such Individual Property would be deemed feasible by a prudent Lender acting reasonably based upon the nature of the Condemnation, Borrower shall promptly commence and diligently prosecute the Restoration of the applicable Individual Property pursuant to Section 6.4 hereof and otherwise comply with the provisions of Section 6.4 hereof; provided , that, Borrower shall not be obligated to pursue completion of the Restoration if Lender is obligated to disburse Net Proceeds pursuant to Section 6.4 hereof with respect thereto (and Borrower has satisfied all applicable conditions to such disbursement) and Lender fails to disburse such proceeds and (b) if Restoration of such Individual Property is not considered feasible by a prudent Lender acting reasonably based upon the nature of the Condemnation, then Lender shall apply the Net Proceeds of such Condemnation to the principal of the Loan in accordance with Section 2.4.2 hereof. If any Individual Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.
(b) Notwithstanding anything to the contrary contained herein or in any other Loan Document, if the Loan or any portion thereof is included in a REMIC Trust and, immediately following a release of any portion of the Lien of the Mortgage in connection with a Condemnation of an Individual Property (but taking into account any proposed Restoration on the remaining portion of such Individual Property) (based solely on real property and excluding any personal property or going concern value), the Loan-to-Value Ratio is greater than 125% (such value to be determined, in Lenders sole discretion, by any commercially reasonable method permitted to a REMIC Trust), the principal balance of the Loan must prepaid down by an amount not less than the least of the following amounts: (i) the Condemnation Proceeds, (ii) the fair market value of the released property at the time of the release, or (iii) an amount such that the Loan-to-Value Ratio (as so determined by Lender) does not increase after the release, unless Lender receives an opinion of counsel that if such amount is not paid, the Securitization will not fail to maintain its status as a REMIC Trust as a result of the related release of such portion of the Lien of the Mortgage. Any such prepayment shall be deemed a voluntary prepayment and shall be subject to Section 2.4.1 hereof (other than the requirements to prepay the Debt in full and provide thirty (30) days notice to Lender).
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Section 6.4 Restoration . The following provisions shall apply in connection with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than the Individual Property Casualty/Condemnation Threshold Amount and the costs of completing the Restoration shall be less than the Casualty/Condemnation Threshold Amount, the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Section 6.4(b)(i) (A), (C), (F), (G) and (H) hereof are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than the Casualty/Condemnation Threshold Amount or the costs of completing the Restoration is equal to or greater than the Casualty/Condemnation Threshold Amount Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 6.4 . The term Net Proceeds for purposes of this Section 6.4 shall mean: (i) the net amount of all insurance proceeds received by Lender pursuant to Section 6.1(a)(i) , (iv) , (ix) and (x) as a result of such damage or destruction, after deduction of the reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ( Insurance Proceeds ), or (ii) the net amount of the Award, after deduction of the reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ( Condemnation Proceeds ), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for Restoration provided that each of the following conditions are met:
(A) no Event of Default shall have occurred and be continuing;
(B) (1) in the event the Net Proceeds are Insurance Proceeds, less than thirty percent (30%) of the total floor area of the Improvements on the Individual Property has been damaged, destroyed or rendered unusable as a result of such Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than twenty two and one half percent (22.5%) of the land constituting the Individual Property is taken, and such land is located along the perimeter or periphery of the Individual Property, and no portion of the Improvements is located on such land;
(C) Borrower shall commence the Restoration as soon as reasonably practicable (but in no event later than one hundred twenty (120) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion, provided, that for purposes of this clause the filing of an application for a building permit for the Restoration shall be deemed to be commencement of the Restoration provided Borrower promptly commences work thereafter and diligently proceeds to the completion of such Restoration;
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(D) Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the Individual Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(ii) hereof, if applicable, or (3) by other funds of Borrower;
(E) Lender shall be satisfied, subject to a force majeure delay, that the Restoration will be completed on or before the earliest to occur of (1) one hundred twenty (120) days prior to the Maturity Date (or with respect to any Extension Term, sixty (60) days prior to the applicable Extended Maturity Date), (2) such time as may be required under all applicable Legal Requirements in order to repair and restore the applicable Individual Property to the condition it was in immediately prior to such Casualty or to as nearly as possible the condition it was in immediately prior to such Condemnation, as applicable, or (3) the expiration of the insurance coverage referred to in Section 6.1(a)(ii) hereof;
(F) the Individual Property and the use thereof after the Restoration will, in all material respects, be in compliance with and permitted under all applicable Legal Requirements (including as a legal non-conforming use);
(G) the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements;
(H) such Casualty or Condemnation, as applicable, does not result in the loss of access to the Individual Property or the related Improvements;
(I) the Debt Yield immediately prior to such Casualty or Condemnation was equal to or greater than (i) six and one-half percent (6.50%) with respect to such Casualty or Condemnation that occurs prior to the commencement of the second Extension Term and (ii) seven percent (7%) with respect to such Casualty or Condemnation that occurs on or after the commencement of the second Extension Term, in each case, with respect to the affected Individual Property;
(J) Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrowers architect or engineer stating the entire cost of completing the Restoration, which budget shall be reasonably approved by Lender in the same manner as each Annual Budget is to be approved by Lender during the continuance of a Cash Trap Event Period; and
(K) the Net Proceeds together with any cash or cash equivalent deposited by Borrower with Lender are sufficient in Lenders reasonable discretion to cover the cost of the Restoration.
(ii) The Net Proceeds shall be held by Lender in an interest bearing Eligible Account and, until disbursed in accordance with the provisions of this Section 6.4(b) ,
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shall constitute additional security for the Debt and Other Obligations under the Loan Documents. The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanics or materialmans liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Individual Property which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy.
(iii) All plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the Casualty Consultant ). Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration. The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and reasonable acceptance by Lender and the Casualty Consultant. All reasonable costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultants fees, shall be paid by Borrower. Lender shall grant or deny with a reasonable explanation any consent required hereunder within fourteen (14) days after the receipt of the applicable request and all documents in connection therewith. In the event that Lender fails to respond within said fourteen (14) day period, such failure shall be deemed to be the consent and approval of Lender if (A) Borrower has delivered to Lender the applicable documents, with the notation IMMEDIATE RESPONSE REQUIRED, FAILURE TO RESPOND TO THIS APPROVAL REQUEST WITHIN FOURTEEN (14) DAYS FROM RECEIPT SHALL BE DEEMED TO BE LENDERS APPROVAL prominently displayed in bold, all caps and fourteen (14) point or larger font in the transmittal letter requesting approval and (B) Lender does not approve or reject (with a reasonable explanation) the applicable request within fourteen (14) days from the date Lender receives such request as evidenced by a certified mail return receipt or confirmation by a reputable national overnight delivery service that the same has been delivered to Borrower.
(iv) In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage. The term Casualty Retainage shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed. The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 6.4(b) , be less than the amount actually held
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back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b) and that all approvals necessary for the re occupancy and use of the Individual Property have been obtained from all appropriate governmental and quasi-governmental authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided , however , that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractors, subcontractors or materialmans contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company issuing the Title Insurance Policy, and Lender receives an endorsement to the Title Insurance Policy insuring the continued priority of the lien of the related Mortgage and evidence of payment of any premium payable for such endorsement. If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall (A) deposit the deficiency (the Net Proceeds Deficiency ) with Lender or (B) deliver a Letter of Credit reasonably satisfactory to Lender in an amount equal to the Net Proceeds Deficiency before any further disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.4(b) shall constitute additional security for the Debt and Other Obligations under the Loan Documents.
(vii) The excess, if any, of the Net Proceeds (and the remaining balance, if any, of the Net Proceeds Deficiency) deposited with Lender after the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b) , and the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender, to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents.
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(c) Lender shall, with reasonable promptness following any Casualty or Condemnation, notify Borrower whether or not Net Proceeds are required to be made available to Borrower for a Restoration pursuant to this Section 6.4 (or, if the same are not required to be made available to Borrower for Restoration pursuant to this Section 6.4 , whether Lender will nevertheless make the same available, which election Lender may make in its sole and absolute discretion). All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 6.4(b)(vii) hereof may be retained and applied by Lender toward the payment of the Debt in accordance with Section 2.4.2 hereof, whether or not then due and payable in such order, priority and proportions as Lender in its sole discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve, in its discretion.
(d) In the event of foreclosure of the Mortgage with respect to an Individual Property, or other transfer of title of an Individual Property in extinguishment in whole or in part of the Debt all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning such Individual Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title.
(e) Notwithstanding anything to the contrary contained in the Loan Documents (except Section 6.3(b) of this Agreement) with respect to the disbursement of Insurance Proceeds or Condemnation Proceeds in respect of the Ground Lease, the express provisions set forth in the Ground Lease shall govern; provided , however , to the extent the compliance by Borrower with the terms and conditions of this Section 6.4 do not create a default under the terms and provisions of the Ground Lease, Borrower shall comply with the terms and provisions of this Section 6.4 and, provided , further , that Borrower shall not grant its consent, approval or waiver with respect to any disbursement of Insurance Proceeds or Condemnation Proceeds in respect of the Ground Lease Property (if such disbursement would violate the terms and provisions of this Section 6.4 ) as may be requested or required in connection with the terms and provisions of the Ground Lease without first obtaining the written consent, approval, or waiver of Lender.
(f) In addition to the foregoing, in connection with any partial Condemnation or Casualty, if any Net Proceeds shall be equal to or greater than sixty percent (60%) of the Release Amount in respect of the applicable Individual Property, then Borrower shall have the right, but not the obligation, regardless of the provisions of Section 2.4.1 hereof, elect not to proceed with a Restoration and to prepay the Adjusted Release Amount of the applicable Individual Property (a Casualty/Condemnation Prepayment ) utilizing the Net Proceeds (together with other funds of the Borrower if such Net Proceeds are less than the Adjusted Release Amount) and obtain the release of the applicable Individual Property from the Lien of the Mortgage thereon and related Loan Documents, provided that (i) Borrower shall have satisfied the requirements of Section 2.5.2 hereof (excluding Section 2.5.2(e) ), (ii) Borrower shall consummate the Casualty/Condemnation Prepayment on or before the second Payment Date occurring following the proposed date of the intended Casualty/Condemnation Prepayment and (iii) Borrower pays to Lender, concurrently with making such Casualty/Condemnation Prepayment, any other amounts required pursuant to Section 2.4.2 hereof. For the avoidance of doubt, unless such payment is made during the continuance of an Event of Default, no Prepayment Premium or other premium or penalty or charge shall be due with respect to a Casualty/Condemnation Prepayment.
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ARTICLE VII
RESERVE FUNDS
Section 7.1 Required Repairs .
7.1.1 Deposits . Borrower shall perform the repairs at the Properties, as more particularly set forth on Schedule 7.1.1 hereto (such repairs hereinafter referred to as Required Repairs ). Borrower shall complete each of the Required Repairs on or before (a) if such repairs involve issues relating to the protection of the health and safety of any tenant, patron or other occupant of the Property, as soon as commercially practicable not to exceed ninety (90) days from the date hereof or (b) if such repairs do not involve issues relating to the protection of human health and safety, then within the time frame set forth on Schedule 7.1.1 (collectively, the Required Repairs Deadline ). It shall be an Event of Default under this Agreement if Borrower does not complete the Required Repairs at the Property on or before the Required Repairs Deadline; provided , however , if Borrower shall have been unable to complete a Required Repair by the Required Repair Deadline, after using commercially reasonable efforts to do so and provided that the failure to complete such Required Repair does not endanger any tenant, patron or other occupant of the Property or the general public and does not materially and adversely affect the value of the Property, the Required Repair Deadline shall be automatically extended solely as to such Required Repair to permit Borrower to complete such Required Repair so long as Borrower is at all times thereafter diligently and expeditiously proceeding to complete the same.
Section 7.2 Tax and Insurance Escrow Fund .
(a) To the extent Taxes, Other Charges and/or Insurance Premiums are not reserved for in a Manager Account maintained by Manager pursuant to the Management Agreement or previously paid by Manager pursuant to the Management Agreement (provided, that to the extent so reserved or paid, Borrower delivers to Lender the invoices and other evidence of payment required under Section 5.1.2 and Section 6.1 hereof in which case the required deposit will be reduced on a dollar-for-dollar basis by such amount), Borrower shall pay to Lender on each Payment Date during a Cash Trap Period, (i) one twelfth (1/12) of the Taxes, Other Charges and all amounts due pursuant to the Loan Documents that Lender reasonably estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes, Other Charges, and (ii) one twelfth (1/12) of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (said amounts in (i) and (ii) above hereinafter called the Tax and Insurance Escrow Fund ). The account in which the Tax and Insurance Escrow Funds are held shall hereinafter be referred to as the Tax and Insurance Reserve Account . Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Section 5.1.2 hereof and under the Mortgages. In making any payment
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relating to the Tax and Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes and Other Charges) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. Provided that sufficient amounts are on deposit in the Tax and Insurance Escrow Fund, Lender shall, upon Borrowers written request, reimburse Borrower from amounts on deposit in the Tax and Insurance Escrow Fund for all real property Taxes, Other Charges and Insurance Premiums actually paid by Borrower. As a precondition to any such reimbursement, Borrower shall submit to Lender an Officers Certificate setting forth the amount of tax payments made and jurisdictions in which such payments were made (if applicable) and upon the written request of Lender receipts for payment or other evidence reasonably satisfactory to Lender that such real, property Taxes, Other Charges and Insurance Premiums have been paid. If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes, Other Charges and Insurance Premiums pursuant to Section 5.1.2 hereof, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. If at any time Lender reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes, Other Charges and Insurance Premiums by the dates set forth in (i) and (ii) above, Lender shall provide written notice to Borrower of such determination and Borrower shall, commencing with the first Payment Date following Borrowers receipt of such written notice, increase its monthly payments to Lender by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Taxes and Other Charges and/or thirty (30) days prior to expiration of the Policies, as the case may be. Any amounts remaining in the Tax and Insurance Escrow Fund after the Debt has been paid in full shall be promptly returned to Borrower. As used in this Section 7.2(a) , other charges shall not include Ground Rent, which will be reserved and disbursed pursuant to Section 7.5 hereof.
(b) Notwithstanding anything herein to the contrary, provided that no Event of Default has occurred and is continuing, to the extent that any of the insurance required to be maintained by Borrower under this Agreement and/or any other Loan Document is effected under a blanket policy reasonably acceptable to Lender insuring substantially all of the real property owned, directly or indirectly, by Guarantor, Borrower shall not be required to make deposits pursuant to the foregoing with respect to Insurance Premiums.
Section 7.3 Replacements and Replacement Reserve .
7.3.1 Replacement Reserve Fund . Borrower shall, during the continuance of a Cash Trap Period, pay to Lender on each Payment Date an amount equal to the Replacement Reserve Monthly Deposit to fund the cost of Replacements; provided , however , that Replacements shall not include expense items that otherwise would be expensed in the operating statements of the Property pursuant to the Uniform System of Accounts and provided , further , that, for so long as Borrower maintains any Individual Property in accordance with the applicable Management Agreement, the Replacement Reserve Monthly Deposit shall be reduced on a dollar-for-dollar basis by any amounts either (x) deposited into the applicable Manager Account for Replacements for the applicable calendar month as set forth in the Annual Budget and required pursuant to the terms of the applicable Management Agreement if Borrower delivers evidence reasonably satisfactory to Lender that such deposit has been made or
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(y) otherwise accounted for pursuant to the Working Capital Peg Balance held in the Operating Account Agreement if Borrower delivers evidence reasonably satisfactory to Lender that the Working Capital Peg Balance sufficiently cover such amounts. Amounts so deposited shall hereinafter be referred to as Borrowers Replacement Reserve Fund and the account in which such amounts are held shall hereinafter be referred to as Borrowers Replacement Reserve Account .
7.3.2 Disbursements from Replacement Reserve Account . (a) Lender shall make disbursements from the Replacement Reserve Account to pay Borrower only for the costs of the Replacements upon satisfaction of the requirements set forth in this Section 7.3.2 . Lender shall not be obligated to make disbursements from the Replacement Reserve Account to reimburse Borrower for the costs which are to be reimbursed from the Required Repair Fund.
(b) Lender shall disburse to Borrower the Replacement Reserve Funds from the Replacement Reserve Account from time to time upon satisfaction by Borrower of each of the following conditions: (i) Borrower shall submit a written request for payment to Lender at least five (5) days prior to the date on which Borrower requests such payment be made and specifies the Replacements to be paid, (ii) on the date such payment is to be made, no Event of Default shall exist and remain uncured and (iii) Lender shall have received an Officers Certificate: (A) stating that, to Borrowers knowledge, all Replacements to be funded by the requested disbursement have been performed in good and workmanlike manner and in accordance with all applicable federal, state and local laws, rules and regulations, in all material respects, (B) identifying each Person that supplied materials or labor in connection with such Replacements to be funded by the requested disbursement, and (C) stating that each such Person has been paid or will be paid the amounts then due and payable to such Person in connection with the Replacements with the proceeds of such disbursement, such Officers Certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender. Lender shall not be required to make disbursements from the Replacement Reserve Account with respect to the Property unless such requested disbursement is in an amount greater than Twenty-Five Thousand and No/100 Dollars ($25,000.00) (or a lesser amount if the total amount in the Required Repair Account is less than $25,000.00), in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 7.3.2 . Subject to Section 7.3.2(c) below, in no event shall Lender be obligated to disburse funds to Borrower from the Replacement Reserve Account if an Event of Default exists.
(c) Notwithstanding the foregoing, except during the continuance of an Event of Default, Lender shall make disbursements from the Replacement Reserve Account at the request of Manager upon receipt of a certificate (i) setting forth the amount of the requested disbursement, (ii) certifying that the requested disbursement will be used for FF&E as required by, and provided in the applicable Management Agreement and (iii) certifying that the amounts being requested are in accordance with the budget provided under the Management Agreement, subject to variances permitted thereby.
7.3.3 Performance of Replacements . (a) Borrower shall make Replacements when required in order to keep each Individual Property in good condition and repair and to keep the Property or any portion thereof from deteriorating consistent with the requirements of the Management Agreement. Borrower shall complete all Replacements in a good and workmanlike manner as soon as practicable following the commencement of making each such Replacement.
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(b) During a Cash Trap Period, Lender reserves the right, at its option, to approve all contracts or work orders for amounts in excess of Four Million and No/100 Dollars ($4,000,000.00) (such approval not to be unreasonably withheld, delayed or conditioned) with materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or materials in connection with the Replacements. Upon Lenders request, Borrower shall assign any contract or subcontract to Lender.
(c) During the continuance of an Event of Default, in the event Lender determines in its reasonable discretion that any Replacement is not being performed in a workmanlike or timely manner or that any Replacement has not been completed in a workmanlike or timely manner, upon three (3) Business Days written notice to Borrower, Lender shall have the option to withhold disbursement for such unsatisfactory Replacement and to proceed under existing contracts or to contract with third parties to complete such Replacement and to apply the Replacement Reserve Fund toward the labor and materials necessary to complete such Replacement and, without providing the requirement of providing any prior notice to Borrower, to exercise any and all other remedies available to Lender upon an Event of Default hereunder.
(d) During the continuance of an Event of Default, in order to facilitate Lenders completion or making of such Replacements pursuant to Section 7.3.3(c) above, Borrower grants Lender the right to enter onto any Individual Property and perform any and all work and labor necessary to complete or make such Replacements and/or employ watchmen to protect such Individual Property from damage (subject to the rights of Tenants). All sums so expended by Lender, to the extent not from the Replacement Reserve Fund, shall be deemed to have been advanced under the Loan to Borrower and secured by the Mortgages. For this purpose Borrower constitutes and appoints Lender its true and lawful attorney in fact with full power of substitution to complete or undertake such Replacements in the name of Borrower. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower empowers said attorney in fact for this purpose as follows: (i) to use any funds in the Replacement Reserve Account for the purpose of making or completing such Replacements; (ii) to make such additions, changes and corrections to such Replacements as shall be necessary or desirable to complete such Replacements; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Individual Property, or as may be necessary or desirable for the completion of such Replacements, or for clearance of title; (v) to execute all applications and certificates in the name of Borrower which may be reasonably required by any of the contract documents; (vi) to prosecute and defend all actions or proceedings in connection with any Individual Property or the rehabilitation and repair of any Individual Property; and (vii) to do any and every reasonable act which Borrower might do in its own behalf to fulfill the terms of this Agreement.
(e) Nothing in this Section 7.3.3 shall: (i) make Lender responsible for making or completing any Replacements; (ii) require Lender to expend funds in addition to the Replacement Reserve Fund to make or complete any Replacement; (iii) obligate Lender to proceed with any Replacements; or (iv) obligate Lender to demand from Borrower additional sums to make or complete any Replacement.
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(f) If reasonably determined to be necessary, Borrower shall permit Lender and Lenders agents and representatives (including, without limitation, Lenders engineer, architect, or inspector) or third parties making Replacements pursuant to this Section 7.3.3 to enter onto each Individual Property during normal business hours (subject to the rights of Tenants under their Leases) to inspect the progress of any Replacements and all materials being used in connection therewith, to examine all plans and shop drawings relating to such Replacements which are or may be kept at each Individual Property, and, during the continuance of an Event of Default, to complete any Replacements made pursuant to this Section 7.3.3 . Borrower shall cause all contractors and subcontractors to cooperate with Lender or Lenders representatives or such other persons described above in connection with inspections described in this Section 7.3.3(f) or the completion of Replacements pursuant to this Section 7.3.3 .
(g) During a Cash Trap Period and in connection with any single Replacement in excess of Four Million and No/100 Dollars ($4,000,000.00), Lender may require an inspection of the Individual Property at Borrowers expense prior to making a monthly disbursement from the Replacement Reserve Account in order to verify completion of the Replacements for which reimbursement is sought (or portion thereof in the case of periodic payments). Lender may require that such inspection be conducted by an appropriate independent qualified professional selected by Lender and reasonably approved by Borrower and/or may require a copy of a certificate of completion by an independent qualified professional reasonably acceptable to Lender prior to the disbursement of any amounts from the Replacement Reserve Account. Borrower shall pay the actual out-of-pocket expense of the inspection as required hereunder, whether such inspection is conducted by Lender or by an independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or any other item comprising a part of any Replacement shall be constructed, installed or completed, as applicable, free and clear of all mechanics, materialmens or other liens (except for those Liens existing on the date of this Agreement which have been approved in writing by Lender).
(i) All Replacements shall comply in all material respects with all applicable Legal Requirements of all Governmental Authorities having jurisdiction over the applicable Individual Property and applicable insurance requirements including, without limitation, applicable building codes, special use permits, environmental regulations, and requirements of insurance underwriters.
(j) In addition to any insurance required under the Loan Documents, Borrower shall provide or cause to be provided workmens compensation insurance, builders risk, and public liability insurance and other insurance to the extent required under applicable law in connection with a particular Replacement. All such policies shall be in form and amount reasonably satisfactory to Lender. All such policies which can be endorsed with standard mortgagee clauses making loss payable to Lender or its assigns shall be so endorsed. Certified copies of such policies shall be delivered to Lender.
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7.3.4 Failure to Make Replacements . (a) It shall be an Event of Default under this Agreement if Borrower fails to comply with any provision of this Section 7.3 and such failure is not cured within thirty (30) days after Borrowers receipt of written notice from Lender. Upon the occurrence and during the continuance of such an Event of Default, Lender may use the Replacement Reserve Fund (or any portion thereof) for any purpose, including but not limited to completion of the Replacements as provided in Section 7.3.3 , or for any other repair or replacement to any Individual Property or toward payment of the Debt in such order, proportion and priority as Lender may determine in its sole discretion. Lenders right to withdraw and apply the Replacement Reserve Fund shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents.
(b) Nothing in this Agreement shall obligate Lender to apply all or any portion of the Replacement Reserve Fund on account of an Event of Default to payment of the Debt or in any specific order or priority.
7.3.5 Balance in the Replacement Reserve Account . The insufficiency of any balance in the Replacement Reserve Account shall not relieve Borrower from its obligation to fulfill all preservation and maintenance covenants in the Loan Documents. Provided no Event of Default has occurred and is continuing, any amount remaining in the Replacement Reserve Account after the termination of any Debt Yield Trigger Period shall be deposited into the Cash Management Account and applied in accordance with the Cash Management Agreement. Any amount remaining in the Replacement Reserve Account after the Debt has been paid in full shall be returned to Borrower.
Section 7.4 Ground Lease Reserve Fund .
7.4.1 Deposits to Ground Lease Fund . Subject to the last sentence of Section 7.4.2 , on each Payment Date during a Cash Trap Period, Borrower shall pay to Lender one-twelfth of the rents (including both base rent and additional rents (excluding any Taxes otherwise reserved for hereunder)) (collectively, the Ground Rent ) due under the Ground Lease during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Ground Rent at least thirty (30) days prior to the respective due dates; provided that, to the extent Ground Rent for any Individual Property is reserved for in a Manager Account maintained by Manager pursuant to a Management Agreement or are previously paid for by such Manager pursuant to such Management Agreement and Borrower delivers to Lender the invoices or other evidence of payment or that such Manager is holding such funds in the Working Capital Peg Balance being held in the Operating Account, the required deposit to the Ground Lease Reserve Account with respect to such Individual Property will be reduced on a dollar-for-dollar basis by such amount. Amounts so deposited shall hereinafter be referred to as the Ground Lease Reserve Fund and the account in which such amounts are held shall hereinafter be referred to as the Ground Lease Reserve Account .
7.4.2 Release of Ground Lease Reserve Fund . Lender shall apply amounts in the Ground Lease Reserve Fund to the payment of the Ground Rent. In making any payment relating to the Ground Rent, Lender may do so according to any bill, statement or estimate procured from the Ground Lessor under the Ground Lease, without inquiry into the accuracy of such bill, statement or estimate. If the amount of Ground Lease Reserve Funds shall exceed the
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amounts due for the Ground Rent under the Ground Lease for the immediately succeeding twelve (12) months as determined by Lender, Lender shall return any excess to Borrower. Any amounts remaining in the Ground Lease Reserve Fund after the Debt has been paid in full shall be returned to Borrower. If at any time Lender reasonably determines that the Ground Lease Reserve Fund is not or will not be sufficient to pay the Ground Rent by the dates set forth above, Lender shall provide written notice to Borrower of such determination and Borrower, commencing with the first Payment Date following receipt of such notice, shall increase its monthly payments to Lender by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Ground Rent.
Section 7.5 Excess Cash Flow Reserve Fund . During a Cash Trap Period, Borrower shall deposit with Lender all Excess Cash Flow in the Cash Management Account, which shall be held by Lender as additional security for the Loan and amounts so held shall be hereinafter referred to as the Excess Cash Flow Reserve Fund and the account to which such amounts are held shall hereinafter be referred to as the Excess Cash Flow Reserve Account .
7.5.1 Release of Excess Cash Flow Reserve Funds . (a) During a Debt Yield Trigger Period, so long as no Event of Default has occurred and is continuing and no Bankruptcy Action of Borrower has occurred, upon written request of Borrower, Lender shall disburse within five (5) Business Days of Borrowers request and no more frequently than bimonthly, Excess Cash Flow Reserve Funds for (i) payment of any Operating Expenses (including management fees and other fees, charges or costs, payable to Manager under the Management Agreement), (ii) emergency repairs and/or life safety issues (including any Capital Expenditures) at any Individual Property, (iii) Capital Expenditures set forth in the Approved Annual Budget or otherwise reasonably approved by Lender (after application of amounts then on deposit in the Replacement Reserve) and Pre-Approved Alterations, (iv) Hotel Taxes and Custodial Funds, (v) subject to Lenders approval, payment of the cost of Replacements not otherwise paid for under Section 7.3 hereof, (vi) costs incurred in connection with the purchase of any Interest Rate Cap Agreement or Replacement Interest Rate Cap Agreement required under the Loan Documents, (vii) any fees and costs payable by Borrower subject to and in compliance with the Loan Documents, (viii) voluntary prepayment of the Loan in accordance with Section 2.4.1 hereof, or (ix) legal fees arising in connection with the Properties or the Borrowers ownership and operation of the Properties; or (B) any defense of any enforcement by Lender of its rights under the Loan Documents, (x) audit, accounting and tax expenses arising in connection with the Properties or Borrowers ownership and operation of the Properties, (xi) payment of shortfalls in the payment of Debt Service and any other amounts due and owing to Lender under the Loan Documents, (xii) payments under the Ground Lease, (xiii) costs associated with existing Leases or any new Leases entered into pursuant to the terms of this Agreement, including costs related to tenant improvement allowances, leasing commissions and Tenant-related Capital Expenditures (after application of amounts then on deposit in the Replacement Reserve Fund), (xiv) principal prepayments of the Loan in the amount necessary to satisfy a Debt Yield Cure, (xv) costs of Restoration in excess of available Net Proceeds, (xvi) payment of shortfalls in the required deposits into the Reserve Accounts (in each case, to the extent required in the Loan Agreement and the Cash Management Agreement), and (xvii) such other items as reasonably approved by Lender. Upon the occurrence of a Cash Sweep Event Cure, all Excess Cash Flow Reserve Funds shall be paid to Borrower.
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(b) Any Excess Cash Flow Reserve Funds remaining on deposit in the Excess Cash Flow Reserve Account after the Debt and all amounts due to Lender have been paid in full shall be paid to Borrower.
Section 7.6 Intentionally Omitted .
Section 7.7 Intentionally Omitted .
Section 7.8 Intentionally Omitted .
Section 7.9 Intentionally Omitted .
Section 7.10 Reserve Funds, Generally . Borrower grants to Lender a first priority perfected security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in each Reserve Fund as additional security for payment of the Debt. Until expended or applied in accordance herewith, the Reserve Funds shall constitute additional security for the Debt. Subject to Priority Waterfall Payments and payments made to Manager pursuant to Section 7.3.2(c) hereof, upon the occurrence and during the continuance of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in any or all of the Reserve Funds to the payment of the Debt in any order in its sole discretion. The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Lender. The Reserve Funds shall be held in an Eligible Account in Permitted Investments in accordance with the terms and provisions of the Cash Management Agreement. All interest or other earnings on the Reserve Funds shall be added to and become a part of such Reserve Funds and shall be disbursed or applied, as applicable, in the same manner as other monies deposited in such Reserve Fund. Borrower shall be responsible for payment of any federal, state or local income or other tax applicable to the interest earned on the Reserve Funds credited or paid to Borrower. Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Reserve Fund or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto. Lender shall not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds, provided such Reserve Funds are held in an Eligible Account in Permitted Investments in accordance with the terms and provisions of the Cash Management Agreement. Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established. Borrower shall assign to Lender all rights and claims Borrower may have against all persons or entities supplying labor, materials or other services which are to be paid from or secured by the Reserve Funds; provided , however , that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains uncured. Any amount remaining in the Reserve Funds after the Debt has been paid in full shall be returned to Borrower.
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ARTICLE VIII
DEFAULTS
Section 8.1 Event of Default . (a) Each of the following events shall constitute an event of default hereunder (an Event of Default ):
(i) if (A) any Monthly Debt Service Payment Amount is not paid on or before the date it is due, (B) the Debt is not paid in full on the Maturity Date or (C) the monthly deposit to the Ground Lease Reserve Account is not paid in full on or before the date when due or (D) any other portion of the Debt (including any deposits to the Reserve Funds) not specified in the foregoing clause (A), (B) or (C) is not paid on or prior to the date when same is due with such failure continuing for five (5) Business Days after Lender delivers notice thereof to Borrower;
(ii) if any of the Taxes or Other Charges are not paid when the same are due and payable other than those Taxes or Other Charges being contested by Borrower in accordance with Section 5.1.2 hereof and such failure continues for five (5) Business Days thereafter;
(iii) if the Policies are not kept in full force and effect, or if certified copies of the Policies are not delivered to Lender upon request when required pursuant to the applicable provisions of this Agreement;
(iv) if Borrower consummates a Transfer or otherwise encumbers any portion of the Properties without Lenders prior written consent in violation of Section 5.2.10 hereof or Article 6 of any Mortgage;
(v) if any representation or warranty made by Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender by or on behalf of Borrower shall have been false or misleading in any material adverse respect as of the date the representation or warranty was made; provided that if such untrue representation or warranty is susceptible of being cured, Borrower shall have the right to cure such representation or warranty within thirty (30) days of receipt of notice from Lender;
(vi) if Borrower or Principal shall make an assignment for the benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for Borrower or Principal or if Borrower or Principal shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower or Principal, or if any proceeding for the dissolution or liquidation of Borrower or Principal, shall be instituted; provided , however , if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower or Principal, upon the same not being discharged, stayed or dismissed within sixty (60) days;
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(viii) if Borrower or Principal attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;
(ix) if a Guarantor Bankruptcy Event occurs with respect to Guarantor, provided , however , it shall be at Lenders option to determine whether any of the foregoing shall be an Event of Default;
(x) if Borrower breaches any covenant contained in Section 4.1.30 or Section 5.1.28 hereof, provided , however , that any such breach shall not constitute an Event of Default (A) if such breach is inadvertent and non-recurring, (B) if such breach is curable, if Borrower shall promptly cure such breach within thirty (30) days after such breach occurs, and (C) upon the written request of Lender, if Borrower promptly delivers to Lender an Additional Insolvency Opinion or a modification of the Insolvency Opinion, as applicable, to the effect that such breach shall not in any way impair, negate or amend the opinions rendered in the Insolvency Opinion, which opinion or modification and the counsel delivering such opinion and modification shall be acceptable to Lender in its sole discretion;
(xi) if Guarantor fails to satisfy Section 5.2 of the Guaranty and Borrower fails to deliver within ten (10) Business Days notice from Lender either (i) a Replacement Guaranty from a Replacement Guarantor or (ii) Cash/LC Collateral.
(xii) with respect to any term, covenant or provision set forth herein which specifically contains a notice requirement or grace period, if Borrower shall be in default under such term, covenant or condition after the giving of such notice or the expiration of such grace period;
(xiii) if any of the assumptions related to the Borrower, contained in the Insolvency Opinion delivered to Lender in connection with the Loan, or in any Additional Insolvency Opinion delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect;
(xiv) if a material default by Borrower has occurred and continues beyond any applicable cure period under the Management Agreement (or any Replacement Management Agreement) and if such default permits the Manager thereunder to terminate or cancel the Management Agreement (or any Replacement Management Agreement), or the term of any Management Agreement (or any Replacement Management Agreement) expires and in each case, unless Borrower engages a Qualified Manager in accordance with the terms and as required by of Section 5.1.23 within thirty (30) days notice of such default (subject to the applicable cure period) or the date of such expiration;
(xv) if Borrower shall fail to obtain and/or maintain the Interest Rate Cap Agreement or Replacement Interest Rate Cap Agreement, as applicable, as required pursuant to Section 2.2.7 hereof;
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(xvi) if there shall be default under any of the other Loan Documents beyond any applicable cure periods contained in such documents, whether as to Borrower, Guarantor or any Individual Property, or if any other such event shall occur or condition shall exist, if the effect of such default, event or condition is to accelerate the maturity of any portion of the Debt or to permit Lender to accelerate the maturity of all or any portion of the Debt;
(xvii) if (A) a material breach or material default by any applicable Individual Borrower under any condition or obligation contained in any Ground Lease not cured within any applicable cure period provided therein, including, without limitation, the occurrence of an event or condition that gives the lessor under the Ground Lease a right to terminate or cancel the Ground Lease, (B) a Ground Lease Property shall be surrendered or the Ground Lease shall be terminated or cancelled for any reason or under any circumstances whatsoever, or (C) any of the terms, covenants or conditions of any Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended without the prior written consent of Lender; provided , however , that prior to declaring an Event of Default under this clause (xvii), Lender shall permit Borrower to release the Property subject to such Ground Lease creating such default situation within forty five (45) days upon payment of the applicable Release Amount and satisfaction of the conditions set forth in Section 2.4.1 hereof and Section 2.5.2 hereof (other than Section 2.5.2(e) ); or
(xviii) if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement not specified in subsections (i) to (xvii) above, for ten (10) days after notice to Borrower from Lender, in the case of any Default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other Default; provided , however , that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and provided further that Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed ninety (90) days.
(b) Upon the occurrence and during the continuance of an Event of Default (other than an Event of Default described in clauses (vi), (vii) or (viii) above) and at any time thereafter, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in and to all or any Individual Property, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and any or all of the Properties, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vi), (vii) or (viii) above, the Debt and Other Obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waive any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.
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Section 8.2 Remedies . (a) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any part of any Individual Property. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing (i) Lender is not subject to any one action or election of remedies law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Properties and each Mortgage has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full, including without limitation, any liquidation fees, workout fees, special servicing fees and interest payable on advances made by the Servicer with respect to delinquent debt service payments or expenses of curing Borrowers defaults under the Loan Documents or other similar fees payable to Servicer or any special servicer in connection therewith.
(b) With respect to Borrower and the Properties, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to any Individual Property for the satisfaction of any of the Debt in any preference or priority to any other Individual Property, and Lender may seek satisfaction out of all of the Properties, or any part thereof, in its absolute discretion in respect of the Debt. In addition, Lender shall have the right from time to time to partially foreclose the Mortgages in any manner and for any amounts secured by the Mortgages then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose one or more of the Mortgages to recover such delinquent payments or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose one or more of the Mortgages to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by one or more of the Mortgages as Lender may elect. Notwithstanding one or more partial foreclosures, the Properties shall remain subject to the Mortgages to secure payment of sums secured by the Mortgages and not previously recovered.
(c) Upon the occurrence and during the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in a manner consistent with Section 9.1.2 hereof (the Severed Loan Documents ) in such denominations as Lender
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shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably appoint Lender as its respective true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney shall do by virtue thereof; provided , however , Lender shall not make or execute any such documents under such power until three (3) days after notice has been given to Borrower by Lender of Lenders intent to exercise its rights under such power. Borrower shall be obligated to pay any costs or expenses incurred in connection with the preparation, execution, recording or filing of the Severed Loan Documents and the Severed Loan Documents shall not contain any representations, warranties or covenants not contained in the Loan Documents and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
(d) As used in this Section 8.2 , a foreclosure shall include, without limitation, any sale by power of sale.
Section 8.3 Remedies Cumulative; Waivers . The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lenders rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lenders sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.
ARTICLE IX
SPECIAL PROVISIONS
Section 9.1 Securitization .
9.1.1 Sale of Notes and Securitization . Borrower acknowledges and agrees that Lender may sell all or any portion of the Loan and the Loan Documents, or issue one or more participations therein, or consummate one or more private or public securitizations of rated single- or multi-class securities (the Securities ) secured by or evidencing ownership interests in all or any portion of the Loan and the Loan Documents or a pool of assets that include the Loan and the Loan Documents (such sales, participations and/or securitizations, collectively, a Securitization ). At the request of Lender and at its sole cost and expense, and to the extent not already provided by Borrower under this Agreement, Borrower shall use reasonable efforts to provide information in the possession or control of Borrower or its Affiliates and not in the
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possession of Lender or which may be reasonably required by Lender in order to satisfy the market standards to which Lender customarily adheres or which may be reasonably required by prospective investors, financing sources and/or the Rating Agencies in connection with any such Securitization including, without limitation, to:
(a) provide additional and/or updated Provided Information;
(b) review, and comment on the Disclosure Documents delivered to Borrower in accordance with the terms of this Section 9.1 , which Disclosure Documents shall be delivered to Borrower for review and comment by Borrower not less than three (3) Business Days prior to the date upon which Borrower is otherwise required to confirm such Disclosure Documents;
(c) deliver an updated Insolvency Opinion;
(d) deliver an opinion of New York counsel with respect to due execution and enforceability of the Loan Documents governed by New York law substantially the same as those delivered as of the Closing Date, which opinions shall be addressed, for purposes of reliance thereon, to each Person acquiring any interest in the Loan in connection with any Securitization, which counsel opinions shall be reasonably satisfactory to Lender and the Approved Rating Agencies;
(e) subject to Section 9.3 hereof, confirm the representations and warranties as set forth in the Loan Documents are true, complete and correct in all material respects as of the closing date of the Securitization with respect to the Property, Borrower and the Loan Documents (except to the extent that any such representations and warranties are and can only be made as of a specific date and the facts and circumstances upon which such representation and warranty is based are specific solely to a certain date in which case confirmation as to truth, completeness and correctness shall be provided as of such specific date or to the extent such representations are no longer true and correct as a result of subsequent events in which case Borrower shall provide an updated representation or warranty);
(f) if requested by Lender, review the sections of the Disclosure Document entitled Risk Factors (solely to the extent Risk Factors relate to Borrower, Guarantor, Manager, the Management Agreement and the Properties), Special Considerations, Description of the Mortgage, Description of the Mortgage Loan and Mortgaged Property, Description of the Borrower, Description of the Property Manager, Management Agreement and Assignment and Subordination of Management Agreement and Annex E - Representations and Warranties of the Borrowers (or sections similarly titled or covering similar subject matters);
(g) execute such amendments to the Loan Documents as may be reasonably necessary to reflect structural changes to the Loan, including, without limitation, immaterial changes related to the cash management structure, that are requested in writing from Lender, from time to time, prior to a Securitization; provided that any such amendments (i) shall not increase (x) any monetary obligation of Borrower or Guarantor, or (y) any other obligation or liability of Borrower under the Loan Documents in any material respect or (z) any other obligation or liability of Guarantor in any respect, (ii) shall not change the weighted average
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spread of the Loan in place immediately prior to such amendment (except following an Event of Default or any prepayment of the Loan pursuant to Section 2.4.2 hereof or to the extent that the application of a prepayment to the Components of Loan pursuant to Section 2.4.1 results in rate creep), (iii) shall not affect the aggregate amortization of the Loan, (iv) shall not change the dates of the Interest Period, the Maturity Date or the Payment Date, (v) shall not affect the time periods during which Borrower is permitted to perform any obligations under the Loan Documents, (v) shall not decrease any of Borrowers rights or remedies under the Loan Documents in any respect and (vi) any such amendments shall be in substantially the same form as the Loan Agreement; and
(h) if reasonably requested by Lender, Borrower shall provide Lender, within a reasonable period of time following Lenders request, with any financial statements, or financial, statistical or operating information, as Lender shall reasonably determine to be required pursuant to Regulation AB under the Securities Act of 1933, as amended (the Securities Act ), or the Securities Exchange Act of 1934, as amended (the Exchange Act ), or any amendment, modification or replacement thereto or other legal requirements in connection with any Disclosure Documents or any filing pursuant to the Exchange Act in connection with the Securitization or as shall otherwise be reasonably requested by Lender, so long as providing such statements or information would not cause Borrower or its Affiliates to be in violation of applicable securities laws.
9.1.2 Loan Components . (a) Borrower covenants and agrees that prior to a Securitization of the Loan, upon Lenders request Borrower shall (i) deliver one or more new notes to replace the original note or modify the original note and other loan documents, as reasonably required, to reflect additional components of the Loan or allocate spread or principal among any new components in Lenders sole discretion, provided , (1) such new or modified note shall at all times have the same weighted average spread of the original Note (except following an Event of Default or any prepayment of the Loan pursuant to Section 2.4.2 hereof or to the extent that the application of a prepayment to the Components of Loan pursuant to Section 2.4.1 results in rate creep, it being understood that no such rate creep shall be permitted in connection with Section 2.4.1 between Component B-1 and Component B-2) and (2) no amortization of principal of the Loan will be required and (ii) modify the Cash Management Agreement to reflect such new components; and further provided , that none of the foregoing actions shall have a material adverse effect on Borrower or affect any of the rights or obligations of Borrower under the Loan Documents in any materially adverse respect. Notwithstanding anything to the contrary contained herein, no reallocation or creation of new components pursuant to this Section 9.1.2 , shall (i) reduce the percentage of the Loan permitted to be voluntarily prepaid without a Prepayment Premium prior to the applicable Yield Maintenance End Date or (ii) would result in a prepayment Premium that would not otherwise have been due as of the Closing Date based upon the definition of Prepayment Premium or Yield Maintenance Premium.
(b) Intentionally Omitted.
(c) Borrower shall execute and deliver such documents as shall reasonably be required by Lender in connection with this Section 9.1.2 , all in form and substance reasonably satisfactory to Lender and the Rating Agencies within ten (10) days following such request by
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Lender. It shall be an Event of Default under this Agreement, the Note, the Mortgages and the other Loan Documents if Borrower fails to promptly comply in all material respects with the terms, covenants or conditions of this Section 9.1.2 . Notwithstanding anything to the contrary herein, Lender shall cause all reasonable costs and expenses incurred by Borrower in connection with this Section 9.1.2 (including, without limitation, any documentary stamp taxes, intangible taxes and other recording taxes) to be paid by Lender.
(d) Intentionally Omitted.
9.1.3 Uncross of Properties . Borrower agrees that at any time Lender shall have the unilateral right to elect to uncross any of the Properties (the Affected Property ). In furtherance thereof, Lender shall have the right to (i) sever or divide the Note and the other Loan Documents in order to allocate to such Affected Property the applicable Release Amount evidenced by a new note and secured by such other loan documents (collectively, the New Note ) having a principal amount equal to the Release Amount applicable to such Affected Property, (ii) segregate the applicable portion of each of the Reserve Funds relating to the Affected Property, (iii) release any cross-default and/or cross-collateralization provisions applicable to such Affected Property and (iv) take such additional action consistent therewith; provided, that (A) such New Note secured by such Affected Property, together with the Loan Documents secured by the remaining Properties, shall not (1) modify (w) the initial weighted average interest rate payable under the Note, (x) the stated maturity of all Notes combined, (y) the aggregate amortization of principal of the Note, (z) any other material economic term of the Loan, as any existed prior to the creation of the New Note and splitting of the Loan or (2) decrease the time periods during which the Borrower is required or permitted to perform its obligations under the Loan Documents, and (B) the New Note shall be in substantially the same form as the Loan Documents. In connection with the transfer of any such Affected Property as provided for in this Section 9.1.3 , the Loan shall be reduced by an amount equal to amount of the Release Amount applicable to such Affected Property and the new loan secured by such Affected Property and evidenced by the New Note shall be in an amount equal to such Release Amount. Subsequent to the release of the Affected Property from the lien of the Loan pursuant to this Section 9.1.3 , the balances of the components of the Loan shall be the same as they would have been had a prepayment occurred in an amount equal to the Release Amount of the Affected Property. At the request of Lender, Borrower shall otherwise cooperate with Lenders reasonable requests in Lenders attempt to satisfy the requirements necessary in order for Lender to obtain written confirmation from the Approved Rating Agencies that such transfer of the Affected Property from the Securitization and splitting of the Loan shall not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof, which requirements shall include, without limitation: (A) delivery of evidence that would be reasonably satisfactory to a prudent lender that the single purpose nature and bankruptcy remoteness of the Borrowers owning Properties other than the Affected Property following such release have not been adversely affected and are in accordance with the terms and provisions of this Agreement (which evidence may include a bring-down of the Insolvency Opinion); and (B) if the same would be required by a prudent lender in such circumstances, an opinion of counsel that the release of the Affected Property will not be a significant modification of this Loan within the meaning of Section 1.1001-3 of the regulations of the United States Department of the Treasury, nor cause a Securitization Vehicle to fail to qualify as a REMIC Trust or Grantor Trust or a tax to be imposed on a Securitization Vehicle. Provided that no Event of Default shall
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have occurred and be continuing under the Loan Documents, Lender shall cause all reasonable costs and expenses incurred by Borrower in connection with this Section 9.1.3 (including, without limitation, any documentary stamp taxes, intangible taxes, other recording taxes and any costs and expenses incurred by Borrower in connection with the transfer of the Affected Property to a Special Purpose Entity and the maintenance and operation of such Special Purpose Entity) to be paid by Lender.
9.1.4 Securitization Costs . All reasonable third party out-of-pocket costs and expenses incurred by Borrower and Guarantor in connection with Borrowers complying with requests made under Section 9.1 (including, without limitation, the fees and expenses of the Rating Agencies) shall be paid by Lender. All of Lenders costs and expenses, including Lenders legal fees, incurred in connection with a Securitization shall be paid by Lender.
Section 9.2 Securitization Indemnification . (a) Borrower understands that certain of the Provided Information may be included in Disclosure Documents in connection with the Securitization and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act, or Exchange Act or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization. In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, Borrower will cooperate with the holder of the Note in updating the Covered Disclosure Information by providing all current information necessary to keep the Covered Disclosure Information accurate and complete in all material respects.
(b) The Indemnifying Persons agree to provide, in connection with the Securitization, an indemnification agreement (A) certifying that (i) the Indemnifying Persons have, at Lenders request in connection with each Securitization, reviewed the sections of the Disclosure Documents entitled Risk Factors (solely to the extent the Risk Factors relate to Borrower, Guarantor, the Management Agreement and the Properties), Special Considerations, Description of the Mortgage, Description of the Mortgage Loan and Mortgaged Property, Description of the Borrower, Description of the Property Manager, Management Agreement and Assignment and Subordination of Management Agreement and Annex E Representations and Warranties of the Borrowers (collectively with the Provided Information, the Covered Disclosure Information ) and (ii) the Covered Disclosure Information does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, (B) jointly and severally indemnifying Lender, any Affiliate of Lender that has filed any registration statement relating to the Securitization or has acted as the sponsor or depositor in connection with the Securitization, any Affiliate of Lender that acts as an underwriter, placement agent or initial purchaser of Securities issued in the Securitization, any other co-underwriters, co-placement agents or co-initial purchasers of Securities issued in the Securitization, and each of their respective officers, directors, partners, employees, representatives, agents and Affiliates and each Person or entity who Controls any such Person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the Indemnified Persons ), for any losses, claims, damages, liabilities, costs or expenses (including without limitation reasonable legal fees and expenses for enforcement of these obligations (collectively, the Liabilities ) to which any such Indemnified Person may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any
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material fact contained in the Covered Disclosure Information or arise out of or are based upon the omission or alleged omission to state in the Covered Disclosure Information a material fact required to be stated therein or necessary in order to make the statements in the Covered Disclosure Information, in light of the circumstances under which they were made, not misleading and (C) agreeing to reimburse each Indemnified Person for any legal or other expenses incurred by such Indemnified Person, as they are incurred, in connection with investigating or defending the Liabilities. This indemnity agreement will be in addition to any liability which Borrower may otherwise have. Moreover, the indemnification and reimbursement obligations provided for in clauses (B) and (C) above shall be effective, valid and binding obligations of Indemnifying Persons, whether or not an indemnification agreement described in clause (A) above is provided.
(c) In connection with Exchange Act Filings, the Indemnifying Persons jointly and severally agree to indemnify (i) the Indemnified Persons for Liabilities to which any such Indemnified Person may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact in the Covered Disclosure Information, or the omission or alleged omission to state in the Covered Disclosure Information a material fact required to be stated therein or necessary in order to make the statements in the Covered Disclosure Information, in light of the circumstances under which they were made, not misleading and (ii) reimburse each Indemnified Person for any legal or other expenses incurred by such Indemnified Persons, as they are incurred, in connection with defending or investigating the Liabilities.
(d) Promptly after receipt by an Indemnified Person of notice of any claim or the commencement of any action, the Indemnified Person shall, if a claim in respect thereof is to be made against any Indemnifying Person, notify such Indemnifying Person in writing of the claim or the commencement of that action; provided , however , that the failure to notify such Indemnifying Person shall not relieve it from any liability which it may have under the indemnification provisions of this Section 9.2 except to the extent that it has been materially prejudiced by such failure and, provided , further , that the failure to notify such Indemnifying Person shall not relieve it from any liability which it may have to an Indemnified Person otherwise than under the provisions of this Section 9.2 . If any such claim or action shall be brought against an Indemnified Person, and it shall notify any Indemnifying Person thereof, such Indemnifying Person shall be entitled to participate therein and, to the extent that it wishes, assume the defense thereof with counsel reasonably satisfactory to the Indemnified Person. After notice from any Indemnifying Person to the Indemnified Person of its election to assume the defense of such claim or action, such Indemnifying Person shall not be liable to the Indemnified Person for any legal or other expenses subsequently incurred by the Indemnified Person in connection with the defense thereof except as provided in the following sentence; provided , however , if the defendants in any such action include both an Indemnifying Person, on the one hand, and one or more Indemnified Persons on the other hand, and an Indemnified Person shall have reasonably concluded that there are any legal defenses available to it and/or other Indemnified Persons that are different or in addition to those available to the Indemnifying Person, the Indemnified Person or Persons shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Person or Persons. The Indemnified Person shall instruct its counsel to maintain reasonably detailed billing records for fees and disbursements for which such Indemnified
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Person is seeking reimbursement hereunder and shall submit copies of such detailed billing records to substantiate that such counsels fees and disbursements are solely related to the defense of a claim for which the Indemnifying Person is required hereunder to indemnify such Indemnified Person. No Indemnifying Person shall be liable for the expenses of more than one (1) such separate counsel unless such Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to another Indemnified Person.
(e) Without the prior written consent of Lender or its designee (which consent shall not be unreasonably withheld or delayed), no Indemnifying Person shall settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such claim, action, suit or proceeding) unless the Indemnifying Person shall have given Lender or its designee reasonable prior written notice thereof and shall have obtained an unconditional release of each Indemnified Person hereunder from all liability arising out of such claim, action, suit or proceedings. As long as an Indemnifying Person has complied with its obligations to defend and indemnify hereunder, such Indemnifying Person shall not be liable for any settlement made by any Indemnified Person without the consent of such Indemnifying Person (which consent shall not be unreasonably withheld or delayed).
(f) The Indemnifying Persons agree that if any indemnification or reimbursement sought pursuant to this Section 9.2 is finally judicially determined to be unavailable for any reason or is insufficient to hold any Indemnified Person harmless (with respect only to the Liabilities that are the subject of this Section 9.2 ), then the Indemnifying Persons, on the one hand, and such Indemnified Person, on the other hand, shall contribute to the Liabilities for which such indemnification or reimbursement is held unavailable or is insufficient: (x) in such proportion as is appropriate to reflect the relative benefits to the Indemnifying Persons, on the one hand, and such Indemnified Person, on the other hand, from the transactions to which such indemnification or reimbursement relates; or (y) if the allocation provided by clause (x) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (x) but also the relative faults of the Indemnifying Persons, on the one hand, and all Indemnified Persons, on the other hand, as well as any other equitable considerations. Notwithstanding the provisions of this Section 9.2 , (A) no party found liable for a fraudulent misrepresentation shall be entitled to contribution from any other party who is not also found liable for such fraudulent misrepresentation, and (B) the Indemnifying Persons agree that in no event shall the amount to be contributed by the Indemnified Persons collectively pursuant to this paragraph exceed the amount of the fees actually received by the Indemnified Persons in connection with the closing of the Loan and Securitization.
(g) The Indemnifying Persons agree that the indemnification, contribution and reimbursement obligations set forth in this Section 9.2 shall apply whether or not any Indemnified Person is a formal party to any lawsuits, claims or other proceedings. The Indemnifying Persons further agree that the Indemnified Persons are intended third party beneficiaries under this Section 9.2 .
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(h) The liabilities and obligations of the Indemnified Persons and the Indemnifying Persons under this Section 9.2 shall survive the termination of this Agreement and the satisfaction and discharge of the Debt.
(i) Notwithstanding anything to the contrary contained herein, Borrower shall have no obligation to act as depositor with respect to the Loan or an issuer or registrant with respect to the Securities issued in any Securitization.
Section 9.3 Exculpation . (a) Subject to the qualifications set forth in this Section 9.3 , Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note, this Agreement, the Mortgages or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgages and the other Loan Documents, or in the Properties, the Rents, or any other collateral given to Lender pursuant to the Loan Documents; provided , however , that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrowers interest in the Properties, in the Rents and in any other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Mortgages and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Mortgages or the other Loan Documents. The provisions of this Section shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (ii) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under any of the Mortgages; (iii) affect the validity or enforceability of or any guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of any assignment of leases contained in the Mortgage; or (vi) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by each of the Mortgages or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against all of the Properties.
(b) Nothing contained herein shall in any manner or way release, affect or impair the right of Lender to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation to the extent actually incurred by Lender (including reasonable attorneys fees and costs reasonably incurred) arising out of or incurred in connection with the following actions or omissions on the part of Guarantor, Borrower, any Affiliated Manager or any Affiliate of Guarantor, Borrower or any Affiliated Manager:
(i) fraud or material and willful misrepresentation by Borrower, Principal, Guarantor, Affiliated Manager or any Affiliate of Borrower, Principal, Guarantor or any Affiliated Manager in connection with the Loan;
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(ii) willful misconduct by Borrower, Principal, Guarantor, Affiliated Manager or any Affiliate of Borrower, Principal, Guarantor or any Affiliated Manager, that results in physical damage or waste to any Property;
(iii) the removal or disposal by, or on behalf, of Borrower, Principal, Guarantor, Affiliated Manager or any Affiliate of Borrower, Principal, Guarantor or any Affiliated Manager, or any portion of any Property during the continuance of an Event of Default;
(iv) the misappropriation or conversion by any Individual Borrower, Principal, Guarantor, Affiliated Manager or any Affiliate of Borrower, Principal, Guarantor or any Affiliated Manager of (A) any Insurance Proceeds paid by reason of a Casualty, (B) any Awards received in connection with a Condemnation of all or a portion of any Individual Property, (C) any Rents during the continuance of an Event of Default, or (D) any Rents paid more than one month in advance;
(v) a material breach of any covenant set forth in Section 5.1.28(a), (b) or (c) hereof;
(vi) if Borrower fails to obtain Lenders prior written consent to any financing or other voluntary Lien encumbering any Individual Property, if such consent is required in accordance with the applicable provisions of the Loan Documents;
(vii) any material amendment, material modification or voluntary termination of any Ground Lease by Borrower without Lenders prior written consent other than as expressly permitted under the Loan Agreement;
(viii) if Borrower fails to obtain Lenders prior written consent to any Sale or Pledge of the Property or a Transfer of the ownership interests in Borrower, in each case, as required by Section 5.2.10 hereof, and in each case, excluding Permitted Transfers, Permitted Encumbrances and any other Lien expressly permitted under the Loan Documents. For the avoidance of doubt, a Transfer resulting from the exercise of Lenders rights under the Loan Documents or the consummation of any remedial or enforcement action by the Lender of the collateral for the Loan, including, without limitation, any foreclosure, deed-in-lieu or assignment in lieu of foreclosure and the exercise of any rights of Lender under the Mortgages, including, without limitation, any right to vote any pledged securities or any right to replace officers and directors of any Person (collectively, a Foreclosure ), shall not be a Transfer in violation of Section 5.2.10 hereof; or
(ix) in the event that the leasehold estate created by the Waikoloa Ground Lease shall be surrendered by or on behalf of Borrower or the Waikoloa Ground Lease shall be terminated or canceled as a result of Borrowers rejection of the Waikoloa Ground Lease in a bankruptcy proceeding. Notwithstanding the foregoing, on such date (the Satisfaction Date ) that is the earlier to occur of (i) the date Borrower delivers an executed estoppel or other written confirmation from the applicable Ground Lessor reasonably satisfactory to Lender pursuant to which Ground Lessor agrees to enter into a
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new lease with Lender on substantially the same terms as the Waikoloa Ground Lease for the remainder of its term and (ii) the date that either the Waikoloa Property is released in accordance with the terms of Section 2.5 hereof or the Waikoloa Ground Lease is released as a Release Parcel in accordance with Section 2.5.6 hereof, Borrower shall be released from liability with respect to this Section 9.3(b)(ix) with respect to acts or omissions occurring from and after the Satisfaction Date.
(c) Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, (i) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgages or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (ii) the Debt shall be fully recourse to Borrower in the event of: (A) any Individual Borrower or Principal filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (B) the filing of an involuntary petition by any Person against any Individual Borrower or Principal under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law in which any Individual Borrower, Principal or Guarantor or any Affiliate of Borrower, Principal or Guarantor colludes with, or otherwise assists, such Person, or solicits or causes to be solicited petitioning creditors for any involuntary petition against any Individual Borrower or Principal, by any Person; (C) any Individual Borrower, Principal or Guarantor or any Affiliate of Borrower, Principal or Guarantor filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law or (D) any Individual Borrower or Principal, consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for any Individual Borrower or Principal, or any portion of the Properties.
(d) In the event that Guarantor fails to satisfy Section 5.2 of the Guaranty, Borrower shall deliver either (i) a Replacement Guaranty from a Replacement Guarantor or (ii) Cash/LC Collateral.
(e) In the event the Cash/LC Collateral is delivered to Lender, then in connection with any prepayment of the Loan from time to time which results in the outstanding principal balance of the Loan being less than $1,750,000,000, Lender shall promptly disburse cash to Borrower or authorize in writing the reduction of the Letter of Credit (as applicable), such that the amount of such Cash/LC Collateral equals the Guaranty Liability Cap. Borrower shall have the right form time to time to replace the cash collateral or letter of credit constituting the Cash/LC Collateral with cash collateral or letters of credit satisfying the definition of Cash/LC Collateral.
Section 9.4 Matters Concerning Manager . If an Event of Default hereunder has occurred and remains uncured and either (a) Manager becomes subject to a Bankruptcy Action or (b) Manager is in default under the Management Agreement beyond any applicable grace or cure period, Borrower shall, in each case, at the request of Lender, exercise its contractual rights under the Management Agreement to terminate the Management Agreement and replace the Manager with a Qualified Manager pursuant to a Replacement Management Agreement, it being understood and agreed that the management fee for such Qualified Manager shall not exceed then prevailing market rates
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Section 9.5 Servicer . At the option of Lender, the Loan may be serviced by a master servicer, primary servicer, special servicer and/or trustee (any such master servicer, primary servicer, special servicer, and trustee, together with its agents, nominees or designees, are collectively referred to as servicer ( Servicer ) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to Servicer pursuant to a pooling and servicing agreement, special servicing agreement or other agreement providing for the servicing of one or more mortgage loans (collectively, the Servicing Agreement ) between Lender and Servicer. Lender shall be responsible for any reasonable set-up fees or any other initial costs relating to or arising under the Servicing Agreement and Borrower shall not be responsible for payment of the regular monthly master servicing fee or trustee fee due to Servicer or the trustee under the Servicing Agreement or any fees or expenses required to be borne by Servicer. Notwithstanding the foregoing, Borrower shall promptly reimburse Lender on demand for the following: all actual out-of-pocket reasonable costs and expenses, liquidation fees, workout fees, special servicing fees, operating advisor fees, certificate administrator fees or any other similar fees and to the extent charges pursuant to Section 2.3.4 hereof and interest at the Default Rate actually paid by Borrower is insufficient to pay for same, interest payable on advances made by the Servicer or the trustee with respect to (a) delinquent Debt Service payments or expenses of curing Borrowers defaults under the Loan Documents, payable by Lender to Servicer or a trustee and provided for under the Servicing Agreement or actual out-of-pocket reasonable expenses paid by Servicer or a trustee in respect of the protection and preservation of the Properties (including, without limitation, payments of Taxes and Insurance Premiums), (b) as a result of an Event of Default under the Loan or the Loan becoming specially serviced, an enforcement, refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a work-out of the Loan Documents or of any insolvency or bankruptcy proceeding of any Borrower or (c) the costs of all property inspections and/or appraisals of the Properties (or any updates to any existing inspection or appraisal) that Servicer may be required to obtain (other than the cost of regular annual inspections required to be borne by Servicer under the Servicing Agreement). Additionally, Borrower shall pay the customary and reasonable servicing fees in connection with any special requests made by Borrower or Guarantor during the term of the Loan including, without limitation, in connection with a prepayment, assumption or modification of the Loan. Lender shall grant or deny with a reasonable explanation any consent required hereunder within fifteen (15) day period (or such shorter period as provided in this Agreement) after the receipt of the applicable request and all documents in connection therewith. In the event that Lender fails to respond within said fifteen (15) day period (or such shorter period as provided in this Agreement), such failure shall be deemed to be the consent and approval of Lender if (A) Borrower has delivered to Lender the applicable documents, with the notation IMMEDIATE RESPONSE REQUIRED, FAILURE TO RESPOND TO THIS APPROVAL REQUEST WITHIN FIFTEEN (15) DAYS (OR SUCH SHORTER PERIOD AS PROVIDE IN THIS AGREEMENT) FROM RECEIPT SHALL BE DEEMED TO BE LENDERS APPROVAL prominently displayed in bold, all caps and fourteen (14) point or larger font in the transmittal letter requesting approval and (B) Lender does not approve or reject (with a reasonable
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explanation) the applicable request within fifteen (15) days (or such shorter period as provided in this Agreement) from the date Lender receives such request as evidenced by a certified mail return receipt or confirmation by a reputable national overnight delivery service that the same has been delivered.
Section 9.6 Intentionally Omitted .
Section 9.7 Register . (a) The Servicer, or if no Servicer has been engaged, Lender, as non-fiduciary agent of Borrower, shall maintain a record that identifies each owner (including successors and assignees) of an interest in the Loan, including the name and address of the owner, and each owners rights to principal and stated interest (the Register ), and shall record all transfers of an interest in the Loan, including each assignment, in the Register. Transfers of interests in the Loan (including assignments) shall be subject to the applicable conditions set forth in the Loan Documents with respect thereto and Servicer will update the Register to reflect the transfer. Furthermore, each Lender that sells a participation shall, acting solely for this purpose as agent of Borrower, maintain a register on which it enters the name and address of each participant and the principal amounts and stated interest of each participants interest (the Participant Register ); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any participant or any information relating to a participants interest) except to the extent that such disclosure is necessary to establish that such obligation is in registered form under Section 5f.103-1(c) of the U.S. Department of Treasury regulations. The entries in the Register and Participant Register shall be conclusive absent manifest error. The Borrower, the Lenders and the Servicer shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, and the Borrower, the Lenders and the Servicer shall treat each Person whose name is recorded in the Participant Register pursuant to the terms hereof as the owner of such participation for all purposes of this Agreement. Failure to make any such recordation, or any error in such recordation, however, shall not affect Borrowers obligations in respect of the Loan. Borrower and Lender acknowledge that the Notes are in registered form and may not be transferred except by register.
(b) Borrower agrees that each participant pursuant to Section 9.1.1(a) shall be entitled to the benefits of Section 2.2.3(f) and (h) and Section 2.7 (subject to the requirements and limitations therein, including the requirements under Section 2.7(e) (it being understood that the documentation required under Section 2.7(e) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment; provided that such participant (A) agrees to be subject to the provisions of Section 2.7(h) as if it were an assignee hereunder; and (B) shall not be entitled to receive any greater payment under Section 2.2.3(f) or Section 2.7 , with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a change in a requirement of law or in the interpretation or application thereof, or compliance by such participant or the participating Lender with any request or directive (whether or not having the force of law) issued from any central bank or other Governmental Authority, in each case after the participant acquired the applicable participation.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Survival . This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party. All covenants, promises and agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender.
Section 10.2 Lenders Discretion . Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.
Section 10.3 Governing Law . (a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
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(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDERS OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
CORPORATION SERVICES COMPANY
80 STATE STREET
ALBANY, NEW YORK 12207
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 10.4 Modification, Waiver in Writing . No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.
Section 10.5 Delay Not a Waiver . Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other
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Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.
Section 10.6 Notices . All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section):
If to Lender:
JPMorgan Chase Bank, National Association
383 Madison Ave.
New York, New York 10179
Attention: Joseph E. Geoghan III
and:
German American Capital Corporation
60 Wall Street, 10th Floor
New York, New York 10005
Attention: Robert W. Pettinato Jr.
and:
Morgan Stanley Mortgage Capital Holdings LLC
1585 Broadway
New York, New York 10036
Attention: Gary P. Curwin
and:
Bank of America, National Association
One Bryant Park
New York, New York 10036
Attention: Leland F. Bunch, III
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and:
GS Commercial Real Estate LP
200 West Street
New York, New York 10282
Attention: Rene Theriault
Facsimile: (917) 977-4870
and
GS Commercial Real Estate LP
200 West Street
New York, New York 10282
Attention: Daniel Bennett
Facsimile: (646) 835-3184
with a copy to:
Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, New York 10281
Attention: William P. McInerney, Esq.
Facsimile: (212) 504-6666
If to Borrower:
Hilton CMBS Holdings LLC
7930 Jones Branch Drive
McLean, Virginia 22102
Attention: Treasurer
and
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Erik Quarfordt
Facsimile No.: (212) 455-2502
A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of telecopy, upon senders receipt of a machine generated confirmation of successful transmission after advice by telephone to recipient that a telecopy notice is forthcoming.
Each Individual Borrower hereby appoints Hilton Hawaiian Village LLC (the Representative Borrower ) to serve as agent on behalf of all Individual Borrowers to receive any notices required to be delivered to any or all of Individual Borrowers hereunder or under the other Loan
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Documents and to be the sole party authorized to deliver notices on behalf of the Individual Borrowers hereunder. Any notice delivered to the Representative Borrower shall be deemed to have been delivered to all Individual Borrowers, and any notice received from the Representative Borrower shall be deemed to have been received from all Individual Borrowers. The Individual Borrowers shall be entitled from time to time to appoint a replacement Representative Borrower by written notice delivered to Lender and signed by both the new Representative Borrower and the Representative Borrower being so replaced.
Section 10.7 Trial by Jury . BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 10.8 Headings . The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
Section 10.9 Severability . Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
Section 10.10 Preferences . Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.
Section 10.11 Waiver of Notice . Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower.
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Section 10.12 Remedies of Borrower . In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrowers sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.
Section 10.13 Expenses; Indemnity . (a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including reasonable attorneys fees and expenses) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby (other than a Securitization) and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by Lender as to any legal matters arising under this Agreement or the other Loan Documents with respect to the Properties) subject to the terms and provisions of Section 9.1.4 hereof; (ii) Borrowers ongoing performance of and compliance with Borrowers respective agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (iii) Lenders ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters reasonably requested by Borrower; (v) securing Borrowers compliance with any requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and expenses, title insurance and fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Properties, or any other security given for the Loan; and (viii) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Properties (including any fees and expenses reasonably incurred by or payable to Servicer or a trustee in connection with the transfer of the Loan to a special servicer upon Servicers anticipation of a Default or Event of Default, liquidation fees, workout fees, special servicing fees, operating advisor fees or any other similar fees and interest payable on advances made by the Servicer with respect to delinquent debt service payments or expenses of curing Borrowers defaults under the Loan Documents) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a work out or of any insolvency or bankruptcy proceedings or any other amounts required under Section 9.5 hereof, provided ,
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however , that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender. Any cost and expenses due and payable to Lender may be paid from any amounts in the Cash Management Account.
(b) Borrower shall indemnify, defend and hold harmless the Indemnified Parties from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not an Indemnified Party shall be designated a party thereto), that may be imposed on, incurred by, or asserted against any Indemnified Party in any manner relating to or arising out of (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, or (ii) the use or intended use of the proceeds of the Loan (collectively, the Indemnified Liabilities ); provided , however , that Borrower shall not have any obligation to any Indemnified Party hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of such Indemnified Party; provided , further , that this Section 10.13(b) shall not apply with respect to taxes other than any taxes that represent losses or damages arising from any non-tax claim. To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnified Parties.
(c) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender for, any fees and expenses incurred by any Rating Agency in connection with any Rating Agency review of the Loan, the Loan Documents or any transaction contemplated thereby or any consent, approval, waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of this Agreement or any other Loan Document and Lender shall be entitled to require payment of such fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver or confirmation.
(d) Borrower shall jointly and severally indemnify the Lender and each of its respective officers, directors, partners, employees, representatives, agents and Affiliates against any liabilities to which Lender, each of its respective officers, directors, partners, employees, representatives, agents and Affiliates, may become subject in connection with any indemnification to the Rating Agencies in connection with issuing, monitoring or maintaining the Securities insofar as the liabilities arise out of or are based upon any untrue statement of any material fact in any information provided by or on behalf of the Borrowers to the Rating Agencies (the Covered Rating Agency Information ) or arise out of or are based upon the omission to state a material fact in the Covered Rating Agency Information required to be stated therein or necessary in order to make the statements in the Covered Rating Agency Information, in light of the circumstances under which they were made, not misleading.
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Section 10.14 Incorporated . The Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.
Section 10.15 Offsets, Counterclaims and Defenses . Any assignee of Lenders interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries . (a) Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Properties other than that of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein. All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lenders sole discretion, Lender deems it advisable or desirable to do so.
Section 10.17 Publicity . All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public which refers to the Loan Documents or the financing evidenced by the Loan Documents, to Lender or its Affiliates shall be subject to the prior written approval of Lender in its sole discretion.
Section 10.18 Cross Default; Cross Collateralization; Waiver of Marshalling of Assets . (a) Borrower acknowledges that Lender has made the Loan to Borrower upon the security of Borrowers collective interest in the Properties and in reliance upon the aggregate of the Properties taken together being of greater value as collateral security than the sum of each Individual Property taken separately. Borrower agrees that the Mortgages are and will be cross collateralized and cross defaulted with each other so that (i) an Event of Default under any of the Mortgages shall constitute an Event of Default under each of the other Mortgages which secure the Note; (ii) an Event of Default under the Note or this Agreement shall constitute an Event of Default under each Mortgage; (iii) each Mortgage shall constitute security for the Note as if a single blanket lien were placed on all of the Properties as security for the Note; and (iv) such cross collateralization shall in no event be deemed to constitute a fraudulent conveyance.
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(b) To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrowers partners and others with interests in Borrower, and of the Properties, or to a sale in inverse order of alienation in the event of foreclosure of all or any of the Mortgages, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Properties for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Properties in preference to every other claimant whatsoever. In addition, each of Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Mortgages, any equitable right otherwise available to Borrower which would require the separate sale of the Properties or require Lender to exhaust its remedies against any Individual Property or any combination of the Properties before proceeding against any other Individual Property or combination of Properties; and further in the event of such foreclosure each of Borrower does hereby expressly consents to and authorizes, at the option of Lender, the foreclosure and sale either separately or together of any combination of the Properties.
Section 10.19 Waiver of Counterclaim . Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.
Section 10.20 Conflict; Construction of Documents; Reliance . In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lenders exercise of any such rights or remedies. Borrower acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors . Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower hereby agrees to indemnify, defend and hold Lender harmless from and against any and all claims, liabilities,
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costs and expenses of any kind (including Lenders attorneys fees and expenses) in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower or Lender in connection with the transactions contemplated herein. The provisions of this Section 10.21 shall survive the expiration and termination of this Agreement and the payment of the Debt.
Section 10.22 Prior Agreements . This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, between Borrower and Lender are superseded by the terms of this Agreement and the other Loan Documents.
Section 10.23 Joint and Several Liability . If Borrower consists of more than one (1) Person the obligations and liabilities of each Person shall be joint and several.
Section 10.24 Certain Additional Rights of Lender (VCOC) . Notwithstanding anything to the contrary contained in this Agreement, Lender shall have:
(a) upon not less than fifteen (15) Business Days prior written notice to Borrower, the right to request and to hold a meeting at Lenders office in New York, New York no more than two (2) times during any calendar year to consult with an officer of Borrower that is familiar with the financial condition of each Borrower and the operation of the Individual Properties regarding such significant business activities and business and financial developments of Borrower is specified by Lender in writing in the request for such meeting; provided , however , that such consultations shall not include discussions of environmental compliance programs or disposal of hazardous substances; and
(b) the right, in accordance with the terms of this Agreement, to examine the books and records of Borrower at any reasonable times upon reasonable notice no more than four (4) times during any calendar year, provided that any such examination shall be conducted so as not to unreasonably interfere with the business of Borrower, guests or any Tenants or other occupants of any Individual Property.
The rights described above in this Section 10.24 may be exercised by Lender on behalf of any Person which Controls Lender.
Section 10.25 Discounted Payoff . (a) Notwithstanding anything to the contrary contained in this Agreement and without any obligation on the part of Borrower to make, or any Lender to accept, a Discounted Payoff under this Loan Agreement, as applicable, Borrower shall be permitted to prepay at a discount any non-securitized portion of the Loan in whole (a Discounted Payoff ); provided that, no Event of Default is continuing and, and provided , further , that the Lender receiving such Discounted Payoff has consented to such prepayment. Notwithstanding anything to the contrary contained in this Agreement, any prepayments made by Borrower in connection with a Discounted Payoff shall be applied solely to reduce any non-securitized portion of the Loan, as applicable, held by Lender by an amount equal to the Face Amount of such Discounted Payoff. Notwithstanding such Discounted Payoff, the non-securitized portion of the Loan shall be deemed to remain outstanding for the term of the Loan at the amount of principal then outstanding immediately prior to such Discounted Payoff for purposes of calculating Debt Yield.
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(b) Borrower acknowledges and agrees that any Discounted Payoff of any Loan shall in no event be characterized by Borrower as a purchase of an interest in the Loan.
(c) Lender acknowledges that any intercreditor or co-lender arrangements among the Lenders shall permit Discounted Payoffs of the entire non-securitized portion of the Loan without requiring the consent of any other Lender, any participants or holders of any other portion of the Loan.
(d) Following any Discounted Payoff, the then existing Release Amount for each Individual Property shall be reduced by a percentage expressed as a fraction (x) the numerator of which is the principal amount of the Loan that is being retired and (y) the denominator of which is the outstanding principal amount of the Loan as of the date immediately prior to such Discounted Payoff.
Section 10.26 Use of Borrower Provided Information . Lender agrees that is shall use commercially reasonable efforts to use Provided Information solely for purposes of the ownership and sale of its interest in the Loan (including, without limitation, the administration of the Loan and any Securitization). Notwithstanding the foregoing, nothing in this Section 10.26 shall prevent any Lender from: (a) disclosing or otherwise using any Provided Information in the manner and for the purposes set forth in Section 9.1 and Section 9.2 of this Agreement, (b) disclosing Provided Information to any loan participant or similar holders of an interest in the Loan, provided that such participants or other holders shall be instructed to use commercially reasonable efforts to use such Provided Information solely in connection with their ownership of their interest in the Loan, (c) disclosing Provided Information subject to an instruction to comply with the provisions of this Section 10.26 , to any prospective participant or other transferee of an interest in the Loan, (d) disclosing Provided Information to its employees, directors, agents, attorneys, accountants, investors, potential investors, finance providers, tax consultants, tax preparers, financial consultants and other professional advisors or those of any of its affiliates, (e) disclosing Provided Information upon the request or demand of any Governmental Authority, (f) disclosing Provided Information in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Legal Requirement, (g) disclosing Provided Information if requested or required to do so in connection with any litigation or similar proceeding, (h) disclosing or otherwise using any Provided Information that has been publicly disclosed, or (i) disclosing or otherwise using any Provided Information in connection with the exercise of any remedy hereunder or under any other Loan Document. In connection with any Securitization, Lender shall use commercially reasonable efforts to cause any trust and servicing agreement applicable to the Loan to require the trustee or certificate administrator thereunder to include on its website with respect to which investors have access to property specific financial reports, provisions substantially similar to those set forth in (i) and (ii) below:
(i) In consideration of the disclosure to the undersigned of certain information on the certificate administrator or trustees website (the Information), or the access thereto, the undersigned will keep the Information confidential (except from such outside
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persons as are assisting it in making an evaluation in connection with purchasing the related certificates, from its accountants and attorneys, and otherwise from such governmental or banking authorities or agencies to which the undersigned is subject), and such Information will not, without the prior written consent of the certificate administrator, be otherwise disclosed by the undersigned or by its officers, directors, partners, employees, agents or representatives in any manner whatsoever, in whole or in part; provided, however, that the obligations of the undersigned to keep any such information confidential shall expire one year following the date that the undersigned is no longer a certificateholder or a beneficial owner of a class of certificates or is not a purchaser of certificates in the case of a prospective purchaser.
(ii) The undersigned will not use or disclose the Information in any manner which could result in a violation of any provision of the Securities Act of 1933, as amended (the Securities Act), or the Securities Exchange Act of 1934, as amended, or would require registration of any certificate not previously registered pursuant to Section 5 of the Securities Act.
Section 10.27 Borrower Affiliate Lender . Lender agrees that the Lender Documents shall not prohibit or restrict Affiliates of Borrower from purchasing or otherwise acquiring and owning the beneficial interests in the Loan as evidenced by any single or multi-class non-voting Securities in respect of any private or public securitization of the Loan, provided , however , that the Lender Documents may include restrictions on the exercise of the rights and remedies by such Affiliates of Borrower under the Loan including, without limitation, (i) restrictions on any such Affiliate having the right to, or exercising, directly or indirectly, any control, decision-making power, voting rights, notice and cure rights, or other rights that would otherwise benefit a holder by virtue of its ownership or control of any interest with respect to the Loan, (ii) restrictions on any such Affiliates approval and consent rights under any intercreditor agreement, (iii) restrictions on such Affiliates initiation of enforcement actions against equity collateral, (iv) restrictions on the making of protective advances, (v) restrictions on such Affiliate from making or bringing any claim, in its capacity as a holder of any direct or indirect interest in the Loan, against Lender or any agent of any of the foregoing with respect to the duties and obligations of such Person under the Loan Documents, any intercreditor agreement or any applicable co-lender agreement and (vi) restrictions on such Affiliates access to any electronic platform for the distribution of materials or information among the Lender, asset status reports or any correspondence or materials or notices of or participation in any discussions, meetings or conference calls (among Lender, any of their respective co-lenders or participants, or otherwise) regarding or relating to any workout discussions or litigation or foreclosure strategy (or potential litigation strategy) involving the Loan, other than in its capacity as Borrower to the extent discussions and negotiations are being conducted with Borrower (as distinct from internal discussions and negotiations among the various creditors).
Section 10.28 Co-Lenders . (a) Borrower hereby acknowledges and agrees that notwithstanding the fact that the Loan may be serviced by Servicer, prior to a Securitization of
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the entire Loan, all requests for approval and consents hereunder and in every instance in which Lenders consent or approval is required, Borrower shall be required to obtain the consent and approval of each Co-Lender and all copies of documents, reports, requests and other delivery obligations of Borrower required hereunder shall be delivered by Borrower to each Co-Lender.
(b) Following the Closing Date (i) the liabilities of Lender shall be several and not joint, (ii) neither Co-Lender shall be responsible for the obligations of the other Co-Lender, and (iii) each Co-Lender shall be liable to Borrower only for their respective Ratable Share of the Loan. Notwithstanding anything to the contrary herein, all indemnities by Borrower and obligations for costs, expenses, damages or advances set forth herein shall run to and benefit each Co-Lender in accordance with its Ratable Share.
(c) Each Co-Lender agrees that it has, independently and without reliance on the other Co-Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrower and its Affiliates and decision to enter into this Agreement and that it will, independently and without reliance upon the other Co-Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or under any other Loan Document.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.
BORROWER: | ||||
CHICAGO HILTON LLC | ||||
CRYSTAL CITY LLC | ||||
HILTON CMBS HOLDINGS LLC | ||||
HILTON EL SEGUNDO LLC | ||||
HILTON LAND INVESTMENT 1, LLC | ||||
HILTON SEATTLE AIRPORT LLC | ||||
HLT DC OWNER LLC | ||||
HLT LOGAN LLC | ||||
HLT MEMPHIS LLC | ||||
HLT NY HILTON LLC | ||||
HLT PROPERTY ACQUISITION LLC | ||||
HLT SAN JOSE LLC | ||||
MCLEAN HILTON LLC | ||||
MIAMI AIRPORT LLC | ||||
PHOENIX SP HILTON LLC | ||||
S.F. HILTON LLC | ||||
SHORT HILLS HILTON LLC, each a Delaware limited liability company |
||||
By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
HILTON HAWAIIAN VILLAGE LLC, a Hawaii limited liability company |
||||
By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
HILTON INTERNATIONAL OF PUERTO RICO, INC., a corporation organized and existing under the laws of the State of Delaware |
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By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
OAKBROOK HILTON SUITES AND GARDEN INN LLC, an Illinois limited liability company |
||||
By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
INTERNATIONAL RIVERCENTER L.L.C., a Louisiana limited liability company |
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By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||||
Title: | Senior Vice President & Treasurer | |||||
NEW ORLEANS RIVERCENTER, a Louisiana ordinary partnership |
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By: | Hilton New Orleans, LLC, a Delaware limited liability company, its partner and Hilton Riverside LLC, a Delaware limited liability company, its partner | |||||
By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||||
Title: | Senior Vice President & Treasurer |
NORC RIPARIAN PROPERTY, INC., a Louisiana corporation |
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By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
GLOBAL RESORT PARTNERS, a Hawaii general partnership |
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By: | HLT GP LLC, a Delaware limited liability company, as partner, and HLT Resorts GP LLC, a Delaware limited liability company, as partner | |||||
By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||||
Title: | Senior Vice President & Treasurer | |||||
HAPEVILLE HOTEL LIMITED PARTNERSHIP, a Delaware limited partnership |
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By: | HLT GP LLC, a Delaware limited liability company, as general partner | |||||
By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||||
Title: | Senior Vice President & Treasurer | |||||
KENNER HOTEL LIMITED PARTNERSHIP, a Delaware limited partnership |
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By: | HLT GP LLC, a Delaware limited liability company, as general partner | |||||
By: |
/s/ Sean DellOrto |
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Name: | Sean DellOrto | |||||
Title: | Senior Vice President & Treasurer |
LENDER: | ||||
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a banking association chartered under the laws of the United States of America |
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By: |
/s/ Joseph E. Geoghan |
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Name: | Joseph E. Geoghan | |||
Title: | Managing Director |
GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation |
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By: |
/s/ Stephen H. Choe |
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Name: | Stephen H. Choe | |||
Title: | Managing Director | |||
By: |
/s/ Robert W. Pettinato |
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Name: | Robert W. Pettinato | |||
Title: | Managing Director |
BANK OF AMERICA, NATIONAL ASSOCIATION, a national banking association |
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By |
/s/ Leland F. Bunch |
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Name: | Leland F. Bunch | |||
Title: | Director |
GS COMMERCIAL REAL ESTATE LP, a Delaware limited partnership |
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By: | MSMC, Inc. a Delaware corporation, its general partner | |||
By: |
/s/ Rene. J. Theriault |
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Name: | Rene J. Theriault | |||
Title: | Authorized Signatory |
MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC, a New York limited liability company | ||||
By: |
/s/ Gary P. Curwin |
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Name: | Gary P. Curwin | |||
Title: | Vice President |
EXHIBIT B-I
(Tax Compliance Certificates)
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement dated as of [ ] [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Agreement ), among JPMorgan Chase Bank, National Association and German American Capital Corporation, Bank of America, N.A., GS Commercial Real Estate LP and Morgan Stanley Mortgage Capital Holdings LLC, as Lender, and the entities set forth on Schedule 1.1 thereto, as Borrower.
Pursuant to the provisions of Section 2.7 of the Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan (as well as any Note evidencing such Loan) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower, and (2) the undersigned shall have at all times furnished the Borrower with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Agreement and used herein shall have the meanings given to them in the Agreement.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, | ||
a banking association chartered under the laws of the United States of America | ||
By: |
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Name: | ||
Title: |
Exhibit B-I-1
GERMAN AMERICAN CAPITAL CORPORATION | ||
By: |
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Name: | ||
Title: |
By: |
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Name: | ||
Title: |
Exhibit B-I-2
BANK OF AMERICA, N.A. | ||
By: |
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Name: | ||
Title: |
Exhibit B-I-3
MORGAN STANLEY MORTGAGE | ||
CAPITAL HOLDINGS LLC | ||
By: |
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Name: | ||
Title: |
Date: , 2013
Exhibit B-I-4
Exhibit B-II
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement dated as of [ ] [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Agreement ), among JPMorgan Chase Bank, National Association and German American Capital Corporation, Bank of America, N.A., GS Commercial Real Estate LP and Morgan Stanley Mortgage Capital Holdings LLC, as Lender, and the entities set forth on Schedule 1.1 thereto, as Borrower.
Pursuant to the provisions of Section 2.7 of the Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Agreement and used herein shall have the meanings given to them in the Agreement.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, | ||
a banking association chartered under the laws of the United States of America | ||
By: |
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Name: | ||
Title: |
Exhibit B-II-1
GERMAN AMERICAN CAPITAL CORPORATION | ||
By: |
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Name: | ||
Title: |
By: |
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Name: | ||
Title: |
Exhibit B-II-2
BANK OF AMERICA, N.A. | ||
By: |
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Name: | ||
Title: |
Exhibit B-II-3
MORGAN STANLEY MORTGAGE | ||
CAPITAL HOLDINGS LLC | ||
By: |
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Name: | ||
Title: |
Date: , 2013
Exhibit B-II-4
Exhibit B-III
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement dated as of [ ] [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Agreement ), among JPMorgan Chase Bank, National Association and German American Capital Corporation, Bank of America, N.A., GS Commercial Real Estate LP and Morgan Stanley Mortgage Capital Holdings LLC, as Lender, and the entities set forth on Schedule 1.1 thereto, as Borrower.
Pursuant to the provisions of Section 2.7 of the Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Agreement and used herein shall have the meanings given to them in the Agreement.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a banking association chartered under the laws of the United States of America |
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By: |
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Name: | ||
Title: |
Exhibit B-III-1
GERMAN AMERICAN CAPITAL CORPORATION | ||
By: |
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Name: | ||
Title: |
By: |
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Name: | ||
Title: |
Exhibit B-III-2
BANK OF AMERICA, N.A. | ||
By: |
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Name: | ||
Title: |
Exhibit B-III-3
MORGAN STANLEY MORTGAGE | ||
CAPITAL HOLDINGS LLC | ||
By: |
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Name: | ||
Title: |
Date: , 2013
Exhibit B-III-4
Exhibit B-IV
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement dated as of [ ] [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Agreement ), among JPMorgan Chase Bank, National Association and German American Capital Corporation, Bank of America, N.A., GS Commercial Real Estate LP and Morgan Stanley Mortgage Capital Holdings LLC, as Lender, and the entities set forth on Schedule 1.1 thereto, as Borrower.
Pursuant to the provisions of Section 2.7 of the Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan (as well as any Note evidencing such Loan) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan (as well as any Note evidencing such Loan), (iii) with respect to the extension of credit pursuant to this Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower, and (2) the undersigned shall have at all times furnished the Borrower with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Agreement and used herein shall have the meanings given to them in the Agreement.
Exhibit B-IV-1
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a banking association chartered under the laws of the United States of America |
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By: |
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Name: | ||
Title: |
Exhibit B-IV-2
GERMAN AMERICAN CAPITAL CORPORATION | ||
By: |
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Name: | ||
Title: |
By: |
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Name: | ||
Title: |
Exhibit B-IV-3
BANK OF AMERICA, N.A. | ||
By: |
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Name: | ||
Title: |
Exhibit B-IV-4
MORGAN STANLEY MORTGAGE | ||
CAPITAL HOLDINGS LLC | ||
By: |
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Name: | ||
Title: |
Date: , 2013
Exhibit B-IV-5
Exhibit 10.4
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this Guaranty ) is executed as of October 25, 2013, by HILTON DOMESTIC PROPERTY LLC , a Delaware limited liability company and HILTON OWNED VIII HOLDING LLC , a Delaware limited liability company, each having its principal place of business at 7930 Jones Branch Drive, McLean, Virginia 22102 (jointly and severally, together with their respective successors and permitted assigns, Guarantor ), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION , a banking association chartered under the laws of the United States of America, having an address at 383 Madison Avenue, New York, New York 10179, GERMAN AMERICAN CAPITAL CORPORATION , a Maryland corporation having an address at 60 Wall Street, New York, New York 10005, BANK OF AMERICA, N.A. , a national banking association having an address at One Bryant Park, New York, New York 10026, GS COMMERCIAL REAL ESTATE LP , a Delaware limited partnership having an address at 200 West Street, New York, New York 10282 and MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS LLC , a New York limited liability company having an address at 1585 Broadway, New York, New York 10036 (together with their respective successors and assigns, each a Co-Lender and, collectively, Lender ).
W I T N E S S E T H :
WHEREAS , pursuant to that certain (i) Amended and Restated Promissory Note A-1, dated the date hereof, in the original principal amount of $962,500,000.00, made by Borrower in favor of JPMorgan Chase Bank, National Association ( Note A-1 ), (ii) Amended and Restated Promissory Note A-2, dated the date hereof, in the original principal amount of $962,500,000.00, made by Borrower in favor of German American Capital Corporation ( Note A-2 ), (iii) Amended and Restated Promissory Note A-3, dated the date hereof, in the original principal amount of $525,000,000.00, made by Borrower in favor of Bank of America, N.A. ( Note A-3 ), (iv) Amended and Restated Promissory Note A-4, dated the date hereof, in the original principal amount of $525,000,000.00, made by Borrower in favor of GS Commercial Real Estate LP ( Note A-4 ) and (v) Amended and Restated Promissory Note A-5, dated the date hereof, in the original principal amount of $525,000,000.00, made by Borrower in favor of Morgan Stanley Mortgage Capital Holdings LLC ( Note A-5 and together with Note A-1, Note A-2, Note A-3 and Note A-4, collectively, as the same may hereafter be amended, restated, replaced, supplemented, renewed, extended or otherwise modified from time to time, the Note ), Borrower has become indebted, and may from time to time be further indebted, to Lender with respect to a loan ( Loan ) which Loan is (i) secured by the liens and security interests of certain mortgages, deed of trust and deeds to secure debt, each dated as of the date hereof, made by the applicable Individual Borrower for the benefit of Lender, (as the same may hereafter be amended, restated, renewed, supplemented, replaced, extended or otherwise modified from time to time, collectively, the Mortgage ), (ii) further evidenced by that certain Loan Agreement, dated as of the date hereof by and between Borrower and Lender (as the same may hereafter be amended, modified, restated, renewed or replaced, the Loan Agreement ) and (iii) further evidenced, secured or governed by the other instruments and documents executed in connection with the Loan (together with the Note, the Loan Agreement and the Mortgage, are hereinafter collectively referred to as the Loan Documents );
WHEREAS , Lender is not willing to make the Loan, or otherwise extend credit, to Borrower unless Guarantor unconditionally guarantees payment and performance to Lender of the Guaranteed Obligations (as herein defined); and
WHEREAS , Guarantor is the owner of a direct or indirect interest in one or more Individual Borrowers comprising Borrower, and Guarantor will directly benefit from Lenders making the Loan to Borrower.
NOW, THEREFORE , as an inducement to Lender to make the Loan to Borrower, and to extend such additional credit as Lender may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I
NATURE AND SCOPE OF GUARANTY
1.1 Guaranty of Obligation . Subject to the terms and conditions hereof, Guarantor hereby irrevocably and unconditionally guarantees to Lender and its successors and assigns the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a primary obligor.
1.2 Definition of Guaranteed Obligations .
(a) As used herein, the term Guaranteed Obligations means all obligations and liabilities of Borrower pursuant to Section 9.3(b) and (c) of the Loan Agreement.
(b) Notwithstanding anything to the contrary in this Guaranty or any of the other Loan Documents: (i) the aggregate liability of Guarantor with respect to the Guaranteed Obligations set forth in Section 9.3 (b) and (c) of the Loan Agreement shall not exceed an amount equal to ten percent (10%) of the principal balance of the Loan outstanding at the time of the occurrence of such event (the Guaranty Liability Cap ), plus any and all reasonable third-party costs actually incurred by Lender (including reasonable attorneys fees and costs reasonably incurred) in connection with the collection of amounts due thereunder, (ii) the aggregate liability of Guarantor with respect to the Guaranteed Obligations set forth in Section 9.3(b)(ix) of the Loan Agreement shall not exceed $15,000,000 and (iii) Guarantor shall have no liability with respect to Section 9.3(b)(v) of the Loan Agreement with respect to failures to pay trade payables or operational debt in the ordinary course of business if (A) the Property does not generate sufficient revenue to pay such trade payables or operational debt or (B) if the funds held in the Cash Management Account, the Reserve Funds or other Lender reserves or escrows in each case, identified to pay such expenses have not been made available to Borrower to pay such
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obligations or have otherwise not been applied by Lender to such obligations and in no event shall Guarantor be required to fund any additional capital contributions or make any loans to Borrower.
(c) In addition to the limitations set forth in Section 1.2(b) above, Guarantor shall have no obligations under this Guaranty or otherwise with respect to the Guaranteed Obligations arising out of acts or omissions occurring after the date of (i) a Transfer resulting from the exercise of Lenders rights under the Loan Documents or (ii) the consummation of any remedial or enforcement action by the Lender under the Loan Documents or with respect to the Property, including, without limitation, any foreclosure, deed-in-lieu or assignment in lieu of foreclosure and any exercise by Lender of its rights under any Loan Document, including, without limitation, any right to vote any pledged securities or any right to replace officers and directors of any Person, that in each case, results in Borrower, Principal, or any Affiliated Manager, as applicable, not being under the Control of Guarantor.
(d) In addition to the limitations set forth in Section 1.2(b) above, notwithstanding anything to the contrary contained herein, in the Loan Agreement or in any other Loan Document, on the Satisfaction Date, Guarantor shall be released from liability under this Guaranty solely with respect to the Guaranteed Obligations pursuant to Section 9.3(b)(ix) of the Loan Agreement arising out of acts or omissions occurring from and after the Satisfaction Date.
1.3 Nature of Guaranty . This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance and not a guaranty of collection. This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor and after (if Guarantor is a natural person) Guarantors death (in which event this Guaranty shall be binding upon Guarantors estate and Guarantors legal representatives and heirs). The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to Lender with respect to the Guaranteed Obligations. This Guaranty may be enforced by Lender and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note.
1.4 Guaranteed Obligations Not Reduced by Offset . The Guaranteed Obligations and the liabilities and obligations of Guarantor to Lender hereunder, shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower, or any other party, against Lender or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.
1.5 Payment By Guarantor . If all or any part of the Guaranteed Obligations shall not be punctually paid when due, whether at demand, maturity, acceleration or otherwise, Guarantor shall, immediately upon demand by Lender, and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity, or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Lender at Lenders address as set forth herein. Such demand(s) may be made at any time coincident with or after the
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time for payment of all or part of the Guaranteed Obligations, and may be made from time to time with respect to the same or different items of Guaranteed Obligations. Such demand shall be deemed made, given and received in accordance with the notice provisions hereof.
1.6 No Duty To Pursue Others . It shall not be necessary for Lender (and Guarantor hereby waives any rights which Guarantor may have to require Lender), in order to enforce the obligations of Guarantor hereunder, first to (a) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other Person, (b) enforce Lenders rights against any collateral which shall ever have been given to secure the Loan, (c) enforce Lenders rights against any other guarantors of the Guaranteed Obligations, (d) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (e) exhaust any remedies available to Lender against any collateral which shall ever have been given to secure the Loan, or (f) resort to any other means of obtaining payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.
1.7 Waivers . Guarantor agrees to the provisions of the Loan Documents, and hereby waives notice of (a) any loans or advances made by Lender to Borrower, (b) acceptance of this Guaranty, (c) any amendment or extension of the Note, the Mortgage, the Loan Agreement or of any other Loan Documents, (d) the execution and delivery by Borrower and Lender of any other loan or credit agreement or of Borrowers execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Properties, (e) the occurrence of any breach by Borrower or an Event of Default, (f) except as specifically provided in the Loan Documents, Lenders transfer or disposition of the Guaranteed Obligations, or any part thereof, (g) except as specifically provided in the Loan Documents, sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (h) except as specifically provided in the Loan Documents, protest, proof of non-payment or default by Borrower, or (i) except as specifically provided herein or in the other Loan Documents, any other action at any time taken or omitted by Lender, and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations.
1.8 Payment of Expenses . In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, within ten (10) Business Days after demand by Lender, pay Lender all reasonable out-of-pocket costs and expenses (including court costs and reasonable third-party attorneys fees) incurred by Lender in the enforcement hereof or the preservation of Lenders rights hereunder. The covenant contained in this Section shall survive the payment and performance of the Guaranteed Obligations.
1.9 Effect of Bankruptcy . In the event that, pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law, or any judgment, order or decision thereunder, Lender must rescind or restore any payment, or any part thereof, received by Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Lender shall be without effect, and this Guaranty shall remain in full force and effect. It is the intention of Borrower and Guarantor that Guarantors obligations hereunder shall not be discharged except by Guarantors performance of such obligations and then only to the extent of such performance.
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1.10 Waiver of Subrogation, Reimbursement and Contribution . Notwithstanding anything to the contrary contained in this Guaranty, until the Debt is indefeasibly paid in full, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating Guarantor to the rights of Lender), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty.
1.11 Borrower . The term Borrower as used herein shall include any new or successor corporation, association, partnership (general or limited), limited liability company, joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower.
ARTICLE II
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTORS OBLIGATIONS
Guarantor hereby consents and agrees to each of the following, and agrees that Guarantors obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following:
2.1 Modifications . Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, the Note, the Mortgage, the Loan Agreement, the other Loan Documents, or any other document, instrument, contract or understanding between Borrower and Lender, or any other parties, pertaining to the Guaranteed Obligations or any failure of Lender to notify Guarantor of any such action.
2.2 Adjustment . Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to Borrower or any Guarantor.
2.3 Condition of Borrower or Guarantor . The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, Guarantor or any other party at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor, or any changes in the shareholders, partners or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor.
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2.4 Invalidity of Guaranteed Obligations . The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement executed in connection with the Guaranteed Obligations, for any reason whatsoever, including without limitation the fact that (a) the Guaranteed Obligations, or any part thereof, exceeds the amount permitted by law, (b) the act of creating the Guaranteed Obligations or any part thereof is ultra vires , (c) the officers or representatives executing the Note, the Mortgage, the Loan Agreement or the other Loan Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (d) the Guaranteed Obligations violate applicable usury laws, (e) Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower other than the payments on the Loan made by Borrower, (f) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (g) the Note, the Mortgage, the Loan Agreement or any of the other Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason.
2.5 Release . Any full or partial release of the liability of Borrower on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other parties to pay or perform the Guaranteed Obligations.
2.6 Other Collateral . The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.
2.7 Release of Collateral . Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.
2.8 Care and Diligence . The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of any collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (a) to take or prosecute any action for the collection of any of the Guaranteed Obligations, or (b) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (c) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.
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2.9 Unenforceability . The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations.
2.10 Offset . The Guaranteed Obligations and the liabilities and obligations of the Guarantor under this Guaranty to Lender shall not be reduced, discharged or released because of or by reason of any existing or future right of offset, claim or defense of Borrower against Lender, or any other party, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise, other than payment of the Guaranteed Obligations.
2.11 Merger . The reorganization, merger or consolidation of Borrower into or with any other Person.
2.12 Preference . Any payment by Borrower to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to Borrower or someone else.
2.13 Other Actions Taken or Omitted . Any other action taken or omitted to be taken with respect to the Loan Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof. It is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into the Loan Documents and extend credit to Borrower, Guarantor represents and warrants to Lender as follows:
3.1 Benefit . Guarantor is an Affiliate of Borrower, is the owner of a direct or indirect interest in one or more Individual Borrowers comprising Borrower, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations.
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3.2 Familiarity and Reliance . Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty.
3.3 No Representation By Lender . Neither Lender nor any other party has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty.
3.4 Guarantors Financial Condition . As of the date hereof, Guarantor is, and after giving effect to this Guaranty and the contingent obligation evidenced hereby, will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities.
3.5 Legality . The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors rights generally, general equitable principles and a covenant of good faith and fair dealing.
3.6 Litigation . There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or, to the knowledge of Guarantor, threatened against Guarantor, which actions, suits or proceedings, if determined against Guarantor would be reasonably likely to materially adversely affect the condition (financial or otherwise) or business of Guarantor.
3.7 No Plan Assets . As of the date of this Guaranty, Guarantor is not an employee benefit plan, as defined in Section 3(3) of ERISA, whether or not subject to Title I of ERISA, and none of the assets of Guarantor constitute or will constitute plan assets of any benefit plan investor within the meaning of 29 C.F.R. Section 2510.3-101 as modified by Section 3(42) of ERISA (the Plan Asset Regulations ). Except as could not reasonably be expected, individually or in the aggregate, to have a materially adverse effect on Guarantor, neither Guarantor nor any ERISA Affiliate is or was obligated to contribute to any employee benefit plan (as so defined) subject to Title IV of ERISA. Transactions contemplated hereunder by or with Guarantor are not subject to any state or other statute or regulation with respect to governmental plans within the meaning of Section 3(32) of ERISA which are substantially
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similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect and which prohibit the transactions contemplated by this Agreement, including, but not limited to the exercise by Lender of any of its rights under the Loan Documents.
3.8 ERISA . (i) Assuming compliance by the Lender of the representation in Section 5.2.9(d) of the Loan Agreement, Guarantor shall not engage in any transactions contemplated under the Loan Agreement or the other Loan Documents which would cause any obligation, or action taken or to be taken, thereunder (or the exercise by Lender of any of its rights under the Note, the Loan Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under Section 406(a) of ERISA.
(ii) Guarantor further covenants and agrees if at such time any employee benefit plan, whether or not subject to Title I of ERISA, holds an equity investment in Guarantor, Guarantor shall, deliver to Lender such certifications from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, but not more frequently than once per calendar year, and on no less than thirty (30) Business Days advance written notice (but in no event shall Guarantors failure to perform this 3.8(ii) constitute an Event of Default), that neither Guarantor is not (i) is subject to any state statutes regulating investments and fiduciary obligations with respect to governmental plans and (ii) one or more of the following circumstances with respect to Guarantor, is true:
(A) Equity interests in Guarantor are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);
(B) Less than twenty-five percent (25%) of each outstanding class of equity interests in Guarantor are held by benefit plan investors within the meaning of 29 C.F.R. §2510.3-101(b)(2), as modified by Section 3(42) of ERISA and the regulations promulgated thereunder; or
(C) Guarantor qualifies as an operating company or a real estate operating company within the meaning of 29 C.F.R. §2510.3-101(c) or (e) or another exception to ERISA applies such that Guarantors assets should not constitute plan assets of any benefit plan investor within the meaning of Section 3(42) of ERISA and the regulations promulgated thereunder.
3.9 Survival . All representations and warranties made by Guarantor herein are made as of the date hereof and shall survive the execution hereof.
ARTICLE IV
SUBORDINATION OF CERTAIN INDEBTEDNESS
4.1 Subordination of All Guarantor Claims . As used herein, the term Guarantor Claims shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations
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of such parties be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantors payment of all or a portion of the Guaranteed Obligations. During the continuance of an Event of Default, Guarantor shall not receive or collect, directly or indirectly, from Borrower any amount upon the Guarantor Claims.
4.2 Claims in Bankruptcy . In the event of receivership, bankruptcy, reorganization, arrangement, debtors relief, or other insolvency proceedings involving Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such dividends and payments to Lender. Should Lender receive, for application against the Guaranteed Obligations, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Borrower and Guarantor, shall constitute a credit against the Guarantor Claims, then upon payment to Lender in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lender to the extent that such payments to Lender on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Lender had not received dividends or payments upon the Guarantor Claims, provided , however , that Guarantor shall have no such subrogation rights until repayment in full of the Debt.
4.3 Payments Held in Trust . In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Lender an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Lender, and Guarantor covenants promptly to pay the same to Lender.
4.4 Liens Subordinate . Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrowers assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrowers assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Lender presently exist or are hereafter created or attach. Without the prior written consent of Lender, Guarantor shall not (i) exercise or enforce any creditors right it may have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtors relief or insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor.
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ARTICLE V
COVENANTS
5.1 Definitions . As used in this Article 5 , the following terms shall have the respective meanings set forth below:
(a) GAAP shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.
(b) Net Worth shall mean an entitys market value assets minus its outstanding liabilities as determined by an as-is FIRREA compliant appraisal (x) in connection with any valuation of the initial Guarantor, ordered by Lender at Borrowers sole cost and expense; provided that Borrower shall not be required to pay for such appraisal until the second (2 nd ) anniversary of the Closing Date and in no event more than one (1) time per calendar year, or (y) GAAP in connection with any valuation of any Qualified Transferee or Qualified Public Company (other than the initial Guarantor).
5.2 Covenants . Until all of the Obligations and the Guaranteed Obligations have been paid in full, Guarantor (i) shall maintain a Net Worth of not less than $500,000,000.00 (the Net Worth Threshold ) without taking into account the value of the Property, (ii) shall not sell, pledge, mortgage or otherwise transfer any of its assets, or any interest therein (x) on terms materially less favorable than would be obtained in an arms-length transaction or (y) if such transaction would cause the Net Worth of Guarantor to fall below the Net Worth Threshold, each as reasonably substantiated by Lender, unless and until such time as Borrower delivers to Lender the Cash/LC Collateral or a Replacement Guaranty.
5.3 Prohibited Transactions . Guarantor shall not, at any time while a default in the payment of the Guaranteed Obligations has occurred and is continuing, until such time as Borrower delivers to Lender the Cash/LC Collateral or a Replacement Guaranty, either (i) enter into or effectuate any transaction with any Affiliate that would reduce the Net Worth of Guarantor (including the payment of any dividend or distribution to a shareholder, or the redemption, retirement, purchase or other acquisition for consideration of any stock or other ownership interest in Guarantor) or (ii) sell, pledge, mortgage or otherwise transfer to any Person any of Guarantors assets, or any interest therein, except on commercially reasonable, market rate terms.
5.4 Financial Statements . Guarantor shall to furnish to Lender annually, within one-hundred twenty (120) days following the end of each Fiscal Year of Guarantor, financial statements audited by a Big Four accounting firm or other independent certified public accountant acceptable to Lender in accordance with the Uniform System of Accounts and reconciled in accordance with GAAP, redacted to exclude information with respect to individual limited partners and individual investor information accompanied by an unqualified opinion of a Big Four accounting firm or other independent certified public accountant reasonably acceptable to Lender.
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ARTICLE VI
MISCELLANEOUS
6.1 Waiver . No failure to exercise, and no delay in exercising, on the part of Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender hereunder shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.
6.2 Notices . Any notice, demand, statement, request or consent made hereunder shall be in writing and shall be deemed to be received by the addressee on (a) the third day following the day such notice is deposited with the United States Postal Service first class certified mail, return receipt requested (b) expedited, prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery and by telecopier (with answer back acknowledged), addressed to the address, as set forth below, of the party to whom such notice is to be given, or to such other address as either party shall in like manner designate in writing. The addresses of the parties hereto are as follows:
Guarantor : | ||
Hilton Worldwide Holdings, Inc. 7930 Jones Branch Drive McLean, Virginia 22102 Attention: Sean DellOrto |
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with a copy to: | ||
Simpson Thacher & Bartlett LLP | ||
425 Lexington Avenue New York, New York 10017 Attention: Erik Quarfordt Facsimile No.: (212) 455-2502 |
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Lender : | ||
JPMorgan Chase Bank, National Association | ||
383 Madison Ave. New York, New York 10179 Attention: Joseph E. Geoghan III |
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German American Capital Corporation 60 Wall Street, 10th Floor New York, New York 10005 |
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Attention: Robert W. Pettinato Jr. |
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Morgan Stanley Mortgage Capital Holdings LLC 1585 Broadway New York, New York 10036 Attention: Gary P. Curwin |
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Bank of America, National Association One Bryant Park New York, New York 10036 Attention: Leland F. Bunch, III |
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GS Commercial Real Estate LP 200 West Street New York, New York 10282 Attention: Rene Theriault Facsimile: (917) 977-4870 |
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GS Commercial Real Estate LP 200 West Street New York, New York 10282 Attention: Daniel Bennett Facsimile: (646) 835-3184 |
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with a copy to: | ||
JPMorgan Chase Bank, National Association 383 Madison Avenue New York, New York 10179 Attention: Nancy Alto Facsimile No.: (212) 623-4779 |
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and | ||
Cadwalader, Wickersham & Taft LLP One World Financial Center New York, New York 10281 Attention: William P. McInerney Facsimile No.: 212-504-6666 |
6.3 Governing Law . THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY AT LENDERS OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND GUARANTOR WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON
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VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND GUARANTOR AND HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. GUARANTOR DOES HEREBY DESIGNATE AND APPOINT:
CORPORATION SERVICES COMPANY
2711 CENTERVILLE ROAD, SUITE 400
WILMINGTON, DELAWARE 19808
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO GUARANTOR IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON GUARANTOR IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
6.4 Invalid Provisions . If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.
6.5 Amendments . This Guaranty may be amended only by an instrument in writing executed by the parties hereto.
6.6 Parties Bound; Assignment; Joint and Several . This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of Lender, assign any of its rights, powers, duties or obligations hereunder, except as contemplated by the Loan Agreement and/or Section 6.16 hereof. If Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several.
6.7 Headings . Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty.
6.8 Recitals . The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.
6.9 Counterparts . To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required. It shall not be necessary that
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the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.
6.10 Rights and Remedies . If Guarantor becomes liable for any indebtedness owing by Borrower to Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may ever have against Guarantor. The exercise by Lender of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.
6.11 Other Defined Terms . Any capitalized term utilized herein shall have the meaning as specified in the Loan Agreement, unless such term is otherwise specifically defined herein.
6.12 Entirety . THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTORS GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
6.13 Waiver of Right To Trial By Jury . EACH OF GUARANTOR AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE LOAN AGREEMENT, THE MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY
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WOULD OTHERWISE ACCRUE. EACH OF GUARANTOR AND LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER PARTY.
6.14 Intentionally Omitted .
6.15 Reinstatement in Certain Circumstances . If at any time any payment of the principal of or interest under the Note or any other amount payable by Borrower under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, then, upon the restoration or return of such payments, the Guarantors obligations hereunder with respect to such payment shall be reinstated as though such payment has been due but not made at such time.
6.16 Guarantor Release .
(a) In connection with a Public Sale or Permitted Assumption permitted pursuant to and in accordance with Section 5.2.10(d) and (f) of the Loan Agreement, Guarantor shall be released as a Guarantor and from its obligations under this Guaranty subject to the satisfaction of all of the terms and conditions set forth in Section 5.2.10(d) and (f) of the Loan Agreement.
(b) If, at any time Guarantor fails to satisfy the Net Worth Threshold, Guarantor shall be released as a Guarantor and from its obligations under this Guaranty if Borrower delivers a Replacement Guaranty from a Replacement Guarantor or Cash/LC Collateral in accordance with Section 9.3(d) and 9.3(e) of the Loan Agreement.
6.17 Special State Provisions . In the event of any inconsistencies between the other terms and conditions of this Agreement and this Section 6.17 , the terms and conditions of this Section 6.17 shall control and be binding:
(a) With respect to the foregoing provisions contained in this Guaranty, the following shall apply with respect to the State of California:
(i) Modifications to Loan and Loan Documents . Guarantor agrees that Lender may do any of the following without affecting the enforceability of this Guaranty or the other Loan Documents: (A) take or release additional security for any obligation in connection with the Loan Documents; (B) discharge or release (by judicial or nonjudicial foreclosure, acceptance of a deed in lieu of foreclosure or otherwise) any Person or Persons liable under the Loan Documents; (C) accept or make compositions or other arrangements or file or refrain from filing a claim in any bankruptcy proceeding of Borrower, any guarantor of Borrowers obligations under the Loan Documents or any pledgor of collateral for any Persons obligations to Lender; and (D) credit payments in such manner and order of priority to principal, interest or other obligations as Lender may determine in accordance with the terms of the Loan Documents.
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(ii) Waivers .
(A) Guarantor agrees that Lenders right to enforce this Guaranty is absolute and is not contingent upon the genuineness, validity or enforceability of any of the Loan Documents. Guarantor waives all benefits and defenses it may have under California Civil Code Section 2810 and agrees that Lenders rights under this Guaranty shall be enforceable even if Borrower had no liability at the time of execution of the Loan Documents or later ceases to be liable.
(B) Guarantor waives all benefits and defenses it may have under California Civil Code Section 2809 and agrees that Lenders rights under the Loan Documents will remain enforceable even if the amount secured by the Loan Documents is larger in amount and more burdensome than that for which Borrower is responsible. The enforceability of the Guaranty against Guarantor shall continue until all sums due under the Loan Documents have been paid in full and shall not be limited or affected in any way by any impairment or any diminution or loss of value of any security or collateral for Borrowers obligations under the Loan Documents, from whatever cause, the failure of any security interest in any such security or collateral or any disability or other defense of Borrower, any guarantor of Borrowers obligations under the Loan Documents, any other pledgor of collateral for any Persons obligations to Lender or any other Person in connection with the Loan.
(C) Guarantor waives all benefits and defenses it may have under California Civil Code Sections 2845, 2849 and 2850 (subject to Section 1.10 of this Guaranty), including, without limitation, the right to require Lender to (i) proceed against Borrower, any guarantor of Borrowers obligations under the Loan Documents, any other pledgor of collateral for any Persons obligations to Lender or any other Person in connection with the Loan, (ii) proceed against or exhaust any other security or collateral Lender may hold, or (iii) pursue any other right or remedy for Borrowers benefit, and agree that Lender may exercise its rights under this Guaranty or may foreclose against any of the Individual Properties without taking any action against Borrower, any guarantor of Borrowers obligations under the Loan Documents, any pledgor of collateral for any Persons obligations to Lender or any other Person in connection with the Loan, and without proceeding against or exhausting any security or collateral Lender holds.
(D) Guarantor waives any rights or benefits it may have by reason of California Code of Civil Procedure Section 580a which could limit the amount which Lender could recover in a foreclosure of any of the Individual Properties to the difference between the amount owing under the Loan Documents and the fair value of any such Individual Property or interests sold at a nonjudicial foreclosure sale or sales of any other real property held by Lender as security for the obligations under the Loan Documents.
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(E) Guarantor, as a guarantor or surety, waives diligence and all demands, protests, presentments and notices of protest, dishonor, nonpayment and acceptance of the Loan Documents.
(F) Guarantor waives all rights and defenses that are or may become available to the guarantor or other surety by reason of California Civil Code Sections 2787 to 2855, inclusive, subject to Section 1.10 of this Guaranty.
(iii) Guarantor Informed of Borrowers Condition . Guarantor acknowledges that it has had an opportunity to review the Loan Documents, the value of the security for each of the other entities comprising Borrower under the Loan Documents and the financial condition of each of the other entities comprising Borrower and the ability of such entity to satisfy its obligations to Lender. Guarantor agrees to keep itself fully informed of all aspects of the financial condition of Borrower and of the performance of Borrower to Lender and agrees that Lender has no duty to disclose to Guarantor any information pertaining to Borrower or any security for the obligations of the other entities comprising Borrower under the Loan Documents.
(iv) Waiver of Estoppel Defense . Upon and during the continuance of an Event of Default, Lender may elect to foreclose nonjudicially the Lien of any or all of the Mortgages and, if such right has arisen, to also exercise its rights under this Guaranty. Guarantor acknowledges that its right to seek reimbursement from Borrower for any amounts paid by it to Lender under this Guaranty will be eliminated if Lender elects to so foreclose the Lien of the Mortgages. Nevertheless, Guarantor waives any such right to reimbursement and agrees that a nonjudicial foreclosure by Lender of the Lien of the Mortgages will not affect the enforceability of the Loan Documents on Guarantors interest in any of the Individual Properties. In order to further effectuate such waiver, each Guarantor hereby agrees that it waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure of the Lien of any or all of the Mortgages, has destroyed its rights of subrogation and reimbursement against Borrower by the operation of Section 580d of the Code of Civil Procedure or otherwise.
(v) Subrogation . Guarantor waives its rights under California Civil Code Sections 2847, 2848 and 2849 to the extent not inconsistent with the Section 1.10 of this Guaranty.
(vi) Confirmation of Waivers . In accordance with California Civil Code Section 2856(c), Guarantor, as guarantor, hereby waives all rights and defenses that the Guarantor may have because the Loan is secured by real property. This means, among other things:
(A) The Lender may collect from Guarantor without first foreclosing on any other real or personal property collateral pledged by the Borrower or any other Person (each an Other Obligor and collectively, the Other Obligors ).
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(B) If the Lender forecloses on any real property collateral pledged by any Other Obligor:
(1) The amount of the Loan may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.
(2) The Lender may collect from Guarantor even if the Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from any Other Obligor.
[NO FURTHER TEXT ON THIS PAGE]
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EXECUTED as of the day and year first above written.
GUARANTOR : | ||
HILTON DOMESTIC PROPERTY LLC , a Delaware limited liability company | ||
By: |
/s/ Sean DellOrto |
|
Name: | Sean DellOrto | |
Title: | Senior Vice President & Treasurer | |
HILTON OWNED VIII HOLDING LLC , a Delaware limited liability company | ||
By: |
/s/ Sean DellOrto |
|
Name: | Sean DellOrto | |
Title: | Senior Vice President & Treasurer |
SCHEDULE 1
BORROWER
Chicago Hilton LLC
Crystal City LLC
Global Resort Partners
Hapeville Hotel Limited Partnership
Hilton CMBS Holdings LLC
Hilton El Segundo LLC
Hilton Hawaiian Village LLC
Hilton International of Puerto Rico, Inc.
Hilton Land Investment 1, LLC
Hilton Seattle Airport LLC
HLT DC Owner LLC
HLT Logan LLC
HLT Memphis LLC
HLT NY Hilton LLC
HLT Property Acquisition LLC
HLT San Jose LLC
International Rivercenter, L.L.C.
Kenner Hotel Limited Partnership
McLean Hilton LLC
Miami Airport LLC
New Orleans Rivercenter
NORC Riparian Property, Inc.
Oakbrook Hilton Suites and Garden Inn LLC
Phoenix SP Hilton LLC
S.F. Hilton LLC
Short Hills Hilton LLC
SCH. 1-1
Exhibit 10.5
HSBC Loan # 11-4003945
LOAN AGREEMENT
Dated as of October 25, 2013
Between
HLT NY WALDORF LLC,
as Borrower
and
HSBC BANK USA, NATIONAL ASSOCIATION,
as Agent,
THE LENDERS NAMED HEREIN,
as Lenders,
HSBC BANK USA, NATIONAL ASSOCIATION
and
DEKABANK DEUTSCHE GIROZENTRALE,
as Lead Arrangers,
and
HSBC BANK USA, NATIONAL ASSOCIATION,
as Syndication Agent
TABLE OF CONTENTS
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Page | ||||||||
3.1.1 |
Organization |
47 | ||||||
3.1.2 |
Proceedings |
47 | ||||||
3.1.3 |
No Conflicts |
47 | ||||||
3.1.4 |
Litigation |
47 | ||||||
3.1.5 |
Governmental Orders |
48 | ||||||
3.1.6 |
Consents |
48 | ||||||
3.1.7 |
Title |
48 | ||||||
3.1.8 |
ERISA Matters |
48 | ||||||
3.1.9 |
Compliance |
49 | ||||||
3.1.10 |
Financial and Other Information |
49 | ||||||
3.1.11 |
Condemnation |
50 | ||||||
3.1.12 |
Utilities and Public Access |
50 | ||||||
3.1.13 |
Separate Lots |
50 | ||||||
3.1.14 |
Assessments |
50 | ||||||
3.1.15 |
Enforceability |
50 | ||||||
3.1.16 |
Assignment of Leases |
50 | ||||||
3.1.17 |
Insurance |
50 | ||||||
3.1.18 |
Flood Zone |
51 | ||||||
3.1.19 |
Physical Condition |
51 | ||||||
3.1.20 |
Boundaries |
51 | ||||||
3.1.21 |
Leases |
51 | ||||||
3.1.22 |
Filing and Recording Taxes |
51 | ||||||
3.1.23 |
Single Purpose |
52 | ||||||
3.1.24 |
Taxes |
58 | ||||||
3.1.25 |
Solvency |
59 | ||||||
3.1.26 |
Federal Reserve Regulations |
59 | ||||||
3.1.27 |
Affiliate Debt |
59 | ||||||
3.1.28 |
Offices; Location of Books and Records |
59 | ||||||
3.1.29 |
Trade Name; Other Intellectual Property |
59 | ||||||
3.1.30 |
No Default |
60 | ||||||
3.1.31 |
Contracts, Licenses and Permits |
60 | ||||||
3.1.32 |
Full and Accurate Disclosure |
60 | ||||||
3.1.33 |
Foreign Person |
60 | ||||||
3.1.34 |
Investment Company Act |
60 | ||||||
3.1.35 |
Organizational Structure |
60 | ||||||
3.1.36 |
Management Agreement |
60 | ||||||
3.1.37 |
Indebtedness |
60 | ||||||
3.1.38 |
ADA |
60 | ||||||
3.1.39 |
FF&E |
60 | ||||||
3.1.40 |
USA Patriot Act Compliance |
61 | ||||||
3.1.41 |
Anti-Terrorism Compliance |
61 | ||||||
3.1.42 |
German Anti-Money Laundering Compliance |
61 | ||||||
3.1.43 |
Labor Matters |
61 | ||||||
3.1.44 |
No Registration |
61 | ||||||
3.1.45 |
No Other Business |
62 | ||||||
Section 3.2 |
Continuing Effectiveness and Survival of Representations |
62 |
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Page | ||||||||
IV. BORROWER COVENANTS | ||||||||
Section 4.1 |
Borrower Affirmative Covenants |
62 | ||||||
4.1.1 |
Existence; Compliance with Legal Requirements |
62 | ||||||
4.1.2 |
Property Taxes and Other Charges |
62 | ||||||
4.1.3 |
Taxes |
63 | ||||||
4.1.4 |
Notifications |
63 | ||||||
4.1.5 |
Access to Property |
63 | ||||||
4.1.6 |
Further Assurances; Supplemental Mortgage Affidavits |
63 | ||||||
4.1.7 |
Financial Reporting |
64 | ||||||
4.1.8 |
Title to the Property |
66 | ||||||
4.1.9 |
Estoppel Statement |
66 | ||||||
4.1.10 |
Leases |
67 | ||||||
4.1.11 |
Alterations |
69 | ||||||
4.1.12 |
Hotel Operation; Brand |
70 | ||||||
4.1.13 |
Updated Appraisal |
70 | ||||||
4.1.14 |
Upfront and Administrative Fee |
70 | ||||||
4.1.15 |
Interest Rate Protection Agreement |
71 | ||||||
4.1.16 |
Insurance |
74 | ||||||
4.1.17 |
Fees |
74 | ||||||
4.1.18 |
Books and Records |
74 | ||||||
4.1.19 |
Debt |
75 | ||||||
4.1.20 |
Maintain Existence |
75 | ||||||
4.1.21 |
Easements and Restrictions; Zoning |
75 | ||||||
4.1.22 |
Required Repairs |
75 | ||||||
4.1.23 |
Comply with Other Loan Documents |
75 | ||||||
4.1.24 |
Purchase of Material Under Conditional Sale Contract |
76 | ||||||
4.1.25 |
ADA |
76 | ||||||
4.1.26 |
USA Patriot Act Compliance |
76 | ||||||
4.1.27 |
Anti-Terrorism Compliance |
76 | ||||||
4.1.28 |
Customer Due Diligence Requirements |
77 | ||||||
4.1.29 |
Contracts, Licenses and Permits |
77 | ||||||
Section 4.2 |
Borrower Negative Covenants |
78 | ||||||
4.2.1 |
Due on Sale and Encumbrance; Transfers of Interests |
78 | ||||||
4.2.2 |
Indebtedness; Liens |
78 | ||||||
4.2.3 |
Dissolution |
78 | ||||||
4.2.4 |
Change in Business |
78 | ||||||
4.2.5 |
Debt Cancellation |
78 | ||||||
4.2.6 |
Affiliate Transactions |
78 | ||||||
4.2.7 |
Zoning |
79 | ||||||
4.2.8 |
Assets |
79 | ||||||
4.2.9 |
No Joint Assessment |
79 | ||||||
4.2.10 |
Principal Place of Business |
79 | ||||||
4.2.11 |
ERISA |
79 | ||||||
4.2.12 |
No Distributions |
80 | ||||||
4.2.13 |
Organizational Documents |
80 | ||||||
4.2.14 |
Intentionally Omitted |
80 | ||||||
4.2.15 |
Government Regulation |
81 |
-iii-
-iv-
Page | ||||||||
VIII. TRANSFERS | ||||||||
Section 8.1 |
Agents and Lenders Reliance |
100 | ||||||
Section 8.2 |
No Transfers |
101 | ||||||
Section 8.3 |
Permitted Transfers |
101 | ||||||
IX. DEFAULTS | ||||||||
Section 9.1 |
Events of Default |
105 | ||||||
Section 9.2 |
Rights and Remedies of Agent and Lenders |
108 | ||||||
Section 9.3 |
Power of Attorney |
109 | ||||||
Section 9.4 |
Remedies Cumulative |
110 | ||||||
Section 9.5 |
Annulment of Defaults |
110 | ||||||
Section 9.6 |
Waivers |
110 | ||||||
Section 9.7 |
Course of Dealing, Etc |
111 | ||||||
X. MISCELLANEOUS | ||||||||
Section 10.1 |
Successors and Assigns |
111 | ||||||
Section 10.2 |
Agents and Lenders Discretion |
111 | ||||||
Section 10.3 |
Governing Law, Jurisdiction and Agent for Service |
111 | ||||||
Section 10.4 |
Modification, Waiver in Writing |
113 | ||||||
Section 10.5 |
Delay Not a Waiver |
113 | ||||||
Section 10.6 |
Notices |
113 | ||||||
Section 10.7 |
Trial by Jury |
115 | ||||||
Section 10.8 |
Headings |
115 | ||||||
Section 10.9 |
Severability |
115 | ||||||
Section 10.10 |
Preferences |
115 | ||||||
Section 10.11 |
Waiver of Notice |
116 | ||||||
Section 10.12 |
Remedies of Borrower |
116 | ||||||
Section 10.13 |
Expenses; Indemnity |
116 | ||||||
Section 10.14 |
Schedules and Exhibits Incorporated |
119 | ||||||
Section 10.15 |
Offsets, Counterclaims and Defenses |
119 | ||||||
Section 10.16 |
No Joint Venture or Partnership; No Third Party Beneficiaries |
119 | ||||||
Section 10.17 |
Publicity |
119 | ||||||
Section 10.18 |
Intentionally Omitted |
120 | ||||||
Section 10.19 |
Waiver of Offsets/Defenses/Counterclaims |
120 | ||||||
Section 10.20 |
Conflict; Construction of Documents; Reliance |
120 | ||||||
Section 10.21 |
Brokers and Financial Advisors |
120 | ||||||
Section 10.22 |
Exculpation |
121 | ||||||
Section 10.23 |
Prior Agreements |
122 | ||||||
Section 10.24 |
Joint and Several Liability |
123 | ||||||
Section 10.25 |
Assignments/Participations/Information Sharing |
123 | ||||||
Section 10.26 |
Cooperation |
127 | ||||||
Section 10.27 |
Adjustments; Set-Off |
128 | ||||||
Section 10.28 |
Counterparts |
129 |
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Page | ||||||||
Section 10.29 |
WAIVER OF SPECIAL DAMAGES |
129 | ||||||
Section 10.30 |
USA Patriot Act Notification |
129 | ||||||
Section 10.31 |
Assignment/ Discharge Upon Payment |
129 | ||||||
Section 10.32 |
Use of Borrower Information; Confidentiality |
130 | ||||||
XI. AGENT | ||||||||
Section 11.1 |
Performance by Agent |
131 | ||||||
Section 11.2 |
Actions |
131 | ||||||
Section 11.3 |
Nonliability of Agent and Lenders |
131 | ||||||
Section 11.4 |
Authorization and Action |
132 | ||||||
Section 11.5 |
Agent as a Lender |
132 |
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SCHEDULES
Schedule 1.1(a) | - | List of Affiliate Contracts | ||
Schedule 1.1(b) | - | Intentionally Omitted | ||
Schedule 1.1(c) | - | The Land | ||
Schedule 1.1(d) | - | Intentionally Omitted | ||
Schedule 1.1(e) | - | Intentionally Omitted | ||
Schedule 1.1(f) | - | Lenders Ratable Share | ||
Schedule 1.1(g) | - | Approved Accountants | ||
Schedule 3.1.4 | - | Litigation | ||
Schedule 3.1.9 | - | Violations | ||
Schedule 3.1.21(a) | - | Rent Roll | ||
Schedule 3.1.35 | - | Borrowers Organizational Chart | ||
Schedule 4.1.20 | - | Searches | ||
Schedule 4.1.22 | - | Required Repairs | ||
Schedule 6.3.4 | - | Borrower Accounts |
EXHIBITS
Exhibit 1.1 | - | Sample NOI Calculation | ||
Exhibit 2.2.8 | - | Form of U.S. Tax Compliance Certificate | ||
Exhibit 10.25(j) | - | Form of Confidentiality Agreement |
-vii-
LOAN AGREEMENT
THIS Loan Agreement, dated as of October 25, 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this Agreement ), between HLT NY WALDORF LLC , a Delaware limited liability company, having its principal place of business at 7930 Jones Branch Drive, McLean, Virginia 22102 ( Borrower ), and HSBC BANK USA , NATIONAL ASSOCIATION , a bank organized under the laws of the United States of America ( HSBC ), having an address at 452 Fifth Avenue, New York, New York 10018, as administrative agent (including any of its successors and assigns, Agent ) for itself and the other Lenders signatory hereto (collectively, together with such other co-lenders as may exist from time to time, Lenders ).
All capitalized terms used herein shall have the respective meanings set forth in Article I .
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lenders; and
WHEREAS, each Lender is severally willing to make such Lenders Ratable Share of the Loan to Borrower, subject to and in accordance with the conditions and terms of this Agreement and the other Loan Documents.
NOW, THEREFORE, in consideration of the covenants set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, represent and warrant as follows:
I. | DEFINITIONS; PRINCIPLES OF CONSTRUCTION |
Section 1.1 Definitions .
For all purposes of this Agreement, except as otherwise expressly provided:
Acceptable Risk Analysis shall have the meaning as set forth in Section 5.1.1(a)(ii)(A) .
Accrual Period shall mean the period commencing on and including the first (1st) calendar day of each calendar month during the term of the Loan and ending on and including the final calendar day of such calendar month; provided, however, that the initial Accrual Period shall commence on and include the Closing Date and shall end on and include the final calendar date of the calendar month in which the Closing Date occurs.
ADA shall mean the Americans with Disabilities Act of 1992, as amended from time to time.
Additional Costs shall have the meaning as set forth in Section 2.2.4(a) .
Additional Interest shall mean any and all amounts which may become due and payable by Borrower pursuant to Section 2.2.4 , Section 2.2.7 or Section 2.2.8 .
Administrative Fee shall have the meaning as set forth in the Loan Fee Letter.
Affected Lender shall have the meaning as set forth in Section 2.2.9(a) .
Affected/Non-Consenting Lender Notice shall have the meaning as set forth in Section 2.2.9(a) .
Affiliate shall mean, as to any Person, any other Person that (a) directly or indirectly, owns more than twenty percent (20%) of such Person, (b) is in Control of, is Controlled by or is under common ownership or Control with such Person or (c) is a director or officer of such Person or of an Affiliate of such Person.
Affiliate Contracts shall mean those contracts listed on Schedule 1.1(a) , as the same may be amended from time to time in accordance with Section 4.2.6 , and any other contract entered into by Borrower and any of its Affiliates in compliance with this Agreement.
Affiliate Debt shall mean any and all Indebtedness owed by Borrower to an Affiliate of Borrower.
Agent shall mean HSBC, together with its successors and assigns, acting in its capacity as administrative agent to the Lenders hereunder and under the other Loan Documents.
Agents Register shall have the meaning as set forth in Section 10.25(g) .
ALTA shall mean American Land Title Association, or any successor thereto.
Alteration Security shall have the meaning as set forth in Section 4.1.11 .
Alteration Threshold shall mean $10,000,000.00.
Annual Budget shall mean the operating and capital budget for the Property setting forth Borrowers good faith estimate of Gross Revenue, Operating Expenses, and Capital Expenditures for the applicable Fiscal Year.
Anti-Terrorism Legal Requirements shall have the meaning as set forth in Section 4.1.27 .
Applicable Interest Rate shall mean (a) the LIBOR Fixed Rate, (b) the LIBOR Floating Rate, or (c) the Reference Rate plus the Margin.
Applicable Lending Office shall mean the related Lending Office of each Lender (or of an Affiliate of such Lender) designated for such Lender on the signature page hereof or such other office of Lender (or of an Affiliate of Lender) as each Lender may from time to time specify to Borrower as the office by which the Loan is to be made and/or maintained by such Lender.
-2-
Applicable Similar Law shall have the meaning as set forth in Section 4.2.11(c) .
Appraisal means a written statement setting forth an opinion of the market value of the Property that (a) has been independently and impartially prepared by a member of the American Institute of Real Estate Appraisers directly engaged by Agent, (b) meets the minimum appraisal standards for national banks promulgated by the Comptroller of the Currency pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (FIRREA), and (c) has been reviewed as to form and content and approved by Agent in its sole discretion.
Approval , Approved , approval or approved shall mean, as the context so determines, an approval in writing given to the party seeking approval after reasonable disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted.
Approved Accountant shall mean (a) any of the certified public accountant listed on Schedule 1.1.(g) attached hereto, or (b) any independent certified public accounting firm of recognized standing approved by Agent, which approval shall not be unreasonably withheld, conditioned or delayed.
Approved Annual Budget shall have the meaning as set forth in Section 4.1.7(h) .
Approved Institutions shall have the meaning as set forth in the definition of Eligible Institution.
Assignee shall have the meaning as set forth in Section 10.25(b) .
Assignment of Contracts shall mean that certain Assignment of Contracts, Licenses and Permits, dated as of the date hereof, from Borrower, as assignor, to Agent, for the Ratable benefit of the Lenders, as assignee, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Assignment of Interest Rate Protection Agreement shall mean, collectively, those certain Assignments of Interest Rate Protection Agreements among Borrower, Agent, for the Ratable benefit of the Lenders, and the Counterparty to the Interest Rate Protection Agreement to be entered into pursuant to Section 4.1.15(c) , as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Assignment of Leases shall mean that certain first priority Assignment of Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Agent, for the Ratable benefit of the Lenders, as assignee, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
-3-
Assignment of Management Agreement shall mean that certain Assignment of Management Agreement, Subordination, Non-Disturbance and Attornment Agreement, dated as of the date hereof, among Borrower, Manager and Agent, for the Ratable benefit of the Lenders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, and any assignment of management agreement, subordination, non-disturbance and attornment agreement hereafter entered into by Borrower, Agent and a successor Manager pursuant to Section 7.2 .
Assuming Borrower shall have the meaning as set forth in Section 8.3(b)(i) .
Assuming Sponsor shall have the meaning as set forth in Section 8.3(b)(iv) .
Award shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of the Property.
Bankruptcy Code shall mean Title 11 of the United States Code entitled Bankruptcy , as amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable state laws relating to bankruptcy, insolvency or creditors rights.
Basel Accord shall have the meaning as set forth in Section 2.2.4 .
Basic Carrying Costs shall mean, the sum of the following costs associated with the Property for the relevant Fiscal Year or payment period: (a) Property Taxes, (b) Other Charges and (c) Insurance Premiums.
BBA LIBOR shall have the meaning set forth in the definition of BBA LIBOR Daily Floating Rate.
BBA LIBOR Daily Floating Rate means a fluctuating rate of interest per annum equal to the British Bankers Association LIBOR Rate ( BBA LIBOR ) as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by Agent from time to time) as determined for each Business Day at approximately 11:00 a.m. London time two (2) Business Days prior to the date in question, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a one month term, as adjusted from time to time in Agents sole discretion for deposit insurance assessment rates and other regulatory costs. If such rate is not available at such time for any reason, then the rate will be determined by such alternate method as reasonably selected by Agent. Interest shall be computed for the actual number of days which have elapsed, on the basis of a 360-day year. Notwithstanding the foregoing, Borrower and the Lenders hereby agree that at such time, as applicable, that the New York Stock Exchange (or any Person who is an Affiliate or parent thereof) becomes the administrator or owner of the BBA LIBOR Daily Floating Rate and/or performs the equivalent role of the British Bankers Association at present with respect to the BBA LIBOR Daily Floating Rate, Agent shall have the right, without the consent of Borrower or any Lender, to amend the foregoing definition of BBA LIBOR Daily Floating Rate solely to reflect any amendments to the same which are necessitated by such change, including, without limitation, by amending the relevant location, place and time of any quote of the BBA LIBOR Daily Floating Rate.
-4-
Benefited Lender shall have the meaning as set forth in Section 10.27(a) .
Borrower shall mean HLT NY Waldorf LLC, a Delaware limited liability company.
Borrowers Account shall mean that certain account of Borrower having account number 35114548 at The Northern Trust Company.
Borrowers Certification shall mean that certain Borrower Certification, dated of even date herewith, by Borrower in favor of Agent, for the Ratable benefit of the Lenders.
Borrowers Contest Right shall mean, if Borrower is in good faith, and by proper legal proceedings, where appropriate, diligently contesting the validity, amount or application of any Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing, provided that in each case, immediately prior to the time of the commencement of any such action or proceeding, and during the pendency of such action or proceeding (a) no Event of Default shall exist and be continuing hereunder, (b) Borrower shall notify Agent of any such contest prior to the commencement thereof, provided that Borrower shall only be required to notify Agent of any such contest with respect to Permitted Trade Payables and Equipment Financing to the extent that the applicable contest relates to an amount which exceeds $1,000,000.00 (a Material Contest ), Borrower shall keep Agent informed of the status of such contest at reasonable intervals, and Borrower shall pay all of Agents reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys fees and disbursements) in connection therewith, (c) adequate reserves with respect to any contest with respect to Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing shall be maintained on Borrowers books in accordance with GAAP, (d) such proceeding shall be permitted under and be conducted in accordance with all applicable Legal Requirements; (e) such contest shall operate to suspend the collection or enforcement, as the case may be, of the contested Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing, and such contest shall be maintained and prosecuted continuously and with diligence, (f) neither the Property nor any part thereof or interest therein will be in immediate or material danger of being sold, forfeited, terminated, canceled or lost, (g) if required by Legal Requirements, as a condition to maintaining such proceeding, Borrower shall pay any such Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing, as applicable, and (h) unless, as a condition to maintaining such proceeding Borrower is required to pay the amount of any such Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing, Borrower shall, upon a request by Agent (and with respect to Permitted Trade Payables and Equipment Financing, only if the same relates to a Material Contest), deposit with Agent Cash, or other security as may be reasonably approved by Agent, in an amount equal to one hundred twenty-five percent (125%) of the contested amount, to insure the payment of any such Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables or Equipment Financing, as applicable, together with all interest and penalties thereon. Notwithstanding the foregoing or the creation of any such reserves, Borrower shall promptly pay any contested Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing, and compliance therewith or payment thereof shall not be deferred, if, at any time the Property or any portion thereof shall be, in Agents reasonable judgment, in
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immediate or material danger of being forfeited or lost or Agent or any Lender is likely to be subject to civil or criminal damages as a result thereof and Agent may pay over any Cash or other security held by Agent to the claimant entitled thereto at any time when, in the reasonable judgment of Agent, the entitlement of such claimant is established. If such action or proceeding is terminated, decided or discontinued adversely to Borrower, Borrower shall deliver to Agent reasonable evidence of Borrowers payment of such contested Taxes, Other Taxes, Property Taxes, Other Charges or Permitted Trade Payables and Equipment Financing, as the case may be.
Brand shall mean the luxury brand for Waldorf=Astoria hotels and resorts operating under the system elements designated by Manager or its Affiliates, from time to time, to identify hotels and resorts as Waldorf=Astoria hotels and resorts and which Brand shall, at all times, be operated consistently with past and current practices as of the Closing Date.
Business Day shall mean any day that is not a Saturday or Sunday or other day on which commercial banks in New York City, are authorized or required by law to remain closed; provided that, when used in connection with a LIBOR Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. For purposes of Section 2.2.3 and Section 2.5 only, the term Business Day shall exclude days on which banks in Frankfurt, Germany are not open for domestic or international business.
Capital Expenditures for any period shall mean amounts expended for replacements and alterations to the Property and required to be capitalized according to GAAP or the Uniform System of Accounts (including expenditures for building improvements and major repairs).
Cash shall mean the legal tender of the United States of America.
Cash or Cash Equivalents shall mean any one or a combination of the following: (a) Cash, and/or (b) U.S. Government Obligations.
Cash Management Collateral shall have the meaning as set forth in Section 6.2.1 .
Casualty shall mean the occurrence of any casualty, damage or injury, by fire or otherwise, to the Property or any part thereof.
Casualty Consultant shall have the meaning as set forth in Section 5.3.2(c) .
Casualty Retainage shall have the meaning as set forth in Section 5.3.2(d) .
CBA shall mean that certain Collective Bargaining Agreement between the Hotel Association of New York City, Inc. and New York Hotel and Motel Trades Council, AFL-CIO, dated July 1, 2012 June 30, 2019.
Claim shall have the meaning as set forth in Section 10.13(c) .
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Closing Date shall mean the date of this Agreement.
Code shall mean the Internal Revenue Code of 1986, as amended.
Co-Lender Agreement shall mean that certain Co-Lender Agreement, dated as of the date hereof, between Agent and the Lenders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Condemnation shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof.
Connection Income Taxes shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profit Taxes.
Consumer Price Index or CPI shall mean the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, New York - Northern New Jersey Long Island, NY NJ CT PA; All Items; 1982-84 = 100. If the Bureau of Labor Statistics substantially revises the manner in which the CPI is determined, an adjustment shall be made by Agent in the revised index which would produce results equivalent, as nearly as possible, to those which would be obtained if the CPI had not been so revised. If the CPI becomes unavailable to the public because publication is discontinued, or otherwise, Agent shall substitute therefor a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency reasonably acceptable to Borrower or, if no such index is available, then, subject to reasonable approval of Borrower, a comparable index published by a major bank, other financial institution, university or recognized financial publication shall be substituted.
Contracts, Licenses and Permits shall have the meaning as set forth in the Assignment of Contracts.
Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise.
Counterparty shall mean each counterparty to, or issuer of, any Interest Rate Protection Agreement other than Borrower or an Affiliate of Borrower which has (or has a guarantor of its obligations that has) the Minimum Counterparty Rating (except for any counterparty or issuer which is a Lender or an Affiliate of a Lender).
Counterparty Opinion shall have the meaning as set forth in Section 4.1.15(f) .
Debt shall mean the outstanding principal amount of the Loan together with all interest accrued and unpaid thereon (including, without limitation, interest accruing after the maturity of the Loan and interest accruing after the filing of any petition in bankruptcy, or the
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commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and all other sums (including, without limitation, any amounts payable to Lenders pursuant to Section 2.2 ) due to Lenders in respect of the Loan under this Agreement, the Mortgage, the Environmental Indemnity, any other Loan Document and any other document made, delivered or given in connection therewith or herewith, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to Agent or to the Lenders that are required to be paid by a Loan Party pursuant to the terms of the Loan Documents) or otherwise, but, except as specifically otherwise provided herein, expressly excluding Borrowers indemnification obligations which expressly survive the repayment of the Loan.
Debt Service shall mean, with respect to any particular period of time, scheduled interest payments under the Note for such period, provided that for the purposes of calculating Debt Service Coverage Ratio, Debt Service shall mean the interest which would have been required to be paid for the period in question on the then outstanding principal balance of the Loan on the first day of the period in question assuming an interest rate equal to the strike price on the proposed Interest Rate Protection Agreement, as applicable, plus the Margin.
Debt Service Coverage Ratio shall mean a ratio for the applicable period in which:
(a) the numerator is NOI (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly ( e.g. Taxes and Insurance Premiums)) for the twelve (12) full calendar month period immediately preceding the date of calculation, including, for purposes of calculating the Operating Expense component of NOI, (i) FF&E reserve fund contributions equal to four percent (4%) of Gross Revenue (but not including any other amounts paid to escrow funds as required by this Agreement) and (ii) for management fees, an amount equal to the greater of (A) the actual amount of such fees and (B) three percent (3%) of Gross Revenue; and
(b) the denominator is the Debt Service for the same twelve (12) full calendar month period immediately preceding the date of calculation.
The Debt Service Coverage Ratio shall be calculated by Borrower and subject to verification by Agent and, as so verified, shall be final absent manifest error.
Debt Yield shall mean, as of any date of determination, the percentage obtained by dividing:
(a) the NOI (excluding interest on credit accounts and using annualized Operating Expenses for any recurring expenses not paid monthly (e.g., Property Taxes and Insurance Premiums)) for the twelve (12) calendar month period immediately preceding the date of calculation, including, for purposes of calculating the Operating Expense component of NOI, (i) FF&E reserve fund contributions equal to four percent (4%) of Gross Revenue and (ii) for management fees, an amount equal to the greater of (A) the actual amount of such fees and (B) three percent (3%) of Gross Revenues; by
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(b) the then outstanding principal balance of the Loan and multiplying the same by one hundred (100).
The Debt Yield shall be calculated by Borrower and subject to verification by Agent and, as so verified, shall be final absent manifest error.
Default shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.
Default Prepayment shall mean a prepayment of the principal amount of the Loan made after the occurrence of any Event of Default or an acceleration of the Maturity Date under any circumstances, including, without limitation, a prepayment occurring in connection with reinstatement of the Mortgage provided by statute under foreclosure proceedings or exercise of a power of sale, any statutory right of redemption exercised by Borrower or any other party having a statutory right of redemption exercised by Borrower or any other party having a statutory right to redeem or prevent foreclosure, any sale in foreclosure or under exercise of a power of sale or otherwise.
Default Rate shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate, or (b) four percent (4%) above the then effective Applicable Interest Rate; provided, however, that upon the Maturity Date, the Default Rate shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate, or (b) four percent (4%) above the Reference Rate plus the Margin.
DekaBank shall mean DekaBank Deutsche Girozentrale.
Deposit Account shall have the meaning as set forth in Section 6.3.5 .
Deposit Bank shall mean HSBC or any successor Eligible Institution selected by Agent to act as Deposit Bank.
Determination Date shall mean that date which is forty-five (45) days following the end of each fiscal quarter (based on a Fiscal Year) occurring during the term of the Loan.
Disbursement and Rate Management Agreement shall mean that certain Disbursement and Rate Management Agreement, dated of even date herewith, by Borrower, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Dollars or $ shall mean lawful money of the United States of America.
Eligible Assignee shall mean any of (a) a commercial bank organized under the laws of the United States, or any State thereof, who has (i) total assets in excess of
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$10,000,000,000 and (ii) a combined capital and surplus of at least $2,500,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization of Economic Cooperation and Development ( OECD ), or a political subdivision of any such country, who has (i) total assets in excess of $10,000,000,000 and (ii) a combined capital and surplus of at least $2,500,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of OECD; (c) a life insurance company organized under the laws of any State of the United States, or organized under the laws of any country and licensed as a life insurer by any State within the United States and having (i) total assets of at least $10,000,000,000 and (ii) a combined capital and surplus of at least $2,500,000,000; (d) a nationally recognized investment banking company in the business of making loans organized under the laws of any State of the United States, and licensed or qualified to conduct such business under the laws of any such State who has (i) total assets of at least $10,000,000,000 and (ii) a net worth of at least $2,500,000,000; (e) a Lender or an Affiliate of a Lender, provided said Lender is not then a defaulting Lender under the Co-Lender Agreement and, provided , further that a Lender shall not be released from its continuing obligations hereunder after any assignment to an Affiliate of such Lender (unless such Affiliate qualifies as an Eligible Assignee under any other subsection of this definition); or (f) a public law entity which may be established by the German Financial Market Stabilisation Agency (Finanzmarktstabilisierungsanstalt) pursuant to Section 8a of the German Financial Market Stabilisation Funds Act (Finanzmarktstabilisierungsanstalt). Notwithstanding anything contained in this definition of Eligible Assignee to the contrary, under no circumstances shall any Person be an Eligible Assignee if such Person or an Affiliate of such Person is then actively engaged in any suit, action or other proceeding as a party adverse to Agent or an Affiliate of Agent. In no event shall the Borrower, Guarantor or Hilton or any Affiliate of the foregoing be an Eligible Assignee. In addition, in no event shall any Hilton Competitor or any Affiliate of such Hilton Competitor be an Eligible Assignee.
Eligible Institution shall mean (a) a depository institution or trust company insured by the Federal Deposit Insurance Corporation the short term unsecured debt obligations or commercial paper of which are rated at least (i) A-1 by S&P, (ii) if rated by Moodys, P-1 by Moodys, or (iii), if rated by Fitch, F-1+ by Fitch, Inc. in the case of accounts in which funds are held for thirty (30) days or less or, in the case of Letters of Credit or accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least A- by S&P, A3 by Moodys if Moodys provides such rating, or A- by Fitch if Fitch provides such rating and (b) the Agent, the Northern Trust Company, Bank of America, N.A., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. (collectively the Approved Institutions ); provided, that with respect to subsection (b) , the ratings of such Approved Institutions do not fall below the lower of the ratings required pursuant to subsection (a) of this definition and the ratings of the Approved Institutions on the Closing Date.
Employee Benefit Plan shall mean any employee benefit plan as defined in Section 3(3) of ERISA, including any employee welfare benefit plan (as defined in section 3(1) of ERISA), any employee pension benefit plan (as defined in Section 3(2) of ERISA), and any plan which is both an employee welfare benefit plan and an employee pension benefit plan, and in respect of which any Loan Party or any ERISA Affiliate is (or, if such Employee Benefit Plan were terminated, would under Section 4062 or Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
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Environmental Indemnity shall mean that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by Borrower for the benefit of Agent, for the Ratable benefit of the Lenders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, including all regulations promulgated, and case law, thereunder.
ERISA Affiliate shall mean any Person that for purposes of Title IV of ERISA is a member of the Borrowers or Guarantors controlled group, or under common control with the Borrower or Guarantor, within the meaning of Section 414 of the Code.
ERISA Event shall mean (a) the occurrence with respect to an Employee Benefit Plan of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the Pension Benefit Guaranty Corporation (or any successor) ( PBGC ); (b) the application for a minimum funding waiver with respect to an Employee Benefit Plan; (c) the provision by the administrator of any Employee Benefit Plan of a notice of intent to terminate such an Employee Benefit Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any of its ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) imposition of a lien under Section 430(k) of the Code or Section 303(k)(1)(A) and (B) of ERISA upon property or assets or rights to property or assets of the Borrower or any of its ERISA Affiliates for failure to make a required payment to an Employee Benefit Plan; (g) the termination of an Employee Benefit Plan by the PBGC pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, an Employee Benefit Plan; (h) any failure by any Employee Benefit Plan to satisfy the minimum funding standards, within the meaning of Sections 412 or 430 of the Code or Section 302 of ERISA, whether or not waived; (i) the determination that any Employee Benefit Plan is or is expected to be in at-risk status, within the meaning of Section 430 of the Code or Section 303 of ERISA or (j) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of liability with respect to the withdrawal or partial withdrawal from a Multiemployer Plan or a determination that a Multiemployer Plan is, or is expected to be insolvent (within the meaning of Section 4245 of ERISA), in reorganization (within the meaning of Section 4241 of ERISA) or in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA).
Event of Default shall have the meaning as set forth in Section 9.1 .
Excess Cash shall have the meaning as set forth in the defined term Manager Required Payments .
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Excluded Taxes shall mean any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to any Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Applicable Lending Office located in, the jurisdiction imposing such Taxes (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of a Lender with respect to an applicable interest in the Loan pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or (ii) such Lender changes its Applicable Lending Office (other than pursuant to Section 2.2.8(h) ), except in each case to the extent that, pursuant to Section 2.2.8 , amounts with respect to such Taxes were payable either to such Lenders assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Applicable Lending Office, (c) Taxes attributable to such Lenders failure to comply with Section 2.2.8(f) and (d) any U.S. federal withholding Taxes imposed under FATCA.
FATCA shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreements entered into in connection with the implementation of such Sections of the Code (or any such amended or successor version therein) and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.
FF&E shall mean all fixtures, furniture, furnishings, equipment (including operating equipment, operating supplies and fixtures attached to and forming part of the Improvements), apparatus and other Personal Property used in, or held in storage for use in (or if the context so dictates, required in connection with), or required for the operation of the Improvements.
Fiscal Year shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan.
Foreclosure shall have the meaning as set forth in Section 10.22(ix) .
Foreign Lender shall mean (a) if the Borrower is a U.S. Borrower, a Lender that is not a United States person as defined in Section 7701(a)(30) of the Code, and (b) if the Borrower is not a U.S. Borrower, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.
Funds shall have the meaning as set forth in Section 6.2.1 .
GAAP shall mean generally accepted accounting principles as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such Person as may be in general use
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by significant segments of the U.S. accounting profession; provided, however, in the event Borrower elects to change its method of accounting to IFRS, all references to GAAP in this Agreement and the Loan Documents shall be deemed to refer to IFRS.
Government Lists shall have the meaning as set forth in Section 3.1.40 .
Governmental Authority shall mean any court, board, agency, commission, office, authority, department, bureau or instrumentality of any nature whatsoever or any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence.
Gross Revenue shall mean all actual revenue and proceeds (whether in cash or on credit), derived from the use, ownership or operation of the Property from whatever source, including, but not limited to, (a) Rents, including, without limitation (i) all income and proceeds received from the rental of rooms, Leases and commercial space, meeting, conference and/or banquet space within the Property including parking revenue and (ii) all income and proceeds received from food and beverage operations and from catering services conducted from the Property even though rendered outside of the Property (b) business interruption, rental interruption and use and occupancy insurance proceeds allocable to the applicable reporting period and (c) all other amounts which in accordance with GAAP and the Uniform System of Accounts are included as revenue attributable to the Property in the annual financial statements which are required to be delivered by Borrower pursuant to the terms of this Agreement. Notwithstanding the foregoing, Gross Revenue shall not include (A) non-recurring revenues as reasonably determined by Agent (other than with respect to clause (b) above), (B) sales, use and occupancy or other Taxes on receipts required to be accounted for by Borrower to any Governmental Authority, (C) payments received by Borrower under the Interest Rate Protection Agreement, (D) security deposits until forfeited or applied in accordance with the applicable Lease or other agreement, (E) refunds and uncollectible accounts, (F) Proceeds (other than as set forth in clause (b) above) and (G) any disbursements to Borrower of any funds established by the Loan Documents.
Guarantor shall mean, collectively, Hilton Domestic Property LLC, a Delaware limited liability company and HLT Owned VIII Holding LLC, a Delaware limited liability company, each with an address of 7930 Jones Branch Drive, McLean, Virginia 22102. The liability of Guarantor under the Loan Documents which are executed by Guarantor shall be joint and several.
Guarantor Bankruptcy Event shall mean if Guarantor or any guarantor or indemnitor under any guaranty or indemnity issued or entered into in connection with the Loan shall make an assignment for the benefit of creditors or if a receiver, liquidator or trustee shall be appointed for Guarantor or any such other guarantor or indemnitor or if Guarantor or such other guarantor or indemnitor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Guarantor or such other guarantor or indemnitor, or if any proceeding for the dissolution or liquidation of Guarantor or such other guarantor or indemnitor shall be instituted; provided , however , if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Guarantor or such other guarantor or indemnitor, upon the same not being discharged, stayed or dismissed within ninety (90) days.
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Guaranty shall mean that certain Guaranty of Recourse Obligations from Guarantor in favor of Agent, for the Ratable benefit of the Lenders, dated as of the date hereof, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Hazardous Substances shall have the meaning as set forth in the Environmental Indemnity.
Hilton shall mean Hilton Hotels Holdings LLC, Hilton Global Holdings LLC, Hilton Worldwide Holdings, Inc., Hilton Worldwide, Inc., Hilton Worldwide Finance LLC, Hilton Illinois Corp., Hilton International Co., HPP Hotels USA, Inc. and any other direct or indirect owner of the Hilton family of brands and businesses.
Hilton Competitor shall mean (a) a Person engaged (or who has publicly announced its intent to engage), directly or indirectly through an Affiliate, in the business of operating, licensing (as licensor), franchising or managing of one or more of the hotel brands or lodging systems of hotels identified as Luxury or Upper Upscale chains on the STR Global Chain Scale list produced by Smith Travel Research, Inc. and STR Global, Ltd. (or their respective successors and assigns) as such list may be updated from time to time (the STR Global Chain List ), and (b) any Affiliates thereof. Notwithstanding the foregoing, any Person who owns any of the foregoing hotels (and such Persons Affiliates) who is not (and whose Affiliates are not) otherwise an operator, licensor, franchisor or manager of one or more of the hotel brands or lodging systems of hotels identified as Luxury or Upper Upscale chains on the STR Global Chain List, shall not constitute a Hilton Competitor.
HSBC shall mean HSBC Bank USA, National Association.
IFRS shall mean the International Financial Reporting Standard.
Improvements shall have the meaning set forth in the Granting Clauses of the Mortgage.
Indebtedness shall mean, for any Person, without duplication: (a) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (b) all unfunded amounts under a loan agreement, letter of credit, or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (c) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests, (d) all indebtedness guaranteed by such Person, directly or indirectly, (e) all obligations under leases that constitute capital leases for which such Person is liable, and (f) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss.
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Indemnified Liabilities shall have the meaning as set forth in Section 10.13(b) .
Indemnified Party shall have the meaning as set forth in Section 10.13(b) .
Indemnified Taxes shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
Independent Director shall have the meaning as set forth in Section 3.1.23(e) .
Initial Cap shall have the meaning as set forth in Section 4.1.15(a) .
Initial Interest Period shall have the meaning as set forth in the definition of Interest Period.
Insurance Premiums shall have the meaning as set forth in Section 5.1.1(b) .
Interest Determination Date shall mean, with respect to each Interest Period, the date that is two (2) Business Days immediately prior to the commencement date of each Interest Period hereunder.
Interest Period shall mean:
(a) initially, the period commencing on the Closing Date and through and including the last day of the calendar month in which the Closing Date occurs (the Initial Interest Period ); and
(b) thereafter, each period commencing on the first day of the calendar month immediately following the expiring Interest Period and through and including the last day of such calendar month;
provided that, the foregoing provisions (a) and (b) relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise begin or end on a day that is not a Business Day, such Interest Period shall begin or end, as applicable, on the next succeeding Business Day;
(ii) any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date; and
(iii) if the Interest Period ends less than one (1) calendar month prior to the Maturity Date, that portion of the Loan with respect to the outstanding principal balance for such period shall be a LIBOR Floating Rate Loan, at Agents election.
Interest Rate Protection Agreement shall mean one or more interest rate caps (together with a confirmation from the Counterparty and the schedules relating thereto), between
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a Counterparty who is a Lender or an Affiliate of a Lender or otherwise has (or has a guarantor of its obligations that has) the Minimum Counterparty Rating, and Borrower and obtained by Borrower as and when required pursuant to, and in compliance with the terms and provisions of, Section 4.1.15 , and all amendments, restatements, replacements, supplements and modifications thereto.
IRS shall mean the United States Internal Revenue Service.
Land shall mean the land more particularly described on Schedule 1.1(c) and includes all rights appurtenant thereto, including, without limitation, all development rights, if any, acquired by Borrower pursuant to any air rights agreements pertaining thereto, and any and all beneficial easements or use agreements for the use of or rights to common facilities or amenities.
Lead Arrangers shall mean, collectively, HSBC and DekaBank.
Lease shall mean all leases, subleases, licenses, franchises, concessions or grants of other possessory interests, tenancies, and any other agreements affecting the use, possession or occupancy of the Property or any part thereof (including, without limitation, guest rooms, restaurants, bars, conference and meeting rooms, and banquet halls and other public facilities), whether now or hereafter existing or entered into (including, without limitation, any use or occupancy arrangements created pursuant to Section 365(d) of the Bankruptcy Code or otherwise in connection with the commencement or continuance of any bankruptcy, reorganization, arrangement, insolvency, dissolution, receivership or similar proceedings, or any assignment for the benefit of creditors, in respect of any tenant or occupant of any portion of the Property) and all amendments, modifications, supplements, extensions or renewals thereof, whether now or hereafter existing and all amendments, modifications, supplements, extensions or renewals thereof. Notwithstanding anything to the contrary contained herein, Occupancy/Event Agreements shall not constitute Leases or Major Leases for purposes of Section 3.1.21 and Section 4.1.10 .
Legal Requirements shall mean all federal, state, county, municipal and other governmental statutes, laws, treaties, rules, orders, regulations, ordinances, judgments, decrees, injunctions, permits or requirements of Governmental Authorities affecting Borrower or the Property or any part thereof or the use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, including, without limitation, the ADA, the Prescribed Laws, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.
Letter of Credit shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit reasonably acceptable to Agent (either an evergreen letter of credit or one which does not expire until at least ninety (90) days after the Maturity Date) in favor of Agent for the Ratable benefit of the Lenders and entitling Agent to draw thereon in New York,
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New York, issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution. If at any time the bank issuing any such Letter of Credit shall cease to be an Eligible Institution, Agent shall have the right upon ten (10) days prior notice to Borrower to draw down the same in full and hold the proceeds of such draw in accordance with the applicable provisions hereof unless within such ten (10) day period Borrower has delivered a replacement Letter of Credit meeting the requirements set forth herein issued by an Eligible Institution. Borrower shall not have or be permitted to have any liability or other obligations under any reimbursement agreement with respect to any Letter of Credit or otherwise in connection with any reimbursement to the Eligible Institution for draws on such Letter of Credit.
LIBOR Base Rate shall mean, with respect to each Interest Period, the rate for deposits in U.S. dollars (with respect to the period equal or comparable to the applicable Interest Period) that appears on Reuters Screen LIBOR01 Page (or the successor thereto) as of 11:00 a.m., London time, on the related Interest Determination Date. If such rate does not appear on Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on such Interest Determination Date, LIBOR shall be the arithmetic mean of the offered rates (expressed as a percentage per annum) for deposits in U.S. dollars (with respect to the period equal or comparable to the applicable Interest Period) that appear on the Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on such Interest Determination Date, if at least two (2) such offered rates so appear. If fewer than two (2) such offered rates appear on the Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on such Interest Determination Date, Agent shall request the principal London Office of any four (4) major reference banks in the London interbank market selected by Agent to provide such banks offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars (with respect to the period equal or comparable to the applicable Interest Period) as of 11:00 a.m., London time, on such Interest Determination Date for the then outstanding principal amount of the Loan. If at least two (2) such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two (2) such quotations are so provided, Agent shall request any three (3) major banks in New York City selected by Agent to provide such banks rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a one-month period as of approximately 11:00 a.m., New York City time, on the applicable Interest Determination Date for the then outstanding principal amount of the Loan. If at least two (2) such rates are so provided, LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined by Agent and at Borrowers request, Agent shall provide Borrower with the basis for its determination. Notwithstanding the foregoing, Borrower and the Lenders hereby agree that at such time, as applicable, that the New York Stock Exchange (or any Person who is an Affiliate or parent thereof) becomes the administrator or owner of the LIBOR Base Rate and/or performs the equivalent role of the British Bankers Association at present with respect to the LIBOR Base Rate, Agent shall have the right, without the consent of Borrower or any Lender, to amend the foregoing definition of LIBOR Base Rate solely to reflect any amendments to the same which are necessitated by such change, including, without limitation, by amending the relevant location, place and time of any quote of the LIBOR Base Rate.
LIBOR Fixed Rate shall mean, for any Interest Period, a rate per annum determined by Agent to be equal to the LIBOR Base Rate divided by (1 minus the Reserve Requirement) for such Interest Period plus the Margin
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LIBOR Fixed Rate Loan shall mean the Loan at any time in which the Applicable Interest Rate for the Loan is calculated with reference to the LIBOR Fixed Rate in accordance with the provisions of Article II .
LIBOR Floating Rate shall mean, for the applicable period, a rate per annum determined by Agent to be equal to the BBA LIBOR Daily Floating Rate divided by (1 minus the Reserve Requirement) for such period plus the Margin.
LIBOR Floating Rate Loan shall mean the Loan at any time in which the Applicable Interest Rate for the Loan is calculated with reference to the LIBOR Floating Rate.
LIBOR Loan shall mean the Loan at any time in which the Applicable Interest Rate thereon is calculated at a LIBOR Fixed Rate or a LIBOR Floating Rate.
Lien shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting the Property, or any portion thereof, or Borrower, or any interest in Borrower, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanics, materialmens and other similar liens and encumbrances against the Property or any portion thereof or Borrower or any direct interest in Borrower.
Loan shall mean the loan in the original principal amount of Five Hundred Twenty-Five Million and 00/100 Dollars ($525,000,000) made by Lenders to Borrower pursuant to this Agreement.
Loan Agreement shall mean this Agreement.
Loan Amount shall mean Five Hundred Twenty-Five Million and 00/100 Dollars ($525,000,000).
Loan Documents shall mean, collectively, this Agreement, the Note, the Mortgage, the Assignment of Leases, the Assignment of Contracts, the Environmental Indemnity, the Assignment of Management Agreement, the Lockbox Agreement, the Guaranty, the Disbursement and Rate Management Agreement, the Assignment of Interest Rate Protection Agreement, the Borrowers Certification, as well as all other documents and instruments now or hereafter executed and/or delivered by Borrower or a Guarantor with respect to the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Loan Fee Letter shall mean that certain letter agreement, dated as of the date hereof, between Agent and Borrower pertaining to the fees payable by Borrower to Agent and/or Lenders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Loan Party shall mean, collectively, Borrower and Guarantor.
Lockbox Account shall have the meaning as set forth in Section 6.3.1 .
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Lockbox Agreement shall mean that certain Multi-Party Account Agreement, dated as of the date hereof, among Agent, Borrower and Lockbox Bank, as the lockbox bank, or any successor Eligible Institution, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Lockbox Bank shall mean The Northern Trust Company or any successor Eligible Institution selected in accordance with the terms and provisions of the Lockbox Agreement.
Lockout Period shall mean the period from the date hereof through but not including the sixth (6 th ) Payment Date.
Losses shall have the meaning as set forth in Section 10.13(b) .
Major Lease shall mean any Lease demising a premises within the Property that is in excess of ten thousand (10,000) rentable square feet.
Major Lease Modification shall have the meaning as set forth in Section 4.1.10(b)
Management Agreement shall mean the management agreement entered into by and between Borrower and the Manager, dated of even date herewith, or any other management agreement entered into by Borrower in accordance with Section 7.2 , pursuant to which such Manager is to provide management and other services with respect to the Property.
Manager shall mean Waldorf=Astoria Management LLC, or any other manager of the Property selected in accordance with Section 7.2 .
Manager Required Payments shall mean all payments which the Manager is required to make with Rents pursuant to the Management Agreement or as confirmed in the Assignment of Management Agreement, including, without limitation, Property Taxes and Other Charges, Insurance Premiums, Debt Service, management fees payable under the Management Agreement, Capital Expenditures, Operating Expenses, FF&E costs, FF&E reserve payments, emergency repair costs, tenant improvement and leasing commission costs, working capital reserves and requirements, sales and use Taxes owed by Borrower pursuant to Legal Requirements, custodial funds and required monthly reserves, before depositing all remaining Rents (collectively, Excess Cash ) into the Lockbox Account.
Margin shall mean two hundred fifteen (215) basis points.
Material Action shall have the meaning as set forth in Section 3.1.23(f) .
Material Adverse Effect shall mean a material adverse effect on (a) the ability of Borrower to perform its payment and performance obligations under the Loan Documents to which it is a party, , (b) the validity or enforceability of any of the Loan Documents, the Lien of the Mortgage or the rights and remedies of Agent and/or Lenders under any of the Loan Documents (except to the extent caused solely by an act or omission of Agent or the Lenders, respectively), (c) the ability of Guarantor to perform its obligations under the Guaranty, (d) the Property or any other collateral for the Loan, (e) the use, operation or value of the Property or (f) the business, profits, prospects, operations or financial condition of Borrower.
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Material Contest shall have the meaning as set forth in the definition of Borrowers Contest Right.
Maturity Date shall mean October 25, 2018 or such earlier date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.
Maximum Commitment shall mean, for each Lender, an amount equal to each Lenders Ratable Share of the Loan.
Maximum Legal Rate shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.
Minimum Counterparty Rating shall mean a credit rating from S&P of at least A-.
Mortgage shall mean that certain Amended, and Restated Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of the date hereof, executed and delivered by Borrower to Agent, for the Ratable benefit of the Lenders, as security for the Loan and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
Multiemployer Plan shall mean a multiemployer plan, as defined in Section 3(37) or Section 4001(a)(3) of ERISA, as applicable, in respect of which the Borrower, Guarantor or any ERISA Affiliate could have any obligation or liability, contingent or otherwise.
Multiple Employer Plan shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower, Guarantor or any ERISA Affiliate and at least one Person other than the Borrower, Guarantor and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower, Guarantor or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
Net Proceeds shall mean all Proceeds payable as a result of a Casualty or a Condemnation to the Property or any portion thereof, after deduction of reasonable costs and expenses (including, but not limited to, attorneys fees and disbursements), if any, in collecting such Proceeds.
Net Proceeds Deficiency shall have the meaning as set forth in Section 5.3.2(f) .
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Net Worth shall mean the excess of total assets over total liabilities, each determined in accordance with GAAP.
New Lease shall have the meaning as set forth in Section 4.1.10(a) .
NOI shall mean the excess of Gross Revenue over Operating Expenses. NOI (including the determination of items that do not qualify as Gross Revenue or Operating Expenses) shall be calculated by Borrower in accordance with the sample calculation set forth on Exhibit 1.1 attached hereto, subject to verification by Agent, which verification shall be final absent manifest error.
Non-Consenting Lender shall have the meaning as set forth in Section 11.4(d) .
Note shall mean that certain Amended and Restated Promissory Note, dated the date hereof, between Borrower and Lenders in the original principal amount of Five Hundred Twenty-Five Million and 00/100 Dollars ($525,000,000.00) (the Original Note ), which Original Note shall be split on the date hereof pursuant to that certain Note Splitter and Modification Agreement between Borrower and Lenders into the following Replacement Notes: that certain Promissory Note A-1, dated of even date herewith, in the principal amount of $262,500,000 and Promissory Note A-2, dated of even date herewith, in the principal amount of $262,500,000 (as each of the same may be amended, supplemented, restated, increased, extended and consolidated, substituted or replaced from time to time, collectively, the Replacement Notes ), which Replacement Notes shall as of the date hereof replace and supersede in its entirety the Original Note, as amended, restated, replaced, supplemented or otherwise modified from time to time.
Notice shall have the meaning as set forth in Section 10.6 .
Occupancy/Event Agreements shall mean (a) short-term occupancy rights of hotel guests which are not the subject of a written agreement, (b) occupancy agreements for groups of hotel guests for transitory periods of time, (c) agreements for catering, business and similar special events or functions at the Property and (d) space license agreements for the installation and/or operation of in-building telecommunications equipment providing wireless frequencies to hotel guests and staff, entered into in the ordinary course of business.
OECD shall have the meaning as set forth in the definition of Eligible Assignee.
OFAC shall have the meaning as set forth in Section 3.1.40 .
Officers Certificate shall mean a certificate delivered to Agent by Borrower or Guarantor, as applicable, which is signed by an authorized senior officer of Borrower or Guarantor, as applicable.
One Year Cap shall have the meaning as set forth in Section 4.1.15(a) .
Operating Equipment shall have the meaning as set forth in the definition of Operating Expenses.
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Operating Expenses shall mean, without duplication, for any period, the sum of all costs and expenses of operating, maintaining, directing, managing and supervising the Property (excluding (a) depreciation and amortization, (b) any Debt Service, (c) any Capital Expenditures, (d) any deposits made to any reserve funds, (e) leasing commissions, (f) non-recurring items or (g) the costs of any other things specified to be done or provided at Borrowers or Managers sole cost and expense), incurred by Borrower or Manager (as agent for Borrower) pursuant to the Management Agreement, or as otherwise specifically provided therein, which are properly attributable to such period under Borrowers system of accounting, including, without limitation: (i) the cost of all food and beverages sold or consumed and of all necessary chinaware, glassware, linens, flatware, uniforms, utensils and other items of a similar nature, including such items bearing the name or identifying characteristics of the hotel as Borrower and/or Manager (as agent for Borrower) shall reasonably consider appropriate (collectively, the Operating Equipment ) and paper supplies, cleaning materials and similar consumable items (collectively, the Operating Supplies ) placed in use (Operating Equipment and Operating Supplies shall be considered to have been placed in use when they are transferred from the storerooms of the Property to the appropriate operating departments and shall not include reserve stocks thereof in storerooms), (ii) salaries and wages of personnel of the Property, including costs of payroll Taxes and employee benefits (which benefits may include, without limitation, a pension plan, medical insurance, life insurance, travel accident insurance and an executive bonus program); (iii) the cost of all other goods and services obtained by Borrower or Manager, as agent for Borrower, in connection with its operation of the Property, including, without limitation, heat and utilities, office supplies and all services performed by third parties, including leasing expenses in connection with telephone and data processing equipment, and all existing and any future installations necessary for the operation of the Improvements for hotel purposes (including, without limitation, heating, lighting, sanitary equipment, air conditioning, laundry, refrigerating, built-in kitchen equipment, telephone equipment, communications systems, computer equipment and elevators), Operating Equipment and existing and any future furniture, furnishings, wall coverings, fixtures and hotel equipment necessary for the operation of the Property for hotel purposes which shall include all equipment required for the operation of kitchens, bars, laundries (if any), and dry cleaning facilities (if any), office equipment, cleaning and engineering equipment and vehicles; (iv) the cost of repairs to and maintenance of the Property other than of a capital nature; (v) Insurance Premiums; (vi) all Property Taxes and Other Charges (other than federal, state or local income Taxes and franchise Taxes or the equivalent) payable by or assessed against Borrower with respect to the operation of the Property; (vii) legal fees and fees of the Approved Accountant for services directly related to the operation of the Property; (viii) the costs and expenses of technical consultants and specialized operational experts for specialized services in connection with non-recurring work on operational, legal, functional, decorating, design or construction problems and activities; provided, however , that, during a Trigger Period, if such costs and expenses have not been included in the Annual Budget, then, if such costs exceed $15,000 in any one instance, the same shall be subject to the reasonable approval by Agent; (ix) all expenses for advertising the Property and all expenses of sales promotion and public relations activities; (x) the cost of any reservations system, any accounting services or other group benefits, programs or services from time to time made available to properties in the Borrowers system; (xi) the cost associated with any Leases; (xii) any management fees, basic and incentive fees or other fees and reimbursables paid or payable to Manager under the Management Agreement; (xiii) any franchise fees or other
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fees and reimbursable expenses paid to a franchisor with respect to the Property, as applicable; and (xiv) all costs and expenses of owning, maintaining, conducting, directing, managing and supervising the operation of the Property to the extent such costs and expenses are not included above, including all Departmental Expenses and Undistributed Operating Expenses (each as defined in the Uniform System of Accounts).
Operating Supplies shall have the meaning as set forth in the definition of Operating Expenses.
Organizational Documents shall mean, as to any Person, its certificate of formation and operating agreement, its partnership agreement and certificate of limited partnership or doing business certificate, as applicable, its articles or certificate of incorporation and by-laws, and/or the other organizational or governing documents of such Person.
Other Charges shall mean all maintenance charges, impositions other than Property Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.
Other Connection Taxes shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in the Loan or any Loan Document).
Other Taxes shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except (i) any such Taxes that are Other Connection Taxes imposed with respect to an assignment and (ii) any prohibited transaction excise tax arising from any Lenders use of plan assets of any benefit plan investor within the meaning of Section 3(42) of ERISA and the regulations that may be promulgated thereunder.
Participant shall have the meaning as set forth in Section 10.25(m) .
Participant Register shall have the meaning as set forth in Section 10.25(m)(iii) .
Patriot Act Offense shall have the meaning as set forth in Section 3.1.40 .
Patriot/AML Laws shall have the meaning as set forth in Section 4.1.26 .
Payment Date shall mean the first (1 st ) day of each calendar month (unless such first (1 st ) calendar day is not a Business Day, in which case Borrower shall not be obligated to make payment until the first (1 st ) succeeding Business Day), being the date on which, pursuant to Sections 2.2.1 and 2.4.1 , Borrower is obligated to make an interest and, if applicable, principal payment hereunder.
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PBGC shall have the meaning as set forth in the definition of ERISA Event.
Pension Plan shall mean any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Title IV of ERISA or Sections 412 and 430 of the Code or Section 302 of ERISA.
Permitted Assumption shall have the meaning as set forth in Section 8.3(b) .
Permitted Debt shall mean, collectively (a) the Note and the other obligations, indebtedness and liabilities specifically provided for in any Loan Document and secured by the Mortgage and the other Loan Documents, (b) indebtedness incurred in the financing of equipment and other Personal Property used on the Property within the ordinary course of Borrowers business, and (c) trade payables and customary purchase money security interests of seller of goods which are Personal Property, as applicable, each incurred in the ordinary course of Borrowers business, not secured by Liens on the Property (other than Liens being properly contested in accordance and compliance with the provisions of this Agreement) (items (b) and (c) are collectively referred to herein as the Permitted Trade Payables and Equipment Financing ), provided that any such Permitted Trade Payables and Equipment Financing: (i) do not exceed at any one time in the aggregate $26,250,000.00, (ii) are normal and reasonable under the circumstances, (iii) are payable by or on behalf of Borrower for or in respect of the operation of the Property in the ordinary course of the operation of Borrowers business or the routine administration of Borrowers business, (iv) are paid within sixty (60) days following the later of (A) the date on which such amount is incurred or (B) the date invoiced, and (v) are not evidenced by a note. Nothing contained herein shall be deemed to require Borrower to pay any Permitted Trade Payables and Equipment Financing which Borrower is contesting in compliance with Borrowers Contest Right.
Permitted Encumbrances shall mean, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters which are (i) disclosed in the Title Insurance Policy or (ii) insured over by the Title Companies under the Title Insurance Policy; provided, however, that with respect to any Lien which is insured over by the Title Companies, Borrower hereby agrees that if the lienor thereunder commences any action against Borrower or the Property (in addition to the filing of the Lien) with respect thereto, Borrower shall discharge such Lien or bond such Lien off of the Property within thirty (30) days of the commencement of any such action, (c) Liens, if any, for Taxes, Other Taxes, Property Taxes, and Other Charges imposed by any Governmental Authority not yet due or delinquent or which are being contested in compliance with Borrowers Contest Right, (d) such other title and survey exceptions as Agent has approved in compliance with this Agreement or may approve in writing in Agents sole discretion, (e) all immaterial easements, rights-of-way, restrictions and other similar non-monetary encumbrances recorded against and affecting the Property and which shall not and do not have a Material Adverse Effect, and (f) rights of Tenants as Tenants only.
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Permitted Investments shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par payable on demand or having a maturity date not later than the Business Day immediately prior to the first Payment Date following the date of acquiring such investment and meeting one of the appropriate standards set forth below:
(a) obligations of, or obligations directly and unconditionally guaranteed as to principal and interest by, the U.S. government or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America and have maturities not in excess of one year;
(b) federal funds, unsecured certificates of deposit, time deposits, bankers acceptances, and repurchase agreements having maturities of not more than ninety (90) days of any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia, the short-term debt obligations of which are rated (i) A-1+ (or the equivalent) by S&P and, if it has a term in excess of three months, the long-term debt obligations of which are rated AAA (or the equivalent) by S&P, and that (A) is at least adequately capitalized (as defined in the regulations of its primary Federal banking regulator) and (B) has Tier 1 capital (as defined in such regulations) of not less than $1,000,000,000, or (ii) in one of the following Moodys rating categories: (A) for maturities less than one month, a long-term rating of A2 or a short-term rating of P-1, (B) for maturities between one and three months, a long-term rating of A1 and a short-term rating of P-1, (C) for maturities between three months to six months, a long-term rating of Aa3 and a short-term rating of P-1 and (D) for maturities over six months, a long-term rating of Aaa and a short-term rating of P-1;
(c) deposits that are fully insured by the Federal Deposit Insurance Corp.;
(d) commercial paper having a maturity of not more than two hundred seventy (270) days and rated (i) A1+ (or the equivalent) by S&P and/or (ii) P-1(or the equivalent) by Moodys; and
(e) any money market fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause (a) above, (ii) has net assets of not less than $5,000,000,000, and (iii) has the highest rating obtainable from S&P and Moodys.
Notwithstanding the foregoing, Permitted Investments (A) shall exclude any security with S&Ps r symbol attached to the rating (indicating high volatility or dramatic fluctuations in their expected returns because of market risk), as well as any mortgage-backed securities and any security of the type commonly known as strips; (B) shall be limited to those instruments that have a predetermined fixed dollar of principal due at maturity that cannot vary or change; (C) shall only include instruments that qualify as cash flow investments (within the meaning of Section 860G(a)(6) of the Code or any treasury regulations thereunder); and (D) shall exclude any investment where the right to receive principal and interest derived from the underlying investment provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment. Interest may either be fixed or variable, and any variable
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interest must be tied to a single interest rate index plus a single fixed spread (if any), and move proportionately with that index. No investment shall be made which requires a payment above par for an obligation if the obligation may be prepaid at the option of the issuer thereof prior to its maturity. All investments shall mature or be redeemable upon the option of the holder thereof on or prior to the earlier of (x) three months from the date of their purchase and (y) the Business Day preceding the day before the date such amounts are required to be applied hereunder.
Permitted Public Exit shall have the meaning as set forth in Section 8.3(a)(iii) .
Permitted Trade Payables and Equipment Financing shall have the meaning as set forth in the definition of Permitted Debt.
Permitted Transfers shall have the meaning set forth in Section 8.3 .
Person shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other entity, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
Personal Property shall have the meaning set forth in the granting clause of the Mortgage.
Phase I Environmental Report shall mean that certain Phase I Environmental Site Assessment with respect to the Property, dated September 26, 2013, and prepared by EMG Corp.
PLL Policy shall have the meaning as set forth in Section 5.1.1(a)(i)(H) .
Policies shall have the meaning as set forth in Section 5.1.1(b)(i).
Preapproved Alterations shall have the meaning as set forth in Section 4.1.11 .
PML shall have the meaning as set forth in Section 5.1.1(a)(ii)(A) .
Prepayment Amount shall have the meaning as set forth in Section 2.2.9(a) .
Prepayment Notice shall have the meaning as set forth in Section 2.2.9(a) .
Prepayment Revocation and Modification Right shall have the meaning as set forth in Section 2.5.1(e) .
Prescribed Laws shall mean, collectively, (a) the USA Patriot Act, (b) Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power Act, 50 U.S.C. §1701 et. seq. and (d) all other Legal Requirements relating to money laundering, terrorism or economic sanctions.
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Proceeds shall mean (a) the amount of all insurance proceeds payable as a result of a Casualty to the Property or any portion thereof, or (b) the amount of the Award payable as a result of a Condemnation to the Property or any portion thereof.
Property shall mean the Land, the Improvements now or hereafter erected thereon and all Personal Property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the Granting Clauses of the Mortgage.
Property Condition Report shall mean that certain Property Condition Report, dated September 26, 2013, by EMG Corp. with respect to the Property.
Property IP shall have the meaning as set forth in Section 3.1.29 .
Property Reports shall mean the Property Condition Report, the Phase I Environmental Reports and the PZR Reports delivered to Lender in connection with the Loan.
Property Taxes shall mean all real estate and personal property Taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or part thereof, together with all interest and penalties thereon.
Provided Information shall have the meaning as set forth in Section 10.32 .
PZR Report shall mean that certain report, prepared by The National Planning & Zoning Consulting Service, dated October 14, 2013, with respect to the Property.
Qualified Flag shall mean, collectively, (a) the Waldorf=Astoria flag and (b) any other flag which is associated with full service, four (4) and five (5) star hotels and is approved by Agent in its reasonable discretion.
Qualified Property Manager shall mean, collectively, (a) the Manager, (b) any Affiliate of Hilton operating a Qualified Flag and (c) any other Person who manages at least 5,000 keys (inclusive of the Property) with respect to full service, four (4) and five (5) star hotels.
Qualified Public Company shall mean (a) a Person whose securities are listed and traded on the New York Stock Exchange, AMEX, NASDAQ, the Frankfurt Stock Exchange, the London Stock Exchange, Euronext or the Luxembourg Stock Exchange, (b) who, on the date of the applicable Transfer, has a Net Worth of no less than One Billion and 00/100 Dollars ($1,000,000,000.00) (inclusive of its interest in the Property), and (c) whose senior management shall have substantial expertise in the ownership and management of full service, four (4) and five (5) star hotels. A Qualified Public Company shall also include any Person who is (a) a wholly-owned subsidiary of a Qualified Public Company or (b) who is an operating partnership through which the Qualified Public Company conducts all or substantially all of its business and which such Qualified Public Company (i) owns, directly or indirectly, in the aggregate at least fifty-one percent (51%) of such operating partnership and (ii) Controls, directly or indirectly, such operating partnership.
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Qualified Transferee shall mean a Person (a) with a Net Worth of no less than One Billion and 00/100 Dollars ($1,000,000,000.00) (inclusive of its interest in the Property), (b) who has not been the subject of a bankruptcy action or a material governmental or regulatory investigation which resulted in a final, non-appealable conviction for criminal activity involving moral turpitude, (c) who is (or is under common Control with a Person that is) regularly engaged in the management, ownership or operation of commercial real estate which shall include at least five thousand (5,000) keys (including the Property) with respect to full service, four (4) and five (5) star hotels, (d) who has complied with Agents and each Lenders customary OFAC requirements and know your customer requirements, (e) who has never been in material litigation with Agent or any Lender and whose Affiliates have never been in material litigation with Agent or any Lender, (f) who has never interfered or obstructed with the exercise of remedies by Agent or any Lender and whose Affiliates have never interfered or obstructed with the exercise of remedies by Agent or any Lender, and (g) who, to the extent that neither of the Lead Arrangers have ever done business with such Person or any of its Affiliates, shall be subject to the consent of Agent, which shall not be unreasonably withheld, conditioned or delayed.
Radius shall have the meaning as set forth in Section 5.1.1(b)(ii) .
Ratable Share , Ratable or ratably shall mean, with respect to any Lender, the percentage that such Lenders Maximum Commitment then constitutes of the Loan Amount. The Ratable Share of each Lender on the date of this Agreement is set forth on Schedule 1.1(f) .
Rating Agencies shall mean Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ), Moodys Investors Service, Inc. ( Moodys ), and Fitch, Inc. ( Fitch ), and any other nationally-recognized statistical rating agency which has been designated by Agent.
Recipient shall mean (a) Agent and (b) any Lender.
Reference Rate shall mean, for any day, the rate of interest for such day from time to time announced by HSBC at its New York City main branch as its prime rate (being a base rate for calculating interest on certain loans), each change in any interest rate hereunder based on the Reference Rate to take effect at the time of such change in the prime rate. If HSBC ceases to announce a prime rate, Reference Rate shall mean the rate of interest published in The Wall Street Journal from time to time as the Prime Rate. If The Wall Street Journal ceases to publish the Prime Rate, Agent shall select an equivalent publication that publishes such Prime Rate, and if such Prime Rates are no longer generally published or are limited, regulated or administered by a governmental or quasi-governmental body, Agent shall select a comparable interest rate index. The Reference Rate is not necessarily the lowest rate for commercial or other types of loans and Lenders have not committed to charge interest hereunder at any lower or lowest rate at which HSBC may now or in the future make loans to Borrower or other borrowers.
Reference Rate Loan shall mean the Loan at any time in which the Applicable Interest Rate for the Loan is calculated with reference to the Reference Rate plus the Margin in accordance with the provisions of Article II .
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Regulation D shall mean Regulation D of the Board of Governors of the Federal Reserve System from time to time in effect, including any successor or other Regulation or official interpretation of said Board of Governors relating to Reserve Requirements applicable to member banks of the Federal Reserve System.
Regulatory Change shall mean any change after the date of this Agreement in Federal, state or foreign law or regulations (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System) or the adoption or making after such date of any interpretation, directive or request of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or government or monetary authority charged with the interpretation or administration thereof.
Related Party or Related Parties shall have the meaning set forth in Section 3.1.23(b)(i) .
Rents all rents, issues, profits, royalties (including all oil and gas or other hydrocarbon substances), earnings, receipts, revenues, accounts, account receivable, security deposits and other deposits (subject to the prior right of the Tenants making such deposits) and income, including, without limitation, all revenues and credit card receipts collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational facilities, parking, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager (including Manager) of the hotel or the commercial space located in the Property or acquired from others (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing reservations of such space), license, lease, sublease and concession fees and rentals, health club membership fees, food and beverage wholesale and retail sales, service charges, vending machine sales, proceeds, if any, from business interruption or other loss of income insurance, fixed, additional and percentage rents, and all operating expense reimbursements, reimbursements for increases in Property Taxes, sums paid by Tenants to Borrower to reimburse Borrower for amounts originally paid or to be paid by Borrower or Borrowers agents or Affiliates for which such Tenants were liable, as, for example, Tenant improvements costs in excess of any work letter, lease takeover costs, moving expenses and Property Taxes and operating expense pass-throughs for which a Tenant is solely liable, parking, maintenance, common area, Taxes, Insurance Premiums, utility and service charges and contributions, proceeds of sale of electricity, gas, heating, air-conditioning and other utilities and services, deficiency rents and liquidated damages, and other benefits now or hereafter derived from any portion of the Property or otherwise due and payable or to become due and payable as a result of any ownership, use, possession, occupancy or operation thereof and/or services rendered, goods provided and business conducted in connection therewith (including any payments received pursuant to Section 502(b) of the Bankruptcy Code or otherwise in arrangement, insolvency, dissolution, receivership or similar proceedings, or any assignment for the benefit of creditors, in respect of any Tenant or other occupants of any portion of the Property and all claims as a creditor in connection with any of the foregoing) and all cash or security deposits, advance rentals, and all deposits or payments of a similar nature relating thereto, now or hereafter, including during any period of redemption, derived from the Property or any portion thereof and all proceeds from the cancellation, surrender, sale or other disposition of the Leases.
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Replacement Lender shall have the meaning as set forth in Section 2.2.9(a) .
Replacement Notice shall have the meaning as set forth in Section 2.2.9(a) .
Reserve Requirement(s) shall mean, for any day as applied to a LIBOR Fixed Rate Loan or a LIBOR Floating Rate Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day, if any, (including, without limitation, any supplemental, marginal, supplemental and emergency reserves) under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as Eurocurrency liabilities in Regulation D) which are required to be maintained by the applicable Lender or its Loan Participants, if any, on such day. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by any Lender or any Lenders respective Loan Participants, if any, by reason of any Regulatory Change against (a) any category of liabilities that includes deposits by reference to which the LIBOR Base Rate or BBA LIBOR Daily Floating Rate is to be determined as provided in this Agreement or (b) any category of extensions of credit or other assets that includes the loans the interest rate on which is determined on the basis of rates used in determining the LIBOR Base Rate or BBA LIBOR Daily Floating Rate.
Restoration shall have the meaning as set forth in Section 5.2.1 .
Restoration Threshold shall mean $25,000,000.00.
Secondary Market Transaction shall have the meaning as set forth Section 10.26(b) .
Severed Loan Documents shall have the meaning as set forth in Section 9.2(c) .
Similar Laws shall have the meaning as set forth in Section 3.1.8 .
SPC Party shall have the meaning as set forth in Section 3.1.23(d) .
Spread Maintenance Premium means the amount equal to (a) the principal amount of any prepayment, multiplied by (b) an interest rate equal to the Margin divided by 360 multiplied by (c) the number of calendar days from the date of any prepayment through and including the last day of the Lock-Out Period, all as determined by Agent.
State shall mean the State of New York.
STR Global Chain List shall have the meaning as set forth in the definition of Hilton Competitor.
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Survey shall mean an ALTA survey of the Property prepared by a surveyor licensed in the State and satisfactory to Agent and the Title Company issuing the Title Insurance Policy, and containing a certification of such surveyor satisfactory to Agent and the Title Company issuing the Title Insurance Policy.
Taxes shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Tenant shall mean any Person obligated by contract or otherwise to pay monies (including a percentage of gross income, revenue or profits) under any Lease now or hereafter affecting all or any part of the Property.
Title Company shall mean, collectively, Fidelity National Title Insurance Company, Chicago Title Insurance Company, First American Title Insurance Company, and Stewart Title Insurance Company, as co-insurers, which are insuring the Lien of the Mortgage.
Title Insurance Policy shall mean an ALTA mortgagee title insurance policy issued by the Title Company in the form reasonably acceptable to Agent issued with respect to the Property and insuring the Lien of the Mortgage.
Transfer shall mean any voluntary or involuntary sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, grant of a security interest, assignment, or transfer of: (a) all or any part of the Property or any estate or interest therein including, but not limited to, (i) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments, (ii) an agreement by Borrower leasing all or a substantial part of the Property or (iii) a sale, assignment or other transfer of, or the grant of a security interest in, Borrowers right, title and interest in and to any Leases or any Rents or Gross Revenue; (b) any ownership interest in (i) Borrower or (ii) any corporation, partnership, limited liability company, trust or other entity owning, directly or indirectly, any interest in Borrower; or (c) the Control of, or the right or power to Control, the day-to-day management and operations of the Property. Notwithstanding the foregoing, neither (1) the pledges of direct or indirect interests in Guarantor or Hilton in connection with a secured credit facility of Hilton (and any foreclosure or other remedial action with respect to such pledges) nor (2) the offering, issuance or transfer of securities in Hilton Worldwide Holdings Inc. listed on the New York Stock Exchange, AMEX or NASDAQ (and transfers of the direct or indirect interests of such shareholders) shall constitute Transfers and shall not be subject to the limitations or restrictions of Article VIII .
Transferee shall have the meaning as set forth in Section 10.25(k) .
Trigger Event shall mean, as of any Determination Date, the Debt Yield shall have fallen below seven and one-half percent (7.5%) for two (2) consecutive quarters (based on a twelve (12) full calendar month period).
Trigger Period shall mean any period commencing upon any Determination Date as of which Agent determines in good faith that a Trigger Event has occurred and is continuing until (a) such subsequent Determination Date, if any, as Agent determines in good faith that the Debt Yield has been equal to or greater than seven and one-half percent (7.5%) for
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two (2) consecutive quarters (based on a twelve (12) full calendar month period) immediately preceding such Determination Date or (b) Borrower prepays the Loan in compliance with Section 2.5.1 (provided that no prepayment premium, including, without limitation, the Spread Maintenance Premium, shall be payable with respect thereto) in an amount which when applied in reduction of the principal amount of the Loan outstanding, would cause the Debt Yield to be equal to or greater than seven and one-half percent (7.5%).
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code as in effect in the State from time to time.
Uniform System of Accounts shall mean the most recent edition of the Uniform System of Accounts for the Lodging Industry, Tenth Revised Edition, 2006, by the Hotel Association of New York City, Inc. and published by the American Hotel and Motel Association, as updated from time to time.
Upfront Fee shall have the meaning set forth in the Loan Fee Letter.
USA Patriot Act shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act).
U.S. Borrower shall mean a Borrower that is a United States person as defined in Section 7701(a)(30) of the Code.
U.S. Government Obligations shall mean any direct obligations of, or obligations guaranteed as to principal and interest by, the United States Government or any agency or instrumentality thereof, provided that such obligations are backed by the full faith and credit of the United States. Any such obligation must be limited to instruments that have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change. If any such obligation is rated by S&P, it shall not have an r highlighter affixed to its rating. Interest must be fixed or tied to a single interest rate index plus a single fixed spread (if any), and move proportionately with such index. U.S. Government Obligations include, but are not limited to: U.S. Treasury direct or fully guaranteed obligations, Farmers Home Administration certificates of beneficial ownership, General Services Administration participation certificates, U.S. Maritime Administration guaranteed Title XI financing, Small Business Administration guaranteed participation certificates or guaranteed pool certificates, U.S. Department of Housing and Urban Development local authority bonds, and Washington Metropolitan Area Transit Authority guaranteed transit bonds. In no event shall any such obligation have a maturity in excess of 365 days.
U.S. Tax Compliance Certificate has the meaning as set forth in Section 2.2.8(f) .
Withholding Agent shall mean any Loan Party and Agent.
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Section 1.2 Principles of Construction .
All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. Any reference in this Agreement or in any other Loan Document to any Loan Document shall be deemed to include references to such documents as the same may hereafter be amended, modified, supplemented, extended, replaced and/or restated from time to time (and, in the case of any note or other instrument, to any instrument issued in substitution therefor). Unless otherwise specified, the words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.
II. | THE LOAN |
Section 2.1 The Loan .
2.1.1 Agreement to Lend and Borrow . (a) Subject to and upon the terms and conditions set forth herein, on the Closing Date each Lender shall make its Ratable Share of the Loan to Borrower and Borrower shall accept the Loan from Lenders.
(b) No Lender is obligated to fund amounts in excess of the amount of its Maximum Commitment set forth on Schedule 1.1(f) .
2.1.2 Single Disbursement to Borrower/No Reborrowings . Borrower shall receive only one borrowing hereunder in respect of the Loan and any amount repaid hereunder in respect of the Loan may not be reborrowed.
2.1.3 The Note . The Loan shall be evidenced by the Note, made by Borrower to each Lender in the respective principal amounts of the related Lenders Ratable Share of the Loan, and all of which notes shall collectively be in the aggregate principal amount of FIVE HUNDRED TWENTY-FIVE MILLION AND 00/100 DOLLARS ($525,000,000.00) and shall be repaid in accordance with the terms of this Agreement and the Note.
2.1.4 Use of Proceeds . Borrower shall use proceeds of the Loan to (a) pay and discharge any existing loans relating to the Property (including the existing 2007 Hilton financing), (b) pay all past-due Basic Carrying Costs, if any, in respect of the Property, (c) pay costs and expenses incurred in connection with the closing of the Loan, (d) fund any working capital requirements of the Property and (e) retain the balance, if any, or make distributions thereof to its direct and indirect owners.
2.1.5 Loan Term . The term of the Loan shall commence on the Closing Date and shall end on the Maturity Date.
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Section 2.2 Interest Rate.
2.2.1 Interest .
(a) Applicable Interest Rate . The outstanding principal amount of the Loan shall bear interest, as provided below, based upon the LIBOR Fixed Rate unless Agent determines, pursuant to and in accordance with the terms and provisions of this Agreement, that the Applicable Interest Rate shall be based on the LIBOR Floating Rate or the Reference Rate plus the Margin.
(b) Computation of Interest and Fees . Accrued interest and fees on the Loan shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed during the applicable Accrual Period in accordance with Section 2.4.1 . Any change in the BBA LIBOR Daily Floating Rate or the Reference Rate shall be effective as of the day on which such change in rate occurs. Each determination of an interest rate by Agent pursuant to any provision of this Agreement shall be conclusive and binding on Borrower in the absence of manifest error. Notwithstanding the foregoing, interest payable at the Default Rate following an Event of Default shall be payable from time to time on demand of Agent. In any event, upon the payment or prepayment of any principal of any portion of the Loan, accrued, unpaid interest on the principal amount so paid or prepaid shall be due and payable.
2.2.2 One Loan Tranche. There shall be no more than one (1) interest rate and one (1) Interest Period for the entire outstanding balance of the Loan at any time.
2.2.3 Certain Notices . Notices by Borrower to Agent of optional prepayments of the Loan, shall be irrevocable (subject to Borrowers Prepayment Revocation and Modification Right) and shall be effective only if received by Agent in writing or telephonically not later than 11:00 a.m., New York time (and if telephonically, also confirmed in writing by 5:00 p.m., New York time), at least twenty (20) days prior to such prepayment. Each notice of optional prepayment shall specify the amount of the Loan to be prepaid, the date of prepayment (which shall be a Business Day). Notwithstanding the foregoing or anything else to the contrary contained herein or any contrary designation by Borrower, Agent and Lenders shall have the right to apply any prepayment of the Loan, regardless of how specified by Borrower, in such order and priority as Agent shall designate in its sole discretion.
2.2.4 Additional Costs . (a) Borrower shall pay to Agent, for Agent and the Ratable benefit of the Lenders, from time to time, as applicable, within ten (10) Business Days after demand therefor by Agent, such amounts as each Recipient may reasonably and in good faith determine to be sufficient to compensate such Recipient for any increase in costs that such Recipient reasonably determines are attributable to its making or maintaining of any portion of the Loan or, with respect to Agent, its obligation to administer the Loan hereunder, or any reduction in any amount receivable by such Recipient hereunder or such obligation (such increases in costs and reductions in amounts receivable being herein called Additional Costs ), in each case resulting from and limited to the amounts necessary to compensate each Recipient for any Regulatory Change (i) which affects similarly situated banks or financial institutions generally and is not applicable to such Recipient primarily by reason of such Recipients particular conduct or condition and (ii) which:
(A) subjects any Recipient to any Taxes (other than (1) Indemnified Taxes, (2) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (3) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations or its deposits, reserves, other liabilities or capital attributable thereto; or
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(B) imposes or modifies any reserve, special deposit or similar requirements (other than the Reserve Requirement utilized in the determination of the LIBOR Base Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Recipient (including, without limitation, any such deposits referred to in the definition of LIBOR Base Rate), or any commitment of such Recipient (including, without limitation, the commitment of such Recipient hereunder); or
(C) imposes any other condition affecting this Agreement or the Note (or any of such extensions of credit or liabilities referred to in subdivision (B) above).
No Lender shall require Borrower to pay any amounts under this Section 2.2.4(a) unless such Lender takes similar action with respect to other similarly situated borrowers with respect to loans where such Lender has a contractual right to do so.
(b) Without limiting the effect of the provisions of clause (a) of this Section 2.2.4 (but without duplication), in the event that, by reason of any Regulatory Change which affects similarly situated banks or financial institutions generally and is not applicable to a Lender primarily by reason of such Lenders particular conduct or condition, any Lender incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Lender that includes deposits by reference to which the LIBOR Base Rate is determined as provided in this Agreement or a category of extensions of credit or other assets of such Lender that includes the portion of the Loan evidenced by such Lenders Note, then, if such Lender so elects by notice to Agent and Borrower, the obligation of such Lender to make or continue such portion of the Loan based on the LIBOR Base Rate hereunder shall be suspended effective on the last day of the then current Interest Period, until such Regulatory Change ceases to be in effect and the portion of the Loan evidenced by such Lenders Note shall, during such suspension, bear interest at the Reference Rate plus the Margin.
(c) Without limiting the effect of the foregoing provisions of this Section 2.2.4 (but without duplication), Borrower shall pay to each Lender from time to time on request such amounts as such Lender may reasonably determine to be necessary to compensate such Lender (or, without duplication, the bank or bank holding company of which such Lender is a subsidiary) for any increase in costs that it reasonably and in good faith determines are attributable to the maintenance by such Lender (or any Applicable Lending Office or such parent bank or bank holding company of such Lender), pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law) of any Governmental Authority (i) arising out of any Regulatory Change or (ii) implementing, after the date of this Agreement, any capital guideline or other requirement (whether or not having the force of law)
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applying to a class of banks including such Lender, hereafter issued by any government or governmental or supervisory authority implementing at the national level the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and/or the Basel Accord (including, without limitation, the various capital guidelines of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 208, Appendices 12 C.F.R. Part 225, Appendices), the various capital guidelines of the office of the Comptroller of the Currency (12 C.F.R. Part 3, Appendices), and the Prompt Corrective Action provisions (12 C.F.R. Part 303)), of capital in respect of the commitment to lend or the Ratable Share of the Loan of such Lender (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender (or any Applicable Lending Office or such parent bank or bank holding company of such Lender) to a level below that which such Lender (or any Applicable Lending Office or such parent bank or bank holding company of such Lender) could have achieved but for such Regulatory Change or implementation). For purposes of this Section 2.2.4(c) , Basel Accord shall mean the various recommendations for capital and liquidity standards issued by the Bank for International Settlements Basel Committee on Banking Supervision, including, without limitation, those recommendations known informally as Basel I, Basel II, and Basel III, as amended, modified and supplemented and in effect from time to time or any replacement thereof. No Lender shall require Borrower to pay any amounts under this Section 2.2.4(c) unless such Lender takes similar action with respect to other similarly situated borrowers with respect to loans where such Lender has a contractual right to do so.
(d) Each Lender shall notify Agent and Borrower of any event occurring after the date of this Agreement entitling Lender to compensation under clause (a) or (c) of this Section 2.2.4 as promptly as practicable, and shall use commercially reasonable efforts to (i) designate a different Applicable Lending Office for the Loan or (ii) take such other reasonable measures, if such designation or measures will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable opinion of such Lender, subject such Lender to any unreimbursed cost or expense (in each case, for which Borrower has not committed to reimburse such Lender after such Lender has given Borrower notice and the opportunity for reimbursement of such cost or expense) and would not otherwise be disadvantageous to such Lender. Such Lender shall furnish to Borrower an accounting setting forth the basis and amount of each request by such Lender for compensation under clause (a) or (c) of this Section 2.2.4 . Reasonable and good faith determinations and allocations by each Lender for purposes of this Section 2.2.4 of the effect of any Regulatory Change pursuant to clause (a) or (b) of this Section 2.2.4 , or of the effect of capital maintained pursuant to clause (c) of this Section 2.2.4 , on its costs or rate of return of maintaining its Ratable Share of the Loan or its obligation to make such Loan, or on amounts receivable by it in respect of the Loan, and of the amounts required to compensate each Lender under this Section 2.2.4 , shall constitute prima facie evidence thereof. Each Lender shall confirm to Borrower at the time it makes any claim under this Section 2.2.4 that the methods of determination and allocation used by it in determining the amount of such claim are reasonably consistent with such Lenders treatment of customers similar to Borrower (as reasonably determined by such Lender). In the event any Lender makes a request for compensation under clause (a) or (c) of this Section 2.2.4 , Borrower shall have the rights set forth in Section 2.2.9 .
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2.2.5 LIBOR Base Rate or BBA LIBOR Daily Floating Rate . Anything herein to the contrary notwithstanding, if, on or prior to the determination of any LIBOR Base Rate or BBA LIBOR Daily Floating Rate for any Interest Period:
(a) any Lender reasonably determines that quotations of interest rates for the relevant deposits referred to in the definition of LIBOR Base Rate or BBA LIBOR Daily Floating Rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for any LIBOR Fixed Rate Loan or LIBOR Floating Rate Loan as provided herein; or
(b) any Lender reasonably determines that by reason of circumstances affecting the London interbank market the relevant rates of interest referred to in the definition of LIBOR Base Rate upon the basis of which the rate of interest for the LIBOR Loan for such Interest Period is to be determined are not likely to adequately to cover the cost to such Lender of making or maintaining a LIBOR Loan for such Interest Period;
then such Lender shall give Borrower and Agent prompt notice thereof and, so long as such condition remains in effect, such Lender shall not be under any obligation to make its Ratable Share of any such LIBOR Loan but shall remain obligated to make its Ratable Share of a Reference Rate Loan for a corresponding amount, or if any portion of the Loan is already outstanding as a LIBOR Loan, such portion shall, commencing immediately after the end of the then current Interest Period, bear interest at the Reference Rate plus the Margin.
2.2.6 Illegality . Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to honor its obligation to maintain its Ratable Share of the Loan, then such Lender shall promptly notify Borrower and Agent thereof and such Lenders obligation to maintain its Ratable Share of the Loan shall be suspended ( provided that, if requested by Borrower, such Lenders Ratable Share of the Loan shall automatically be converted to a Reference Rate Loan if doing so would enable such Lender to lawfully honor its obligation to maintain its Ratable Share of the Loan) until such time as such Lender may again make its Ratable Share of the Loan and Borrower shall, if required by applicable law, upon the request of such Lender, following receipt of an Affected/Non-Consenting Lender Notice make an election to replace such Affected/Non-Consenting Lender or pay the applicable Prepayment Amount in accordance with Section 2.2.9 (but without compensation to such Lender pursuant to Section 2.2.7 ). Notwithstanding the foregoing, such Lender shall, as promptly as practicable, designate a different Applicable Lending Office for the Loan if doing so would enable it to lawfully honor its obligation to maintain its Ratable Share of the Loan.
2.2.7 Breakage Costs . (a) Borrower agrees to compensate each Lender for any loss, cost or expense incurred by it as a result of (i) a default by Borrower in the payment of the principal or interest on the Loan, (ii) a default by Borrower in making any prepayment after such Borrower has given a notice thereof in accordance with the provisions of this Agreement (subject to Borrowers Prepayment Revocation and Modification Rights), (iii) the making of a prepayment (mandatory or optional) of a LIBOR Loan for any reason (including, without limitation, the acceleration of the maturity of the Loan pursuant to Section 9.2 ) on a day that is not the last day of an Interest Period with respect thereto, or (iv) the early termination of any
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swap or other interest rate hedging arrangements, including, without limitation, any such loss, cost or expense arising from the reemployment of funds obtained by it, from fees payable to terminate the deposits from which such funds were obtained or from reversing any swap or other interest rate hedging arrangements; provided, however that Borrower shall not be required to indemnify any Lender from any loss or expense arising from the applicable Lenders willful misconduct or gross negligence. In no event shall the compensation to be paid by Borrower under Section 2.2.7(a) be less than Five Hundred and 00/100 Dollars ($500.00) on each such occurrence.
(b) Each such Lender will furnish to Borrower a certificate setting forth the basis and amount of each request by Lender for compensation under this Section 2.2.7 , which certificate shall provide reasonable detail as to the calculation of such loss, cost or expense. Such certificate shall constitute prima facie evidence of the amount of such loss, cost or expense, which shall be calculated by such Lender on a reasonable and customary basis, consistent with the basis on which such calculations are then being made by similarly situated banks or financial institutions generally.
2.2.8 Taxes . (a) Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.2.8 ) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made. For the purpose of this Section 2.2.8 , the term Loan Documents shall not include the Interest Rate Protection Agreement, the Assignment of Interest Rate Protection Agreement or any other document with respect thereto, and the term applicable law shall include FATCA.
(b) Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of Agent timely reimburse it for the payment of, any Other Taxes.
(c) Borrower shall indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.2.8 ) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to Agent), or by Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error; provided, that Borrower will not be required to indemnify any Recipient pursuant to this Section 2.2.8(c) for any Indemnified Taxes (or any expenses
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arising therefrom) that such Recipient paid, or actually knew were payable or required to be withheld or deducted from a payment to such Recipient, more than one hundred eighty (180) days before such Recipient (or the Agent on its behalf) demands such indemnity pursuant to this Section 2.2.8(c) .
(d) Each Lender shall severally indemnify Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lenders failure to comply with the provisions of Section 10.25(m)(iii) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by Agent to the Lender from any other source against any amount due to Agent under this Section 2.2.8(d) .
(e) As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.2.8 , such Loan Party shall deliver to Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Agent.
(f) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and Agent, at the time or times reasonably requested by the Borrower or Agent, such properly completed and executed documentation reasonably requested by the Borrower or Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or Agent as will enable the Borrower or Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.2.8(f)(ii)(A) , Section 2.2.8(f)(ii)(B) and Section 2.2.8(f)(ii)(D) below) shall not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower:
(A) any Lender that is a United States person as defined in Section 7701(a)(30) of the Code shall deliver to the Borrower and Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from
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time to time thereafter upon the reasonable request of the Borrower or Agent) executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or Agent) whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the interest article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the business profits or other income article of such tax treaty;
(2) executed originals of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit 2.2.8 -1 to the effect that such Foreign Lender is not a bank within the meaning of Section 881(c)(3)(A) of the Code, a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a controlled foreign corporation described in Section 881(c)(3)(C) of the Code (a U.S. Tax Compliance Certificate ) and (y) executed originals of IRS Form W-8BEN; or
(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit 2.2.8-2 or Exhibit 2.2.8-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit 2.2.8-4 on behalf of each such direct and indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and Agent (in such number of copies as shall be
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requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or Agent) executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or Agent as may be necessary for the Borrower and Agent to (x) comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or (y) determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), FATCA shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and Agent in writing of its legal inability to do so.
(g) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.2.8 (including by the payment of additional amounts pursuant to this Section 2.2.8 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.2.8 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.2.8(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.2.8(g)) , in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.2.8(g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This Section 2.2.8(g) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
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(h) If any Lender requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to this Section 2.2.8 , then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different Applicable Lending Office for funding or booking the Loan or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to this Section 2.2.8 in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(i) Each partys obligations under this Section 2.2.8 shall survive the resignation or replacement of Agent or any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all obligations under any Loan Document.
2.2.9 Treatment of Affected/Non-Consenting Lender .
(a) If Agent, with respect to a Non-Consenting Lender, and/or any Lender (an Affected Lender ) gives notice to Borrower of the occurrence of the circumstances described in Section 2.2.4(a) , Section 2.2.4(c) , Section 2.2.6 or Section 11.4(d) (the Affected/Non-Consenting Lender Notice ), Borrower may, within seventy-five (75) days of receipt of such notice, give written notice (either a Replacement Notice or Prepayment Notice ) to Agent and the Affected Lender or Non-Consenting Lender, as applicable, of Borrowers intention to (i) replace the Affected Lender or Non-Consenting Lender, as applicable, with an Eligible Assignee designated in such notice and otherwise reasonably acceptable to Agent (a Replacement Lender ), or (ii) prepay the entire principal balance of the portion of the Loan held by such Affected Lender or Non-Consenting Lender, as applicable, together with (A) all accrued and unpaid interest with respect to the portion of the principal balance being prepaid to and including the date of such prepayment, (B) any amounts payable pursuant to Section 2.2.7 , and (C) all fees and expenses, including, without limitation, reasonable attorneys fees and disbursements, actually incurred by Agent and the applicable Lenders in connection with the prepayment, but specifically excluding any Spread Maintenance Premium which is payable (the Prepayment Amount ).
(b) If Borrower delivers a Replacement Notice, then unless the Affected Lender agrees, within ten (10) days of receipt of such Replacement Notice, to waive the application of Section 2.2.4(a) , Section 2.2.4(c) or Section 2.2.6 hereof or the Non-Consenting Lender agrees, within ten (10) days of receipt of such Replacement Notice, to consent to the applicable waiver, modification, consent or amendment in accordance with Section 11.4(d) , the Affected Lender or Non-Consenting Lender, as applicable, shall thereafter assign all of its rights and obligations under the Loan Documents and Co-Lender Agreement to the Replacement Lender and the Replacement Lender shall assume all of the Affected Lenders or Non-Consenting Lenders rights and obligations under the Loan Documents and the Co-Lender Agreement, as applicable, from and after the applicable date of transfer. In connection therewith, the Replacement Lender shall pay to the Affected Lender or Non-Consenting Lender, as applicable, the Prepayment Amount. Upon the effective date of such assignment, the Replacement Lender shall become a party to this Loan Agreement and the Co-Lender Agreement
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and shall have all the rights and obligations of a Lender hereunder and under the Co-Lender Agreement and the Affected Lender or Non-Consenting Lender, as applicable, shall be released from its obligations hereunder and under the Co-Lender Agreement from and after the date of such assignment, and no further consent or action by any party shall be required. Any Affected Lender or Non-Consenting Lender which is replaced as a Lender under this section shall remain entitled to the benefits of this Loan Agreement and the Co-Lender Agreement, including, without limitation, this section, in respect of the period prior to its replacement.
(c) If Borrower delivers a Prepayment Notice, then unless the Affected Lender agrees, within ten (10) days of receipt of such Prepayment Notice, to waive the application of Section 2.2.4(a) , Section 2.2.4(c) or Section 2.2.6 or the Non-Consenting Lender agrees, within ten (10) days of receipt of such Prepayment Notice, to consent to the applicable waiver, modification, consent or amendment pursuant to Section 11.4(d) , as applicable, Borrower shall have the right to pay the Prepayment Amount to such Affected Lender or Non-Consenting Lender, as applicable, and upon payment of such Prepayment Amount, such Affected Lender or Non-Consenting Lender, as applicable, shall no longer be a Lender hereunder or under the Co-Lender Agreement and shall have no rights or obligations hereunder or under the Co-Lender Agreement from and after the payment of such Prepayment Amount.
(d) Borrower shall complete any such assignment or prepayment pursuant to this Section 2.2.9 within ninety (90) days of Borrowers receipt of the Affected/Non-Consenting Lender Notice.
Section 2.3 Usury Savings.
This Agreement and the other Loan Documents are subject to the express condition that at no time shall Borrower be required to pay interest on the principal balance of the Loan at a rate which could subject Lenders to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Agent or Lenders for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.
Section 2.4 Loan Payments.
2.4.1 Payment Before Maturity Date . Borrower shall make a payment to Agent, for the Ratable benefit of the Lenders, of interest only at the Applicable Interest Rate on the Closing Date for the initial Accrual Period. On the Payment Date occurring in December, 2013 and on each Payment Date thereafter to and including the Maturity Date Borrower shall make a payment to Agent, for the Ratable benefit of the Lenders, of interest only at the Applicable Interest Rate; each payment to be calculated in the manner set forth in Section 2.2.1 .
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2.4.2 Payment on Maturity Date . Borrower shall pay to Agent the outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the Mortgage and the other Loan Documents on the Maturity Date.
2.4.3 Late Payment Charge . If any principal, interest or any other sum due under the Loan Documents (excluding the balloon payment due on the Maturity Date) is not paid by Borrower within two (2) Business Days of the date on which it is due, Borrower shall pay to Agent, for the Ratable benefit of the Lenders, upon demand an amount equal to the lesser of three percent (3%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Agent in handling and processing such delinquent payment and to compensate Lenders for the loss of the use of such delinquent payment. Any such amount shall be secured by the Mortgage and the other Loan Documents.
2.4.4 Interest Rate and Payment After Default. In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of the Loan and all other amounts due pursuant to the Loan Documents shall accrue interest at the Default Rate, calculated from the date the Default occurred which led to such an Event of Default without regard to any grace or cure periods contained herein.
2.4.5 Method and Place of Payment . (a) Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Agent not later than 2:00 p.m., New York City time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at Agents office, and any funds received by Agent after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day. Borrower shall use commercially reasonable efforts to make all Debt Service payments on or before 1:00 p.m., New York City time on the Payment Date; provided, that, so long as Agent receives Borrowers Debt Service payments prior to the close of business, New York City time on the Business Day immediately preceding the date upon which interest at the Default Rate and/or any late payment charge shall accrue, Agent shall not charge Borrower interest at the Default Rate or any late payment charge payable hereunder.
(b) Whenever any payment to be made hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the Applicable Interest Rate or the Default Rate, as the case may be, during such extension.
2.4.6 Forwarding of Payments by Agent Except as otherwise agreed by Agent and Lenders, each payment received by Agent under this Agreement or the Note for the account of any Lender shall be paid by Agent promptly to such Lender, in immediately available funds, for the Loan or other portion of the Debt in respect of which such payment is made.
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2.4.7 Ratable Shares Except to the extent otherwise provided herein: (a) the Loan shall be allocated Ratably among the Lenders according to the amounts of their Ratable Share; (b) each payment or prepayment of principal of the Loan by Borrower (including those made from Net Proceeds) shall be made Ratably for the account of the Lenders (subject to the terms of any Co-Lender Agreement); and (c) each payment of interest on the Loan by Borrower shall be made for the Ratable account of the Lenders (subject to the terms of the Co-Lender Agreement).
Section 2.5 Prepayment.
2.5.1 Voluntary Prepayments . (a) Agent, for the Ratable benefit and account of the Lenders, will accept a prepayment in whole or in part of the Loan during the Lockout Period if Borrower gives to Agent not less than twenty (20) days prior notice, which notice shall be irrevocable subject to Borrowers Prepayment Revocation and Modification Right, and concurrently with, and as a condition to, such prepayment, Borrower pays to Agent, for the Ratable benefit and account of the Lenders, (i) the Spread Maintenance Premium (if applicable) applied solely to the applicable portion of the principal balance of the Loan that is actually paid, (ii) all accrued and unpaid interest with respect to the portion of the principal balance being prepaid to and including the date of such prepayment; (iii) any amounts payable pursuant to Section 2.2.7 and Section 2.4.3 , (iv) any sums payable by Borrower to the Counterparty in connection with the early termination or partial termination of the Interest Rate Protection Agreement, and (v) all fees and expenses, including, without limitation, reasonable attorneys fees and disbursements, actually incurred by Agent and Lenders in connection with the prepayment.
(b) From and after the expiration of the Lockout Period, Borrower may prepay the Loan in whole or in part without premium or penalty, provided that Borrower gives to Agent not less than twenty (20) days prior notice, which notice shall be irrevocable subject to Borrowers Prepayment Revocation and Modification Right, and concurrently with, and as a condition to such prepayment, Borrower pays to Agent, for the Ratable benefit and account of the Lenders (i) all accrued and unpaid interest to and including the date of such prepayment, (ii) any amounts payable pursuant to Section 2.2.7 and Section 2.4.3 , (iii) any sums payable by Borrower to the Counterparty in connection with the early termination or partial termination of the Interest Rate Protection Agreement, and (iv) all fees and expenses, including, without limitation, reasonable attorneys fees and disbursements, incurred by Agent and Lenders in connection with the prepayment.
(c) In each instance of prepayment permitted under this Section 2.5.1 , no principal amount repaid may be reborrowed.
(d) Except as otherwise expressly permitted herein, the principal balance of the Note may not be prepaid in whole or in part.
(e) Notwithstanding anything to the contrary contained herein, Borrower shall have the right from time to time to revoke or modify any notice of prepayment; provided, that (a) Borrower provides notice to Agent of any such revocation or any modification which changes the amount to be prepaid at least two (2) Business Days prior to the proposed prepayment date
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and notice to Agent of any modification (other than with respect to the amount being prepaid) at any time prior to the proposed prepayment and (b) Borrower pays to Agent, for the Ratable benefit of the Lenders, all out-of-pocket costs and expenses actually incurred by Agent and the Lenders, including without limitation, expenses pursuant to Section 2.2.7 , as a result of any such modification or revocation, regardless of when such notice was provided to Agent (the Prepayment Revocation and Modification Right ).
2.5.2 Mandatory Prepayments . (a) On each date on which Agent actually receives a distribution of Net Proceeds and if Agent is not required to make such Net Proceeds available to Borrower for the Restoration of the Property pursuant to Section 5.3 , Agent may, in its sole and absolute discretion, elect to either make the Net Proceeds available for Restoration pursuant to Section 5.3 or use the Net Proceeds to prepay, without premium or penalty, including, without limitation, the Spread Maintenance Premium, the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Proceeds. Any prepayment received by Agent, for the Ratable benefit of the Lenders, pursuant to this Section 2.5.2 on a date other than a Payment Date shall be held by Agent as collateral security for the Loan in a non-interest bearing account and shall be applied by Agent on the next Payment Date.
(b) In addition, Borrower shall, at Agents option, prepay without premium or penalty, including, without limitation, the Spread Maintenance Premium, the principal balance of the Note in an amount equal to the amount required by Agent due to the enactment, adoption or amendment to applicable Legal Requirements in accordance with Section 5.3 of the Mortgage.
(c) Borrower shall not be required to pay any premium or penalty, including, without limitation, the Spread Maintenance Premium, in connection with any prepayment of the Loan by Borrower to terminate a Trigger Period.
(d) In each instance of prepayment under this Section 2.5.2 , Borrower shall be required to pay all other sums due hereunder (including under Section 2.2.7 and Section 2.4.3 ), and no principal amount repaid may be reborrowed.
2.5.3 Default Prepayment . If a Default Prepayment occurs, Borrower shall pay to Agent for the Ratable benefit of Lenders, the entire Debt, including, without limitation, if such Default Prepayment occurs during the Lockout Period, an amount equal to one percent (1%) of the Default Prepayment, in which case, the Spread Maintenance Premium shall not be payable.
2.5.4 Prepayment Waivers . Borrower acknowledges that the inclusion of the waiver of prepayment rights, the agreement to pay the Default Prepayment and the Spread Maintenance Premium, and the agreement to pay Agents and the Lenders costs and expenses in connection with a prepayment were separately negotiated with Agent, that the economic value of the various elements of this waiver and agreement were discussed and that the consideration given by Borrower for the Loan was adjusted to reflect the specific waiver and agreement negotiated between Borrower, Agent and Lenders and contained herein.
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Section 2.6 Payments Not Conditional.
All payments required to be made by Borrower hereunder or under the Note or the other Loan Documents shall be made irrespective of, and without deduction for, any setoff, claim or counterclaim and shall be made irrespective of any defense thereto.
III. | REPRESENTATIONS AND WARRANTIES |
Section 3.1 Borrower Representations .
Borrower represents and warrants that:
3.1.1 Organization . Borrower is duly organized, validly existing and in good standing with full power and authority to own its assets and conduct its business of owning and operating the Property and is duly qualified in all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such qualification. Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents by it, and has the power and authority to execute, deliver and perform under this Agreement, the other Loan Documents and all the transactions contemplated hereby.
3.1.2 Proceedings . This Agreement and the other Loan Documents have been duly authorized, executed and delivered by Borrower and constitute a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
3.1.3 No Conflicts . The execution and delivery of this Agreement and the other Loan Documents by Borrower and the performance of its obligations hereunder and thereunder (including, without limitation, payment and performance of its obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan)) will not conflict with any provision of any law or regulation to which Borrower is subject, or conflict with, result in a breach of, or constitute a default under, any of the terms, conditions or provisions of any of Borrowers organizational documents or any agreement or instrument to which Borrower is a party or by which it is bound, or any order or decree applicable to Borrower, or result in the creation or imposition of any lien on any of Borrowers assets or property (other than pursuant to the Loan Documents).
3.1.4 Litigation . Except as set forth on Schedule 3.1.4 , there are no actions, suits, proceedings or investigations pending or, to Borrowers knowledge, threatened against Borrower and/or the Property in any court or by or before any other Governmental Authority, or labor controversy affecting Borrower, or its properties, businesses, assets or revenues, individually or in the aggregate, that would reasonably be expected to have or does have a Material Adverse Effect.
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3.1.5 Governmental Orders . Borrower is not in default with respect to any order or decree of any court or any order, regulation or demand of any Governmental Authority, which default might have consequences that would reasonably be expected to have or does have a Material Adverse Effect.
3.1.6 Consents . No consent, approval, authorization or order of any court or Governmental Authority or other Person is required for the execution, delivery and performance by Borrower of, or compliance by Borrower with, this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby and thereby, other than those which have been obtained by Borrower.
3.1.7 Title . Borrower has good, marketable and insurable fee simple title to the real property comprising part of the Property and good title to the Personal Property, free and clear of all Liens whatsoever except the Permitted Encumbrances. The Mortgage, when properly recorded in the appropriate records and any Uniform Commercial Code financing statements required to be filed in connection therewith when so filed, will create (a) a valid, first priority, perfected Lien on the Property, subject only to Permitted Encumbrances and Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty to the extent a security interest may be perfected therein by the recording of the Mortgage or the filing of financing statements under the Uniform Commercial Code, all in accordance with the terms thereof, in each case subject only to any Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. Except for the Permitted Encumbrances, to Borrowers knowledge, there are no mechanics, materialmens or other similar Liens, claims or unpaid bills which have been filed for work, labor or materials affecting the Property which are or may be Liens prior to, or equal or coordinate with, the Lien of the Mortgage. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgage, this Agreement and the other Loan Documents, materially and adversely affect the value, use or operation of the Property or impair Borrowers ability to perform its obligations under the Loan Documents (including, without limitation, the payment and performance of its obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan)).
3.1.8 ERISA Matters . (a) Borrower is not an employee benefit plan, as defined in Section 3(3) of ERISA, subject to Title I of ERISA or a plan subject to Section 4975 of the Code, (b) none of the assets of Borrower constitutes plan assets of one or more such employee benefit plans or plans within the meaning of 29 C.F.R. Section 2510.3-101, (as modified by Section 3(42) of ERISA), (c) Borrower is not a governmental plan within the meaning of Section 3(32) of ERISA and (d) transactions contemplated under this Agreement by or with Borrower are not subject to state statutes applicable to Borrower with respect to governmental plans within the meaning of Section 3(32) of ERISA, which are substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect and which prohibit the transactions contemplated by this Agreement ( Similar Laws ).
(b) Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) Guarantor and each of its ERISA Affiliates is in
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compliance with the applicable provisions of ERISA and the provisions of the Code relating to Employee Benefit Plans and the regulations and published interpretations thereunder; (ii) no ERISA Event has occurred in the five-year period prior to the date on which this representation is made or deemed made or is reasonably expected to occur; and (iii) all amounts required by applicable law with respect to, or by the terms of, any retiree welfare benefit arrangement maintained by Guarantor or any ERISA Affiliate or to which Guarantor or any ERISA Affiliate has an obligation to contribute have been accrued in accordance with Statement of Financial Accounting Standards No. 106.
3.1.9 Compliance . Except as set forth in the Property Reports, Borrower and the Property and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances and codes. In addition, Borrower has obtained all material approvals, licenses, permits and franchises required by Governmental Authorities applicable to it and the Property. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which would reasonably be expected to have or does have a Material Adverse Effect. Borrower has not committed any act which may give any Governmental Authority the right to cause Borrower to forfeit the Property or any part thereof or any monies paid in performance of Borrowers obligations under any of the Loan Documents. Except as set forth in the Property Reports and as listed on Schedule 3.1.9 attached hereto and the matters addressed in Section 4.1.1 , Borrower has no knowledge of any violations or notices of violations of any Legal Requirements relating to Borrower and/or the Property. To Borrowers knowledge, all material easements, restrictions, covenants or operating agreements which benefit or burden the Property are in full force and effect, and there are no material defaults thereunder by any party thereto.
3.1.10 Financial and Other Information . All financial data, including, without limitation, the statements of cash flow and income and operating expense, if any, that have been delivered to Agent and/or Lenders in respect of the Property (a) are true, complete and correct in all material respects (or the same have been corrected by financial data subsequently delivered to Agent prior to the Closing Date), (b) fairly represent the financial condition of the Property as of the date of such reports, and (c) have been prepared in accordance with GAAP and the Uniform System of Accounts in all material respects throughout the periods covered, except as disclosed therein. The foregoing representation shall not apply to any such financial data that constitutes projections, provided that Borrower represents and warrants that such projections were made in good faith and that Borrower has no reason to believe that such projections are materially inaccurate. Except for Permitted Encumbrances, Borrower does not have any contingent liabilities, liabilities for Taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a materially adverse effect on the Property or the operation thereof, except as referred to or reflected in said financial statements. Since the date of the financial statements, there has been no material adverse change in any condition, fact, circumstance or event that would make the financial statements, reports, certificates or other documents submitted in connection with the Loan inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely, or is reasonably likely to materially and adversely affect, the Property, Borrower or its business, operations or condition (financial or otherwise). All documents furnished to Agent by or at the direction of Borrower, as part of or in support of the Loan application or pursuant to this Agreement or any of the other Loan
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Documents, are true, correct and complete and fairly represent the matters to which they pertain as of the dates made in all material respects and there have been no materially adverse changes with respect to such matters since the respective dates thereof. In addition, there is no fact or circumstance presently known to Borrower which has not been disclosed to Agent and which materially adversely affects, or is reasonably likely to materially adversely affect, the Property, Borrower or its business, operations or condition (financial or otherwise).
3.1.11 Condemnation . No Condemnation or other similar proceeding has been commenced or, to Borrowers knowledge, is contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property.
3.1.12 Utilities and Public Access . Except as set forth in the Title Insurance Policy, (a) the Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate for the development and operation of the Property for its intended uses and (b) all roads and streets necessary for the full utilization of the Improvements for their intended purpose have been completed and with respect to all roads and streets, the necessary rights of way therefor have either been acquired by the appropriate Governmental Authority or have been dedicated to public use and accepted by said Governmental Authority allowing for the use and operation of, and access to the Improvements.
3.1.13 Separate Lots . Except as set forth in the Title Insurance Policy, the Property is comprised of one (1) or more parcels that constitute separate tax lots and do not constitute a portion of any other tax lot not a part of the Property.
3.1.14 Assessments . Except as set forth in the Title Insurance Policy, there are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.
3.1.15 Enforceability . The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors rights and the enforcement of debtors obligations), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto.
3.1.16 Assignment of Leases . The Assignment of Leases creates a valid assignment of, or a valid security interest in, certain rights under the related Leases, to the extent that any Leases exist, subject only to a license granted to Borrower to exercise certain rights and to perform certain obligations of the lessor under such Leases, including the right to operate the Property. No Person other than Agent (on behalf of Lenders) has any interest in or assignment of the Leases or any portion of the Rents due and payable or to become due and payable thereunder.
3.1.17 Insurance . Borrower has obtained and has delivered to Agent original or certified copies of all of the Policies (or Acord 25, Acord 27 and Acord 28 certificates satisfactory to Agent evidencing the existence of the same), with all premiums prepaid
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thereunder, reflecting the insurance coverages, amounts and other requirements set forth in this Agreement. No claims have been made under any of the Policies, and no Person, including Borrower, has done, by act or omission, anything which would impair the coverage of any of the Policies.
3.1.18 Flood Zone . None of the Improvements on the Property are located in an area identified by the Federal Emergency Management Agency as a special flood hazard area.
3.1.19 Physical Condition . Except as disclosed in the Property Reports, (a) neither the Property nor any portion thereof is now damaged or injured as result of any fire, explosion, accident, flood or other Casualty, and (b) Borrower has not received written notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, in each case, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.
3.1.20 Boundaries . Except as set forth on the Survey, all of the Improvements which are located on the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvements on adjoining properties encroach upon the Property, and no easements or other encumbrances affecting the Property encroach upon any of the Improvements, which would reasonably be expected to have or does have a Material Adverse Effect except those which are insured against by the Title Insurance Policy.
3.1.21 Leases . The Property is not subject to any Leases other than the Leases described in the rent roll attached hereto as Schedule 3.1.21 and made a part hereof and, the rent roll is true, complete and accurate in all material respects as of the Closing Date; (b) except as set forth on Schedule 3.1.21 , the Leases identified on Schedule 3.1.21 are in full force and effect and Borrower has not received or delivered written notice that either party is in default under a Lease except for (i) defaults which have been cured and (ii) defaults that will not reasonably be expected to have, and do not have, in the aggregate, a Material Adverse Effect, (c) the copies of the Leases delivered to Agent are true and complete in all material respects, and there are no oral agreements with respect thereto; (d) no Rent (including security deposits) has been paid more than one (1) month in advance of its due date (except in connection with the reservation of rooms and banquet and meeting spaces and services in the ordinary course of business); (e) all work to be performed by Borrower under each Lease has been performed as required as of the date that this representation is being made and all such work has been accepted by the applicable Tenant; and (f) any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Borrower to any Tenant as of the date that this representation is being made has already been received by such Tenant. In addition, none of the apartments at the Property are subject to any rent control laws or regulations of the City or State of New York, or, to Borrowers knowledge, any rent stabilization laws or regulations of the City or State of New York.
3.1.22 Filing and Recording Taxes . All mortgage, mortgage recording, stamp, intangible, personal property or other similar Taxes required to be paid under applicable Legal Requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgage, have been paid or are being paid simultaneously herewith.
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3.1.23 Single Purpose .
(a) Borrower hereby represents with respect to Borrower that it:
(i) is and always has been duly formed, validly existing, and in good standing in the state of its incorporation and in all other jurisdictions where it is qualified to do business;
(ii) has no judgments or, except as set forth in the Title Insurance Policy, liens of any nature against it except for Tax liens not yet due;
(iii) is in compliance in all material respects with all laws, regulations, and orders applicable to it and, except as otherwise disclosed in this Agreement, has received all permits necessary for it to operate;
(iv) is not involved in any material dispute with any taxing authority other than any disputes for taxes that are being contested in good faith and in compliance with the terms hereof by appropriate proceedings;
(v) except as set forth in the Title Insurance Policy, has paid all Taxes and Property Taxes which it owes except as permitted pursuant to this Agreement other than any Taxes and Property Taxes that are being contested in good faith and in compliance with the terms hereof by appropriate proceedings;
(vi) has never owned any real property other than the Property and Personal Property necessary or incidental to its ownership or operation of the Property and has never engaged in any business other than the ownership and operation of the Property;
(vii) is not now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding that is still pending or that resulted in a judgment against it that has not been paid in full;
(viii) subject to Section 3.1.10 , has provided Agent with complete financial statements that reflect a fair and accurate view of the entitys financial condition;
(ix) intentionally omitted; and
(x) has no material contingent or actual obligations not related to the Property.
(b) Borrower hereby represents from the date of such entitys formation to the date of this Agreement that it:
(i) has not entered into any contract or agreement with any of its Affiliates, constituents, or owners, or any guarantors of any of its obligations or any Affiliate of any of the foregoing (individually, a Related Party and collectively, the Related
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Parties ), except upon terms and conditions that are commercially reasonable and substantially similar to those available in an arms-length transaction with an unrelated party, except as may have been expressly permitted pursuant to the terms of the 2007 Hilton financing that is no longer outstanding;
(ii) has paid all of its debts and liabilities from its assets or such debts and liabilities have been repaid or discharged as of the date hereof;
(iii) has done or caused to be done all things necessary to observe all organizational formalities applicable to it and to preserve its existence;
(iv) except as expressly permitted pursuant to the terms of the 2007 Hilton financing that is no longer outstanding, has maintained all of its books, records, financial statements and bank accounts separate from those of any other Person ;
(v) except as expressly permitted pursuant to the terms of the 2007 Hilton financing that is no longer outstanding, has not had its assets listed as assets on the financial statement of any other Person;
(vi) has been treated as a disregarded entity for U.S. federal income tax purposes;
(vii) has been, and at all times has held itself out to the public as, a legal entity separate and distinct from any other Person other than for tax purposes (including any Affiliate or other Related Party);
(viii) has corrected any known misunderstanding regarding its status as a separate entity;
(ix) has conducted all of its business and held all of its assets in its own name, except as expressly permitted pursuant to the terms of the 2007 Hilton financing that is no longer outstanding;
(x) has not identified itself or any of its affiliates as a division or part of the other for non-tax purposes;
(xi) has maintained and utilized separate stationery, invoices and checks bearing its own name;
(xii) except as expressly permitted pursuant to the terms of the 2007 Hilton financing that is no longer outstanding, has not commingled its assets with those of any other Person and has held all of its assets in its own name;
(xiii) except as expressly permitted pursuant to the terms of the 2007 Hilton financing that is no longer outstanding and except for guarantees or obligations that have been released or discharged or that will be released or discharged on the Closing Date, has not guaranteed or become obligated for the debts of any other Person and has not held itself out as being responsible for the debts or obligations of any other Person;
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(xiv) intentionally omitted;
(xv) has allocated fairly and reasonably any overhead expenses that have been shared with an Affiliate, including paying for office space and services performed by any employee of an Affiliate or Related Party;
(xvi) except pursuant to the 2007 Hilton financing which has been repaid or otherwise discharged, has not pledged its assets to secure the obligations of any other Person and no such pledge remains outstanding;
(xvii) has maintained adequate capital in light of its contemplated business operations; provided, however, that the foregoing did not and shall not require any partners, members or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(xviii) has maintained a sufficient number of employees in light of its contemplated business operations and has paid the salaries of its own employees from its own funds; provided, however, that the foregoing did not and shall not require any partners, members or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(xix) has not owned any subsidiary or any equity interest in any other entity;
(xx) has not incurred any indebtedness that is still outstanding other than indebtedness that is permitted under the Loan Documents; and
(xxi) has not had any of its obligations guaranteed by an Affiliate, except for guarantees that have been either released or discharged (or that will be discharged as a result of the closing of the Loan) or the Guaranty.
(c) Borrower hereby covenants that as of the date hereof and until such time as the Debt shall be paid in full:
(i) Borrower shall not own and will not own any asset or property other than (A) the Property and (B) incidental Personal Property necessary for the ownership or operation of the Property;
(ii) Borrower shall not engage in any business other than the ownership, management and operation of the Property and Borrower will conduct and operate its business as presently conducted and operated;
(iii) Except for capital contributions or capital distributions permitted under the terms and conditions of its organizational documents and properly reflected on its books and records and except as permitted pursuant to Section 4.2.6 and for any Affiliate Contracts, Borrower shall not enter into any contract or agreement with any Affiliate of Borrower, any constituent party of Borrower or any Affiliate of any constituent party, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties;
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(iv) Borrower shall not incur any Indebtedness, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation) other than (A) the Debt (including any indemnification obligations which expressly survive the repayment of the Loan), (B) Permitted Debt and (C) such other liabilities that are permitted pursuant to the terms of the Loan Documents; provided, however, the foregoing shall not require any partners, members, or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(v) Borrower shall not make any loans to any third party (including any Affiliate or constituent party), and shall not acquire obligations or securities of its Affiliates;
(vi) Borrower shall remain solvent and Borrower will pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due; provided, however, that the foregoing shall not require any partners, members, or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(vii) Borrower shall do all things necessary to observe organizational formalities and preserve its separate existence, and Borrower shall not, nor will Borrower permit any constituent party to, amend, modify or otherwise change the operating agreement or other organizational documents of Borrower without the prior consent of Agent in any manner that (A) violates the single purpose covenants set forth in this Section 3.1.23 or (B) amends, modifies or otherwise changes any provision thereof that by its terms cannot be modified at any time when the Loan is outstanding or by its terms cannot be modified without Agents consent;
(viii) Borrower shall maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates and any constituent party. Borrowers assets will not be listed as assets on the financial statement of any other Person, provided , however , that Borrowers assets may be included in a consolidated financial statement of its Affiliates provided that (A) appropriate notation shall be made on such consolidated financial statements to indicate the separateness of Borrower and such Affiliates and to indicate that Borrowers assets and credit are not available to satisfy the debts and other obligations of such Affiliates or any other Person and (B) such assets shall be listed on Borrowers own separate balance sheet Borrower shall maintain its books, records, resolutions and agreements as official records;
(ix) Borrower shall be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of Borrower or any constituent party of Borrower), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other and shall maintain and utilize a separate telephone number and separate stationery, invoices and checks bearing its own name, except, in the case of each of the foregoing, for Tax purposes;
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(x) Borrower shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; provided; however, that the foregoing shall not require any partners, members or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(xi) Neither Borrower nor any constituent party shall seek or effect the liquidation, dissolution, winding up, consolidation or merger, in whole or in part, of Borrower or transfer, sell or otherwise dispose of all or substantially all of its assets;
(xii) Except as contemplated by the Loan Documents and Management Agreement with respect to Manager (but subject to Section 7.1 hereof), Borrower shall not commingle the funds and other assets of Borrower with those of any Affiliate or constituent party or any other Person, and will hold all of its assets in its own name;
(xiii) Borrower shall maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party or any other Person;
(xiv) Borrower shall not guarantee or become obligated for the debts of any other Person and does not and will not hold itself out to be responsible for or have its credit available to satisfy the debts or obligations of any other Person;
(xv) Except as contemplated by the Management Agreement, Borrower shall not permit any Affiliate or constituent party independent access to its bank accounts;
(xvi) Borrower shall pay the salaries of its own employees (if any) from its own funds and maintain a sufficient number of employees (if any) in light of its contemplated business operations; provided; however, that the foregoing shall not require any partners, members or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(xvii) Borrower shall compensate each of its consultants and agents from its funds for services provided to it and pay from its own assets all obligations of any kind incurred; provided, however, that the foregoing shall not require any partners, members or other owners of Borrower to make (or restrict them from making) additional capital contributions to Borrower;
(xviii) Intentionally omitted;
(xix) Borrower shall allocate fairly and reasonably any overhead expenses that are shared with an affiliate, including for shared office space and for services performed by an employee of an affiliate;
(xx) Borrower shall not pledge its assets to secure the obligations of any other Person;
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(xxi) Borrower shall not buy or hold evidence of Indebtedness issued by any other Person (other than cash or investment-grade securities);
(xxii) Borrower shall not form, acquire or hold any subsidiary (whether corporate, partnership, limited liability company or other) or own any equity interest in any other entity; and
(xxiii) Borrower shall not have any of its obligations guaranteed by an Affiliate; except as permitted by the Loan Documents with respect to the Guaranty.
(d) (i) If Borrower is a limited partnership or a limited liability company, (other than a single member limited liability company), each general partner or managing member (each, an SPC Party ) shall be a corporation owning at least a .0.10% general partnership or membership interest, as applicable, whose sole asset is its interest in Borrower and each such SPC Party will at all times comply, and will cause Borrower to comply, with each of the representations, warranties, and covenants contained in this Section 3.1.23 as if such representation, warranty or covenant was made directly by such SPC Party. Upon the withdrawal or the disassociation of an SPC Party from Borrower, Borrower shall immediately appoint a new SPC Party whose articles of incorporation are substantially similar to those of such SPC Party.
(ii) If Borrower is a single member limited liability company, Borrower shall have at least two springing members, one of which, upon the dissolution of such sole member or the withdrawal or the disassociation of the sole member from Borrower, shall immediately become the sole member of Borrower, and the other of which shall become the sole member of Borrower if the first such springing member no longer is available to serve as such sole member.
(e) Borrower shall at all times cause there to be at least two (2) duly appointed Independent Directors. The term Independent Director means an individual who has prior experience as an independent director, independent manager or independent member with at least three (3) years of employment experience and who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional Independent Directors, another nationally-recognized company reasonably approved by Agent, in each case that is not an Affiliate of Borrower and that provides professional Independent Directors and other corporate services in the ordinary course of its business, and which individual is duly appointed as an Independent Director and is not, and has never been, and will not while serving as Independent Director be, any of the following:
(i) a member, partner, equityholder, manager, director, officer or employee of Borrower or SPC Party, as applicable, or any of their respective equityholders or Affiliates (other than as an Independent Director of the Borrower or SPC Party, as applicable, or an Affiliate of Borrower or SPC Party, as applicable, that is not in the direct chain of ownership of Borrower and SPC Party and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such Independent Director is employed by a company that routinely provides professional Independent Directors or managers in the ordinary course of its business);
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(ii) a creditor, supplier or service provider (including provider of professional services) to Borrower or SPC Party, as applicable, or any of their respective equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Directors and other corporate services to Borrower or SPC Party, as applicable or any of its Affiliates in the ordinary course of its business);
(iii) a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or
(iv) a Person that Controls (whether directly, indirectly or otherwise) any of (i) , (ii) or (iii) above.
A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (i) by reason of being the Independent Director of a special purpose entity affiliated with Borrower or SPC Party, as applicable, shall be qualified to serve as an Independent Director of Borrower or SPC Party, as applicable, provided that the fees that such individual earns from serving as an Independent Director of affiliates of the Borrower or SPC Party, as applicable, in any given year constitute in the aggregate less than five percent (5%) of such individuals annual income for that year. For purposes of this paragraph, a special purpose entity is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entitys separateness that are substantially similar to the single purpose covenants set forth in Section 3.1.23(c) through (d) .
(f) Borrower or SPC Party, as applicable, shall not, without the prior unanimous written consent of all Independent Directors, take any Material Action, provided , however , that the Borrowers or SPC Partys, as applicable, board of directors may not vote on, or authorize the taking of, any Material Action, unless there are at least two (2) Independent Directors then serving in such capacity. The term Material Action means to file any insolvency, or reorganization case or proceeding, to institute proceedings to have Borrower or SPC Party be adjudicated bankrupt or insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under any law relating to relief from debts or the protection of debtors, to consent to the filing or institution of bankruptcy or insolvency proceedings against Borrower or SPC Party, to file a petition seeking, or consent to, reorganization or relief with respect to Borrower or SPC Party under any applicable federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or for Borrower or SPC Party or a substantial part of its property, to make any assignment for the benefit of creditors of Borrower or SPC Party, to admit in writing Borrowers or SPC Partys inability to pay its debts generally as they become due, or to take action in furtherance of any of the foregoing.
3.1.24 Taxes . The Borrower is treated as a partnership or a disregarded entity for U.S. federal income tax purposes. Each Loan Party has timely filed or caused to be filed all Tax returns and reports required to have been filed by it and has paid or caused to be paid all U.S. federal and other material Taxes required to have been paid by it, except Taxes which are being contested in compliance with Borrowers Contest Right. There are no Liens for Taxes and no claim is being asserted with respect to Taxes, except for statutory Liens for Taxes not yet due and payable or for Taxes the amount or validity of which are currently being contested in good faith by appropriate proceedings and, in each case, with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower.
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3.1.25 Solvency . Borrower (a) has not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations to pay the Debt and perform such obligations which constitute Debt (including any indemnification obligations which expressly survive the repayment of the Loan) under the Loan Documents. Giving effect to the Loan, the fair saleable value of Borrowers assets exceeds and will, immediately following the making of the Loan, exceed Borrowers total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrowers assets is and will, immediately following the making of the Loan, be greater than Borrowers probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured. Borrowers assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur Indebtedness and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower).
3.1.26 Federal Reserve Regulations . No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents.
3.1.27 Affiliate Debt . There is no Affiliate Debt owed or outstanding.
3.1.28 Offices; Location of Books and Records . The chief executive office or chief place of business of Borrower is McLean, Virginia. The jurisdiction of organization (as such terms are used in Revised Article 9 of the UCC as in effect in the state in which the Property is located from time to time) of Borrower is Delaware and Borrowers federal employer identification number is 26-1125786. Borrower is duly organized, validly existing and in good standing in the State of Delaware and is authorized to do business in the State of New York. Borrowers books of accounts and records are located at its chief executive office or the chief place of business.
3.1.29 Trade Name; Other Intellectual Property . Borrower does not own any intellectual property and the use of all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights as Borrower considers necessary for the conduct of its business as now conducted (collectively, the Property IP ) is granted pursuant to the Management Agreement. The Manager has been granted a non-exclusive license to use the Property IP pursuant to the Manager License Agreement, dated as of October 24, 2007, between HLT Domestic IP LLC and Manager (the Manager License Agreement ), which agreement is in full force and effect and, to Borrowers knowledge, no default exists thereunder.
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3.1.30 No Default . No Default or Event of Default exists.
3.1.31 Intentionally Omitted .
3.1.32 Full and Accurate Disclosure . To Borrowers knowledge, no information contained in this Agreement, the other Loan Documents, or any written statement furnished by or at the direction of Borrower or Guarantor pursuant to the terms of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. To Borrowers knowledge, there has been no material adverse change in any condition, fact, circumstance or event that would make the financial statements, rent rolls, reports, certificates or other documents submitted by or at the direction of Borrower or Guarantor in connection with the Loan inaccurate, incomplete or otherwise misleading in any material respect or that otherwise would reasonably be expected to have or does have a Material Adverse Effect. In addition, there is no fact or circumstance presently known to Borrower which has not been disclosed to Agent and which would reasonably be expected to have or does have a Material Adverse Effect.
3.1.33 Foreign Person . Borrower is not a foreign person within the meaning of Section 1445(f)(3) of the Code.
3.1.34 Investment Company Act . Borrower is not (a) an investment company or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended; or (b) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.
3.1.35 Organizational Structure . Borrowers organizational structure is accurately reflected on its organizational chart, which is annexed hereto as Schedule 3.1.35 .
3.1.36 Management Agreement . The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder.
3.1.37 Indebtedness . Borrower has no Indebtedness, other than Indebtedness permitted pursuant to Section 3.1.23(c)(iv) .
3.1.38 ADA . Except as otherwise disclosed in the Property Condition Report, the Property complies in all material respects with the ADA requirements applicable to the Property.
3.1.39 FF&E . The Borrower owns all FF&E necessary to operate the Property as a hotel, except for certain equipment leased by Borrower in the ordinary course of business. As of the Closing Date, the Manager shall be holding $-0- in a FF&E reserve account with respect to the Property.
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3.1.40 USA Patriot Act Compliance. Neither Borrower, Guarantor, nor any of their respective Affiliates who are owners of a direct or indirect legal, beneficial or economic ownership interest in Borrower (a) is listed on any Government Lists, (b) is a Person who has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC (as defined below) or in any enabling legislation or other Presidential Executive Orders in respect thereof, or (c) has been previously indicted for or convicted of any Patriot Act Offense (as defined below). For purposes hereof, the term Patriot Act Offense means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (i) the criminal laws against terrorism, (ii) the criminal laws against money laundering, (iii) the Bank Secrecy Act, as amended, (iv) the Money Laundering Control Act of 1986, as amended, or (v) the USA Patriot Act. Patriot Act Offense also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense. For purposes hereof, the term Government Lists means (A) the Specially Designated Nationals and Blocked Persons Lists maintained by Office of Foreign Assets Control ( OFAC ), (B) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Agent notified Borrower in writing is now included in Governmental Lists, or (C) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other government authority or pursuant to any Executive Order of the President of the United States of America that Lender notified Borrower in writing is now included in Governmental Lists.
3.1.41 Anti-Terrorism Compliance. No portion of the proceeds of the Loan will be used, are needed, or will be invested by the Borrower or any Affiliate of Borrower in order to support international terrorism or activities that may contravene U.S. federal, state or other Governmental Authoritys anti-money laundering laws, rules and regulations or German or European Union anti-money laundering laws and regulations.
3.1.42 German Anti-Money Laundering Compliance. Each of Borrower, Guarantor, and their respective Affiliates who are owners of a direct or indirect legal, beneficial or economic ownership interest in Borrower is acting solely for its own account and not for the account or upon the initiative ( Veranlassung ) of any economic beneficiary ( wirtschaftlich Berechtigter ) within the meaning of Section 1 (6) of the German Money Laundering Act ( Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz) ) of the Loan, i.e., no natural person owns, directly or indirectly, more than twenty-five percent (25%) of a beneficial interest or voting interest in Borrower.
3.1.43 Labor Matters. Borrower does not currently have any employees. The Management Agreement and the CBA are the only agreements entered into by Borrower relating to the provision of workforce services for the Property.
3.1.44 No Registration. Except for the recordation of the Mortgage and the Assignment of Leases and the recordation and/or filing of any Uniform Commercial Code financing statements required by Agent in connection with the Loan, it is not necessary to file, register or record any Loan Documents in any public place or elsewhere.
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3.1.45 No Other Business. As of the Closing Date, (a) Borrower is not a party to any material agreement other than the Loan Documents, the Management Agreement, the CBA, its organizational documents and the Leases (it being understood that service contracts entered into in the ordinary course of business shall not be deemed material agreements), and (b) Borrower does not have any subsidiaries.
Section 3.2 Continuing Effectiveness and Survival of Representations . All representations and warranties of Borrower set forth in Section 3.1 of this Agreement and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as Borrower remains indebted to Lenders but have only been made by Borrower as of the date hereof. The representations and warranties set forth in Section 3.1 shall survive, and any covenants contained in Section 3.1 shall continue, for so long as any amount remains payable to Agent and/or Lenders under this Agreement or any of the other Loan Documents.
IV. | BORROWER COVENANTS |
Section 4.1 Borrower Affirmative Covenants.
Borrower hereby covenants and agrees that:
4.1.1 Existence; Compliance with Legal Requirements . Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it and the Property, including, without limitation, Prescribed Laws. Within six (6) months subsequent to the Closing Date, Borrower shall use commercially reasonable efforts to cure those violations set forth on Schedule 3.1.9 and, within nine (9) months of the Closing Date, Borrower shall have Borrower named as an owner on each of the liquor licenses with respect to the Property required by Legal Requirements. In addition, Borrower shall, at all times during the term of the Loan, have an effective Certificate of Occupancy in place with respect to the Property.
4.1.2 Property Taxes and Other Charges . Borrower shall pay all Property Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof as the same become due and payable and Borrower shall furnish to Agent receipts for the payment of the Property Taxes and the Other Charges at least ten (10) days prior to the date the same shall become delinquent. Notwithstanding the foregoing, Borrower may, at its own expense, exercise Borrowers Contest Right with respect to any Property Taxes and Other Charges. Borrower shall not permit or suffer and shall promptly discharge any Lien (other than Permitted Encumbrances) against the Property, by payment, bonding or otherwise and, to the extent that such Lien was bonded and not discharged, within sixty (60) days after the Lien was bonded and as reasonably requested by Agent thereafter (but no more frequently than once every sixty (60) days), Borrower shall consult with Agent regarding the status of such Lien.
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4.1.3 Taxes. The Borrower will be treated as a partnership or a disregarded entity for U.S. federal income tax purposes. Each Loan Party will timely file or cause to be filed all Tax returns and reports required to be filed by it and will pay or cause to be paid all U.S. federal and other material Taxes required to be paid by it, except Taxes that are being contested in compliance with Borrowers Contest Right.
4.1.4 Notifications . Borrower shall give prompt written notice to Agent of: (a) any litigation or governmental proceedings pending or threatened in writing against any Loan Party to the extent that the same may have a Material Adverse Effect; (b) any material adverse change in Borrowers condition, financial or otherwise (other than changes which generally affect the hospitality industry, financial markets or the United States or New York economy); (c) the occurrence of any Default or Event of Default and the applicable Loan Partys proposed remedial action with respect thereto; (d) any action threatened or pending against any Loan Party under ERISA to the extent that the same is reasonably likely to or does have a Material Adverse Effect; and (e) any material adverse change in Guarantors condition, financial or otherwise (other than changes which generally affect the hospitality industry, financial markets or the United States or New York economy) which would be reasonably likely to have a material adverse effect on Guarantors ability to perform its obligations under the Guaranty.
4.1.5 Access to Property . Subject to the rights of Tenants, guests and patrons, Borrower shall permit agents, representatives and employees of the Lead Arrangers to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice and, provided that no Event of Default then exists, Lead Arrangers shall not charge Borrower for Lead Arrangers costs and expenses with respect thereto.
4.1.6 Further Assurances; Supplemental Mortgage Affidavits . Borrower shall, at Borrowers sole cost and expense:
(a) execute and deliver to Agent such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the collateral (including, without limitation, Agents first priority security interest therein) at any time securing or intended to secure the Debt, as Agent may reasonably require;
(b) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Agent shall reasonably require from time to time; and
(c) furnish to Agent all instruments, documents, certificates, plans and specifications, existing appraisals, title and other insurance, reports and agreements and each and every other document and instrument required to be furnished by the terms of this Agreement or the other Loan Documents, all at Borrowers reasonable expense; provided, that, the foregoing shall not require Borrower to obtain updated appraisals after the Closing Date unless specifically required by the terms of this Agreement.
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4.1.7 Financial Reporting . (a) Borrower shall keep and maintain or will cause to be kept and maintained proper and accurate books and records, in accordance with the Uniform System of Accounts and reconciled in accordance with GAAP (or such other accounting basis acceptable to Agent), reflecting the financial affairs of Borrower. Agent shall have the right from time to time during normal business hours upon reasonable notice to Borrower to examine such books and records at the office of Borrower or other Person maintaining such books and records and to make such copies or extracts thereof as Agent shall desire.
(b) Borrower shall furnish Agent annually, within one hundred twenty (120) days following the end of each Fiscal Year, a complete copy of Borrowers unaudited annual financial statements prepared by Borrower in accordance with the Uniform System of Accounts and reconciled in accordance with GAAP, including, without limitation, (i) a detailed balance sheet, (ii) an income statement and (iii) a contingent liability schedule. Borrowers financial statements delivered pursuant to this Section 4.1.7(b) shall be accompanied by an Officers Certificate stating that such financial statements present fairly the financial condition and the results of operations of Borrower and that such financial statements are true, complete and materially correct.
(c) Borrower shall furnish Agent annually, within one hundred twenty (120) days following the end of each Fiscal Year, a complete copy of Guarantors annual financial statements audited by an Approved Accountant and prepared in accordance with GAAP, including, without limitation, (i) a detailed balance sheet, (ii) an income statement, (iii) a contingent liability schedule, (iv) a list of the addresses of the real property then owned by Guarantor and (v) a statement of Guarantors Net Worth (as defined in the Guaranty) (inclusive of the Property). Guarantors financial statements delivered pursuant to this Section 4.1.7(c) shall be accompanied by an Officers Certificate (A) certifying that Guarantor has a Net Worth (as defined in the Guaranty) of at least the Required Minimum Net Worth (as defined in the Guaranty), (B) stating that such financial statements present fairly the financial condition and the results of operations of Guarantor and that such financial statements are true, complete and materially correct and (C) certifying as of the date thereof whether to the best of such Guarantors knowledge there exists an event or circumstance which constitutes a Default or Event of Default by Guarantor under the Guaranty and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same.
(d) Borrower shall furnish Agent on or before the forty-fifth (45th) day after the end of each fiscal quarter (based on a Fiscal Year), an Officers Certificate setting forth a calculation reflecting the NOI, Gross Revenue, Operating Expenses and the Debt Yield as of the last day of such quarter, for such quarter and the last four quarters, as well as certifying as of the date thereof whether, to the best of Borrowers knowledge, there exists a Default or Event of Default by Borrower under the Loan Documents and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same.
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(e) Borrower will furnish to Agent within forty-five (45) days following the end of each calendar month, the following items:
(i) monthly and year-to-date unaudited financial statements of Borrower, including, without limitation, (a) a detailed balance sheet, (b) an income statement and (c) a contingent liability schedule; and
(ii) copies of the STAR reports for the Property.
(f) Intentionally Omitted.
(g) With respect to Major Leases only, Borrower shall promptly provide Agent with a copy of any notice received from a Tenant under a Major Lease threatening non-payment of Rent or other default, alleging or acknowledging a default by landlord, requesting a termination of a Major Lease or a material modification of any Major Lease or notifying Borrower of the exercise or non-exercise of any option provided for in such Tenants Major Lease, or any other similar material correspondence received by Borrower from Tenants under Major Leases.
(h) Agent hereby acknowledges receipt of the Annual Budget for the remainder of the Fiscal Year ending December 31, 2013. Borrower shall submit the Annual Budget to Agent for information only prior to the commencement of each Fiscal Year; provided, that, at any time that a Trigger Period exists or an Event of Default exists, the Annual Budget shall be subject to the approval of Agent, which approval shall not be unreasonably withheld, conditioned or delayed (each such Annual Budget, an Approved Annual Budget ). If Borrower or Manager, if applicable, shall materially change or modify the Approved Annual Budget during a Trigger Period or the existence of an Event of Default, Borrower shall deliver to Agent an amended Annual Budget reflecting such change or modification for Agents consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Agent shall not withhold its consent with respect to (i) expenditures necessary to comply with life, health or safety matters and (ii) Employment Costs (as such term is defined in the Management Agreement) with respect to employees of the Manager who do work with respect to the Property. If Borrower shall fail to deliver the Annual Budget and/or obtain Agents approval with respect thereto as required pursuant to this Section 4.1.7(h) , the most recently Approved Annual Budget shall be used by Borrower for operation of the Property; provided that, each line item of such Approved Annual Budget shall be increased by the greater of (i) 5% and (ii) the amount of the increase, if any, in the Consumer Price Index for the immediately preceding calendar year (other than the line items in respect of Taxes, Insurance Premiums, union wages, utilities expenses and Other Charges, which line items shall be adjusted to reflect actual increases in such expenses). If Borrower has submitted the Annual Budget for approval to the extent required pursuant to this Section 4.1.7(h) , and there exists a dispute between Borrower and Agent with respect to one (1) or more of the line items thereon, each disputed line item shall be increased by the greater of (i) 5% and (ii) the amount of the increase, if any, in the Consumer Price Index for the immediately preceding calendar year (other than the line items in respect of Taxes, Insurance Premiums, union wages, utilities expenses and Other Charges, which line items shall be adjusted to reflect actual increases in such expenses). So long as neither a Trigger Period exists nor an Event of Default has occurred and is continuing, any Annual Budget, and any amendments or modifications thereto shall be deemed an Approved Annual Budget, and Agent shall have no approval right with respect thereto. In the event that Borrower is required to submit an Annual Budget or any amendment or modification thereof for approval pursuant to
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this Section 4.1.7(h) , each such request for approval shall contain the following in capitalized bold letters on the top of the cover page stating: THIS IS A REQUEST FOR CONSENT TO [THE ANNUAL BUDGET][A MODIFICATION TO THE ANNUAL BUDGET] WITH RESPECT TO THE WALDORF=ASTORIA NYC. AGENTS RESPONSE IS REQUESTED WITHIN TEN (10) DAYS. AGENTS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN BORROWERS RIGHT TO DELIVER A SECOND NOTICE . Each such request shall include the proposed Annual Budget or amendments thereto. In the event that Agent fails to grant or withhold its approval and consent to such Annual Budget or amendment thereto within such ten (10) day period, then Borrower may send a second request to Agent which shall contain a legend in capitalized bold letters on the top of the cover page stating: THIS IS A REQUEST FOR CONSENT TO [THE ANNUAL BUDGET] [A MODIFICATION TO THE ANNUAL BUDGET] WITH RESPECT TO THE WALDORF=ASTORIA NYC. AGENTS RESPONSE IS REQUESTED WITHIN TEN (10) DAYS. AGENTS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN AGENTS CONSENT BEING DEEMED TO HAVE BEEN GRANTED . In the event that Agent fails to grant or withhold its approval and consent to the applicable request within such ten (10) day period (and, in the case of a withholding of consent, stating the grounds therefor in reasonable detail), Agents approval and consent shall be deemed to have been granted. In the event that Agent timely disapproves of any line item in a proposed Annual Budget in accordance with the foregoing, Borrower shall promptly revise such line item in the Annual Budget and resubmit the same to Agent (and each such resubmittal shall be subject to the provisions of this Section 4.1.7(h) as if the applicable proposed Annual Budget were being submitted to Agent for its initial review of the same, provided that the aforesaid ten (10) day periods shall each be five (5) days in connection with any such resubmittal). Borrower shall promptly revise each disputed line item in the proposed Annual Budget and resubmit the same to Agent in accordance with the foregoing until Agent approves the disputed line item in the proposed Annual Budget. Any line items not specifically disapproved by Agent shall be deemed approved.
(i) Borrower shall furnish to Agent, within five (5) Business Days after request (or as soon thereafter as may be reasonably possible), such further detailed information with respect to the operation of the Property and the financial affairs of Borrower as may be reasonably requested by Agent, provided that the same is consistent with industry standards. Notwithstanding the foregoing, to the extent that any such requested information shall require in excess of five (5) Business Days to prepare, Borrower shall provide the same to Agent as soon as reasonably practical but in no event later than thirty (30) days after such request.
4.1.8 Title to the Property . Borrower will warrant and defend the validity and priority of the Lien of the Mortgage and the Assignment of Leases on the Property, and the Lien created pursuant to Section 6.2 against the claims of all Persons whomsoever, subject with respect to the Property only to Permitted Encumbrances.
4.1.9 Estoppel Statement . (a) After request by Agent, Borrower shall within ten (10) days furnish Agent with a statement, duly acknowledged and certified, stating (i) the unpaid principal amount of the Note, (ii) the Applicable Interest Rate of the Note, (iii) the date installments of interest and/or principal were last paid on the Note, (iv) any offsets or defenses to the payment of the Debt and performance of Borrowers obligations hereunder which constitute
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the Debt, if any, and (v) that this Agreement and the other Loan Documents have not been modified or if modified, giving particulars of such modification; provided , however, that so long as no Event of Default has occurred and is continuing, Borrower shall not be required to provide such certificates more than two (2) times in any calendar year.
(b) Borrower shall use commercially reasonable efforts to deliver to Agent, upon request, tenant estoppel certificates from each commercial Tenant party to a Major Lease at the Property (subject to the terms of such Major Lease); provided , however, that so long as no Event of Default has occurred and is continuing, Borrower shall not be required to seek such certificates more frequently than two (2) times in any calendar year.
4.1.10 Leases . (a) Subject to subsection (b) below, Borrower may enter into any Lease, exercise all extensions and renewals and enter into any modification, amendments, assignments and supplements to any Leases without the prior approval of Agent, provided that, any new Lease and all modifications, amendments and supplements to any Lease executed after the date hereof (each, a New Lease ) shall (i) provide for rental rates comparable to existing local market rates for similar properties; provided, however, that so long as no Trigger Period is in effect, a Lease of commercial space (A) demising less than 5,000 square feet or (B) with respect to the spa located at the Property (so long as the same relates to a spa with a square footage no greater than the square footage of the spa on the Closing Date), in each case, with a term of less than five (5) years may be made on lower than market rate terms with a Tenant who is not an Affiliate of Borrower if Borrower reasonably determines in its prudent business judgment that such Lease will provide additional incremental revenue to the Property in excess of its stated rent, (ii) be on commercially reasonable terms, (iii) provide that such Lease is subordinate to the Mortgage and that, upon the foreclosure of the Mortgage, sale by power of sale thereunder or deed-in-lieu of foreclosure, the Tenant will attorn to the transferee of the Property; provided , that with respect to any approval (or deemed approval) by Agent, Agent shall, upon request of Borrower, enter into a subordination, non-disturbance and attornment agreement with any lessee entering into such Lease in accordance with the provisions of Section 4.1.10(f) , (iv) not contain any terms which would materially adversely affect Agents and/or Lenders rights under the Loan Documents, (v) shall not grant the Tenant any option to purchase, right of first offer or right of refusal or other preemptive right to acquire all or any portion of the Property, and (vi) shall be on an arms length basis with a bona-fide third party. Notwithstanding the foregoing, Borrower may enter into one or more New Leases with Affiliates of Borrower, provided that any such New Lease complies with the requirements set forth in subsection (i) through (v) above and such New Lease, together with any other Lease to an Affiliate of Borrower shall not exceed 7,500 square feet in the aggregate. To the extent that Agents consent is required in connection with a New Lease under Section 4.1.10(a) , such consent shall not be unreasonably withheld, conditioned or delayed.
(b) All Major Leases and all material amendments, supplements, extensions, restatements, expansions and modifications thereof ( Major Lease Modification ) executed after the date hereof shall, prior to execution, be subject to Agents approval, not to be unreasonably withheld. Borrower shall not permit or consent to the assignment of any Major Lease without Agents prior consent unless and except (i) to the extent the right to assign without Borrowers consent is already reserved to the Tenant thereunder in any Major Lease in existence on the date of this Agreement and there has been no amendment to such Major Lease during the
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term of this Loan which was entered into without the consent of Agent as required pursuant to the provisions hereof or (ii) if the existing Tenant shall not be released from its obligations under such Major Lease from and after any such assignment. Each request for approval and consent of a New Lease which does not meet the requirements of subsection (a) hereof, a Major Lease, a Major Lease Modification or assignment of a Major Lease shall contain a legend in capitalized bold letters on the top of the cover page stating: THIS IS A REQUEST FOR CONSENT TO A [NEW LEASE][MAJOR LEASE] [MAJOR LEASE MODIFICATION][ASSIGNMENT OF A MAJOR LEASE] WITH RESPECT TO THE WALDORF=ASTORIA NYC. AGENTS RESPONSE IS REQUESTED WITHIN TEN (10) DAYS. AGENTS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN BORROWERS RIGHT TO DELIVER A SECOND NOTICE . Each such request shall include the following documentation with such request: (i) the applicable New Lease, Major Lease, Major Lease Modification or assignment document, as applicable, and (ii) all other materials reasonably necessary in order for Agent to evaluate such New Lease, Major Lease, Major Lease Modification or assignment. In the event that Agent fails to grant or withhold its approval and consent to such Lease, Major Lease, Major Lease Modification or assignment within such ten (10) day period, then Borrower may send a second request to Agent which shall contain a legend in capitalized bold letters on the top of the cover page stating: THIS IS A REQUEST FOR CONSENT TO A [NEW LEASE][MAJOR LEASE] [MAJOR LEASE MODIFICATION][ASSIGNMENT OF MAJOR LEASE] WITH RESPECT TO THE WALDORF=ASTORIA NYC. AGENTS RESPONSE IS REQUESTED WITHIN FIVE (5) BUSINESS DAYS. AGENTS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN AGENTS CONSENT BEING DEEMED TO HAVE BEEN GRANTED . In the event that Agent fails to grant or withhold its approval and consent to the applicable request within such five (5) Business Day period (provided that Borrower has provided to Agent all information reasonably requested by Agent to make such determination) (and, in the case of a withholding of consent, stating the grounds therefor in reasonable detail), Agents approval and consent shall be deemed to have been granted. Notwithstanding the foregoing, Agents consent shall not be required in connection with (i) any Lease (or amendment, modification, assignment or termination thereof) that is not a Major Lease so long as the same complies with Section 4.1.10(a) hereof, (ii) renewals, expansions or extensions of any Lease (including a Major Lease) by a tenant that is a party to such Lease as of the Closing so long as the rental terms are on market terms (or such rental terms are already set forth in such Lease), (iii) any de minimis modifications of any Major Lease or (iv) a commercially reasonable termination of any Major Lease arising from a default by the Tenant thereunder.
(c) Borrower (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner; (iii) shall not collect any of the Rents under any Leases more than one (1) month in advance (other than security deposits and the first months rent upon signing); and (iv) shall not execute any assignment of lessors interest in the Leases or the Rents (except as contemplated by the Loan Documents). No termination by Borrower or acceptance of surrender by a Tenant of any Major Leases (regardless of when any such Major Lease was entered into) shall be permitted unless (A) by reason of a Tenant default and then only in a commercially reasonable manner to preserve and protect the Property; or (B) the exercise by a Tenant of any termination right expressly provided in any existing Major Lease or any Major Lease hereafter entered into in compliance with the conditions set forth in this Section 4.1.10 .
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(d) Upon request Borrower shall furnish Agent with executed copies of all Leases, certified as true and complete by Borrower.
(e) Intentionally Omitted.
(f) Upon request, Agent shall enter into a subordination, non-disturbance and attornment agreement on Agents then current form with such revisions thereto which are reasonably satisfactory to Agent and the Tenant, as applicable, with any Tenant requesting the same; provided, that such Tenants Lease has been approved by Agent, unless Agents approval is not otherwise required hereunder and Borrower pays all reasonable costs and expenses, including attorneys fees and disbursements, incurred by Agent with respect thereto.
4.1.11 Alterations . Borrower shall not be required to obtain Agents prior written consent to any alterations to any Improvements except as required pursuant to this Section 4.1.11 and pursuant to the Restoration provisions herein. Notwithstanding the foregoing, Agents consent shall not be required in connection with any alterations (a) to the extent not in violation of subsection (b) hereof, for any repairs or capital improvements required pursuant to this Agreement, (b) that will not have a Material Adverse Effect upon completion of such alterations (the parties acknowledging that the following alterations may have a Material Adverse Effect and therefore shall be subject to Agent consent, which consent shall not be unreasonably withheld, conditioned or delayed: (i) any alteration which results in a reduction of the square footage of the Improvements, including, without limitation, a reduction in the number of hotel rooms or a reduction in the square footage of the meeting space; and (ii) any alteration which materially adversely affects the use or operation of the Improvements), and such alterations shall be subject to contracts, the aggregate remaining cost of which are no more than an amount equal to the Alteration Threshold, (c) that are specifically provided for in the Approved Annual Budget (to the extent Agent had an approval right with respect to such Approved Annual Budget pursuant to Section 4.1.7(h) and approved the same) or otherwise consented to by Agent, (d) that are related to a tenant improvement the cost of which is either (i) to be paid by the Tenant pursuant to a Lease entered into in accordance with the terms of this Agreement or (ii) to be paid by Borrower pursuant to a Lease permitted under this Loan Agreement, (e) are performed in connection with a Restoration after the occurrence of a Casualty in accordance with the terms and provisions of this Agreement, (f) to the extent not in violation of subsection (b) hereof, for replacements if there are sufficient reserves on deposit with Agent, Manager or in a Borrowers Account pursuant to the Management Agreement for such amounts to pay for such obligations, (g) constitute decorative work performed in the ordinary course of business that are paid out of the Manager reserves for FF&E, (h) intentionally omitted, (i) are required by any applicable Legal Requirements, including, without limitation, Local Law 11, or (j) relate to life, health or safety matters. If the total unpaid amounts incurred and to be incurred with respect to any alterations to the Improvements shall at any time exceed the Alteration Threshold (other than (i) such amounts to be paid or reimbursed by Tenants under the Leases, (ii) the costs incurred in connection with a Restoration of the Property, or (iii) such amounts for which sufficient reserves are on deposit with Agent or Manager), Borrower shall promptly deliver to Agent as security for the payment of such amounts and as additional security for
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Borrowers obligations under the Loan Documents (including, without limitation, the payment and performance by Borrower of its obligations which constitute the Debt) any of the following: (A) Cash or Cash Equivalents, (B) other securities having a rating reasonably acceptable to Agent or (C) a Letter of Credit (the Alteration Security ). Such security shall be in an amount equal to the excess of the total unpaid amounts incurred and to be incurred with respect to alterations to the Improvements (other than such amounts to be paid or reimbursed by Tenants under the Leases) over the Alteration Threshold. Provided that no Event of Default shall then exist, any such amounts held by Agent pursuant to this Section 4.1.11 (less a ten percent (10%) retainage which shall be held by Agent until the applicable alterations have been completed) shall be disbursed to Borrower within five (5) Business Days after receipt of Borrowers request of such disbursement upon Agent being furnished with (A) evidence reasonably satisfactory to Agent of Borrowers expenditure of such amounts above the Alteration Threshold together with copies of all contracts, statements and invoices regarding such work, (B) an officers certificate from Borrower certifying that such work has been completed in accordance with the applicable plans and specifications and all Legal Requirements and (C) such lien waivers, notices of completion, sworn contractors statements and other statements as Agent may reasonably request. Provided that no Event of Default has occurred and is continuing, the ten percent (10%) retainage shall be disbursed to Borrower upon the completion of such alteration, Borrowers satisfaction of items (A) through (C) above and Borrowers delivery to Agent of a copy of any certificate of occupancy or compliance certificate required to be issued in connection with such alteration by any Governmental Authority. The provisions of this Section 4.1.11 shall not pertain to a Restoration for which the provisions of Article V are intended to govern. Notwithstanding anything to the contrary contained herein, Borrower shall not commence any alterations to the Improvements without obtaining a permit or waiver, if applicable, from the Landmarks Preservation Commission.
4.1.12 Hotel Operation; Brand . Borrower shall maintain the Property in a manner which is consistent with past and current practices as of the Closing Date and, at all times while the Management Agreement with Waldorf=Astoria Management LLC, or any Affiliate thereof, is in place, shall operate the Property under the Brand. In addition, at any time that the Property is not operated under the Brand, the Property shall be operated under a Qualified Flag.
4.1.13 Updated Appraisal . Agent shall have the right to order new Appraisals of the Property from time to time. Borrower hereby agrees, upon demand, to pay to Agent the cost and expense for such Appraisals and a fee for Agents review of each Appraisal; provided , however , that Borrowers obligation to pay such cost and expense shall be limited to one Appraisal of the Property every two (2) years, unless the Appraisal (a) is ordered after the occurrence and during the continuance of an Event of Default, (b) is ordered at such time as the Loan is being administered by the special credits unit, or (c) is required by any Legal Requirement.
4.1.14 Upfront and Administrative Fee . Borrower shall pay to Agent the Upfront Fee and the Administrative Fee in accordance with the Loan Fee Letter.
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4.1.15 Interest Rate Protection Agreement .
(a) Prior to or contemporaneously with the Closing Date, Borrower shall have entered into one or more Interest Rate Protection Agreements with one (1) or more Lenders or Affiliates thereof or such other financial institution having the Minimum Counterparty Rating, in form and substance satisfactory to Agent in its reasonable discretion, which shall have a notional amount equal to the then outstanding balance of the Loan and shall cap the LIBOR Base Rate on the entire outstanding principal balance of the Loan for a period of at least twenty-four (24) months at a rate less than or equal to four percent (4% ) per annum, calculated on an annual basis (the Initial Cap ). Upon the expiration of the Initial Cap, Borrower shall either renew the Initial Cap or enter into one or more Interest Rate Protection Agreements with one (1) or more Lenders or Affiliates thereof or such other financial institution having the Minimum Counterparty Rating, in form and substance satisfactory to Agent in its reasonable discretion, which shall have a notional amount equal to the then outstanding balance of the Loan, shall cap the LIBOR Base Rate at a rate equal to the greater of (a) four percent (4%) per annum and (b) a strike price which would result in a Debt Service Coverage Ratio of not less than 1.35 to 1.00, and shall cap the LIBOR Base Rate on the entire outstanding principal balance of the Loan for a period of at least one (1) year (each such Interest Rate Protection Agreement, an One Year Cap ). Borrower shall enter into an additional One Year Cap meeting the requirements of the immediately preceding sentence on or before the expiration of each One Year Cap until the Maturity Date of the Loan. Each determination of the Debt Service Coverage Ratio made pursuant to this Section 4.1.15 shall be determined by Borrower and verified by Agent, which verification shall be final absent manifest error. At least thirty (30) days prior to the expiration of the Initial Cap or any One Year Cap, Borrower shall deliver to Agent an Officers Certificate which shall include Borrowers calculation of the Debt Service Coverage Ratio and shall include Borrowers calculation of Gross Revenues, Operating Expenses and NOI. It shall be an Event of Default hereunder if Borrower fails, at any time during the term of the Loan, to have an Interest Rate Protection Agreement in place which satisfies the conditions set forth in this Section 4.1.15 . The only material monetary obligation of Borrower under any such Interest Rate Protection Agreement shall be to pay for such Interest Rate Protection Agreement which payment shall be made in full upon the execution of any such Interest Rate Protection Agreement. Promptly upon obtaining any Interest Rate Protection Agreement, Borrower shall deliver the same to Agent.
(b) Borrower shall comply with all of its obligations under the terms and provisions of the Interest Rate Protection Agreement. Borrower shall take all action reasonably requested by Agent to enforce Agents rights under the Interest Rate Protection Agreements in the event of a default by Counterparty and shall not waive, amend or otherwise modify any of its rights thereunder. Borrower shall not (i) without the prior written consent of Agent, modify, amend or supplement the terms of the Interest Rate Protection Agreement (other than in connection with an extension of the term thereof which modification, amendment or supplement shall only be effective upon such extension), (ii) without the prior written consent of Agent, cause the termination of the Interest Rate Protection Agreement prior to its stated maturity date, (iii) without the prior written consent of Agent, waive or release any obligation of the Counterparty (or any successor or substitute party to the Interest Rate Protection Agreement) under the Interest Rate Protection Agreement, (iv) without the prior written consent of Agent, consent or agree to any act or omission to act on the part of the Counterparty (or any successor or substitute party to the Interest Rate Protection Agreement) which, without such consent or agreement, would constitute a default under the Interest Rate Protection Agreement, (v) fail to exercise promptly and diligently each and every material right which it may have under the
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Interest Rate Protection Agreement, (vi) take or omit to take any action or suffer or permit any action to be omitted or taken, the taking or omission of which would result in any right of offset against sums payable under the Interest Rate Protection Agreement or any defense by the Counterparty (or any successor or substitute party to the Interest Rate Protection Agreement) to payment or (vii) fail to give prompt notice to Agent of any notice of default given by or to Borrower under or with respect to the Interest Rate Protection Agreement, together with a complete copy of such notice.
(c) Borrower shall collaterally assign to Agent, pursuant to an Assignment of Interest Rate Protection Agreement in substantially the same form as delivered on the Closing Date, all of its right, title and interest to receive any and all payments under the Interest Rate Protection Agreement (and any related guarantee, if any) and shall deliver to Agent an executed counterpart of such Interest Rate Protection Agreement, notify the Counterparty of such collateral assignment and obtain the agreement (either in such Interest Rate Protection Agreement or by separate instrument) of such Counterparty to make any payments to become payable under or pursuant to the Agreement directly to Agent until such time as the Assignment of Interest Rate Protection Agreement is terminated or otherwise canceled. At such time as the Loan is repaid in full, all of Agents right, title and interest in the Interest Rate Protection Agreement shall terminate and Agent shall execute and deliver at Borrowers sole cost and expense, such documents as may be required to evidence Agents release of the Interest Rate Protection Agreements and to notify the Counterparty of such release. If Agent receives any payments under the Interest Rate Protection Agreement (other than a payment by reason of a termination event or any other payment during the existence of an Event of Default), Agent shall apply the same to Debt Service payable on the next succeeding Payment Date. If Agent receives any payments under the Interest Rate Protection Agreement during the existence of an Event of Default or by reason of a termination event under the Interest Rate Protection Agreement, Agent shall have the right to hold the same, to deposit the same in a cash collateral account as additional security for the Loan or to apply same to any portion of the Debt in any order it desires or, if the Interest Rate Protection Agreement has been partially or wholly terminated, to apply same to the cost of acquiring another interest rate protection agreement in form and substance, and from a counterparty, satisfactory to Agent in all respects.
(d) If for any reason a Counterpartys rating shall no longer satisfy the Minimum Counterparty Rating, Borrower shall within thirty (30) days following receipt of notice thereof from Agent or any other Person, procure a new Interest Rate Protection Agreement from one (1) or more of the Lenders or Affiliates thereof or a counterparty which satisfies the Minimum Counterparty Rating and shall pledge same to Agent pursuant to an assignment of interest rate protection agreement substantially in the form of the Assignment of Interest Rate Protection Agreement executed on the Closing Date and shall within fifteen (15) Business Days of delivery of such Interest Rate Protection Agreement, deliver an opinion letter from counsel to such new Counterparty in form and substance reasonably satisfactory to Agent. The provisions of this subsection (d) shall not be applicable if the Counterparty is a Lender or an Affiliate of a Lender
(e) In the event that Borrower fails to purchase and deliver to Agent the Interest Rate Protection Agreement as and when required hereunder, Agent may purchase the Interest Rate Protection Agreements and the cost incurred by Agent in purchasing the Interest Rate Protection Agreements shall be paid by Borrower to Agent with interest thereon at the Default Rate from the date such cost was incurred by Agent until such cost is paid to Agent.
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(f) In connection with an Interest Rate Protection Agreement unless any Lender or an Affiliate thereof is the Counterparty, Borrower shall obtain and deliver to Agent an opinion of counsel from counsel for the Counterparty thereunder (upon which Agent and Lenders and their respective successors and assigns may rely) (the Counterparty Opinion ), under New York law and, if the Counterparty is a non-U.S. entity, the applicable foreign law, substantially in compliance with the requirements set forth below:
(i) The Counterparty Opinion shall be addressed to Agent, for itself and Lenders, and their respective successors and assigns and shall state that it may be relied upon by (A) successor Agent, (B) any Assignee of any Lenders interest in the Loan, (C) any Participant, and (D) any servicer of the Loan,
(ii) The Counterparty Opinion shall contain the following opinions:
(A) the Counterparty under the Interest Rate Protection Agreement is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Interest Rate Protection Agreement;
(B) the execution and delivery of the Interest Rate Protection Agreement by the Counterparty thereunder, and any other agreement (including, without limitation, the Assignment of Interest Rate Protection Agreement) which such Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by-laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property;
(C) all consents, authorizations and approvals required for the execution and delivery by the Counterparty of the Interest Rate Protection Agreement, and any other agreement (including, without limitation, the Assignment of Interest Rate Protection Agreement) which such Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and
(D) the Interest Rate Protection Agreement, and any other agreement (including, without limitation, the Assignment of Interest Rate Protection Agreement) which the Counterparty thereunder has executed and delivered pursuant thereto, has been duly executed and delivered by such Counterparty and constitutes the legal, valid and binding obligation of such Counterparty,
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enforceable against such Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(iii) The Counterparty Opinion shall also contain the following additional opinions if the Counterparty is a foreign entity:
(A) Jurisdiction where Counterparty is located will respect and give effect to the choice of law provisions of the Interest Rate Protection Agreement and any other agreement (including, without limitation, the Assignment of Interest Rate Protection Agreement) which the Counterparty thereunder has executed and delivered pursuant thereto; and
(B) A judgment obtained in the courts of the State of New York is enforceable in the jurisdiction where Counterparty is located.
The initial draft of any such Counterparty Opinion shall be delivered to Agent for review and approval within ten (10) Business Days of the execution of the applicable Interest Rate Protection Agreement.
4.1.16 Insurance . Borrower shall maintain in effect at all times while any Debt remains outstanding, the insurance policies required by this Agreement.
4.1.17 Fees . On the date hereof, Borrower has paid to the Lead Arrangers all reasonable costs and expenses, including, without limitation, attorneys fees and disbursements, incurred by Lead Arrangers in connection with the closing of the Loan. In addition, Borrower has paid, on the date hereof, all reasonable costs and expenses, including, without limitation, appraisal fees, recording fees and charges, abstract fees, title policy fees, escrow fees, attorneys fees and disbursements, the fees of any environmental consultants and all other reasonable costs and expenses of every character which have been incurred by Agent in connection with the preparation and execution of the Loan Documents. In the event (a) that the Mortgage is foreclosed in whole or in part or is put into the hands of an attorney for collection, suit, action or foreclosure, or (b) of a bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower and its successors or assigns, shall be chargeable with and agrees to pay all out-of-pocket costs of collection and defense, including attorneys fees and expenses, incurred by Agent, the Lenders and Borrower in connection therewith and in connection with any appellate proceeding or post judgment action involved therein, together with all required service or use Taxes. Borrower will, within ten (10) Business Days after demand by Agent, reimburse Agent for all of the foregoing reasonable expenses which have been incurred. All amounts incurred or paid by Agent under this Section 4.1.17 , together with interest thereon at the Default Rate from the due date until paid by Borrower, shall be added to the Debt and shall be secured by the Lien of the Mortgage.
4.1.18 Books and Records . Borrower shall keep and maintain detailed, complete and accurate books, records and accounts reflecting all items of income and expense of
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Borrower in connection with the Property and the results of the operation thereof; and, upon the request of Agent, to make such books, records and accounts available to Agent for inspection or independent audit at reasonable times upon reasonable advance notice to Borrower. Any independent audit conducted hereunder shall be at Agents expense unless such audit shall uncover a material error in statements previously delivered to Agent, in which case Borrower shall pay all reasonable costs related thereto. Agent hereby agrees to keep, and to use reasonable efforts to cause its agents, employees and consultants to keep, any information acquired hereby confidential unless already known to the general public or as required by law.
4.1.19 Debt . Borrower shall duly and promptly pay all Borrowers Debt to Lenders according to the terms of this Agreement, the Note and the other Loan Documents, and shall incur no other Indebtedness in any form, whether direct, indirect, primary, secondary, or contingent, without Agents prior written consent, other than Permitted Debt.
4.1.20 Maintain Existence . Borrower shall maintain its existence in good standing and make no changes in its organization, except to the extent permitted under Article VIII . In addition, Borrower hereby agrees to use commercially reasonable efforts to obtain litigation, Tax, judgment, bankruptcy and UCC searches with respect to the entities set forth on Schedule 4.1.20 with respect to each entitys jurisdiction of formation and the principal place of business of such entities (to the extent such searches are customary in the applicable jurisdiction of formation and principal place of business), and deliver the same to Agent promptly upon receipt of the same. To the extent that Agent reasonably determines that any matter which is disclosed in such search results may have a Material Adverse Effect, Borrower shall make commercially reasonable efforts to resolve such matter.
4.1.21 Easements and Restrictions; Zoning . (a) Borrower shall submit to Agent for Agents approval prior to the execution thereof by Borrower all proposed easements, restrictions, covenants, and other similar instruments which would affect the title to the Property, accompanied by a Survey showing the exact proposed location thereof and such other information as Agent shall reasonably require, except with respect to Permitted Encumbrances. With respect to any and all existing easements, restrictions, covenants or operating agreements which benefit or burden the Property and any easement, restriction or covenant to which the Property may hereafter be subjected in accordance with the provisions hereof, Borrower shall: (i) observe and perform the obligations imposed upon the Borrower or the Property in all material respects,; (ii) not alter, modify or change the same without the prior approval of Agent; (iii) enforce its rights thereunder in a commercially reasonable manner so as to preserve for the benefit of the Property the full benefits of the same; and (iv) deliver to Agent a copy of any notice of default or other material written notice received by Borrower in respect of the same promptly after Borrowers receipt of such notice.
4.1.22 Required Repairs . Borrower shall perform the repairs at the Property as set forth on Schedule 4.1.22 hereto. In addition, Borrower shall repair any water damaged guest rooms which have mold growth, as applicable, after the completion of the scheduled roof repairs (set forth on Schedule 4.1.22 ) with respect to the Property.
4.1.23 Comply with Other Loan Documents . Borrower shall perform all of Borrowers obligations under the Note and the other Loan Documents (including, without limitation, Borrowers payment and performance obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan)).
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4.1.24 Purchase of Material Under Conditional Sale Contract . Borrower shall not permit any materials, equipment, fixtures or any other part of the Improvements to be purchased or installed under any security agreement or other arrangements wherein the seller reserves or purports to reserve the right to remove or to repossess any such items or to consider them personal property after their incorporation in the Improvements, unless authorized by Agent in writing and in advance.
4.1.25 ADA . (a) The Property shall at all times comply with all applicable requirements of the ADA in all material respects, (b) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Agent to (i) comply with any applicable directive from any Governmental Authority relating to ADA compliance and (c) Borrower shall notify Agent in writing of any material, written notice which Borrower receives from any source whatsoever (including, but not limited to, a Governmental Authority) relating to ADA compliance, possible material liability of Borrower pursuant to the ADA, or any material actual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement with respect to the ADA.
4.1.26 USA Patriot Act Compliance.
(a) Borrower shall and shall cause its Affiliates who are owners of a direct or indirect legal, beneficial or economic ownership interest in Borrower to comply with the USA Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction over Borrower, its Affiliates and the Property, which relate to money laundering and terrorism (collectively, Patriot/AML Laws ).
(b) If, at any time, Agent has a reasonable belief that Borrower or any Affiliate who is in the chain of ownership of Borrower of Borrower is not in compliance with the Patriot/AML Laws, upon ten (10) days notice to Borrower, Agent shall have the right to audit Borrowers and such Persons compliance with the Patriot/AML Laws. In the event that Borrower fails or fails to cause its Affiliates who are owners of a direct or indirect legal, beneficial or economic ownership interest in Borrower to comply with the Patriot/AML Laws, then Agent may, at its option, cause Borrower to comply or cause Borrower to cause its Affiliates who are owners of a direct or indirect legal, beneficial or economic ownership interest in Borrower to comply therewith and any and all reasonable costs and expenses incurred by Agent in connection therewith shall be secured by the Mortgage and the other Loan Documents and shall be immediately due and payable.
4.1.27 Anti-Terrorism Compliance . (a) No portion of the proceeds of the Loan will be used, are needed, or will be invested by Borrower, any Affiliates of Borrower who are owners of a direct or indirect legal, beneficial or economic ownership interest in Borrower, or Guarantor, in order to support international terrorism or activities that may contravene U.S. federal, state or any other Governmental Authority, as well as, German or European Union know-your-customer and anti-money laundering laws and regulations (collectively, Anti-Terrorism Legal Requirements ). Borrower understands and hereby acknowledges that Agent
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and Lenders have certain know-your-customer and anti-money laundering responsibilities under various laws, rules and regulations of the United States of America, the Federal Republic of Germany and the European Union and shall deliver to Agent, in each case, as reasonably requested by Agent and/or any Lender or as requested by any Governmental Authority administering such laws and regulations, information regarding Borrowers direct and indirect beneficial owners identities or sources of funds or other similar information and may seek to ensure that representatives or direct or indirect beneficial owners of Borrower are not named on one of the Government Lists or similar lists maintained by the Federal Republic of Germany or by the European Union.
(b) In the event that Agent or any Lender is required by Legal Requirements to request additional documentation and information from Borrower with respect to Patriot/AML Laws or Anti-Terrorism Legal Requirements, Borrower agrees, upon the reasonable request of Agent and/or any Lender, to provide Agent and/or such Lender additional information as may be necessary in order to satisfy their know-your-customer and anti-money laundering responsibilities under various laws, rules and regulations of the United States of America, the Federal Republic of Germany and the European Union.
4.1.28 Customer Due Diligence Requirements. Borrower shall, promptly after written request by Agent (whether for itself, on behalf of any Lender or any prospective new Lender), furnish or cause to be furnished to Agent any documentation and such other information or evidence as may be reasonably requested by Agent to enable Agent, such Lender or such prospective Lender to comply with applicable Legal Requirements.
4.1.29 Contracts, Licenses and Permits. (a) Borrower shall abide by, perform and discharge in all material respects all obligations, covenants, agreements and conditions to be performed by Borrower under all material Contracts, Licenses and Permits.
(b) Borrower shall exercise commercially reasonable efforts to enforce or secure the performance of each and every material obligation, covenant, condition and agreement to be performed by the licensor, grantor or other contracting party under all such Contracts, Licenses and Permits.
(c) Borrower shall, from time to time, upon request by Agent, provide to Agent a current and complete list as of the time in question of all material Contracts, Licenses and Permits then in existence and deliver the same to Agent; provided that Borrower shall not be required to provide such list more than two (2) times per calendar year.
(d) Borrower shall not surrender, terminate (other than a termination in connection with a default beyond any applicable notice and cure periods by a third party under the applicable Contract, License and Permit), cancel, modify, amend, enter into any agreement in substitution for, or consent to the assignment of any material Contract, License and Permit which would have a Material Adverse Effect without Agents prior consent, which consent shall not be unreasonably withheld.
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Section 4.2 Borrower Negative Covenants.
Borrower covenants and agrees that:
4.2.1 Due on Sale and Encumbrance; Transfers of Interests . Borrower shall not permit or suffer any Transfer, other than Permitted Transfers, Permitted Encumbrances or a Permitted Assumption, without the prior written consent of Agent.
4.2.2 Indebtedness; Liens. Borrower shall not incur any Indebtedness, other than Indebtedness permitted pursuant to Section 3.1.23(c)(iv) . In addition, no Indebtedness other than the Debt may be secured (subordinate or pari passu ) by the Property. Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of the Property except for Permitted Encumbrances. Borrower shall not subject the Property or any part thereof to any material easements, rights-of-way, restrictions and other similar non-monetary encumbrances which would reasonably be expected to have or does have a Material Adverse Effect. The parties hereto acknowledge and agree that easements entered into in the ordinary course of business with respect to water and sewer lines, telephones, telegraph lines, electric lines and other utilities shall not be construed to be material except to the extent that the same would reasonably be expected to have or does have a Material Adverse Effect.
4.2.3 Dissolution . Borrower shall not engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, or transfer, lease or sell, in one transaction or any combination of transactions, all or substantially all of the property or assets of Borrower. In addition, Borrower shall not engage in any business enterprise other than as provided in this Agreement and shall not enter into any partnership or joint venture with any other Person.
4.2.4 Change in Business . Borrower shall not enter into any line of business other than the ownership, management, development and operation of the Property (and any ancillary business related to such ownership, leasing, management, maintenance and operation).
4.2.5 Debt Cancellation . Borrower shall not cancel or otherwise forgive or release any claim or debt (other than (a) the termination or modifications of Leases in compliance with Section 4.1.10 , (b) the forgiveness in the ordinary course of Borrowers business of Rent in arrears in connection with a settlement with a Tenant under a Lease or (c) the forgiveness in the ordinary course of business of amounts owed or in arrears under Occupancy/Event Agreements) owed to Borrower by any Person, except in the ordinary course of Borrowers business.
4.2.6 Affiliate Transactions . Borrower shall not enter into, or be a party to, any material transaction with an Affiliate of Borrower or any of the constituent members of Borrower or amend or permit the amendment of any material Affiliate Contract, except (a) Affiliate Contracts and amendments thereto which have been approved by Agent in its reasonable discretion or (b) Affiliate Contracts and amendments thereto which are entered into by Borrower in the ordinary course of business and are no less favorable to Borrower than would be obtained in a comparable arms length transaction with an unrelated third party.
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4.2.7 Zoning . Borrower shall not initiate or consent to any zoning reclassification of any portion of the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Agent. Borrower will promptly notify Agent of any anticipated or proposed change in the zoning for the Property or any portion thereof or any other property with respect to which a change in zoning would affect Borrowers use and enjoyment of the Property, or any part thereof, promptly upon its learning of any such anticipated or proposed change. Agent shall have the right to (a) participate (at Borrowers sole cost and expense) in any and all proceedings, judicial, administrative or otherwise, with respect to or in any way affecting the Property, including, without limitation, zoning, environmental and other matters using counsel of Agents choosing, and (b) with respect to any change in the zoning for the Property initiated or consented to by Borrower, require a zoning opinion, acceptable to Agent in its reasonable discretion.
4.2.8 Assets . Borrower shall not purchase or own any property other than the Property and incidental Personal Property necessary for the ownership or operation of the Property.
4.2.9 No Joint Assessment . Borrower shall not suffer, permit or initiate the joint assessment of the Property (a) with any other real property constituting a tax lot separate from the Property, and (b) with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any Taxes which may be levied against such personal property shall be assessed or levied or charged to the Property.
4.2.10 Principal Place of Business . Borrower shall not change its principal place of business, its jurisdiction of organization or its authorizations to do business without first giving Agent thirty (30) days prior notice. Borrower shall not change its federal employer identification number without providing Agent prompt notice of such change.
4.2.11 ERISA . (a) Assuming compliance by Agent and the Lenders with paragraph (d) of this Section 4.2.11 , Borrower shall not engage in any transaction contemplated under this Agreement which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Agent of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under Section 406(a) of ERISA.
(b) Borrower agrees that if at such time as any benefit plan investor within the meaning of Section 3(42) of ERISA holds an equity interest in Borrower, Borrower shall deliver to Agent such certifications from time to time throughout the term of the Loan, as reasonably requested by Agent in its sole discretion, but not more frequently than once per calendar year and on not less than thirty (30) days advance written notice, that (i) Borrower is not a benefit plan investor within the meaning of Section 3(42) of ERISA, or a governmental plan within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to any Similar Laws; and (iii) one or more of the following circumstances is true:
(A) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);
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(B) Less than twenty-five percent (25%) of the total value of each outstanding class of equity interests in Borrower are held by benefit plan investors within the meaning of Section 3(42) of ERISA; or
(C) Borrower qualifies as an operating company or a real estate operating company within the meaning of 29 C.F.R. §2510.3-101(c) or (e) or another exception to ERISA applies such that Borrowers assets should not constitute plan assets of any benefit plan investor within the meaning of Section 3(42) or ERISA and 29 C.F.R. §2510.3-101(f)(2).
(c) Each Lender hereby represents and warrants that, throughout the term of the Loan, no portion of the assets used by any Lender in connection with the transactions contemplated under this Agreement and the other Loan Documents constitutes assets of a (i) benefit plan investor within the meaning of the Plan Assets Regulations unless the applicable Lender is relying on an available prohibited transaction exemption, all of the conditions of which are and continue to be satisfied or (ii) governmental plan (as defined in Section 3(32) of ERISA) which is subject to any provision which is substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code ( Applicable Similar Law ), unless the acquisition and holding of the Loan or any interest therein will not give rise to a violation of any such Applicable Similar Law.
4.2.12 No Distributions . (a) Borrower will not make any distributions or other disbursements to its shareholders, partners or members or Persons owned by or related to any of its shareholders, partners or members (except for any payments under the Affiliate Contracts) during the continuance of an Event of Default or during a Trigger Period.
(b) Borrower will use, or shall use commercially reasonable efforts to cause Manager to use, any and all Rents collected from the Property to pay Operating Expenses (including, without limitation, Property Taxes and Other Charges, Insurance Premiums, and Debt Service) and shall maintain or use commercially reasonable efforts to cause Manager to maintain adequate reserves for current liabilities with respect to Borrower and the Property which shall be delinquent if not paid during the current calendar year, prior to the making of any distributions to the owners of Borrower.
4.2.13 Organizational Documents . Borrower will not amend, modify or otherwise change its Organizational Documents in any material respect without the prior consent of Agent in any manner that (a) violates the single purpose covenants set forth in Section 3.1.23 , (b) amends, modifies or otherwise changes any provision thereof that by its terms cannot be modified at any time when the Loan is outstanding or by its terms cannot be modified without Agent or the Lenders consent, or (c) which would otherwise have, or does have, a Material Adverse Effect.
4.2.14 Intentionally Omitted .
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4.2.15 Government Regulation . Borrower shall not (a) be or become subject at any time to any law, regulation, or list of any Governmental Authority (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Agent or Lenders from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, or (b) fail to provide documentary and other evidence of Borrowers identity as may be requested by Agent or Lenders at any time to enable Agent or Lenders to verify Borrowers identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act.
V. | INSURANCE, CASUALTY AND CONDEMNATION |
Section 5.1 Insurance.
5.1.1 Insurance Policies . (a) Borrower, at its sole cost and expense, shall obtain and maintain, or cause to be maintained, and deliver to Agent evidence of the following insurance Policies which evidence shall be acceptable to Agent in its sole discretion:
(i) Liability insurance, as follows, which shall be maintained at all times during the term of the Loan:
(A) Commercial general liability insurance applicable to claims for personal injury and/or bodily injury including death or property damage occurring upon, in or about the Property; occurring as a result of the construction and use and occupancy of facilities located at or on the Property; or as a result of construction thereof. Coverage shall be provided on an occurrence basis pursuant to the ISO Commercial General Liability Coverage Form (CG 00 01 10 01) or its equivalent, and for personal and/or bodily injury or property damage as now are or hereafter incorporated into such form and its endorsements. Such coverage shall be in amounts of not less than $1,000,000 per occurrence bodily injury and property damage combined, $1,000,000 per occurrence personal & advertising injury, $1,500,000 aggregate products and completed operations liability, and $1,500,000 general aggregate limit per location, including a self-insured retention of not greater than $500,000, and, if written on a blanket policy, $50,000,000 in the aggregate for all locations. The policy shall be written with no more than a $1,000,000 deductible. Such coverage shall name Agent as an additional insured and provide such Additional Insured coverage on a primary and non-contributory basis;
(B) Commercial automobile liability insurance providing bodily injury and property damage coverage of no less than $1,000,000 combined single limit covering all owned, non-owned and hired vehicles. The policy shall be written with not more than a $500,000 deductible. Such coverage shall name Agent as an additional insured and provide such additional insured coverage on a primary and non-contributory basis;
(C) Commercial umbrella/excess liability coverage of not less than $100,000,000 per occurrence and $100,000,000 in the annual aggregate.
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Commercial umbrella/excess liability insurance shall provide additional coverage over all limits and coverages noted in paragraph (A) , (B) and employers liability per (D) . This limit may be increased, from time to time, to reflect what a reasonably prudent owner or lessee of buildings or improvements similar in type and locality to that of the Property would carry. This policy shall be written on an occurrence form basis and provide follow-form coverage including primary and non-contributory additional insured coverage in favor of Agent;
(D) If applicable, workers compensation and disability insurance to the full extent as required by applicable law; and employers liability coverage subject to a limit of no less than $500,000 per accident, $500,000 disease per employee and $1,000,000 disease policy limit. The policy shall be written with no more than a $1,000,000 deductible. Such workers compensation, disability and employers liability insurance shall cover Borrower and its employees engaged in any work for or related to the Property;
(E) The policies described in paragraphs (A) , (B) and (C) shall cover, at minimum elevators, escalators, independent contractors, contractual liability (covering, to the maximum extent permitted by law, Borrowers obligation to indemnify Agent and the Lenders as required under this Agreement), products and completed operations liability coverage;
(F) If applicable, fidelity/crime insurance providing coverage against loss due to employee dishonesty, forgery & alteration, money & securities, funds transfer and other prudent crime coverages in an amount not less than $5,000,000, and with a deductible not greater than $1,000,000, provided that maintenance of such deductible shall be commercially reasonable and shall be maintained by owners of properties similar in type, location and quality as the Property;
(G) So-called dram shop insurance on other liability insurance required in connection with the sale of alcoholic beverages;
(H) Environmental insurance against claims for pollution and remediation legal liability related to the Property (the PLL Policy ), such insurance: (1) to be a claims made and reported Policy for an initial term of seven (7) years; (2) with limits of liability of $5,000,000 for each Pollution Condition and $5,000,000 in the aggregate; (3) with a self-insured retention amount of $50,000 for each Pollution Condition; (4) shall name Agent as an additional named insured per Mortgagee Assignment endorsements providing automatic rights of assignment in the event of defaults; (5) shall be dedicated solely to the Property and Borrower shall not be permitted to add any additional locations during the PLL Policy term; and (6) shall, throughout the PLL Policy term, include the same coverages, terms, conditions and endorsements (and shall not be amended in any way without the prior written consent of Agent) as the PLL Policy approved on the Closing Date; and
(I) Such other types and amounts of insurance with respect to the Property and the operation thereof which are commonly maintained in the case of other property and buildings similar to the Property in nature, use, location, height and type of construction as may from time to time be reasonably required by Agent.
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(ii) Property insurance, as follows, which shall be maintained at all times during the term of the Loan:
(A) Insurance against loss customarily included under standard all risk policies including flood, earthquake, windstorm/named windstorm, terrorism, vandalism, and malicious mischief, comprehensive equipment breakdown, and such other insurable hazards as, under good insurance practices, from time to time are insured against for other property and buildings similar to the Property in nature, use, location, height, and type of construction. The amount of such insurance shall be not less than one hundred percent (100%) of the insurable value replacement cost value of the Property, including Improvements and betterments at the Property and, except as otherwise permitted herein, providing no deductible greater than $500,000; Borrower may utilize a $5,000,000 aggregate deductible (basket aggregate) in conjunction with a per occurrence deductible which will not exceed $500,000. Each such insurance Policy shall either contain an agreed amount replacement cost endorsement or be provided in such amount so as to avoid coinsurance penalty application and shall cover, without limitation, all tenant improvements and betterments (except to the extent that the Tenant is required to insure the same pursuant to the applicable Lease) on a replacement cost basis. Agent shall be named mortgagee on a standard mortgagee endorsement and lender loss payee;
If all or any portion of the Property is, at any time during the term of the Loan, located in an area having special flood and/or earthquake and/or named windstorm perils or if such area hereafter shall be designated by the United States Government, or any agency thereof, as having special flood or earthquake or windstorm perils, the coverages provided by coverage extensions and/or policies insuring against flood, earthquakes and windstorm/named windstorms in amounts, applicable to each peril separately, as may be reasonably required by Agent. Windstorm/named windstorm, flood and earthquake coverage required in the first paragraph of this Section 5.1.1(a)(ii)(A) above) deductibles shall not be greater than five percent (5%) of the total insured value per loss of the subject property; provided , however , that Borrower shall be permitted to maintain higher deductibles with respect to flood, windstorm/named windstorm and earthquake coverage, subject to a maximum of fifteen percent (15%) of the total insurable value of the Property if Borrower provides a guaranty in form and substance acceptable to Agent from Guarantor in an amount equal to the difference between five percent (5%) and the higher deductibles. Notwithstanding the foregoing, Borrower shall be permitted to provide coverage for named windstorm in an amount equal to the 1,000-year Probable Maximum Loss ( PML ) as indicated in a risk analysis for all high risk locations under the Policy (such analysis to be
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approved by Agent) and secured by the Borrower utilizing a third-party engineering firm qualified to perform such risk analysis using the most current RMS software, or its equivalent, to include consideration of storm surge and loss amplification, at the expense of Borrower). The risk analysis windstorm required pursuant to this subsection (ii)(a) shall be referred to herein as an Acceptable Risk Analysis ;
(B) Law & ordinance coverage including, demolition cost, debris removal, operations of building laws, and increased cost of construction, including, without limitation, increased costs arising out of changes in applicable laws and codes.
(1) Demolition cost means the cost incurred to demolish all or part of the Property, including the cost to clear the site, if any law or ordinance that exists at the time of loss requires such demolition. Coverage is provided in such amount as is reasonably required by Agent;
(2) Operation of building laws means the cost to rebuilt at the same location any undamaged part of the Property, which is required by law to be demolished after a covered loss; and
(3) Increased cost of construction includes the increased cost Borrower incurs for materials and labor required to rebuild the damaged portion of the Property at the same location and in a manner that satisfies the minimum requirement of the applicable law or ordinance at the time of the loss;
Operation of Building Laws and Increased Cost of Construction are required in such amounts as may be reasonably required by Agent;
(C) Time element coverages, including extra expense coverage, for indirect loss or damage by all risks covered by the insurance provided for in (A) above. Such coverage shall be equal to an amount not less than one hundred percent (100%) of the projected net operating income and fixed expenses on an actual loss sustained basis for the entire period of Restoration and which shall also provide an Extended Period of Indemnity Endorsement as to be reasonably required by Agent. Agent shall be named as First Lender Loss Payee as respects this coverage. All coinsurance provisions shall be waived or such coverage shall be in such amounts as to avoid the application of a coinsurance penalty. The amount of such time element coverage shall be determined prior to the Closing Date and at least once each year thereafter based on Borrowers reasonable estimate of the annual amount of net operating income and fixed expenses payable for the succeeding twelve (12) month period. In the event that all or any portion of the Property shall be damaged or destroyed in a total amount exceeding the Restoration Threshold, Borrower shall assign to Agent all Proceeds under the policies of such insurance and all amounts payable and all net amounts, when collected by Borrower under such policies;
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(D) If applicable, comprehensive boiler and machinery coverage with limits with respect to any one accident of no less than $100,000,000. Such coverage shall insure against direct and indirect loss or damage to all tenant improvements and betterments that Borrower is required to insure pursuant to this Agreement by explosion or breakdown of mechanical and electrical equipment, including steam boiler, air conditioning equipment, pressure vessels or similar apparatus, with exclusions for testing removed, now or hereafter installed on the Property. Coverage for indirect loss/rental interruption insurance for a period of at least twelve (12) months from the date of loss;
(E) If the all risk commercial property insurance required under subsection (i) above and the rent loss and/or business interruption insurance Policies required under subsection (ii) above do not cover perils of terrorism or acts of terrorism, Borrower shall maintain commercial property and rent loss and/or business interruption insurance for loss resulting from perils and acts of terrorism on terms (including amounts) consistent with those required under subsections (i) and (ii) ) above. Notwithstanding the foregoing, the amount of terrorism coverage that shall be required for the Policies required under subsections (i) and (ii) above shall be in an amount equal to the lesser of (1) the full replacement cost of the Property, as determined by Agent, and (2) the outstanding principal balance of the Loan. If the Terrorism Risk Insurance Program Reauthorization Act of 2007 or a similar or subsequent statute ( TRIPRA ) is not in effect, then provided that terrorism insurance is commercially available, Borrower shall be required to carry terrorism insurance throughout the term of the Loan as required by the preceding sentence, but in such event Borrower shall not be required to spend on terrorism coverage more than two (2) times the amount of the insurance Premium that is payable at such time in respect of the property and business interruption/rental loss insurance required hereunder (without giving effect to the cost of the terrorism, earthquake and windstorm components of such casualty and business interruption/rental loss insurance), and if the cost of terrorism insurance exceeds such amount, Borrower shall purchase the maximum amount of terrorism insurance available with funds equal to such amount;
For the purposes of this Agreement terrorism shall mean the use of threatened use of force or violence against person or property, or commission of an act dangerous to human life or property, undertaken by any person or group, whether or not acting on behalf of or in connection with any organization, government, power, authority or military force, when the effect is to intimidate, harm or coerce a government, the civilian population or any segment thereof, or to disrupt any segment of the economy. Terrorism shall also include any act which is verified or recognized by the United States Government as an act of terrorism;
(F) Such other types and amounts of insurance with respect to the Property and the operation thereof which are commonly maintained in the case of other property and buildings similar to the Property in nature, use, location, height and type of construction as may from time to time be reasonably required by Agent; and
(G) During any construction and/or renovation period, coverage as required in subsection (ii)(A) , (B) , (C) , (D) , (E) and (F) shall be extended to include any insurable hard and/or soft costs.
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(b) Requirements of Insurance Policies :
(i) All insurance provided for in Section 5.1.1(a) shall be obtained under valid and enforceable policies (collectively, the Policies or in the singular, the Policy ), and, to the extent not specified above, shall be subject to the approval of Agent as to deductibles, Lender Loss Payees, Loss Payees, Additional Insureds, Joint Loss Payee/Beneficiary and Insureds. At least five (5) Business Days prior to the expiration date of any existing Policy, Borrower shall furnish to Agent certificates of insurance evidencing the Policies, accompanied by evidence, satisfactory to Agent, that the premiums due thereunder have been paid (the Insurance Premiums ). Not later than one hundred-twenty (120) days after the renewal or replacement of each of the Policies, Borrower shall deliver to Agent an original or certified copy (as required pursuant to this paragraph) of a renewal or replacement Policy or Policies. Binding Evidence means an Evidence of Commercial Property form (Accord 28 or its equivalent) for all first-party related coverages and a Binder of Insurance (Accord 25-S or its equivalent) for all third-party liability coverages. Notwithstanding the foregoing, in connection with the renewal of a Policy with an existing carrier and provided that the form and terms of such Policy are not being amended, except to renew the same, Borrower shall not be required to deliver to Agent such renewal Policy but shall make the same available for review by Agent and the Lenders at Borrowers premises upon the reasonable request of Agent.
(ii) Any required insurance may be procured under a blanket insurance Policy covering the Property and other properties or assets of Borrower or its affiliates, provided that any such blanket insurance Policy shall otherwise provide the same protection as would a separate Policy insuring only the Property in compliance with the provisions of Section 5.1.1(a) . Agent, in its reasonable discretion, shall determine whether such blanket Policies provide sufficient limits of insurance. In the event Borrower adds any locations to the Policy that are subject to the perils of wind/named storm, Borrower shall notify Agent and provide an updated Acceptable Risk Analysis, as applicable, and the limits provided for such perils shall be increased as necessary so as to be in compliance with the requirements of Section 5.1.1(a)(ii)(A) . Agent reserves the right to approve Borrower adding any additional locations under the Policies, provided that, as of the date hereof, with respect to Terrorism such additions are within a 1,000 foot radius (the Radius ) of the Property. In the event Borrower adds additional locations within the Radius, Borrower shall (A) increase the limits of any such Policy so that it shall be adequate to maintain the coverage set forth in this Section 5.1.1 for each property in the aggregate within the Radius that is covered by such blanket Policy calculated on a total insured value basis or (B) provide the required coverage for the Property on a separate Policy in compliance with the requirements of Section 5.1.1 .
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(iii) Unless otherwise specified, all Policies of insurance provided for or contemplated by Section 5.1.1(a) shall, in the case of first-party property damage, including, but not limited to builders risk, terrorism, boiler and machinery, flood and earthquake insurance, name Borrower as the insured and Agent (for the Ratable benefit of Lenders and their successors and/or assigns) as the Mortgagee under a standard non-contributing mortgagee clause or its equivalent in favor of Agent (including Agent as First Mortgagee and First Lender Loss Payee) providing that the loss, if it exceeds the Restoration Threshold, thereunder shall be payable to Agent for the Ratable benefit of Lenders and providing thirty (30) days advance notice of cancellation to Agent. Loss of Rental Income, Business Income and other applicable Time Element insurance shall name Agent (for the Ratable benefit of Lenders and their successors and/or assigns) as Lender Loss Payee pursuant to the ISO Loss Payable form (CP 1218 0695) or an equivalent form reasonably acceptable to Agent in form and content.
(iv) Each Policy shall contain a provision whereby the insurer: (A) agrees that such Policy shall not be canceled or terminated; the coverage, deductible, and limits of such Policy shall not be materially modified; other provisions of such Policy shall not be materially modified if such Policy, after giving effect to such modification, would not satisfy the requirements of this Agreement, and such Policy shall not be so modified, canceled or fail to be renewed, without in each case, at least thirty (30) days prior written notice to Agent, provided , that ten (10) days notice will be required for cancellation due to non-payment of premiums and, provided , further , that if the insurer will not or cannot provide the notices required herein, Borrower shall be obligated to provide such notice, (B) waives any right to claim any Insurance Premiums and commissions against Agent or any Lender, provided that the Policy need not waive the requirement that the Insurance Premiums be paid in order for a claim to be paid to the insured and (C) provides that Agent and the Lenders are permitted to make payments to effect the continuation of such policy upon notice of cancellation due to non-payment of premiums. In the event any Policy (except for general public and other liability and Workers Compensation insurance) shall contain breach of warranty provisions, such Policy shall not be invalidated by and shall insure to the benefit of Agent for the benefit of Lenders regardless of (A) any act, failure to act or negligence of or violation of warranties, declarations or conditions contained in such Policy by any named insured, (B) the occupancy or use of the Property for purposes more hazardous than permitted by the terms thereof, or (C) any foreclosure or other action or proceeding taken by Agent or the Lenders pursuant to any provision of the Mortgage or any other Loan Document.
(v) Borrower shall pay the Insurance Premiums for the Policies as the same become due and payable. Except to the extent that Borrower is required to provide the Policies or certificates with respect thereto to Agent in compliance with this Section 5.1.1 , Borrower shall make certified copies of the Policies available for review at Borrowers premises; provided , however , Agent and Lenders shall not be deemed by reason of the custody or review of such Policies, as applicable, to have knowledge of the contents thereof. Borrower also shall deliver to Agent within ten (10) days after Agents request, a statement setting forth the particulars as to all such Policies, indicating that all Insurance Premiums due thereon have been paid in accordance with the Policy payment terms and that the same are in full force and effect at Closing and upon renewal.
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(vi) If at any time Agent is not in receipt of written evidence that all insurance required hereunder is maintained in full force and effect, Agent and the Lenders shall have the right (but not the obligation), upon notice to Borrower, to take such action as Agent deems necessary to protect Lenders interest in the Property, including, without limitation, the obtaining of such insurance coverage as Lenders in its sole discretion deems appropriate and all Insurance Premiums incurred by Agent and the Lenders in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Agent upon demand and until paid shall be secured by the Mortgagee and shall bear interest at the Default Rate.
(vii) Upon written notice to and written approval from insurance carriers, in the event of foreclosure of the Mortgage or other transfer of title to the Property in extinguishment in whole or in part of the Debt, all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure, Agent, Lender, or other transferee in the event of such other transfer of title.
5.1.2 Insurance Carrier Ratings . The Policies shall be issued by financially sound and responsible insurance companies having a Financial Strength rating of A- and a Financial Size rating of X or better by A.M. Best Company, Inc. or A- with S&P for the primary $100,000,000.00 layer, and all other insurance companies having a rating of A-VIII or better by A.M. Best Company, or a rating agency otherwise approved by Agent. In all cases, the ratings shall be current for the time when the insurance is effected.
Section 5.2 Casualty and Condemnation.
5.2.1 Casualty . If the Property shall sustain a Casualty (provided that no notice shall be required in connection with a Casualty which is de minimis), Borrower shall give prompt notice of such Casualty to Agent and shall promptly commence and diligently prosecute to completion the repair and restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such Casualty (a Restoration ) and otherwise in accordance with Section 5.3 . Borrower shall pay all costs of such Restoration whether or not such costs are covered by insurance. Agent may, but shall not be obligated to, make proof of loss in accordance with the policy requirements if not made by Borrower within sixty (60) days of the occurrence of a Casualty. In addition, Agent may participate in any settlement discussions with any insurance companies with respect to any Casualty and any Governmental Authority with respect to any Condemnation in which the Net Proceeds or the cost of competing the restoration is equal to or greater than the Restoration Threshold and Borrower shall deliver to Agent all instruments required by Agent to permit such participation.
5.2.2 Condemnation . Borrower shall give Agent prompt notice of any actual or threatened Condemnation by any Governmental Authority of all or any part of the Property and shall deliver to Agent a copy of any and all papers served in connection with such proceedings. Agent may participate in any such proceedings, and Borrower shall from time to time deliver to Agent all instruments requested by Agent to permit such participation. Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Agent, its attorneys and experts, and cooperate with them in the carrying on or defense of any such
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proceedings. Notwithstanding any Condemnation, Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and this Agreement. Lenders shall not be limited to the interest paid on the Award by any Governmental Authority but shall be entitled to receive out of the Award interest and additional interest (if any) at the rate or rates provided in this Agreement or in the Note. If the Property or any portion thereof is taken by any Governmental Authority, Borrower shall promptly commence and diligently prosecute the Restoration of the Property and otherwise comply with the provisions of Section 5.3 . If the Property is sold, through foreclosure or otherwise, prior to the receipt by Agent of the Award, Agent shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Net Proceeds with respect to the applicable Award, or a portion thereof in an amount sufficient to pay the Debt.
Section 5.3 Delivery of Net Proceeds.
5.3.1 Minor Casualty or Condemnation . If a Casualty or Condemnation has occurred to the Property, Borrowers right, title and interest in and to all Proceeds are, except as otherwise herein provided, hereby assigned by Borrower to Agent and all Net Proceeds shall, except as otherwise herein provided, be paid to Agent. Borrower shall, in good faith and in a commercially reasonable manner, file and prosecute the adjustment, compromise or settlement of any claim for Proceeds and if the gross claim may exceed the Restoration Threshold, subject to Borrowers right to receive the direct payment of any Net Proceeds as herein provided, will cause the same to be paid directly to Agent to be held and applied in accordance with the provisions of this Agreement. Notwithstanding the foregoing, any insured claims in which the Net Proceeds are less than $2,500,000 shall be paid directly to Borrower so long as no Event of Default has occurred and is continuing. Except upon the occurrence and during the continuance of an Event of Default, Borrower may settle any insurance claim with respect to Net Proceeds which do not exceed the Restoration Threshold. Whether or not an Event of Default shall have occurred and be continuing, Agent shall have the right to participate in any settlement which would in Agents reasonable judgment result in Net Proceeds which exceed the Restoration Threshold and Borrower shall deliver or cause to be delivered to Agent all instruments reasonably requested by Agent to permit such participation. Borrower shall pay all reasonable out-of-pocket costs, fees and expenses incurred by Agent on behalf of Lenders (including all attorneys fees and expenses, the reasonable fees of insurance experts and adjusters and reasonable out-of-pocket costs incurred in any litigation or arbitration), and interest thereon at the Default Rate to the extent not paid within fifteen (15) Business Days after delivery of a request for reimbursement by Agent, accompanied by reasonable back-up documentation, in connection with the settlement of any claim for Proceeds and the seeking and obtaining of any payment on account thereof in accordance with the foregoing provisions. If any Proceeds are received by Borrower and may be retained by Borrower pursuant to this Section 5.3.1 , such Proceeds shall, until the completion of the related Work, be held in trust for Agent for the Ratable benefit of Lenders and shall be segregated from other funds of Borrower to be used to pay for the cost of the Restoration and insured continuing expenses in accordance with the terms hereof, and to the extent such Proceeds exceed the Restoration Threshold, such Proceeds shall be forthwith paid directly to and held by Agent to be applied or disbursed in accordance with this Article V . If an Event of Default shall have occurred and be continuing, or if Borrower fails to file any insurance claim in accordance with the Policy requirements for a period of fifteen (15) Business Days, or to prosecute same with commercially reasonable diligence following
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Borrowers receipt of written notice to do so from Agent, Borrower hereby irrevocably empowers Agent, in the name of Borrower as its true and lawful attorney-in-fact, to file and prosecute such claim (including settlement thereof) with counsel satisfactory to Agent and to collect and to make receipt for any such payment, all at Borrowers expense (including payment of interest at the Default Rate for any amounts advanced by Agent pursuant to this sentence). If a Casualty or Condemnation has occurred to the Property and the Net Proceeds shall be less than the Restoration Threshold and the costs of completing the Restoration shall be less than the Restoration Threshold, and provided no Event of Default shall have occurred and remain uncured, the Net Proceeds will be disbursed by Agent to Borrower. Borrower shall (i) commence the Restoration in accordance with the terms of this Agreement as soon as reasonably practicable after receipt of the Net Proceeds (but in no event later than one hundred twenty (120) days after such Casualty or Condemnation, whichever the case may be, occurs) and (ii) Borrower commence and satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement.
5.3.2 Major Casualty or Condemnation . (a) If a Casualty or Condemnation has occurred to the Property, Borrower shall commence and satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement, provided that, if required to pursuant to the terms of this Agreement, Agent shall have made the Net Proceeds available to Borrower in accordance with the provisions of this Agreement. If the Net Proceeds are equal to or greater than the Restoration Threshold or the costs of completing the Restoration are equal to or greater than the Restoration Threshold, Agent shall make the Net Proceeds available for the Restoration and payment of insured continuing expenses, provided that each of the following conditions are met:
(i) no Default or Event of Default shall have occurred and be continuing;
(ii) (A) in the event the Net Proceeds are insurance proceeds, less than thirty percent (30%) of the total floor area of the Improvements at the Property has been damaged, destroyed or rendered unusable as a result of such Casualty or (B) in the event the Net Proceeds are an Award, less than ten percent (10%) of the land constituting the Property is taken, and such land is located along the perimeter or periphery of the Property, and no portion of the Improvements is the subject of the Condemnation;
(iii) Borrower shall commence the Restoration as soon as reasonably practicable (but in no event later than one hundred twenty (120) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion;
(iv) Agent shall be satisfied that (A) the undisbursed amount of the Net Proceeds shall be sufficient to pay for the costs of completing the Restoration or Borrower has deposited sufficient funds with Agent to pay for any such deficiency, (B) any operating deficits and all payments of principal and interest under the Note will be paid during the period required for Restoration from (1) the Net Proceeds, (2) business income insurance, as required hereunder or (3) other funds of Borrower;
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(v) Agent shall be satisfied that the Restoration will be completed on or before the earliest to occur of (A) the date which is six (6) months prior to the Maturity Date, (B) such time as may be required under applicable Legal Requirements in order to repair and restore the Property to the condition it was in immediately prior to such Casualty or to as nearly as possible the condition it was in immediately prior to such Condemnation, as applicable or (C) the expiration of the business income insurance required hereunder;
(vi) the Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable Legal Requirements (including, if permitted by Legal Requirements, as a legal, non-conforming use);
(vii) the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements; and
(viii) such Casualty or Condemnation, as applicable, does not result in the loss of ordinary and customary access to the Property or the related Improvements.
(b) Except as otherwise provided herein, the Net Proceeds shall be paid directly to Agent and held by Agent in an interest-bearing account and, until disbursed in accordance with the provisions of this Section 5.3.2 , shall constitute additional security for the Debt. The Net Proceeds shall be disbursed by Agent to Borrower from time to time during the course of the Restoration, promptly after receipt of evidence satisfactory to Agent that (i) all requirements set forth in Section 5.3.2(a) have been satisfied (with respect to a Casualty or Condemnation where the applicable Net Proceeds exceed the Restoration Threshold only), (ii) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (iii) there exist no notices of pendency, stop orders, mechanics or materialmans liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property arising out of the Restoration which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy.
(c) All plans and specifications required in connection with a Restoration with a cost exceeding $2,500,000.00 shall be subject to prior approval by Agent and, at Agents election, by an independent architect selected by Agent (the Casualty Consultant ), which approval shall not be unreasonably withheld, conditioned or delayed. The plans and specifications shall require that the Restoration be completed in a diligent and workmanlike manner at least equivalent to the quality and character of the original work in the Improvements ( provided , however , that in the case of a partial Condemnation, the Restoration shall be done to the extent reasonably practicable after taking into account the consequences of such partial Condemnation), so that upon completion thereof, the Property shall be as nearly as possible to the condition of the Property prior to the damage or destruction; it being understood, however, that Borrower shall not be obligated to restore the Property to the precise condition of the Property prior to such Casualty provided the Property is restored, to the extent practicable, to be of at least equal value and of substantially the same character as prior to the Casualty. Borrower shall restore all Improvements such that when they are fully restored and/or repaired, such Improvements and their contemplated use fully comply with all applicable material Legal
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Requirements. In connection with any contract which exceeds $2,500,000.00, the identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to the reasonable approval of Agent and the Casualty Consultant. All reasonable costs and expenses incurred by Agent in connection with recovering, holding and advancing the Net Proceeds for the Restoration including, without limitation, reasonable attorneys fees and disbursements and the Casualty Consultants fees and disbursements, shall be paid by Borrower upon demand and if the same are not paid within ten (10) Business Days of such demand, such amounts shall accrue interest at the Default Rate commencing on the date of such demand. Each request for approval of any contractors, subcontractors or materialmen engaged in the Restoration and/or the contracts under which they have been engaged shall contain a legend in capitalized bold letters on the top of the cover page stating: THIS IS A REQUEST FOR CONSENT TO A [CONTRACTORS/SUBCONTRACTS/MATERIALMEN AND/OR CONTRACTS WITH RESPECT TO THE RESTORATION OF THE WALDORF=ASTORIA NYC]. AGENTS RESPONSE IS REQUESTED WITHIN TEN (10) BUSINESS DAYS. AGENTS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN BORROWERS RIGHT TO DELIVER A SECOND NOTICE . Each such request shall include the following documentation with such request: (i) all applicable information regarding any contractor, subcontractor or materialman for which Borrower seeks approval and the contract for which Borrower seeks approval, as applicable, and (ii) all other materials reasonably necessary in order for Agent to evaluate such request. In the event that Agent fails to grant or withhold its approval and consent to any such contractor, subcontractor, materialman or contract within such ten (10) Business Day period, then Borrower may send a second request to Agent which shall contain a legend in capitalized bold letters on the top of the cover page stating: THIS IS A REQUEST FOR CONSENT TO [CONTRACTORS/SUBCONTRACTS/MATERIALMEN AND/OR CONTRACTS WITH RESPECT TO THE RESTORATION OF THE WALDORF=ASTORIA NYC]. AGENTS RESPONSE IS REQUESTED WITHIN FIVE (5) BUSINESS DAYS. AGENTS FAILURE TO RESPOND WITHIN SUCH TIME PERIOD SHALL RESULT IN AGENTS CONSENT BEING DEEMED TO HAVE BEEN GRANTED . In the event that Agent fails to grant or withhold its approval and consent to the applicable request within such five (5) Business Day period (provided that Borrower has provided to Agent all information reasonably requested by Agent to make such determination) (and, in the case of a withholding of consent, stating the grounds therefor in reasonable detail), Agents approval and consent shall be deemed to have been granted.
(d) In no event shall Agent be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, less the Casualty Retainage. The term Casualty Retainage shall mean, as to each contractor, subcontractor or materialman engaged in the Restoration, an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed. The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 5.3.2(d) , be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty Consultant certifies to Agent that the Restoration has been completed in accordance with the
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provisions of this Section 5.3.2(d) and all applicable Legal Requirements and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate Governmental Authorities, and Agent receives evidence satisfactory to Agent that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided , however , that Agent will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Agent that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractors, subcontractors or materialmans contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Agent or by the title company issuing the Title Insurance Policy, and Agent receives an endorsement to the Title Insurance Policy insuring the continued priority of the lien of the Mortgage and evidence of payment of any premium payable for such endorsement. If required by Agent, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman.
(e) Agent shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.
(f) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the opinion of Agent in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (in the form of Cash or a Letter of Credit) (the Net Proceeds Deficiency ) with Agent within ten (10 Business Days of demand thereof and no further disbursement of the Net Proceeds shall be made until such deposit is received. The Net Proceeds Deficiency deposited with Agent shall be held by Agent and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 5.3.2 shall constitute additional security for the Debt.
(g) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Agent after the Casualty Consultant certifies to Agent that the Restoration has been completed in accordance with the provisions of this Section 5.3.2 , and the receipt by Agent of evidence satisfactory to Agent that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Agent to Borrower, provided no Event of Default shall have occurred and shall be continuing under any of the Loan Documents and provided , however , that with respect to an Award, no amounts shall be remitted to Borrower in excess of the Net Proceeds Deficiency deposited with Agent.
(h) Agent shall, with reasonable promptness following any Casualty or Condemnation, notify Borrower whether or not Net Proceeds are required to be made available to Borrower for a Restoration pursuant to this Section 5.3.2 (or, if the same are not required to be made available to Borrower for Restoration pursuant to this Section 5.3.2 , whether Agent will nevertheless make the same available, which election Agent may make in its sole and absolute discretion). All Net Proceeds not required (i) to be made available for the Restoration or (ii) to
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be returned to Borrower as excess Net Proceeds pursuant to Section 5.3.2(g) may be retained and applied by Agent toward the payment of the Debt, without prepayment premium or penalty (but subject to Sections 2.2.7 and 2.4.3 ), whether or not then due and payable in such order, priority and proportions as Agent in its sole discretion shall deem proper, or, at the discretion of Agent, the same may be paid, either in whole or in part, to Borrower for such purposes as Agent shall designate.
5.3.3 Application of Net Proceeds . Upon the occurrence of an Event of Default, Agent, at its option, may withdraw all the Net Proceeds or the undisbursed balance thereof and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Agent and may apply the such Net Proceeds and Net Proceeds Deficiency either to the payment of Restoration or to payment of the Debt (without premium or penalty, but subject to Section 2.2.7 ) in such order, proportion and priority as Agent may determine in its sole discretion. Agents right to withdraw and/or direct the withdrawal of the Net Proceeds and Net Proceeds Deficiency and apply such Net Proceeds and Net Proceeds Deficiency shall be in addition to all other rights and remedies provided to Agent under the Loan Documents.
VI. | RESERVE FUNDS |
Section 6.1 Reserve Funds . Upon the occurrence and during the continuance of an Event of Default, Agent shall have the right to establish and maintain reserves for the payment of Property Taxes and Other Charges, Insurance Premiums (except to the extent that the Policies are maintained under a blanket Policy), ongoing Capital Expenditures and for such other purposes as Agent shall determine in its sole discretion; provided, however, that Agent shall not establish any such reserves with respect to any amounts which are Manager Required Payments or are otherwise either being paid for by the Manager or reserved by the Manager in accordance with the Management Agreement. Notwithstanding the foregoing, Borrower hereby acknowledges and agrees that all Funds being held by Agent, for the Ratable benefit of the Lenders, during the continuance of an Event of Default, may be held or applied by Agent in any manner as determined by Agent in its sole discretion.
Section 6.2 Security Interest in Funds.
6.2.1 Grant of Security Interest . Borrower shall be the owner of the Net Proceeds Deficiency, if any, deposited with Agent after a Casualty or Condemnation, the payments received by Agent from the Counterparty under and pursuant to any Assignment of Interest Rate Protection Agreement, all amounts in the Deposit Account and the Lockbox Account and any other amounts delivered to Agent, for the Ratable benefit of the Lenders, hereunder as security for the Loan (collectively, the Funds ). Borrower hereby pledges, assigns and grants a security interest to Agent for the Ratable benefit of Agent and Lenders, as security for payment of the Debt and the performance of all other terms, conditions and covenants of the Loan Documents on Borrowers part to be paid and performed, in all of Borrowers right, title and interest in and to the Funds. Agent and Borrower hereby acknowledge and agree that, at all times, the Lockbox Account, the Deposit Account and the Funds shall be under the sole dominion and control of Agent and, subject to the provisions
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hereof, Borrower shall not have any right of withdrawal with respect to the Lockbox Account or the Deposit Account. Borrower acknowledges and agrees that Agents security interest in the Lockbox Account, the Deposit Account and Funds shall be automatically perfected by control pursuant to Sections 8-106(e), 9-104(a)(1), 9-106(a) and 9-314(a) of the UCC, as applicable. In addition, Borrower hereby pledges, assigns and grants a first priority continuing security interest to Agent for the Ratable benefit of Agent and Lenders, as security for payment of the Debt and the performance of all other terms, conditions and covenants of the Loan Documents on Borrowers part to be paid and performed, in all of Borrowers right, title and interest in and to (a) the Lockbox Account, the Deposit Account and the Funds, (b) any and all amounts invested in Permitted Investments, as applicable, (c) all interest, dividends, Cash, instruments, investment property and other property from time to time received, receivable or otherwise payable in respect of or in exchange for any or all of the foregoing, and (d) to the extent not covered by the foregoing, all proceeds (as defined in the UCC) of any or all of the foregoing (collectively, the Cash Management Collateral ). Agent shall have with respect to the Cash Management Collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC as if such rights and remedies were fully set forth herein. Borrower agrees that it will not (a) sell or otherwise dispose of any of the Cash Management Collateral or (b) create or permit to exist any Lien upon or with respect to all or any of the Cash Management Collateral, except the Lien granted to Agent under this Agreement.
6.2.2 Prohibition Against Further Encumbrance . Borrower shall not, without the prior consent of Agent, further pledge, assign or grant any security interest in the Funds or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Agent as the secured party, to be filed with respect thereto.
6.2.3 Application of Funds . Upon the occurrence of an Event of Default, Agent, at its option, may withdraw the Funds and apply the Funds to payment of the Debt in such order, proportion and priority as Agent may determine in its sole discretion. Agents right to withdraw and apply the Funds shall be in addition to all other rights and remedies provided to Agent or Lenders under the Loan Documents.
Section 6.3 Lockbox Account and Deposit Account .
6.3.1 Lockbox Account . Borrower hereby confirms that, simultaneously with the execution of this Agreement, pursuant to the Lockbox Agreement, it has established a deposit account at the Lockbox Bank in the name of Borrower for the benefit of Agent, for the Ratable benefit of the Lenders (the Lockbox Account ).
6.3.2 Instructions to Lockbox Bank; Use of Funds . Pursuant to the Lockbox Agreement, Borrower shall irrevocably instruct and authorize the Lockbox Bank to disregard any and all orders for withdrawal from the Lockbox Account made by, or at the direction of, Borrower. Agent shall direct the Lockbox Bank to transfer all amounts on deposit in the Lockbox Account on a daily basis (except upon (a) the occurrence and during the continuance of an Event of Default and/or (b) the occurrence of a
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Trigger Event and during the continuance of a Trigger Period) to the Borrowers Account. Upon the occurrence of an Event of Default and during the continuance of an Event of Default and upon the occurrence of a Trigger Event and during the continuance of a Trigger Period, Agent shall instruct the Lockbox Bank to transfer all amounts on deposit in the Lockbox Account, on a daily basis, to the Deposit Account.
6.3.3 No Amendment . Borrower agrees that, prior to the payment in full of the Debt, the terms and conditions of the Lockbox Agreement shall not be amended, modified or supplemented without the prior written consent of Agent (which consent Agent may grant or withhold in its sole discretion) and the Lockbox Agreement shall not be terminated without the prior written consent of Agent.
6.3.4 Deposits into the Lockbox Account . Borrower hereby represents, warrants and covenants that Borrower shall or shall cause Manager to (i) deposit any Rents actually received by Borrower or Manager into the applicable account as provided in Section 4.01 of the Management Agreement, and (ii) Borrower shall direct Manager to deposit all Excess Cash distributable by Manager to Owner pursuant to Section 4.04.3 of the Management Agreement into the Lockbox Account within one (1) Business Day after receipt thereof and, until so deposited, any such amounts held by Borrower or Manager, as applicable, shall be deemed to be Funds and shall be held in trust by Borrower or Manager, as applicable, for the benefit of Agent, for the Ratable benefit of the Lenders, and shall not be commingled with any other funds or property of Borrower or Manager, as applicable. In addition, Borrower hereby represents, warrants and covenants that (i) there are no accounts other than the accounts set forth on Schedule 6.3.4 attached hereto (and additional or replacement accounts which Borrower established upon reasonable notice to Agent, the Lockbox Account, any accounts maintained from time to time by Manager pursuant to the Management Agreement, the Deposit Account and Borrowers Account maintained by Borrower or any other Person on behalf of Borrower with respect to the Property or the collection of Rents, (ii) so long as any portion of the Loan shall be outstanding, neither Borrower nor any other Person on behalf of Borrower shall open any other operating accounts with respect to the Property or the collection of Rents, except as provided in subsection (i) above, and (iii) in the event that any Excess Cash is being paid into an account other than the Lockbox Account, Borrower shall promptly, upon becoming aware of the same, cause such Excess Cash to be paid into the Lockbox Account.
6.3.5 Deposit Account . On the date hereof, Borrower has established a deposit account with Deposit Bank in the name of Borrower for the benefit of Agent, for the Ratable benefit of the Lenders (the Deposit Account ). The Deposit Account is and shall be treated as a securities account as such term is defined in Section 8-501(a) of the UCC and control of the Deposit Account shall be vested in Agent in accordance with Section 9-104 of the UCC. In the event that balances in the Deposit Account are uninvested and maintained as Cash, the Deposit Account shall be treated as a deposit account as such term is defined in Section 9-102(a) of the UCC. Deposit Bank hereby agrees that each item of property (whether investment property, financial asset, security, instrument, cash or other property) credited to the Deposit Account shall be treated as a financial asset within the meaning of Section 8-102(a)(9) of the UCC. Deposit Bank shall have the right, from time to time, to pay itself all customary fees relating to the Deposit Account, if any, from amounts in the Deposit Account.
6.3.6 Trigger Period/Event of Default. During the continuance of a Trigger Period and, subject to the next succeeding sentence, during the continuance of an Event of
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Default, Agent shall hold all amounts in the Deposit Account as additional collateral for the Loan. During the existence of an Event of Default, all Funds in the Deposit Account may be applied by Agent, at its election, to the payment of the Debt in such order, proportion and priority as Agent may determine in its sole discretion and/or to create reserves in accordance with Section 6.1 . During the existence of a Trigger Period, provided that no Event of Default then exists, Agent shall disburse Funds on deposit in the Deposit Account to Borrower, upon Borrowers request, to pay for the following costs and expenses incurred (or to be incurred) by Borrower in connection with the ownership, management and/or operation of the Property (to the extent that the same have not been paid for by Manager in accordance with the Management Agreement): (a) Operating Expenses (including management fees payable to Manager pursuant to the Management Agreement), (b) emergency repairs and/or life-safety items (including Capital Expenditures), (c) budgeted Capital Expenditures, (d) sales and use Taxes and custodial funds payable to Governmental Authorities, (e) FF&E costs, (f) costs associated with approved Leases, existing Leases or Leases otherwise entered into in accordance with the Loan Documents (including, tenant improvements, leasing commissions and Tenant related Capital Expenditures (after exhausting any reserves for the same then being maintained by Manager)), (g) any actual, out-of-pocket costs incurred by Borrower to obtain Interest Rate Protection Agreements required pursuant to Section 4.1.15 , (h) shortfalls with respect to the Property Tax reserve, Insurance Premium reserve or other reserves maintained by Manager, as applicable, (i) fees and costs incurred by Borrower pursuant to the Loan Documents, (j) payments, costs and expenses due and payable to Agent and the Lenders, as applicable, under the Loan Documents, (k) actual, out-of-pocket legal, audit and accounting costs associated with the Property or the Borrower (other than any legal fees incurred by Borrower, Guarantor or their respective Affiliates in connection with any enforcement of Borrowers, Guarantors or any of their respective Affiliates rights under the Loan Documents), (l) actual, out-of-pocket expenses incurred by Borrower to restore the Property after a Casualty or Condemnation, (m) voluntary prepayments of the Loan to cure the Trigger Period or otherwise and (n) such other costs and expenses which are reasonably approved by Agent. Borrower shall not be entitled to more than two (2) disbursements of Funds from the Deposit Account in any calendar month, Borrower shall provide at least ten (10) Business Days notice to Agent of any request for a disbursement from the Deposit Account, and each request for disbursement shall be in a minimum amount of at least $100,000.00 (other than with respect to the final disbursement). In addition, Borrower shall provide to Agent evidence, reasonably satisfactory to Agent, of the costs and expenses so incurred by Borrower or, to be incurred by Borrower, and for which Borrower is requesting funds from the Deposit Account. Upon Borrowers request, promptly following the expiration of any Trigger Period and provided that no Event of Default shall then exist, Agent hereby agrees to transfer all amounts then in the Deposit Account to Borrowers Account.
6.3.7 Reasonable Care. Beyond the exercise of reasonable care in the custody thereof or as otherwise expressly provided herein, neither Agent nor Lenders shall have any duty as to the Deposit Account or Funds in its possession or control as agent therefor or bailee thereof or any income thereon or the preservation of rights against any Person or otherwise with respect thereto. Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Deposit Account and the Funds in its possession, as applicable, if the same is accorded treatment substantially equal to that which Agent accords its own property, it being understood that Agent and the Lenders shall not be liable or responsible for any loss or damage to the Funds, or for any diminution in value thereof, by reason of the act or omission of
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Agent, the Lenders or their respective Affiliates, agents, employees or bailees, except to the extent that such loss or damage results from Agents or Lenders gross negligence or willful misconduct.
Section 6.4 Permitted Investments.
6.4.1 Permitted Investments . Agent may invest any balances of the Funds in such Permitted Investments as Agent shall determine in its reasonable discretion is appropriate given the length of time that such Funds are to be invested, which Permitted Investments shall be held under the sole dominion and control of Agent and subject at all times to the terms hereof. No investment shall be made unless Agent shall have and continue to have a perfected first priority lien in such investment securing the Debt and all filings and other actions necessary to ensure the validity, perfection, and first priority of such lien shall have been taken. Agent shall have no liability for any loss of such funds that are invested in investments and no such loss shall affect Borrowers obligations to make the deposits required under this Article VI .
6.4.2 Earnings on Fund Collateral; Monthly Statements . All interest or other income (whether by virtue of Permitted Investments or otherwise) accruing on such funds, as applicable, shall, in each case, be held as if a part of the funds so invested. All risk of loss in respect of the investments shall be borne by Borrower.
6.4.3 Income Taxes . Borrower (or if Borrower is a disregarded entity for U.S. federal income Tax purpose, its tax owner) shall report on its federal, state and local income Tax returns all interest or income paid or accrued on such funds.
Section 6.5 Letters of Credit.
6.5.1 Delivery of Letters of Credit . (a) In lieu of making a Cash deposit with Agent with respect to any required Alteration Security or Net Proceeds Deficiency, Borrower may deliver to Agent a Letter of Credit in accordance with the provisions of this Section 6.5 . The aggregate amount of any Letter of Credit, Cash and other security (as permitted herein) on deposit with respect to any Alteration Security or any Net Proceeds Deficiency shall at all times be at least equal to the aggregate amount which Borrower is required to have on deposit with respect thereto pursuant to this Agreement.
(b) Borrower shall give Agent no less than thirty (30) days notice of Borrowers election to deliver a Letter of Credit and Borrower shall pay to Agent all of Agents reasonable out-of-pocket costs and expenses in connection therewith. Borrower shall not be entitled to draw from any such Letter of Credit. Upon thirty (30) days notice to Agent, Borrower may replace a Letter of Credit with a Cash deposit (or deposit of other collateral to the extent permitted hereunder) if a Letter of Credit has been outstanding for more than six (6) months. Prior to the return of a Letter of Credit, Borrower shall deposit an amount equal to the amount that would have accumulated and not been disbursed in accordance with this Agreement if such Letter of Credit had not been delivered.
6.5.2 Security for Debt . Each Letter of Credit delivered pursuant to this Agreement shall constitute additional security for the payment of the Debt. Upon the occurrence of an Event of Default, Agent shall have the right, at its option, to draw on any Letter of Credit
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and to apply all or any part thereof to the payment of the items for which such Letter of Credit was delivered or to apply each such Letter of Credit to payment of the Debt in such order, proportion or priority as Agent may determine.
6.5.3 Additional Rights of Agent . In addition to any other right Agent may have to draw upon a Letter of Credit pursuant to the terms and conditions of this Agreement, Agent shall have the additional right to draw in full any Letter of Credit: (a) with respect to any evergreen Letter of Credit, if Agent has received a notice from the issuing bank that the Letter of Credit will not be renewed and a substitute Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (b) with respect to any Letter of Credit with a stated expiration date, if Agent has not received a notice from the issuing bank that it has renewed the Letter of Credit at least thirty (30) days prior to the date on which such Letter of Credit is scheduled to expire and a substitute Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (c) upon receipt of notice from the issuing bank that the Letter of Credit will be terminated (except if the termination of such Letter of Credit is permitted pursuant to the terms and conditions of this Agreement or a substitute Letter of Credit is provided); or (d) if Agent has received notice or determines in good faith that the bank issuing the Letter of Credit shall cease or has ceased to be an Eligible Institution and within ten (10) days after Agent notifies Borrower in writing of such circumstance, Borrower shall fail to deliver to Agent a substitute Letter of Credit issued by an Eligible Institution. Notwithstanding anything to the contrary contained in the above, Agent is not obligated to draw any Letter of Credit upon the happening of an event specified in (a) , (b) , (c) or (d) above and shall not be liable for any losses sustained by Borrower due to the insolvency of the bank issuing the Letter of Credit if Agent has not drawn the Letter of Credit.
VII. | PROPERTY MANAGEMENT |
Section 7.1 The Management Agreement.
Borrower shall use commercially reasonable efforts to cause Manager to manage the Property, in all material respects, in accordance with the Management Agreement, shall use commercially reasonable efforts to cause the Manager to maintain all Rents in one (1) or more segregated accounts, and shall use commercially reasonable efforts to cause Manager to make all required Manager Required Payments. Borrower shall (a) diligently perform and observe, in all material respects, all of the terms, covenants and conditions of the Management Agreement on the part of Borrower to be performed and observed, (b) promptly after Borrower becomes aware notify Agent of any notice to Borrower of any material default by Borrower in the performance or observance of any of the terms, covenants or conditions of the Management Agreement on the part of Borrower to be performed and observed and (c) promptly after Borrower becomes aware notify Agent of any material default by Manager in the performance or observance of any of the terms, covenants or conditions of the Management Agreement on the part of Manager to be performed and observed. If Borrower shall default in the performance or observance of any term, covenant or condition of the Management Agreement on the part of Borrower to be performed or observed, then, without limiting Agents other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing Borrower from any of its obligations hereunder or under the Management Agreement, Agent shall have the right, but
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shall be under no obligation, to pay any sums and to perform any act as may be appropriate to cause all terms, covenants and conditions of the Management Agreement on the part of Borrower to be performed or observed. Borrower shall promptly deliver to Agent a copy of each financial statement, business plan, Capital Expenditure plan, notice and report received by Borrower under the Management Agreement.
Section 7.2 Prohibition Against Termination or Modification.
Borrower shall not surrender, terminate, cancel, modify in any material, adverse manner, renew or extend the Management Agreement, or, subject to the provisions of this Section 7.2 , enter into any other agreement relating to the management or operation of the Property with Manager or any other Person or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without the express consent of Agent, which consent shall not be unreasonably withheld; provided , however , that Borrower, may, without the consent of Agent, terminate the Management Agreement and replace the Manager with a Qualified Property Manager; provided, that any such replacement management agreement shall be on arms length terms and include market rate economics and Borrower shall cause such Manager to enter into an Assignment of Management Agreement with Agent, substantially in the form entered into by Manager on the Closing Date with such modifications to the same which are reasonably acceptable to both Agent and such Manager. In connection with any such change of management, Borrower hereby agrees that the Property shall be required to maintain a Qualified Flag. Notwithstanding the foregoing, at any time that the Manager is an Affiliate of Borrower, Borrower shall not surrender, terminate, cancel, modify, renew or extend the Management Agreement without the express consent of Agent, which consent shall not be unreasonably withheld.
Section 7.3 Replacement of Manager.
During the continuance of an Event of Default, Agent shall have the right, subject to the terms of the Assignment of Management Agreement, to direct Borrower to exercise Borrowers contractual rights under the Management Agreement to terminate the Management Agreement if (a) (i) the Manager files a voluntary petition under the Bankruptcy code or any other Federal or state bankruptcy or insolvency law; (ii) an involuntary petition is filed against Manager under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, and such petition is not dismissed within ninety (90) days of the date of filing, or (iii) Manager makes an assignment for the benefit of creditors or (b) if Manager is then in default under the Management Agreement beyond all applicable grace and cure periods. Borrower shall use commercially reasonable efforts to cause the Manager to, at all times, maintain the Property IP. At all times during the term of the Loan, the Property shall be managed by a Qualified Property Manager.
VIII. | TRANSFERS |
Section 8.1 Agents and Lenders Reliance.
Borrower acknowledges that Agent and Lenders have examined and relied on the experience of Borrower and its members and principals in owning and operating properties such
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as the Property in agreeing to enter into this Agreement and make the Loan, and will continue to rely on Borrowers ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the payment and performance of the Borrowers obligations, including, without limitation, Borrowers payment and performance obligations which constitute the Debt, under the Loan Documents. Borrower acknowledges that Agent and Lenders have a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Debt or the performance of Borrowers obligations under the Loan Documents, including, without limitation, Borrowers payment and performance obligations which constitute the Debt, Agent and Lenders can recover the Debt by a sale of the Property.
Section 8.2 No Transfers.
Except for Permitted Transfers and a Permitted Assumption, Borrower shall not Transfer the Property or any part thereof or permit or suffer the Property or any part thereof to be Transferred or permit any other Transfer to occur, unless Agent shall consent thereto in writing, in Agents sole and absolute discretion.
Section 8.3 Permitted Transfers.
(a) The restrictions on Transfers set forth in Section 8.2 shall not apply to the following Transfers ( Permitted Transfers ):
(i) Transfers by Guarantor and its subsidiaries of its direct or indirect interests in Borrower; provided, that subsequent to any such Transfer, Guarantor shall directly or indirectly own at least 50.1% of the ownership interests in Borrower and, directly or indirectly, Control Borrower and either the Manager or a Qualified Property Manager shall manage the Property;
(ii) a Transfer of the Property to a newly formed bankruptcy remote, special purpose entity which is in compliance with Section 3.1.23(c) through (f) and which is owned, directly or indirectly, at least 50.1% by Guarantor and Controlled, directly or indirectly, by Guarantor; provided, that Borrower complies with the provisions of Section 8.3(b)(v) and (vii) below and the Manager or a Qualified Property Manager manages the Property; and
(iii) if (A) Guarantor or any indirect or direct subsidiary of Guarantor becomes a Qualified Public Company, (B) Guarantor merges with or into a Qualified Public Company, or (C) one hundred percent (100%) of the direct or indirect interests in Borrower are sold or transferred to a Qualified Public Company (each, a Permitted Public Exit ). In connection with a Permitted Public Exit, the Property shall continue to be managed by Manager or a Qualified Property Manager;
(iv) following a Permitted Public Exit, any Transfers of direct and indirect interests in a Qualified Public Company; provided, that after any such Transfer the senior management of Borrower shall have substantial expertise in the ownership and management of full service, four (4) and five (5) star hotels and the Property shall continue to be managed by Manager or a Qualified Property Manager;
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(v) easements affecting the Property that are granted pursuant to and in compliance with the terms of this Agreement or otherwise with the approval of Agent (not to be unreasonably withheld) in accordance with the terms of this Agreement and the Mortgage;
(vi) any Liens that are Permitted Encumbrances or otherwise permitted under the Loan Documents and any Leases entered into in compliance with Section 4.1.10 ; or
(vii) Transfers of direct or indirect interests in Guarantor or any of Guarantors direct or indirect owners; provided, that the Property shall continue to be managed by Manager or a Qualified Property Manager.
(b) In addition to the Permitted Transfers, if Borrower Transfers the Property or in excess of 49.9% of the legal or beneficial interests in the Property or in Borrower are Transferred such that Guarantor no longer directly or indirectly owns at least 50.1% of and Controls Borrower, an assumption of the entire Loan shall be permitted without Agents consent (a Permitted Assumption ), provided that Agent receives forty-five (45) days prior written notice of such Transfer and no Event of Default has occurred and is continuing at the time such Permitted Assumption is consummated, and further provided that the following additional requirements are satisfied:
(i) In the event of a deed of the Property, the proposed borrower (the Assuming Borrower ) shall be a newly formed single purpose, bankruptcy remote entity which meets the requirements of Section 3.1.23(c) through (f) hereof;
(ii) Borrower shall pay Agent, for the Ratable benefit of the Lenders, a transfer fee equal to Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00);
(iii) Borrower shall pay any and all reasonable out-of-pocket costs incurred in connection with such Permitted Assumption (including, without limitation, Agents reasonable attorneys fees and disbursements and all recording fees, title insurance premiums and mortgage taxes, as applicable);
(iv) the Borrower or Assuming Borrower, as applicable, shall be at least 50.1% owned, directly or indirectly, in the aggregate, and Controlled, directly or indirectly, by one or more Qualified Transferees (collectively, the Assuming Sponsor ). Such Assuming Borrower shall execute a certificate pursuant to which it (A) certifies that it is owned, directly or indirectly, by the Assuming Sponsor and Controlled, directly or indirectly, by the Assuming Sponsor, (B) represents that neither it nor the Assuming Sponsor, is subject to any material litigation relating to its respective creditworthiness, (C) certifies that it is in compliance with the provisions of Section 3.1.23(c) through (f) , and (D) makes the representations set forth in Sections 3.1.40 , 3.1.41 , and 3.1.42 ;
(v) with respect to a Transfer of the Property, the Assuming Borrower (or an Affiliate of the Assuming Borrower) shall assume all of the obligations of
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Borrower under the Loan Documents in a manner reasonably satisfactory to Agent in all respects, including, without limitation, by entering into an assumption agreement in form and substance reasonably satisfactory to Agent;
(vi) the Assuming Sponsor shall have assumed all of the liabilities and obligations of Guarantor under the Guaranty or shall have executed a replacement guaranty substantially similar to the Guaranty; provided, that, in either event, the Assuming Sponsor shall not be entitled to the Guaranty Liability Cap (as defined in the Guaranty), which Guaranty Liability Cap shall not be contained in any such replacement guaranty. In addition, if the Assumed Sponsor consists of more than one Person, then such Assumed Sponsors liability under the Guaranty or any replacement guaranty, shall be joint and several;
(vii) if the Permitted Assumption is accomplished by deed or conveyance of the Property rather than by assignment of all of the ownership interests in Borrower, Borrower shall deliver, at its sole cost and expense, an endorsement to the Title Insurance Policy, as modified by the assumption agreement, as a valid first lien on the Property and naming the Assuming Borrower as owner of the Property, which endorsement shall insure that, as of the date of the recording of the assumption agreement, the Property shall not be subject to any additional exceptions or liens other than those contained in the Title Insurance Policy issued on the Closing Date and any other Permitted Encumbrances; and
(viii) the Property shall be managed by the Manager pursuant to the Management Agreement or another Qualified Property Manager pursuant to a management agreement which shall be on arms length terms and include market rate economics. Borrower shall cause any such Qualified Property Manager to enter into an Assignment of Management Agreement with Agent, substantially in the form entered into by Manager on the Closing Date with such modifications to the same which are reasonably acceptable to both Agent and such Qualified Property Manager.
Immediately upon a consummation of any such Permitted Assumption, including, without limitation, the satisfaction of all of the above requirements, the Borrower and, to the extent that there is a replacement guarantor pursuant to subsection (vi) , Guarantor herein shall be released from all liability under this Agreement, the Note, the Mortgage and the other Loan Documents for acts or omissions occurring after such Transfer. The foregoing release shall be effective upon the date of such Transfer and Agent agrees to provide written evidence thereof reasonably requested by Borrower.
(c) If, after any Permitted Transfer described in Section 8.3(a)(iii) and (iv) , Guarantor shall no longer own a direct or indirect interest in the Property or Borrower, one (1) or more replacement Guarantors which are Qualified Transferees or, in connection with a Permitted Public Exit only, a Qualified Public Company, shall assume all of the liabilities and obligations of Guarantor under the Guaranty or execute a replacement guaranty substantially similar to the Guaranty and, upon the consummation of such Transfer and the delivery of the assumption of the Guaranty or the replacement guaranty, as applicable, Guarantor shall be released from all
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liability under the Guaranty for acts or omissions occurring after such Transfer. In addition, each Qualified Transferee who owns a direct or indirect beneficial interest in Borrower after any such Permitted Transfer shall be required to be a Guarantor. The foregoing release shall be effective upon the date of such Transfer and the delivery of the assumption of the Guaranty or the replacement Guaranty, as applicable, and Agent agrees to provide written evidence thereof reasonably requested by Borrower. If any such replacement guarantor consists of more than one (1) Qualified Transferee, their liability thereunder shall be joint and several. In addition, any such replacement guarantor or guarantors shall not be entitled to the Guaranty Liability Cap, which Guarantor Liability Cap shall not be contained in such replacement guaranty; provided, however that any replacement guarantor resulting from a Permitted Transfer pursuant to clause (A) of the definition of Permitted Public Exit shall be entitled to the Guarantor Liability Cap and it shall be contained in such replacement guaranty.
(d) Notwithstanding the fact that each Qualified Transferee and Qualified Public Company, as applicable, shall be required to meet a Net Worth requirement on the date of the applicable Permitted Transfer or Permitted Assumption in accordance with this Agreement, such Qualified Transferee and Qualified Public Company shall not be required to maintain such Net Worth.
(e) Notwithstanding anything to the contrary contained herein, if any Permitted Transfer requires the consent of the Manager pursuant to the Management Agreement, then if the Manager does not consent to such Permitted Transfer, such Transfer shall not be a Permitted Transfer and shall not be permitted hereunder. To the extent that a Qualified Property Manager becomes the Manager of the Property in connection with any of the Permitted Transfers set forth herein or in connection with a Permitted Assumption, such Qualified Property Manager shall enter into an Assignment of Management Agreement with Agent, substantially in the form entered into by Manager on the Closing Date with such modifications to the same which are reasonably acceptable to both Agent and such Manager. In addition, the Property shall, at all times, have a Qualified Flag.
(f) Notwithstanding the provisions of this Section 8.3 , to the extent that any Permitted Transfer (or series of Permitted Transfers) results in a Person (other than a direct or indirect wholly owned and controlled subsidiary of Hilton) acquiring a direct or indirect interest of twenty percent (20%) or more of Borrower or having direct or indirect Control of Borrower, and, in connection with a Permitted Assumption, as applicable, Borrower shall provide written notice of any such Transfer to Agent at least thirty (30) days prior to such Transfer (or forty-five (45) days in connection with a Permitted Assumption) and Borrower shall deliver to Agent searches and documentation regarding such Persons (which, in the case of a Permitted Assumption, shall include the Assuming Borrower, Assuming Sponsor, and any other Person owning a direct or indirect interest of twenty percent (20%) or more in the Assuming Borrower or having direct or indirect Control of the Assuming Borrower) reasonably requested by Agent in furtherance of Agents and each Lenders OFAC and know your customer requirements, which search results and documentation shall be reasonably acceptable to Agent and the Lenders. Agent and each Lender hereby agree to complete their respective OFAC and know your customer diligence in accordance with this subsection (f) within twenty (20) days after Agent receives notice from Borrower regarding such proposed Permitted Transfer; provided, that Agent has received all required documentation and search results from Borrower promptly after receipt
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of Borrowers notice with respect to such Permitted Transfer. If such search results and/or documentation are not acceptable to Agent or any Lender, in their reasonable discretion, such Transfer shall not be permitted even if such Transfer is a Permitted Transfer or a Permitted Assumption, as applicable. Borrower shall be responsible for the costs of any such required searches and the delivery of any such requested documentation. In addition, the applicable transferee shall comply with Section 4.1.26 , Section 4.1.27 , and Section 4.1.28 hereof. Notwithstanding the foregoing, in connection with a Permitted Public Exit described in Section 8.3(a)(iii) only, Agent and the Lenders shall require the foregoing searches and documentation only with respect to any Person who has been identified as having a direct or indirect interest of twenty percent (20%) or more of Borrower or having direct or indirect Control of Borrower. Borrower hereby acknowledges and agrees that the twenty percent (20%) threshold used in this subsection (f) may be reduced to ten percent (10%) upon notice from Agent to Borrower that one (1) or more of the Lenders internal know your customer procedures shall require a ten percent (10%) threshold.
(g) Borrower shall be responsible to pay Agents reasonable costs and expenses, including, without limitation, reasonable attorneys fees and disbursements, in connection with any Permitted Transfer or Permitted Assumption, as applicable.
IX. | DEFAULTS |
Section 9.1 Events of Default.
(a) Each of the following events shall constitute an event of default hereunder (an Event of Default ):
(i) if (A) the Debt is not paid in full on the Maturity Date, (B) any regularly scheduled monthly payment of interest and/or principal due under the Note is not paid in full within two (2) Business Days of the applicable Payment Date, or (C) except as to any amount explicitly included in (A) and (B) of this sub-paragraph (i) , any other amount payable pursuant to the Loan Documents is not paid in full when due and payable in accordance with the provisions of the applicable Loan Document and such failure continues for ten (10) days after Agent delivers written notice thereof to Borrower;
(ii) if Borrower shall fail to pay any of the Property Taxes or Other Charges when due other than those Property Taxes and Other Charges being contested by Borrower in compliance with Borrowers Contest Right;
(iii) if the Policies are not kept in full force and effect;
(iv) if Borrower breaches or permits or suffers a breach of Article 6 of the Mortgage or Article VIII hereof;
(v) if Borrower fails to obtain and/or maintain the Interest Rate Protection Agreement or any subsequent One Year Cap, as applicable, as required by Section 4.1.15 ;
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(vi) if any material representation or warranty made by Borrower or Guarantor in this Agreement or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Agent and/or Lenders on behalf of Borrower shall have been false or shall have omitted a material fact so as to make the same not misleading in any material adverse respect as of the date the representation or warranty was made; provided, however, that except with respect to the representations set forth in Section 3.1.1 , Section 3.1.2 , Section 3.1.3 , Section 3.1.4 , Section 3.1.6 , Section 3.1.7 , Section 3.1.8 , Section 3.1.10 , Section 3.1.11 , Section 3.1.13 , Section 3.1.15 , Section 3.1.17 , Section 3.1.20 , Section 3.1.21 , Section 3.1.23 , Section 3.1.25 , Section 3.1.26 , Section 3.1.30 , Section 3.1.32 , Section 3.1.33 , Section 3.1.34 , Section 3.1.35 , Section 3.1.36 , Section 3.1.37 , Section 3.1.40 , Section 3.1.41 and Section 3.1.42 , provided such breach is susceptible of being cured, the same shall not be an Event of Default hereunder provided that the same is cured within ten (10) Business Days after the earlier to occur of (a) Borrowers knowledge of such breach, and (b) Agents notification to Borrower in writing of such breach;
(vii) if Borrower shall make an assignment for the benefit of creditors;
(viii) if a receiver, liquidator or trustee shall be appointed for Borrower or if Borrower shall be adjudicated bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, or if any proceeding for the dissolution or liquidation of Borrower shall be instituted; provided , however , if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower upon the same not being discharged, stayed or dismissed within sixty (60) days;
(ix) if a Guarantor Bankruptcy Event occurs with respect to Guarantor;
(x) if Borrower attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;
(xi) if Borrower breaches any covenant contained in Section 4.2.7 (to the extent that any such zoning action has been completed), Section 4.2.9 (to the extent that any such joint assessment has been completed) or Section 4.2.11 ;
(xii) if Borrower breaches any covenant contained in Section 4.2.7 (to the extent that any such zoning action has not been completed) or Section 4.2.9 (to the extent that any such joint assessment has not been completed) and such breach of Section 4.2.7 or Section 4.2.9 continues for ten (10) Business Days after the earlier to occur of (A) Borrower becoming aware of such default and (B) Agent providing notice to Borrower regarding such default;
(xiii) if Borrower breaches any covenant contained in Section 4.2.2 , Section 4.2.6 , Section 4.2.10 , Section 4.2.12 , and Section 4.2.13 and such breach of Section 4.2.2 , Section 4.2.6 , Section 4.2.10 , Section 4.2.12 or Section 4.2.13 continues for ten (10) Business Days after the earlier to occur of (A) Borrower becoming aware of such default and (B) Agent providing notice to Borrower regarding such default;
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(xiv) if Borrower breaches any representation, warranty or covenant in Section 3.1.23(a) , (b) or (c) , and (a) such failure is susceptible of being cure and is not cured within ten (10) Business Days after the date on which Agent notified Borrower in writing of such breach or (b) in the case of Sections 3.1.23(b) and (c) , if such breach leads to a substantive consolidation of the assets of Borrower with the assets of another Person in any bankruptcy proceeding with respect to such other Person; provided, that any such breach shall not constitute an Event of Default if such breach is de minimis, inadvertent and non-recurring and/or would not reasonably be expected to and does not cause a substantive consolidation of Borrower with any other Person in any bankruptcy proceeding with respect to such other Person;
(xv) if Borrower fails to comply with the covenants as to Prescribed Laws set forth in Section 4.1.1 , Section 4.1.26(a) , or Section 4.1.27 ;
(xvi) if Guarantor breaches in any material respect any covenant, warranty or representation contained in the Guaranty, including, without limitation, Section 4.2 of the Guaranty;
(xvii) if one or more final, non-appealable judgments or decrees shall be entered against Borrower involving in the aggregate a liability in excess of $1,000,000 and shall not (A) be covered by insurance, or (B) have been vacated or bonded and stayed within thirty (30) days; or
(xviii) if Borrower shall be in Default under any of the other terms, covenants or conditions of this Agreement or any other Loan Document not otherwise specified in subsections (i) to (xvii) above and such Default continues for ten (10) days, in the case of any such Default which can be cured by the payment of a sum of money, or for ten (10) days after notice from Agent in the case of any other such Default; provided , however , that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such ten (10) day period and provided , further , that Borrower shall have commenced to cure such Default within such ten (10) day period and thereafter diligently and expeditiously proceeds to cure the same, such ten (10) day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed forty-five (45) days.
(b) Upon the occurrence and during the continuance of an Event of Default (other than an Event of Default described in clauses (vii) , (viii) or (ix) above) and at any time thereafter Agent may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, take such action, without notice or demand, that Agent deems advisable to protect and enforce its rights against Borrower and in and to the Property, including, without limitation, declaring the Debt to be immediately due and payable, and Agent may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and the Property, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vii) ,
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(viii) or (ix) above, the Debt and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.
Section 9.2 Rights and Remedies of Agent and Lenders.
(a) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Agent against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Agent at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Agent shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Property. Any such actions taken by Agent shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Agent may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Agent permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing (i) Agent is not subject to any one action or election of remedies law or rule, and (ii) all liens and other rights, remedies or privileges provided to Agent shall remain in full force and effect until Agent has exhausted all of its remedies against the Property and the Mortgage has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full.
(b) Agent shall have the right from time to time following the occurrence of an Event of Default to partially foreclose the Mortgage in any manner and for any amounts secured by the Mortgage then due and payable as determined by Agent in its sole discretion including, without limitation, the following circumstances: (i) in the event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Agent may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Agent elects to accelerate less than the entire outstanding principal balance of the Loan, Agent may foreclose the Mortgage to recover so much of the principal balance of the Loan as Agent may accelerate and such other sums secured by the Mortgage as Agent may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered.
(c) Upon the occurrence and during the continuance of an Event of Default, Agent shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents (the Severed Loan Documents ) in such denominations as Agent shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall execute and deliver to Agent from time to time, promptly after the request of Agent, a severance agreement and such other documents as Agent shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Agent, provided that the same shall contain provisions substantially the same as are set forth in
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Section 10.22 . Borrower hereby absolutely and irrevocably appoints Agent as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney shall do by virtue thereof; provided , however , Agent shall not make or execute any such documents under such power until three (3) Business Days after notice has been given to Borrower by Agent of Agents intent to exercise its rights under such power. Borrower shall not be obligated to pay any costs or expenses incurred in connection with the preparation, execution, recording or filing of the Severed Loan Documents, and the Severed Loan Documents shall not contain any representations, warranties or covenants not contained in the Loan Documents and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
(d) Upon the occurrence of an Event of Default, Agent may:
(i) execute all applications and certificates on behalf of Borrower which may be required by any Governmental Authority or Legal Requirement or contract documents or agreements;
(ii) complete the marketing and leasing of leasable space in the Improvements, and modify or amend existing leases and occupancy agreements, all as Agent shall deem to be necessary or desirable;
(iii) take such other action hereunder, or refrain from acting hereunder, as Agent may, in its sole and absolute discretion, from time to time determine, and without any limitation whatsoever, to carry out the intent of this Section 9.2 .
(e) Upon the occurrence and during the continuance of an Event of Default, Agent may appoint or seek appointment of a receiver, without notice and without regard to the solvency of Borrower or the adequacy of the security, for the purpose of preserving the Property, preventing waste, and to protect all rights accruing to Agent and/or Lenders by virtue of this Agreement and the other Loan Documents. All expenses incurred in connection with the appointment of such receiver, or in protecting, preserving, or improving the Property, shall be charged against Borrower and shall be secured by the Mortgage and enforced as a Lien against the Property.
(f) Upon the occurrence of an Event of Default, Agent may accelerate maturity of the Note and any other indebtedness of Borrower to Lenders, and demand payment of the principal sum due thereunder, with interest, costs and attorneys fees and expenses (including those for appellate proceedings), and enforce collection of such payment by foreclosure of the Mortgage or the enforcement of any other collateral, or other appropriate action.
Section 9.3 Power of Attorney.
For the purposes of carrying out the provisions and exercising the rights, powers and privileges granted by or referred to in this Agreement, Borrower hereby irrevocably constitutes and appoints Agent its true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and do and perform any acts
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which are referred to in this Agreement, in the name and on behalf of Borrower. The power vested in such attorney-in-fact is, and shall be deemed to be, coupled with an interest and irrevocable. Notwithstanding the foregoing, Agent shall not exercise such power unless an Event of Default has occurred and is continuing.
Section 9.4 Remedies Cumulative.
Upon the occurrence of any Event of Default, the rights, powers and privileges provided in this Article IX and all other remedies available to Agent and Lenders under this Agreement or under any of the other Loan Documents or at law or in equity may be exercised by Agent and Lenders at any time and from time to time and shall not constitute a waiver of Agents or any of Lenders other rights or remedies thereunder, whether or not the Loan shall be due and payable, and whether or not Agent shall have instituted any foreclosure proceedings or other action for the enforcement of its rights under the Loan Documents. The rights, powers and remedies of Agent under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Agent may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law, in equity or otherwise. Agents rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Agent may determine in Agents sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.
Section 9.5 Annulment of Defaults.
An Event of Default shall not be deemed to be in existence for any purpose of this Agreement or any Loan Document if Agent shall have waived such Event of Default in writing or provided in writing that the same has been cured to its reasonable satisfaction, but no such waiver shall extend to or affect any subsequent Event of Default or impair any of the rights of Lenders upon the occurrence thereof.
Section 9.6 Waivers.
Borrower hereby waives to the extent not prohibited by applicable law (a) all presentments, demands for payment or performance, notices of nonperformance (except to the extent required by the provisions hereof or of any other Loan Documents), protests and notices of dishonor, (b) any requirement of diligence or promptness on Agents or Lenders part in the enforcement of its rights (but not fulfillment of its obligations) under the provisions of this Agreement or any other Loan Document, and (c) any and all notices of every kind and description which may be required to be given by any statute or rule of law, to the fullest extent permitted by applicable law.
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Section 9.7 Course of Dealing, Etc.
No course of dealing and no delay or omission by Agent, Lenders or Borrower in exercising any right or remedy hereunder shall operate as a waiver thereof or of any other right or remedy and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver or consent shall be binding upon Lenders unless it is in writing and signed by Agent. Agents exercise of Agents right to remedy any default by Borrower to Lenders or any other person, firm or corporation shall not constitute a waiver of the default remedied, a waiver of any other prior or subsequent default by Borrower or a waiver of the right to be reimbursed for any and all of its expenses in so remedying such default. All rights and remedies of Lenders hereunder are cumulative.
X. | MISCELLANEOUS |
Section 10.1 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective, permitted successors and assigns permitted hereby except that, subject to the provisions of Section 8.3 , no Borrower or Guarantor may assign or otherwise transfer any of its rights or obligations under the Loan Documents without the prior written consent of Agent, in Agents sole discretion (and any attempted assignment or transfer by Borrower or Guarantor without such consent shall be null and void). Nothing in the Loan Documents, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in Section 10.25(m) hereof) and, to the extent expressly contemplated hereby, the Affiliates of any Lender) any legal or equitable right, remedy or claim under or by reason of any of the Loan Documents.
Section 10.2 Agents and Lenders Discretion.
Whenever, pursuant to this Agreement, Agent and/or a Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Agent and/or any Lender, the decision of Agent and/or such Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Agent and/or such Lender, as applicable, and shall be final and conclusive.
Section 10.3 Governing Law, Jurisdiction and Agent for Service.
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDERS AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
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RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST CREATED PURSUANT THE MORTGAGE AND THE OTHER LOAN DOCUMENTS (OTHER THAN WITH RESPECT TO LIENS AND SECURITY INTERESTS IN PROPERTY WHOSE PERFECTION AND PRIORITY IS COVERED BY ARTICLE 9 OF THE UCC (INCLUDING, WITHOUT LIMITATION, THE ACCOUNTS) WHICH SHALL BE GOVERNED BY THE LAW OF THE JURISDICTION APPLICABLE THERETO IN ACCORDANCE WITH SECTIONS 9-301 THROUGH 9-307 OF THE UCC AS IN EFFECT IN THE STATE OF NEW YORK) SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW EXCEPT AS SPECIFICALLY SET FORTH ABOVE.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST AGENT, ANY LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT AGENTS OR LENDERS OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
CORPORATION SERVICES COMPANY
80 STATE STREET
ALBANY, NEW YORK 12207
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AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO AGENT OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR OR REFUSES TO CONSENT TO SUCH DESIGNATION AS AUTHORIZED AGENT FOR BORROWER PURSUANT TO A WRITTEN CONSENT IN FORM AND SUBSTANCE SATISFACTORY TO AGENT .
Section 10.4 Modification, Waiver in Writing.
No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.
Section 10.5 Delay Not a Waiver.
Neither any failure nor any delay on the part of Agent and/or Lenders in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement or any other Loan Document, neither Agent nor Lenders shall be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.
Section 10.6 Notices.
All notices, demands, requests, consents, approvals or other communications (any of the foregoing, a Notice ) required, permitted, or desired to be given hereunder or under any
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other Loan Document (other than the Guaranties, which shall be governed by the respective provisions thereof concerning notices) shall be in writing sent by registered or certified mail, postage prepaid, return receipt requested, or delivered by hand or reputable overnight courier addressed to the party to be so notified at its address set forth herein, or to such other address as such party may hereafter specify in accordance with the provisions of this Section 10.6 . Any Notice to Borrower shall be effective if rendered in accordance with this Section to Borrower solely. Agent shall use commercially reasonable efforts to provide copies of notices rendered to Borrower to the additional parties specified below, but the failure to effect any such Notice to such additional party shall not affect the validity and full force and effect of such Notice upon Borrower. Any Notice shall be deemed to have been received: (a) three (3) days after the date such Notice is mailed, (b) on the date of delivery by hand if delivered during business hours on a Business Day (otherwise on the next Business Day), and (c) on the next Business Day if sent by an overnight commercial courier, in each case addressed to the parties as follows:
If to Agent: | HSBC Bank USA, National Association, as Agent | |
545 Washington Boulevard, 10 th Floor | ||
Jersey City, New Jersey 07310 | ||
Attention: Commercial Mortgage Servicing Department | ||
with a copy to: | HSBC Bank USA, National Association, as Agent | |
452 Fifth Avenue | ||
New York, New York 10018 | ||
Attention: Robert D. Gominiak | ||
with a copy to: | Cadwalader, Wickersham & Taft LLP | |
One World Financial Center | ||
New York, New York 10281 | ||
Attention: Steven M. Herman, Esq. | ||
If to Lenders: | at their respective Applicable Lending Office set forth opposite their signatures hereto. | |
If to Borrower: | HLT NY Waldorf LLC | |
c/o Hilton Worldwide Inc. | ||
7930 Jones Branch Drive | ||
McLean, Virginia 22180 | ||
Attention: Sean DellOrto | ||
With a copy to: | c/o Blackstone Real Estate Advisors | |
345 Park Avenue | ||
New York, New York 10154 | ||
Attention: William J. Stein and Judy Turchin |
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With a copy to: | Simpson Thacher & Bartlett LLP | |
425 Lexington Avenue | ||
New York, New York 10017 | ||
Attention: Erik Quarfordt, Esq. |
Section 10.7 Trial by Jury.
BORROWER, AGENT AND EACH LENDER EACH HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AGENT AND EACH LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BORROWER, AGENT AND EACH LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
Section 10.8 Headings.
The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
Section 10.9 Severability.
Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
Section 10.10 Preferences .
Each Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the Debt. To the extent Borrower makes a payment or payments to Agent or any Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Debt or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Agent or such Lender.
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Section 10.11 Waiver of Notice.
Borrower shall not be entitled to any notices of any nature whatsoever from Agent or Lenders except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Agent and/or Lenders to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Agent and/or any Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Agent and/or such Lender to Borrower.
Section 10.12 Remedies of Borrower.
In the event that a claim or adjudication is made that Agent or any Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Agreement or the other Loan Documents, Agent or such Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Agent nor such Lender nor its agents shall be liable for any monetary damages, and Borrowers sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Agent or a Lender has acted reasonably shall be determined by an action seeking declaratory judgment. Any expedited procedure legally available with such a declaratory judgment action or action for injunctive relief may be utilized to the extent possible.
Section 10.13 Expenses; Indemnity.
(a) Borrower shall pay or, if Borrower fails to pay, shall reimburse Agent upon receipt of notice and demand from Agent for all reasonable costs and expenses (including reasonable attorneys fees and disbursements) incurred by Agent in connection with (i) Borrowers and/or Guarantors ongoing performance of and compliance with Borrowers and/or Guarantors agreements and covenants contained in this Agreement and the other Loan Documents on their respective parts to be performed or complied with after the date of this Agreement, including, without limitation, confirming compliance with environmental and insurance requirements and paying the fees of any environmental consultant to the extent provided for in the Mortgage of Environmental Indemnity; (ii) Agents ongoing performance of and compliance with all agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the date of this Agreement; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Borrower and/or Guarantor; (iv) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Agent all required legal opinions, and other similar expenses incurred, in creating and perfecting the Liens in favor of Agent, for the Ratable benefit of the Lenders, pursuant to this Agreement and the other Loan Documents; (v) enforcing or preserving any rights, whether at trial or not, including appeals therefrom, in response to third party claims or the prosecuting or defending of any action or proceeding, mediation, arbitration or other litigation or administrative proceeding, in each case against, under or affecting Borrower, Guarantor, this Agreement, the other Loan Documents, the Property, or any other security given for the Loan; and (vi) enforcing
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any obligations of or collecting any payments due from Borrower and/or Guarantor under this Agreement, the other Loan Documents or with respect to the Property (including, without limitation, Borrowers payment and performance of such obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan)) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a work-out or of any insolvency or bankruptcy proceedings or any foreclosure or acceptance of a deed-in-lieu of foreclosure; provided , however , that Borrower shall not be liable for the payment of any such costs and expenses to Agent to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Agent. This Section 10.13(a) shall not apply with respect to Taxes, other than any Taxes that represent losses, claims or damages arising from this Section 10.13(a) .
(b) Borrower shall indemnify, defend and hold harmless Agent and each Lender, each Participant in the Loan, and their respective officers, directors, partners, employees and agents (each, an Indemnified Party ) from and against, and shall reimburse the affected Indemnified Party for, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and expenses of counsel for Agent in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Agent shall be designated a party thereto) (collectively, Losses ), that may be imposed on, incurred by, or asserted against such Indemnified Party in any manner relating to or arising out of (i) any breach by Borrower of its obligations under (including, without limitation, a breach of Borrowers payment and performance of its obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan)), or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, (ii) the use or intended use of the proceeds of the Loan or (iii) any other matter arising from this Agreement or the Loan (collectively, the Indemnified Liabilities ); provided , however , that Borrower shall not have any obligation to such Indemnified Party hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of such Indemnified Party. To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by such Indemnified Party.
(c) In case any such claim, action or proceeding (a Claim ) is brought against an Indemnified Party in respect of which indemnification may be sought by such Indemnified Party pursuant hereto, Agent shall give prompt written notice thereof to Borrower, which notice shall include all documents and information in the possession of or under the control of Agent and such Indemnified Party relating to such Claim and shall specifically state that indemnification for such Claim is being sought under this Section 10.13 ; provided , however , that the failure of Agent to so notify Borrower shall not limit or affect such Indemnified Partys rights to be indemnified pursuant to this Section 10.13 except to the extent Borrower is materially prejudiced by such failure. Upon receipt of such notice of Claim (together with such documents and information from Agent and such Indemnified Party), Borrower shall, at its sole cost and expense, in good faith defend any such Claim with counsel reasonably satisfactory to Agent and such Indemnified Party (it being understood that counsel selected by Borrowers
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insurance carrier shall be deemed to be acceptable to Agent and such Indemnified Party, provided such insurer is an acceptable insurer under the Loan Documents or otherwise was accepted by Agent as an insurer), which counsel may, without limiting the rights of Agent and such Indemnified Party pursuant to the next succeeding sentence of this Section 10.13 , also represent Borrower in such investigation, action or proceeding. In the alternative, such Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the reasonable expense of Borrower, if (i) such Indemnified Party reasonably determines that the conduct of its defense by Borrower could be materially prejudicial to its interests, (ii) Borrower refuses to defend, or (iii) Borrower shall have failed, in such Indemnified Partys reasonable judgment, to defend the Claim in good faith (unless such Claim is being defended by Borrowers insurance carrier, provided such insurer is an acceptable insurer under the Loan Documents or otherwise was accepted by Agent as an insurer). Borrower may settle any Claim against such Indemnified Party without such Indemnified Partys consent, provided (A) such settlement is without any liability, cost or expense whatsoever to such Indemnified Party, (B) the settlement does not include or require any admission of liability or culpability by such Indemnified Party under any federal, state or local statute or regulation, whether criminal or civil in nature and (C) Borrower obtains an effective written release of liability for such Indemnified Party from the party to the Claim with whom such settlement is being made, which release must be reasonably acceptable to such Indemnified Party, and a dismissal with prejudice with respect to all claims made by the party against such Indemnified Party in connection with such Claim. Agent and such Indemnified Party shall reasonably cooperate with Borrower, at Borrowers sole cost and expense, in connection with the defense or settlement of any Claim in accordance with the terms hereof. If Borrower refuses to defend any Claim or fails to defend such Claim in good faith (other than a Claim that is being defended by Borrowers carrier, provided such insurer is an acceptable insurer under the Loan Documents or otherwise was accepted by Agent as an insurer) and such Indemnified Party elects to defend such Claim by counsel of its own choosing Borrower shall be responsible for any good faith settlement of such Claim entered into by such Indemnified Party. If such Indemnified Party reasonably determines that the conduct of its defense by Borrower could be materially prejudicial to its interests and elects to defend such Claim by counsel of its own choosing, Borrower shall be responsible for any reasonable settlement of such Claim entered into by such Indemnified Party. Except as provided in the preceding two (2) sentences, no Indemnified Party may pay or settle any Claim and seek reimbursement therefor under this Section 10.13 . Nothing contained herein shall be construed as requiring Agent or any Indemnified Party to expend funds or incur costs to defend any Claim in connection with the matters for which Agent or any Indemnified Party is entitled to indemnification pursuant to this Section 10.13 . The obligations of Borrower hereunder, including, without limitation, its payment and performance obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan), shall specifically include the obligation to expend its own funds, to incur costs in its own name and to perform all actions as may be necessary to protect Agent or any other Indemnified Party from the necessity of expending its own funds, incurring cost or performing any actions in connection with the matters for which Agent or such other Indemnified Party is entitled to indemnification hereunder.
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Section 10.14 Schedules and Exhibits Incorporated.
The Schedules and Exhibits annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.
Section 10.15 Offsets, Counterclaims and Defenses.
Any Assignee of Agents or any Lenders interest in and to this Agreement and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such Assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrower, Agent and Lenders intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Agent or Lenders nor to grant Agent or Lenders any interest in the Property other than that of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit of Agent and Lenders and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Agent and Lenders any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein, including, without limitation, Borrowers obligation to pay or perform the Debt, as applicable. In addition, no Lender is the agent or representative of Borrower and this Agreement shall not make any Lender liable to any Person for goods delivered to or services performed by them upon the Property, or for debts or claims accruing to such parties against Borrower and there is no contractual relationship, either express or implied, between any Lender and any Person supplying any work, labor or materials for the Improvements.
Section 10.17 Publicity.
(a) All news releases, publicity or advertising by Borrower or its Affiliates or by Agent or any Lender through any media intended to reach the general public that refers to the Loan Documents or the financing evidenced by the Loan Documents shall be subject to the prior approval of Agent or Borrower, as applicable, which approval shall not be unreasonably withheld, conditioned or delayed.
(b) The Lead Arrangers shall have the right to issue news releases, and publicize and/or advertise the fact that they have provided financing with respect to the Property and in connection therewith the Lead Arrangers shall have the right to photograph and use such photographs of the Property in any advertisements, brochures, print, media and other copy,
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provided such photographs are submitted in advance to Borrower for its reasonable approval. Borrower hereby approves the use by the Lead Arrangers of the photographs included on pages 2 and 5 of the Eastdil offering memorandum.
Section 10.18 Intentionally Omitted.
Section 10.19 Waiver of Offsets/Defenses/Counterclaims.
Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Agent or Lenders or their agents or otherwise to offset any obligations to make the payments required by the Loan Documents. No failure by Agent or Lenders to perform any of its obligations hereunder shall be a valid defense to, or result in any offset against, any payments which Borrower is obligated to make under any of the Loan Documents.
Section 10.20 Conflict; Construction of Documents; Reliance.
In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Agent or any Lender or any parent, subsidiary or affiliate of Agent or such Lender. Neither Agent nor any Lender shall be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or affiliate of Agent or such Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Agents and/or Lenders exercise of any such rights or remedies. Borrower acknowledges that Agent and each Lender engages in the business of real estate financings and other real estate transactions and investments that may be viewed as adverse to or competitive with the business of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors.
Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement other than Eastdil Secured. Borrower shall be responsible for all brokerage commissions payable to Eastdil Secured. Borrower shall indemnify, defend and hold each Indemnified Party and its officers and directors harmless from and against any Losses in any way relating to or arising from a Claim by any Person that such Person acted on behalf of Borrower or Agent or any Lender in connection with the transactions contemplated herein. The provisions of this Section 10.21 shall survive the expiration and termination of this Agreement and the payment of the Debt.
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Section 10.22 Exculpation.
Subject to the qualifications set forth in this Section 10.22 , neither Agent nor Lenders shall enforce the liability and obligation of Borrower to perform and observe the obligations (including, without limitation, those payment and performance obligations which constitute the Debt) contained in the Note, this Agreement, the Mortgage or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Agent may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Agent to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Property, the Rents or any other collateral given to Agent and/or Lenders pursuant to the Loan Documents; provided , however , that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrowers interest in the Property, in the Rents and in any other collateral given to Agent and/or Lenders, and Lenders, by accepting the Note, this Agreement, the Mortgage, and the other Loan Documents, shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Mortgage or the other Loan Documents. The provisions of this Section shall not, however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b) impair the right of Agent or Lenders to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (c) affect the validity or enforceability of any guaranty or indemnification agreement made in connection with the Loan or any of the rights and remedies of Agent or Lenders thereunder; (d) impair the right of Agent or Lenders to obtain the appointment of a receiver; (e) impair the enforcement of the Assignment of Leases; (f) constitute a prohibition against Agent or Lenders to seek a deficiency judgment against Borrower in order to fully realize on any security given by Borrower in connection with the Loan or to commence any other appropriate action or proceeding in order for Agent or Lenders to exercise its remedies against such security; or (g) constitute a waiver of the right of Agent or Lenders to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation to the extent actually incurred by Agent or Lenders (including reasonable attorneys fees and costs reasonably incurred) arising out of or incurred in connection with the following:
(i) fraud or any material and willful misrepresentation by Borrower or Guarantor in connection with the Loan;
(ii) the removal or disposal by, or on behalf of Borrower or Guarantor, of any portion of the Property during the continuance of an Event of Default (other than in the ordinary course of business);
(iii) the misappropriation or conversion by Borrower of (A) any Proceeds paid by reason of a Casualty, (B) any Award received in connection with a Condemnation of all or any portion of the Property, or (C) any Rents during the continuance of an Event of Default;
(iv) a breach of the covenant set forth in Section 4.2.12(a) ;
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(v) any security deposits, advance deposits or any other deposits collected with respect to the Property which are not delivered to Agent upon a Foreclosure, except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases or other applicable agreements prior to such Foreclosure;
(vi) intentional physical waste or willful misconduct by or on behalf of Borrower or Guarantor which results in physical waste to the Property;
(vii) any material breach by Borrower of (A) Section 3.1.23(c)(ii) or (iv) , or (B) Section 3.1.23(c)(xiv) or (xx) which, in either case under this subsection (B) , results in a substantive consolidation of the assets of Borrower with the assets of another Person; and
(viii) if Borrower fails to obtain Agents prior written consent to a Transfer to the extent required by Article VIII hereof or Article VI of the Mortgage, and in each case, excluding Permitted Transfers, Permitted Encumbrances and any other Lien expressly permitted under the Loan Documents. For the avoidance of doubt, a Transfer resulting from the exercise of Agent and/or Lenders rights under the Loan Documents or the consummation of any remedial or enforcement action by the Agent of the collateral for the Loan, including, without limitation, any foreclosure, deed-in-lieu of foreclosure and the exercise of any rights of Agent and/or Lenders under the Mortgage (collectively, a Foreclosure ), shall not constitute a Transfer in violation of Article VIII hereof or Article VI of the Mortgage.
Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, (A) neither Agent nor Lenders shall be deemed to have waived any right which Agent and/or Lenders may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt owing to Agent and Lenders in accordance with the Loan Documents, and (B) the Debt shall be fully recourse to Borrower in the event that: (1) Borrower files a voluntary petition under the Bankruptcy code or any other Federal or state bankruptcy or insolvency law; (2) an Affiliate which Controls, directly or indirectly, Borrower files, or joins in the filing of, an involuntary petition against Borrower under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any person; (3) Borrower files an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law in which Borrower colludes with, or otherwise assists, or solicits or causes to be solicited petitioning creditors for any involuntary petition from any Person; or (4) any Affiliate which Controls Borrower consents to or acquiesces in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property.
Section 10.23 Prior Agreements.
This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, are superseded by the terms of this Agreement and the other Loan Documents.
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Section 10.24 Joint and Several Liability.
If Borrower is comprised of more than one Person, all representations, warranties, covenants (both affirmative and negative) and all other obligations hereunder (including, without limitation, the payment and performance of the obligations which constitute the Debt (including any indemnification obligations which expressly survive the repayment of the Loan)) shall be the joint and several obligation of each entity making up Borrower and a Default or Event of Default by any such Person shall be deemed a Default or Event of Default by all such entities and Borrower. The representations, covenants and warranties contained herein or in any other Loan Document shall be read to apply to the individual entities comprising Borrower when the context so requires but a breach of any such representation, covenant or warranty or a breach of any obligation under the Loan Documents shall be deemed a breach by all such entities and Borrower, entitling Agent and/or Lenders, as applicable, to exercise all of their rights and remedies under all the Loan Documents and under applicable law. Notwithstanding anything to the contrary herein contained, except as provided in the Guaranty, no principal, director, officer or employee or direct or indirect partner or member of Borrower, nor any principal, director, officer or employee of any such partner or member, shall have any personal liability under the Loan Documents.
Section 10.25 Assignments/Participations/Information Sharing.
(a) Except in connection with a Permitted Transfer, Borrower may not assign this Agreement or any of its rights or obligations hereunder without the prior approval of Agent.
(b) No Lender shall assign, transfer, sell, pledge or hypothecate all or any portion of its rights or obligations in and to the Loan (including all or a portion of its Maximum Commitment and the Loan at the time owing to it) to any other Person (a Person to which any such assignment, transfer or sale is made in accordance with this Section 10.25 being an Assignee ):
(i) without the prior written consent of Agent, which consent shall not be unreasonably withheld and shall not be required if the Assignee is an Affiliate of such Lender ( provided that such Lender shall not be released from its continuing obligations hereunder after such assignment to its Affiliate), a Lender or an Eligible Assignee;
(ii) so long as no Event Default has occurred and is continuing, without the prior written consent of Borrower, which consent shall not be unreasonably withheld, conditioned or delayed (except with respect to any such assignment to a Person who is a Hilton Competitor) and which consent shall not be required if the Assignee is an Affiliate of the assigning Lender ( provided that such Lender shall not be released from its continuing obligations hereunder after such assignment to its Affiliate), a Lender or an Eligible Assignee;
(iii) unless such transaction shall be an assignment of a constant and not a varying, Ratable percentage of such Lenders interest in the Loan;
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(iv) unless the aggregate principal amount of the Loan which is the subject of such transaction (including as a result of a participation) is Twenty-Five Million Dollars ($25,000,000) or more, unless otherwise consented to by Agent in its sole discretion and, so long as no Event of Default has occurred and is continuing, Borrower, in its reasonable discretion;
(v) unless, after giving effect to such transaction, such Lenders aggregate unassigned and unparticipated interest in the Loan shall be in a principal amount of at least Twenty-Five Million Dollars ($25,000,000) unless such transaction encompasses all of such Lenders rights in and to the Loan in which case such Lender shall have assigned all of its rights in and to the Loan; and
(vi) the parties to each such assignment shall execute and deliver to Agent, for its acceptance and recording in the Agents Register, Agents form of assignment and acceptance agreement which is attached to the Co-Lender Agreement.
(c) For purposes of this Section 10.25 , the term Affiliate, as the same relates to DekaBank, shall include any real estate debt fund represented and/or managed by Deka Immobilien Investment GmbH (including, without limitation, the DRK ( Deka Realkredit Klassik ) Fund), and any such real estate debt fund shall be deemed an Eligible Assignee.
(d) Notwithstanding anything herein to the contrary, the Lenders may, without the consent of Agent, any other Lender, Borrower or any of its Affiliates, Guarantor, and/or any other Person, assign, pledge or otherwise transfer its interest in the Loan to any Person which is a trustee, administrator or receiver (or their respective nominees, collateral agents or collateral trustees) of a mortgage pool securing covered mortgaged bonds ( Hypothekenpfandbriefe ) issued by an eligible German bank ( Pfandbriefbanken ) under German Pfandbrief legislation, as such legislation may be amended and be in effect from time to time, or any successor or substitute legislation, or to any other Person that is acting as nominee, collateral agent or collateral trustee of the holders of such mortgage bonds (as a collective whole) with respect to such mortgage pool, and any such Person shall have the right to be a Lender in lieu of the Lender which assigned, pledged or otherwise transferred its interest to such Person.
(e) In connection with any assignment, transfer, sale, pledge, hypothecation, participation or securitization permitted hereunder, Borrower shall, upon five (5) Business Days notice of any such pending transaction, at Borrowers expense, provide a reliance letter with respect to the Simpson Thacher & Bartlett LLP legal opinion delivered on the Closing Date, which reliance letter shall permit such Assignee, Participant, pledgee, securitization trust or other such transferee to rely on the opinion delivered by Simpson Thacher & Bartlett LLP on the Closing Date.
(f) From and after the effective date of any assignment by a Lender or all or any portion of its interest in the Loan, (x) the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned to it, have the rights and obligations of a Lender hereunder and (y) the Lender assignor shall, to the extent of the interest assigned by it, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an assignment covering all of the remaining portion of an assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.2.4 , 2.2.7 , 2.2.8 , 10.12 , 10.13 and 10.29 hereof.
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(g) Agent acting solely for this purpose as an agent of the Borrower, shall maintain a register (the Agents Register ) showing the name and addresses of the Lenders and each Lenders Ratable Share of the Loan (including any stated interest to which such Lender is entitled) from time to time. The entries in the Agents Register shall be conclusive, in the absence of manifest error, and Borrower, Agent and the Lenders shall treat each Person whose name is recorded in the Agents Register as the owner of such portion of the Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents. The Agents Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(h) The assigning Lender shall give Agent, the other Lenders and Borrower prompt notice of such assignment.
(i) Notwithstanding anything to the contrary set forth herein, provided that no Event of Default then exists, the Lead Arrangers shall, at all times during the Loan, collectively hold an interest in the Loan of at least $180,000,000 (which has not been participated); provided, that the foregoing shall in no event restrict any assignment or participation by DekaBank to any real estate debt fund represented and/or managed by Deka Immobilien Investment GmbH (including, without limitation, the DRK ( Deka Realkredit Klassik ) Fund) so long as DekaBank continues to control servicing and decision making with respect to any portion of the Loan owned by DekaBank or any such fund.
(j) Borrower authorizes each Lender to disclose to any Assignee or Participant of such Lender (each, a Transferee ), any prospective Transferee, any Affiliate of such Lender and any Counterparty any and all financial or other information in such Lenders possession concerning Borrower and its Affiliates which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lenders credit evaluation of Borrower and its Affiliates prior to becoming a party to this Agreement, so long as such recipient is not a Hilton Competitor and executes a confidentiality agreement substantially in the form of Exhibit 10.25(j) attached hereto. Notwithstanding the foregoing, with respect to any prospective Transferee which the Lead Arrangers began discussions with prior to the Closing Date pursuant to the terms and conditions of the Summary of Terms and Conditions, dated September 7, 2013, between the Lead Arrangers and Borrower, such Transferees shall not be required to execute a confidentiality agreement.
(k) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank in accordance with applicable law, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
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(l) Borrower agrees that (i) Borrower shall execute and deliver to Agent any amendment and/or other document that may be necessary to effectuate such an assignment and (ii) upon the request to Agent by any Lender, Borrower shall execute and deliver to such Lender one or more substitute notes of Borrower evidencing such Lenders Ratable Share of the Loan in substantially the same form as the Note with appropriate insertions as to payee and principal amount; each such substitute note shall be dated as of the Closing Date.
(m) (i) Any Lender may, subject to the provisions of Sections 10.25(b)(ii), (iv), (v) and Section 10.25(i) , sell participations to one or more Persons (a Participant ) in all or a portion such Lenders rights and obligations under this Agreement (including all or a portion of its Maximum Commitment and the Loan at the time owing to it); provided that (A) such Lenders obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the parties hereto for the performance of such obligations, (C) Borrower, Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders and its Participants rights and obligations, as applicable, under this Agreement and (D) in no event shall any Lender sell a participation to Borrower, Guarantor, Hilton or any Affiliate of the foregoing. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement. Subject to Section 10.25(m)(ii) hereof, the parties hereto agree that each Participant shall be entitled to the benefits of Sections 2.2.4 , 2.2.7 and 2.2.8 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.25(b) hereof (it being understood that the documentation required under Section 2.2.8(f) shall be delivered to the participating Lender).
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.2.4 or 2.2.8 hereof than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant except to the extent such entitlement to receive a greater payment results from a Regulatory Change that occurs after the Participant acquired the applicable participation.
(iii) Each Lender that sells a participation in the Loan shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each such Participant and the principal amount of each such Participants interest in the Loan (including any stated interest to which such Participant is entitled) or other obligations under the Loan Documents (the Participant Register ); provided, that no Lender shall have any obligation to disclose all or any portion of such Participant Register to any Person except to the extent that such disclosure is necessary to establish that such obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in any such Participant Register shall be conclusive absent manifest error, and the applicable Lender shall treat each Person whose name is recorded in such Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.
(n) Unless expressly agreed to the contrary, a transferor Lender makes no representation or warranty and assumes no responsibility to any Assignee or Participant for the legality, validity, adequacy, accuracy, completeness or performance of (i) the financial condition of Borrower or (ii) the legality, validity, effectiveness, enforceability, adequacy, accuracy,
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completeness or performance of (A) any Loan Document or any other document, (B) any statement or information (whether written or oral) made in or supplied in connection with any Loan Document, or (C) any observance or performance by Borrower of its obligations under any Loan Document or any other document. Each Assignee and Participant shall confirm to the transferor Lender, Agent and the other Lenders that it (i) has made, and will continue to make, its own independent determination of all risks arising under or in connection with the Loan Documents (including the financial condition and affairs of Borrower and its related entities and the nature and extent of any recourse against any party or its assets) in connection with its participation in the Loan, this Agreement and the other Loan Documents, and (ii) has not relied exclusively on any information supplied to it by the transferor Lender in connection with any Loan Document. Nothing in any Loan Document requires any transferor Lender to (i) accept a re-transfer from the applicable Assignee or Participant of any of the rights and obligations assigned or transferred under this Section 10.25 or (b) support any losses incurred by the assignee by reason of the non-performance by Borrower of its obligations under any Loan Document or otherwise.
Section 10.26 Cooperation .
(a) Borrower hereby acknowledges and agrees that Agent and the Lenders reserve the right to syndicate and/or participate their respective interests the Loan and Borrower agrees, at Agents request, to reasonably cooperate with Agent and the Lenders in any such syndication and/or participation, including, without limitation, (i) providing updated information regarding Borrower, the Guarantor and the Property as may be reasonably requested from time to time by Agent, (ii) assisting in the preparation of marketing materials to be used in connection with the syndication, (iii) executing such substitute promissory notes and other documents (including non-substantive amendments to the Loan Documents evidencing the assignment to the syndicate lenders) and instruments as may be necessary to evidence its obligations under the Loan (including, without limitation, its payment and performance of the obligations which constitute the Debt) to such syndicate Lenders; provided, that there shall be no (A) increase in the aggregate interest or principal payable under the Loan, (B) increase in Borrowers obligations under the Loan Documents, (C) decrease in Borrowers rights under the Loan Documents, or (D) senior/junior or mortgage/mezzanine loan structure or any other material changes to the Loan Documents, including, without limitation, by way of rate creep, and (iv) delivering any updated opinion letters (or opinion reliance letters in favor of the assignee lender) and/or estoppel certificates with respect to the Loan pursuant to Section 4.1.9(a) which are reasonably requested by Agent or Lenders in connection with any such syndication and in form and substance reasonably satisfactory to Agent. Borrowers compliance with and any such cooperation by Borrower pursuant to Section 10.25 and Section 10.26 shall be at no cost to Borrower except for (1) Borrowers overhead costs and, (2) to the extent that any such syndication or participation occurs within ninety (90) days of the date hereof, Borrowers attorneys fees and disbursements incurred in connection with the splitting of the Note and related, customary syndication documentation.
(b) Borrower acknowledges that Agent and/or Lenders and their successors and assigns may (i) sell this Agreement, the Note and other Loan Documents to one or more investors, subject to Section 10.25(i) , (ii) participate the Loan to one or more investors, (iii) deposit this Agreement, the Note and other Loan Documents with a trust, which trust may
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sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interest therein to investors (the transactions referred to in clauses (i) through (iv) are each referred to herein as Secondary Market Transaction ). Borrower shall reasonably cooperate with Agent and Lenders in effecting any such Secondary Market Transaction. Borrower shall provide such information and documents relating to Borrower, the Property and any Tenants of the Improvements as Agent may reasonably request in connection with such Secondary Market Transaction. In addition, Borrower shall make available to Agent all information concerning its business and operations that Agent and Lenders may reasonably request. Subject to the provisions of Section 10.32 , Agent and Lenders shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms and other third-party advisory firms involved with the Loan and the Loan Documents or the applicable Secondary Market Transaction. It is understood that the information provided by Borrower to Agent and/or Lenders may ultimately be incorporated into the offering documents for the Secondary Market Transaction and thus various investors may also see some or all of the information. Agent, Lender and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Borrower in the form as provided by Borrower. Agent and Lenders may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development.
Section 10.27 Adjustments; Set-Off.
(a) If any Lender (a Benefited Lender ) shall at any time receive any payment of all or part of its Ratable Share of the Loan, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 9.1(a)(viii) , or otherwise including pursuant to subsection (b) below), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lenders Ratable Share of the Loan, or interest thereon, such Benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lenders Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided , however , that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Borrower agrees that each Lender so purchasing a portion of another Lenders Ratable Share of the Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute
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or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify Borrower and Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.
Section 10.28 Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement.
Section 10.29 WAIVER OF SPECIAL DAMAGES.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER SHALL NOT ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST AGENT AND/OR LENDERS ON ANY THEORY OF LIABILITY FOR SPECIAL INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF THIS AGREEMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS, THE LOAN OR THE USE OF PROCEEDS THEREOF.
Section 10.30 USA Patriot Act Notification.
Agent and Lenders hereby notify Borrower that pursuant to the requirements of the USA Patriot Act, Agent and the Lenders are required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Agent and Lenders to identify Borrower in accordance with the USA Patriot Act.
Section 10.31 Assignment/ Discharge Upon Payment.
Upon repayment or prepayment of the Loan in full by Borrower in accordance with the terms of this Agreement and the other Loan Documents:
(a) Lenders shall, on a one-time basis, assign the Note and Agent shall assign the Mortgage, each without recourse, covenant or warranty of any nature, express or implied, (except if any Lender is not delivering the original Note, in which case such Lender shall execute and deliver a lost note affidavit (without indemnity) in its customary form with respect to the copy of its Note) to such new mortgagee designated by Borrower (other than Borrower or a nominee of Borrower); provided that Borrower (a) has caused to be paid the reasonable out-of-pocket expenses of Agent and Lenders incurred in connection therewith and Agents and Lenders attorneys fees for the preparation, delivery and performance of such an assignment, (b) has caused the delivery of an executed Statement of Oath under Section 275 of the New York Real Property Law; and (c) has provided such other information and documents which a prudent mortgagee would reasonably require to effectuate such assignment. Borrower shall be responsible for all mortgage recording Taxes, recording and filing fees and other charges payable in connection with any such assignment; or
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(b) The Lenders shall return the Note to Borrower and Agent shall discharge the Mortgage and the Assignment of Leases and authorize the termination of any UCC-1 financing statements with respect to the Loan, each without recourse, covenant or warranty of any nature, express or implied (except if any Lender is not delivering its original Note, in which case such Lender shall execute and deliver to Borrower a lost note affidavit (without indemnity) in its customary form with respect to the copy of its Note). Borrower shall pay all reasonable out-of-pocket expenses of Agent and Lenders incurred in connection herewith and Agents and Lenders attorneys fees and disbursements for the preparation, delivery and performance of the foregoing documentation. In addition, Borrower shall be responsible for all recording and filing fees, as applicable, and other charges payable in connection with the foregoing discharge.
Section 10.32 Use of Borrower Information; Confidentiality. Agent and Lenders hereby agree that they shall (a) use commercially reasonable efforts to use any and all financial and other information provided at any time prepared by, or on behalf of, Borrower or Guarantor (collectively, Provided Information ) solely for purposes of the ownership and sale of its interest in the Loan (including, without limitation, the administration of the Loan, any assignment or participation of the Loan and any Secondary Market Transaction) and (b) keep confidential all Provided Information. Notwithstanding the foregoing, nothing in this Section 10.32 shall prevent Agent or any Lender from: (i) disclosing or otherwise using any Provided Information in the manner and for the purposes set forth in Section 10.25 of this Agreement (it being understood that in connection with such disclosure under this clause (i), (A) the Agent and Lenders will consult in good faith with the Borrower and will consider in good faith matters raised by the Borrower in such consultation and (B) such disclosure shall not include financial projections, budgets or other forward-looking information of the Borrower or the Guarantor, unless required by applicable law), (ii) disclosing Provided Information to any loan participant or similar holders of an interest in the Loan, provided that such participants or other holders shall be instructed to use commercially reasonable efforts to use such Provided Information solely in connection with their ownership of their interest in the Loan and to keep the same confidential in accordance with this Section 10.32 , (iii) disclosing Provided Information to any prospective participant or other transferee of an interest in the Loan (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 10.32 ), (iv) disclosing Provided Information to its employees, directors, agents, attorneys, accountants and other professional advisors or those of its affiliates (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 10.32 ), (v) disclosing Provided Information to investors and potential investors subject to an agreement to comply with the provisions of this Section 10.32 , (vi) disclosing Provided Information upon the request or demand of any Governmental Authority having or claiming to have authority to regulate or oversee any aspect of Agent or Lenders business or that of its Affiliates in connection with the exercise of such authority or claimed authority, (vii) disclosing Provided Information in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Legal Requirement, (viii) disclosing Provided Information if requested or required to do so in connection with any litigation or similar proceeding, (ix) disclosing or otherwise using any Provided Information that has been publicly disclosed (other than information that has become available to the public as a result of disclosure by such party in breach of this Section 10.32 ), or (x) disclosing or otherwise using any Provided Information in connection with the exercise of any remedy hereunder or under any other Loan Document.
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XI. | AGENT |
Section 11.1 Performance by Agent.
If an Event of Default shall have occurred and be continuing, Agent shall have the right, but not the duty, without limitation, upon any of Agents rights pursuant hereto, to perform the obligations of Borrower which are the subject of the Event of Default, in which event Agent shall endeavor to give notice to Borrower of Agents performance, and Borrower agrees to pay to Agent, within five (5) days of demand therefor, all actual and reasonable costs and expenses incurred by Agent in connection therewith, including, without limitation, attorneys fees and disbursements, together with interest from the date of expenditure at the Default Rate, if an Event of Default shall have given rise to such expenditure.
Section 11.2 Actions.
If Agent shall have reasonable cause to believe that any action or proceeding related to the Property could, if adversely determined, have a material adverse effect upon the rights or interests of Agent and/or Lenders under this Agreement or any of the other Loan Documents, Agent shall have the right to commence, appear in and defend such action or proceeding, and in connection therewith Agent may pay necessary expenses, employ counsel, and pay attorneys fees and disbursements. Borrower agrees to pay to Agent, within five (5) days after demand therefor by Agent, all actual and reasonable costs and expenses incurred by Agent in connection therewith, including, without limitation, attorneys fees and disbursements, together with interest from the date of expenditure at the Default Rate, if an Event of Default shall have given rise to such action or proceeding. Borrowers obligations to repay such expenses shall be secured by the Loan Documents.
Section 11.3 Nonliability of Agent and Lenders.
Borrower acknowledges and agrees that:
(a) by accepting or approving anything required to be observed, performed, fulfilled or given to Agent or Lenders pursuant to the Loan Documents, including any certificate, statement of profit and loss or other financial statement, survey, appraisal, lease or insurance policy, neither Agent nor Lenders shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by Agent; and
(b) neither Agent nor any Lender shall be directly or indirectly liable or responsible for any loss, claim, cause of action, liability, indebtedness, damage or injury of any kind or character to any person or property arising from any construction on, or occupancy or use of, any of the Property, including, without limitation, any loss, claim, cause of action, liability, indebtedness, damage or injury caused by, or arising from: (i) any defect in any building, structure, grading, fill, landscaping or other improvements. thereon or in any on-site or off-site improvement or other facility therein or thereon; (ii) any act or omission of Borrower, the parties comprising Borrower or any of Borrowers agents, employees, independent contractors, licensees or invitees; (iii) any accident in or on the Land and Improvements or any fire, flood or
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other Casualty or hazard thereon; (iv) the failure of Borrower, any of Borrowers licensees, employees, invitees, agents, independent contractors or other representatives to maintain the Property in a safe condition; and (v) any nuisance made or suffered on any part of the Property.
Section 11.4 Authorization and Action.
(a) Each Lender hereby appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents and the Co-Lender Agreement as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto.
(b) By their execution of this Agreement, all of the Lenders hereby authorize and direct Agent to act on their behalf in all respects in connection with the Loan Documents and the making of the Loan, subject to the provisions of the Loan Documents and the Co-Lender Agreement, and agree with Borrower that Borrower shall only be required to and shall only deal with Agent and each of the Lenders shall be bound by any acts of Agent.
(c) If Agent shall resign as Agent (which Agent may so resign upon thirty (30) days written notice to Borrower and each Lender), or if the Lenders shall remove Agent in accordance with the provisions of the Co-Lender Agreement, then the Lenders shall, in accordance with the Co-Lender Agreement, designate another agent to perform the obligations and exercise the rights of Agent hereunder. Provided that no Event of Default then exists, Borrowers consent, which shall not be unreasonably withheld, shall be required with respect to the designation of any successor Agent who is (i) not then a Lender, or (ii) is then a Lender who owns less than a $50,000,000 interest in the Loan. The successor Agent shall assume such obligations in writing and from and after Borrowers receipt of a copy of notice of such replacement and receipt of a copy of such assumption the successor Agent shall be the sole Agent hereunder and the term Agent shall thereafter refer to such successor. Notwithstanding the foregoing, HSBC shall be the Agent at all times during the term of the Loan unless HSBC is a Defaulting Lender (as defined in the Co-Lender Agreement) or is otherwise in default of its obligations under the Co-Lender Agreement and the Lenders are entitled to remove HSBC as Agent thereunder.
(d) In the event that the unanimous consent of the Lenders is required under the Loan Documents or the Co-Lender Agreement with respect to a waiver, modification, consent or amendment requested by Borrower and Agent has so received the consent of all of the Lenders except one (1) Lender (the Non-Consenting Lender ), Borrower shall have the right to (1) replace such Non-Consenting Lender or (2) prepay to such Non-Consenting Lender the Prepayment Amount, each in accordance and compliance with the provisions of Section 2.2.9 hereof.
Section 11.5 Agent as a Lender.
With respect to Agents ownership interest in the Loan and the Loan Documents as a Lender, Agent in its capacity as a Lender shall have the rights and powers of a Lender under this Agreement and the other Loan Documents as set forth herein and therein and may exercise
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the same as though it were not Agent. Agent in its capacity as a Lender and its affiliates may accept deposits from, lend money to, act as trustee under indentures of accept investment banking engagements from and generally engage in any kind of business with, Borrower, any of its affiliates and/or subsidiaries and any Person who may do business with or own securities of Borrower, any of its affiliates and/or subsidiaries, all as if such Lender were not Agent and without any duty to account therefor to the other Lenders.
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IN WITNESS WHEREOF , the parties hereto have caused this Loan Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.
BORROWER: | ||||
HLT NY WALDORF LLC , | ||||
a Delaware limited liability company | ||||
By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
[ signatures continued on next page ]
AGENT: | ||||
HSBC BANK USA, NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America , as Agent | ||||
By: |
/s/ Robert D. Gominiak |
|||
Name: | Robert D. Gominiak | |||
Title: | Vice President |
LENDERS: | ||||
HSBC BANK USA, NATIONAL ASSOCIATION, a bank organized under the laws of the United States of America | ||||
By: |
/s/ Robert D. Gominiak |
|||
Name: | Robert D. Gominiak | |||
Title: | Vice President | |||
HSBC Bank USA, National Association | ||||
545 Washington Boulevard, 10 th Floor | ||||
Jersey City, New Jersey 07310 | ||||
Attention: Commercial Mortgage Servicing Department | ||||
Facsimile No. (212) 704-8499 | ||||
HSBC Bank USA, National Association | ||||
452 Fifth Avenue | ||||
New York, New York 10018 | ||||
Attention: Robert D. Gominiak | ||||
Facsimile No. (917) 229-5294 | ||||
Cadwalader, Wickersham & Taft LLP | ||||
One World Financial Center | ||||
New York, New York 10281 | ||||
Attention: Steven M. Herman, Esq. | ||||
Facsimile No. (212) 504-6666 |
DEKABANK DEUTSCHE GIROZENTRALE | ||||
By: |
/s/ Michael McAuliffe |
|||
Name: | Michael McAuliffe | |||
Title: | Managing Director | |||
By: |
/s/ Alexander Wünsch |
|||
Name: | Alexander Wünsch | |||
Title: | Senior Vice President | |||
Applicable Lending Office: | ||||
DekaBank Deutsche Girozentrale | ||||
Mainzer Landstrasse 16 | ||||
60325 Frankfurt am Main, Germany | ||||
Attention: Alexander Wünsch |
EXHIBIT 1.1
SAMPLE NOI CALCULATION
Revenue |
||||
Rooms |
||||
F&B |
||||
Other Operated |
||||
Rental & Other Revenue |
||||
Total Revenue |
||||
Departmental Expenses |
||||
Rooms |
||||
F&B |
||||
Other Operated |
||||
Rental & Other Revenue |
||||
Total Departmental Expense |
||||
Departmental Profit |
||||
Rooms |
||||
F&B |
||||
Other Operated |
||||
Rental & Other Revenue |
||||
Total Departmental Profit |
||||
Overhead Expenses |
||||
Administrative & General |
||||
Sales & Marketing (incl. Prog Fee) |
||||
Property Operations & Maintenance |
||||
Energy |
||||
Total Overhead |
||||
GOP |
||||
Management Fee (1) |
Exhibit 1.1 p. 1
GOP after Base Fee |
||||
Income before Fixed Charges |
||||
Fixed Charges |
||||
Property Taxes |
||||
Insurance |
||||
Other Fixed |
||||
Rent |
||||
Total Fixed Charges |
||||
EBITDA |
||||
Reserve for Replacement (2) |
||||
NOI |
(1) | The Management Fee will be calculated as 3% of Total Revenue |
(2) | The Reserve fpr Replacement will be calculated as 4% of Total Revenue |
Exhibit 1.1 p. 2
EXHIBIT 2.2.8(1-4)
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
SCHEDULE 2.2.8-1
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Loan Agreement), by and among HLT NY WALDORF LLC (Borrower) and HSBC BANK USA, NATIONAL ASSOCIATION (Agent), for itself and the other Lenders signatory thereto (Lenders).
Pursuant to the provisions of Section 2.2.8 of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF LENDER] | ||
By: |
|
|
Name: | ||
Title: |
Date: , 20[ ]
Exhibit 2.2.8(1-4), page 1
SCHEDULE 2.2.8-2
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Loan Agreement), by and among HLT NY WALDORF LLC (Borrower) and HSBC BANK USA, NATIONAL ASSOCIATION (Agent), for itself and the other Lenders signatory thereto (Lenders).
Pursuant to the provisions of Section 2.2.8 of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF PARTICIPANT] | ||
By: |
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Name: | ||
Title: |
Date: , 20[ ]
Exhibit 2.2.8(1-4), page 2
SCHEDULE 2.2.8-3
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Loan Agreement), by and among HLT NY WALDORF LLC (Borrower) and HSBC BANK USA, NATIONAL ASSOCIATION (Agent), for itself and the other Lenders signatory thereto (Lenders).
Pursuant to the provisions of Section 2.2.8 of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF PARTICIPANT] | ||
By: |
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Name: | ||
Title: |
Date: , 20[ ]
Exhibit 2.2.8(1-4), page 3
SCHEDULE 2.2.8-4
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Loan Agreement, dated as of [ ], 2013 (as amended, restated, replaced, supplemented or otherwise modified from time to time, the Loan Agreement), by and among HLT NY WALDORF LLC (Borrower) and HSBC BANK USA, NATIONAL ASSOCIATION (Agent), for itself and the other Lenders signatory thereto (Lenders).
Pursuant to the provisions of Section 2.2.8 of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Loan Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.
[NAME OF LENDER] | ||
By: |
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Name: | ||
Title: |
Date: , 20[ ]
Exhibit 2.2.8(1-4), page 4
EXHIBIT 10.25(j)
FORM OF CONFIDENTIALITY AGREEMENT
[ ] (the Recipient ), as a prospective lender or participant, as applicable, shall be furnished with Evaluation Material (as defined herein) regarding HLT NY Waldorf LLC and certain of its affiliates (the Company ) in connection with the Recipients consideration of acquiring an interest in that certain loan in the original principal amount of $525,000,000 made to the Company on October [25], 2013 (the Facility ) by HSBC Bank USA, National Association and Dekabank Deutsche Girozentrale, collectively as lenders (and collectively with any co-lenders who may exist from time to time the Lenders ) and administered by HSBC Bank USA, National Association, as agent (the Agent ). Recipient acknowledges that this confidentiality agreement (the Agreement ) is for the benefit of the Company and the Agent and by signing below agrees to be bound by the terms and conditions hereof.
I. Confidentiality
A. | As used herein: (a) Evaluation Material refers to any information regarding the Company or the Facility furnished or communicated to Recipient by or on behalf of the Company in connection with the Facility (whether prepared or communicated by the Agent or the Company, their respective advisors or otherwise), and (b) Internal Evaluation Material refers to all memoranda, notes and other documents and analyses developed by the Recipient using any of the information specified under the definition of Evaluation Material. |
B. | Recipient acknowledges that the Company considers the Evaluation Material and the Internal Evaluation Material to include confidential, sensitive and proprietary information and agrees that it shall use reasonable precautions in accordance with its established procedures to keep the Evaluation Material and the Internal Evaluation Material confidential, provided that (i) it may make any disclosure of such information to which the Company gives its prior written consent, and (ii) any of such information may be disclosed by Recipient to its affiliates and their respective partners, directors, officers, employees, agents, advisors and other representatives who need to know such information (collectively, Representatives ) (it being understood that such Representatives shall be informed by it of the confidential nature of such information and shall be directed by Recipient to treat such information in accordance with the terms of this Agreement). Recipient agrees to be responsible for any breach of this Agreement that results from the actions or omissions of its Representatives. |
C. |
Other than as permitted pursuant to this Section I.C., Recipient shall be permitted to disclose the Evaluation Material and the Internal Evaluation Material to the extent, and only to such extent, required by law or regulation or requested by any governmental agency or other regulatory authority (including any self-regulatory organization) or in connection with any legal proceedings after (i) promptly notifying the Company and Agent of such requirement such that the Company may, at its sole cost and expense, seek a protective order or other appropriate remedy or, in the |
Exhibit 10.25(j), page 1
Companys sole discretion, permit disclosure of the Evaluation Material and the Internal Evaluation Material, and (ii) receiving permission for the disclosure from the Company. If a protective order or other remedy is not obtained by the Company, then if required based upon the advice of its legal counsel, the Recipient may disclose only that portion of the Evaluation Material and Internal Evaluation Material as is legally required. Notwithstanding the foregoing, notification shall not be required in the event such notification is requested by a regulatory authority with supervisory authority over Recipient or is prohibited by applicable law or legal process. |
D. | Recipient shall have no obligation hereunder with respect to any Evaluation Material to the extent that such information (i) is or becomes publicly available other than as a result of a disclosure by Recipient in violation of this agreement, or (ii) was within the Recipients possession prior to its being furnished pursuant hereto or becomes available to the Recipient on a non-confidential basis from a source other than the Company or its agents, provided that the source of such information was not known by Recipient to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any other party with respect to such information. |
E. | If the Recipient of the Evaluation Material decides not to participate in the transaction described herein, or upon request of Agent, then such Recipient shall as soon as practicable return all Evaluation Material (and destroy all copies of the Internal Evaluation Material) to Agent or represent in writing to Agent that Recipient has destroyed all copies of the Evaluation Material and the Internal Evaluation Material) unless prohibited from doing so by Recipients audit or regulatory policies or procedures. All oral information shall continue to be subject to the terms of this Agreement. |
II. Information
A. | Recipient acknowledges and agrees that (i) Agent received the Evaluation Material from third party sources (including the Company) and it is provided to Recipient for informational purposes, (ii) Agent, the Lenders and their respective affiliates bear no responsibility (and shall not be liable) for the accuracy or completeness (or lack thereof) of the Evaluation Material or any information contained therein, (iii) no representation regarding the Evaluation Material is made by Agent, any Lender or any of their affiliates, (iv) Agent, the Lenders and their respective affiliates have made no independent verification as to the accuracy or completeness of the Evaluation Material, and (v) Agent, the Lenders and their respective affiliates shall have no obligation to update or supplement any Evaluation Material or otherwise provide additional information. |
Exhibit 10.25(j), page 2
B. | Recipient acknowledges and agrees that (i) the Evaluation Material has been prepared to assist interested parties in making their own evaluation of the Company and the Facility and does not purport to be all-inclusive or to contain all of the information that a prospective participant may consider material or desirable in making its decision to become a lender, (ii) it is the responsibility of Recipient to take such steps as it deems necessary to assure that it has the information it considers material or desirable in making its decision to become a lender and (iii) it is the responsibility of Recipient to perform its own independent investigation and analysis of the Facility or the transactions contemplated thereby and the creditworthiness of the Company. |
C. | Recipient represents that it is sophisticated and experienced in extending credit to entities similar to the Company and acknowledges that the Evaluation Material is not a substitute for Recipients independent evaluation and analysis and should not be considered as a recommendation by the Agent, the Lenders or any of their respective affiliates that any Recipient enter into the Facility. |
D. | Recipient acknowledges that (i) the Evaluation Material may include certain forward looking statements and projections provided by the Company, (ii) any such statements and projections reflect various estimates and assumptions by the Company concerning anticipated results, (iii) no representations or warranties are made by the Company or any of its affiliates as to the accuracy of any such statements or projections, (iv) whether or not any such forward looking statements or projections are in fact achieved will depend upon future events some of which are not within the control of the Company, and (v) actual results may vary from the projected results and such variations may be material. |
III. General
A. | It is understood that unless and until a definitive agreement regarding the Facility between the parties thereto has been executed, Recipient will be under no legal obligation of any kind whatsoever with respect to the Facility by virtue of this Agreement except for the matters specifically agreed to herein. |
B. | Recipient agrees that money damages would not be a sufficient remedy for breach of this Agreement, and that in addition to all other remedies available at law or in equity, the Company and Agent shall be entitled to equitable relief, including injunction and specific performance, without proof of actual damages. |
Exhibit 10.25(j), page 3
C. | This Agreement embodies the entire understanding and agreement between Recipient, the Company and Agent with respect to the Evaluation Material and the Internal Evaluation Material, and supersedes all prior understandings and agreements relating thereto. The terms and conditions of this Agreement shall apply until such time, if any, that Recipient becomes a party to the definitive agreements regarding the Facility, and thereafter the provisions of such definitive agreements relating to confidentiality shall govern. If Recipient does not enter into the Facility, then the application of this Agreement shall terminate with respect to all Evaluation Material on the date falling one year after the latest date any Evaluation Material is distributed by the Company to Recipient of Agent with respect to the Facility. |
D. | This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to principles of conflicts of law (except Section 5-1401 of the New York General Obligation Law to the extent that it mandates that the law of the State of New York govern). |
[ ]
By: |
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Name: | ||
Title: |
Exhibit 10.25(j), page 4
Exhibit 10.6
HSBC Loan #: 11-4003945
GUARANTY OF RECOURSE CARVEOUTS
THIS GUARANTY (this Guaranty ) is executed as of October 25, 2013 by HILTON DOMESTIC PROPERTY LLC , a Delaware limited liability company, having an address at c/o Hilton Worldwide Inc., 7930 Jones Branch Drive, McLean, Virginia 22102 and HLT OWNED VIII HOLDING LLC , a Delaware limited liability company, having an address at c/o Hilton Worldwide Inc., 7930 Jones Branch Drive, McLean, Virginia 22102 (whether one or more collectively referred to as Guarantor ), for the benefit of HSBC BANK USA , NATIONAL ASSOCIATION , a bank organized under the laws of the United States of America, having an address at 452 Fifth Avenue, New York, New York 10018 ( HSBC ), as agent (HSBC in such capacity, together with its successors and assigns in such capacity, Agent ) for the Ratable benefit of HSBC, in its individual capacity as a lender, and any other co-lenders as may exist from time to time (collectively, with HSBC in its individual capacity as a lender, Lenders ).
W I T N E S S E T H :
WHEREAS, pursuant to that certain Loan Agreement, dated of even date herewith, by and among HLT NY Waldorf LLC, ( Borrower ), Agent and Lenders (together with all extensions, renewals, modifications, substitutions and amendments thereof, the Loan Agreement ), Agent has agreed to administer and Lenders have agreed to make a loan to Borrower in the principal amount of FIVE HUNDRED TWENTY-FIVE MILLION AND NO/100 DOLLARS ($525,000,000.00) (the Loan ), which Loan is evidenced by those certain note(s) in the aggregate principal amount of the Loan, dated as of the date hereof, made by Borrower to each Lender according to its respective Ratable Share of the Loan (such note(s), together with all extensions, renewals, modifications, substitutions and amendments thereof, the Note ), and secured by, among other things, that certain Amended and Restated Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing made by Borrower, dated as of the date hereof (as the same may hereafter be amended, restated, replaced, supplemented, renewed, extended or otherwise modified from time to time, the Mortgage );
WHEREAS, Lenders are not willing to make the Loan, or otherwise extend credit, to Borrower unless Guarantor unconditionally guarantees payment and performance to Lenders of the Guaranteed Obligations (as herein defined); and
WHEREAS, Guarantor is the owner of a direct or indirect interest in Borrower, and Guarantor will directly benefit from Lenders making the Loan to Borrower.
NOW, THEREFORE, as an inducement to Lenders to make the Loan to Borrower and to extend such additional credit as Lenders may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I
NATURE AND SCOPE OF GUARANTY
1.1 Guaranty of Obligation . Subject to the terms and conditions hereof, Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Agent and Lenders and their respective successors and assigns the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a primary obligor.
1.2 Definitions. The following terms shall have the respective meanings set forth below. All other capitalized terms used herein and not otherwise defined, shall have the respective meanings ascribed to such terms in the Loan Agreement.
Guaranteed Obligations means
(a) the obligations or liabilities of Borrower to Agent and/or Lenders for any loss, damage, cost, expense, liability, claim or other obligation to the extent actually incurred by Agent and/or Lenders (including reasonable attorneys fees and costs reasonably incurred) arising out of or incurred in connection with any of the following:
(i) fraud or any material and willful misrepresentation by Borrower or Guarantor in connection with the Loan;
(ii) the removal or disposal by, or on behalf of Borrower or Guarantor, of any portion of the Property during the continuance of an Event of Default (other than in the ordinary course of business);
(iii) the misappropriation or conversion by Borrower of (A) any Proceeds paid by reason of a Casualty, (B) any Award received in connection with a Condemnation of all or any portion of the Property, or (C) any Rents during the continuance of an Event of Default;
(iv) a breach of the covenant set forth in Section 4.2.12(a) of the Loan Agreement;
(v) any security deposits, advance deposits or any other deposits collected with respect to the Property which are not delivered to Agent upon a Foreclosure (as defined herein), except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases or other applicable agreements prior to such Foreclosure;
(vi) intentional physical waste or willful misconduct by or on behalf of Borrower or Guarantor which results in physical waste to the Property;
(vii) any material breach by Borrower of (A) Section 3.1.23(c)(ii) or (iv) of the Loan Agreement or (B) Section 3.1.23(c)(xiv) or (xx) of the Loan Agreement which, in either case, results in a substantive consolidation of the assets of Borrower with the assets of another Person; and
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(viii) if Borrower fails to obtain Agents prior written consent to a Transfer to the extent required by Article VIII of the Loan Agreement or Article VI of the Mortgage, and in each case, excluding Permitted Transfers, Permitted Encumbrances and any other Lien expressly permitted under the Loan Documents. For the avoidance of doubt, a Transfer resulting from the exercise of Agents and/or Lenders rights under the Loan Documents or the consummation of any remedial or enforcement action by Agent with respect to the collateral for the Loan, including, without limitation, any foreclosure, deed-in-lieu of foreclosure and the exercise of any rights of Agent and/or Lenders under the Mortgage (collectively, a Foreclosure ), shall not constitute a Transfer in violation of Article VIII of the Loan Agreement or Article VI of the Mortgage.
(b) Notwithstanding anything to the contrary in any of the Loan Documents, (i) neither Agent nor Lenders shall be deemed to have waived any right which Agent and/or Lenders may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt owing to Agent and/or Lenders in accordance with the Loan Documents and (ii) the Debt shall be fully recourse to Guarantor in the event that: (A) Borrower files a voluntary petition under the Bankruptcy code or any other Federal or state bankruptcy or insolvency law; (B) an Affiliate which Controls, directly or indirectly, Borrower files, or joins in the filing of, an involuntary petition against Borrower under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any person; (C) Borrower files an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law in which Borrower colludes with, or otherwise assists, or solicits or causes to be solicited petitioning creditors for any involuntary petition from any Person; or (D) any Affiliate which Controls Borrower consents to or acquiesces in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property.
(c) Notwithstanding anything to the contrary contained in this Guaranty or any of the other Loan Documents, Guarantor shall have no obligations under this Guaranty or otherwise with respect to the Guaranteed Obligations arising out of acts or omissions (i) of a receiver or custodian first occurring after the appointment of a receiver or custodian by Agent and the Lenders or (ii) with respect to actions taken by Borrower from and after such time as Guarantor no longer Controls Borrower or the Property, whether as a result of a Foreclosure sale or otherwise but in all cases pursuant to the exercise of remedies under the Loan Documents.
(d) Notwithstanding anything to the contrary in this Guaranty or any of the other Loan Documents: (i) the aggregate liability of Guarantor with respect to the Guaranteed Obligations shall not exceed an amount equal to fifteen percent (15%) of the
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principal balance of the Loan outstanding at the time of the occurrence of such event, plus all expenses payable pursuant to Section 1.8 (the Guaranty Liability Cap ); provided , however , that if any replacement Guarantor assumes this Guaranty pursuant to Section 8.3 of the Loan Agreement, the Guaranty Liability Cap shall be deemed to be deleted from this Guaranty, ab initio , with respect to such replacement Guarantors obligations hereunder; and (ii) Guarantor shall have no liability with respect to Section 1.2 (a)(vii) with respect to failures to pay trade payables or operational debt in the ordinary course of business if (A) the Property does not generate sufficient revenue to pay such trade payables or operational debt or (B) if the funds held in the Lockbox Account identified to pay such expenses have not been made available to Borrower in accordance with Section 6.3 of the Loan Agreement to pay such obligations or have otherwise not been applied by Lender to such obligations and in no event shall Guarantor be required to fund any additional capital contributions or make any Loans to Borrower.
Net Worth shall mean the excess of total assets, exclusive of the Property, over total liabilities as presented on Guarantors financial statements delivered in accordance with Section 4.1 hereof.
Officers Certificate shall mean, with respect to a Guarantor that is a corporation, partnership, limited liability company or other entity, a certificate delivered to Agent by such Guarantor, which is signed by an authorized senior officer of such Guarantor, by such Guarantors managing member or general partner, as applicable, and with respect to a Guarantor that is a natural person, a certificate signed and delivered to Agent by such Guarantor.
Required Minimum Net Worth shall mean $100,000,000.
1.3 Nature of Guaranty . This Guaranty is an irrevocable, unconditional, absolute, continuing guaranty of payment and performance and not a guaranty of collection of the Guaranteed Obligations. This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor and after (if Guarantor is a natural person) Guarantors death (in which event this Guaranty shall be binding upon Guarantors estate and Guarantors legal representatives and heirs). The fact that at any time or from time to time the Loan may be increased or reduced shall not release or discharge the obligation of Guarantor to Lenders with respect to the Guaranteed Obligations. This Guaranty may be enforced by Agent on behalf of Lenders and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note.
1.4 Guaranteed Obligations Not Reduced by Offset . The Guaranteed Obligations and the liabilities and obligations of Guarantor to Agent and Lenders hereunder shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower or any other party against Agent and/or Lenders or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.
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1.5 Payment By Guarantor . If all or any part of the Guaranteed Obligations shall not be punctually paid when due by Borrower, whether at demand, maturity, acceleration or otherwise, Guarantor shall, immediately upon demand by Agent and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Agent at Agents address as set forth herein. Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations and may be made from time to time with respect to the same or different items of Guaranteed Obligations. Such demand shall be deemed made, given and received in accordance with the notice provisions hereof. If the amount due on the Guaranteed Obligations is not paid to Agent as aforesaid within five (5) days after demand by Agent, the same shall bear interest at the Default Rate from the date of demand until the date all of the Guaranteed Obligations have been paid (which interest shall be included within the meaning of Guaranteed Obligations).
1.6 No Duty To Pursue Others . It shall not be necessary for Agent or Lenders (and Guarantor hereby waives any rights which Guarantor may have to require Agent or Lenders), in order to enforce the obligations of Guarantor hereunder, first to (a) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other Person, (b) enforce Agents or Lenders rights against any collateral which shall ever have been given to secure the Loan, (c) enforce Agents or Lenders rights against any other guarantors of the Guaranteed Obligations, (d) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (e) exhaust any remedies available to Agent or Lenders against any collateral which shall ever have been given to secure the Loan, or (f) resort to any other means of obtaining payment of the Guaranteed Obligations. Neither Agent nor Lenders shall be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.
1.7 Waivers . Guarantor agrees to the provisions of the Loan Documents and hereby waives notice of (a) any loans or advances made by Agent and/or Lenders to Borrower, (b) acceptance of this Guaranty, (c) any amendment or extension of the Note, the Mortgage, the Loan Agreement or of any other Loan Documents, (d) the execution and delivery by Borrower, Agent and Lenders of any other loan or credit agreement or of Borrowers execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Property, (e) the occurrence of any breach by Borrower of any of the Loan Documents or an Event of Default, (f) except as specifically provided in the Loan Documents, Lenders transfer or disposition of the Guaranteed Obligations, or any part thereof, (g) except as specifically provided in the Loan Documents, sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (h) except as specifically provided in the Loan Documents, protest, proof of non-payment or default by Borrower, or (i) except as specifically provided in the Loan Documents, any other action at any time taken or omitted by Agent or Lenders and, generally, all demands and notices of every kind in connection with this Guaranty, the other Loan Documents, any other documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guaranteed.
1.8 Payment of Expenses . In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, within ten (10) days after
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demand by Agent, pay Agent all reasonable out-of-pocket costs and expenses (including court costs and reasonable third-party attorneys fees and disbursements) incurred by Agent in the enforcement hereof or the preservation of Agents and Lenders rights hereunder. The covenant contained in this Section shall survive the payment and performance of the Guaranteed Obligations.
1.9 Effect of Bankruptcy . In the event that pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law or any judgment, order or decision thereunder, Agent and/or Lenders must rescind or restore any payment or any part thereof received by Agent and/or Lenders in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Agent and/or Lenders shall be without effect and this Guaranty shall remain in full force and effect. It is the intention of Borrower and Guarantor that Guarantors obligations hereunder shall not be discharged except by Guarantors performance of such obligations and then only to the extent of such performance.
1.10 Waiver of Subrogation, Reimbursement and Contribution . Notwithstanding anything to the contrary contained in this Guaranty, until the Debt is indefeasibly paid in full, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of Agent and/or Lenders), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty or otherwise.
1.11 Borrower . The term Borrower as used herein shall include any new or successor corporation, association, partnership (general or limited), limited liability company joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower.
ARTICLE II
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTORS OBLIGATIONS
Guarantor hereby consents and agrees to each of the following and agrees that Guarantors obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following:
2.1 Modifications . Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Loan, the Note, the Mortgage, the Loan Agreement, the other Loan Documents or any other document, instrument, contract or understanding between Borrower and Agent and/or Lenders or any other parties pertaining to the Guaranteed Obligations or any failure of Agent or Lenders to notify Guarantor of any such action.
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2.2 Adjustment . Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender or Agent on their behalf to Borrower or any Guarantor.
2.3 Condition of Borrower or Guarantor . The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, Guarantor or any other party at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or Guarantor or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor or any changes in the shareholders, partners or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor.
2.4 Invalidity of Guaranteed Obligations . The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations or any document or agreement executed in connection with the Guaranteed Obligations for any reason whatsoever, including without limitation the fact that (a) the Guaranteed Obligations or any part thereof exceeds the amount permitted by law, (b) the act of creating the Guaranteed Obligations or any part thereof is ultra vires , (c) the officers or representatives executing the Note, the Mortgage, the Loan Agreement or the other Loan Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (d) the Guaranteed Obligations violate applicable usury laws, (e) the Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower other than indefeasible payment of the Debt by Borrower, (f) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (g) the Note, the Mortgage, the Loan Agreement or any of the other Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason.
2.5 Release of Obligors . Any full or partial release of the liability of Borrower on the Guaranteed Obligations or any part thereof, or of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Agent and Lenders will look to other parties to pay or perform the Guaranteed Obligations.
2.6 Other Collateral . The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.
2.7 Release of Collateral . Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including, without limitation, negligent, willful,
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unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.
2.8 Care and Diligence . The failure of Agent and/or Lenders or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of any collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Agent and/or Lenders (a) to take or prosecute any action for the collection of any of the Guaranteed Obligations or (b) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (c) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.
2.9 Unenforceability . The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectability or value of any of the collateral for the Guaranteed Obligations.
2.10 Offset . The Guaranteed Obligations and the liabilities and obligations of the Guarantor to Agent and Lenders hereunder shall not be reduced, discharged or released because of or by reason of any existing or future right of offset, claim or defense of Borrower against Agent and/or Lenders, or any other party, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise, other than payment of the Guaranteed Obligations.
2.11 Merger . The reorganization, merger or consolidation of Borrower into or with any other Person.
2.12 Preference . Any payment by Borrower to Agent and/or Lenders is held to constitute a preference under bankruptcy laws or for any reason Agent or Lenders are required to refund such payment or pay such amount to Borrower or someone else.
2.13 Other Actions Taken or Omitted . Any other action taken or omitted to be taken with respect to the Loan Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce Agent to enter into the Loan Documents and Lenders to enter into the Loan Agreement and extend credit to Borrower, Guarantor represents and warrants to Agent and Lenders as follows:
3.1 Benefit . Guarantor is an Affiliate of Borrower, is the owner of a direct or indirect interest in Borrower, and has received, or will receive, direct or indirect benefit from the making of the Loan.
3.2 Familiarity and Reliance . Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of the Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty.
3.3 No Representation By Lenders . Neither Agent nor Lenders nor any other party has made any representation, warranty or statement to Guarantor in order to induce the Guarantor to execute this Guaranty.
3.4 Guarantors Financial Condition . As of the date hereof, and after giving effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is and will be solvent and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities.
3.5 Legality . The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not and will not contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors rights.
3.6 Consents . No consent, approval, authorization or order of any court or Governmental Authority or other Person is required for the execution, delivery and performance by Guarantor of, or compliance by Guarantor with, this Guaranty or the consummation of the transactions contemplated hereby, other than those which have been obtained by Guarantor.
3.7 Litigation . There is no action, suit or proceeding pending or, to Guarantors knowledge, threatened against Guarantor in any court or by or before any other Governmental Authority, which actions, suits or proceedings, if determined against Guarantor would reasonably be expected to have or does have a Material Adverse Effect.
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3.8 No Plan Assets . (a) As of the date of this Guaranty (i) Guarantor is not an employee benefit plan, as defined in Section 3(3) of ERISA, subject to Title I of ERISA, or a plan subject to Section 4975 of the Code, (ii) none of the assets of Guarantor constitutes plan assets of one or more such plans within the meaning of 29 C.F.R. Section 2510.3 101 (as modified by Section 3(42) of ERISA), (iii) Guarantor is not a governmental plan within the meaning of Section 3(32) of ERISA and (iv) transactions contemplated by this Guaranty by or with Guarantor are not subject to state statutes applicable to Guarantor with respect to, governmental plans within the meaning of Section 3(32) of ERISA, which are substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect and which prohibit the transactions contemplated by this Guaranty.
(b) As of the date hereof, except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) Guarantor and each of its ERISA Affiliates is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to Employee Benefit Plans and the regulations and published interpretations thereunder; (ii) no ERISA Event has occurred in the five-year period prior to the date on which this representation is made or deemed made or is reasonably expected to occur; and (iii) all amounts required by applicable law with respect to, or by the terms of, any retiree welfare benefit arrangement maintained by Guarantor or any ERISA Affiliate or to which Guarantor or any ERISA Affiliate has an obligation to contribute have been accrued in accordance with Statement of Financial Accounting Standards No. 106.
3.9 Financial and Other Information . All financial data delivered by Guarantor or its Affiliates to Agent and/or Lenders in respect of Guarantor (a) are true and correct in all material respects and (b) fairly represent the financial condition of Guarantor as of the date of such reports. Guarantor does not have any contingent liabilities, liabilities for Taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Guarantor and reasonably likely to have a materially adverse effect on Guarantor, except as referred to or reflected in said financial statements. Since the date of the financial statements, there has been no material adverse change in the financial condition, operations or business of Guarantor from that set forth in said financial statements. All documents furnished to Agent and/or Lenders by or on behalf of Guarantor, as part of or in support of the Loan application or pursuant to this Guaranty or any of the other Loan Documents, are true, correct, complete in all material respects and fairly represent the matters to which they pertain as of the dates made and there have been no materially adverse changes with respect to such matters since the respective dates thereof.
3.10 Tax Filings . Guarantor has filed (or has obtained effective extensions for filing) all federal, state and local Tax returns required to be filed by Guarantor and has paid or made adequate provision for the payment of all federal and material state and local Taxes, charges and assessments payable by Guarantor, except Taxes which are being contested in good faith by appropriate proceedings and for which Guarantor has set aside on its books adequate reserves in accordance with GAAP. Guarantor believes that any Tax returns filed by it properly reflect the income and Taxes of Guarantor for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable Tax authority upon audit.
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3.11 Survival . All representations and warranties made by Guarantor herein shall survive the execution hereof.
ARTICLE IV
COVENANTS
4.1 Financial Reporting . (a) Guarantor shall keep and maintain or will cause to be kept and maintained proper and accurate books and records, in accordance with GAAP (or such other accounting basis acceptable to Agent), reflecting the financial affairs of Guarantor. Agent shall have the right from time to time during normal business hours upon reasonable notice to Guarantor to examine such books and records at the office of Guarantor or other Person maintaining such books and records.
(b) Guarantor shall furnish Agent annually, within one hundred twenty (120) days following the end of each Fiscal Year, (i) a complete copy of Guarantors annual financial statements audited by the Approved Accountant and prepared in accordance with GAAP, including, without limitation, (A) a detailed balance sheet, (B) an income statement, and (C) a list of addresses of real property then owned by, and any contingent liabilities of, Guarantor and (ii) an Officers Certificate certifying that Guarantor has a Net Worth of at least the Required Minimum Net Worth.
(c) Guarantors financial statements delivered pursuant to Section 4.1(b) shall be accompanied by an Officers Certificate stating that such financial statements present fairly the financial condition and the results of operations of Guarantor and that such financial statements are true, complete and correct in all material respects, and certifying as of the date thereof whether to the best of such Guarantors knowledge there exists an event or circumstance which constitutes a Default or Event of Default by Guarantor under this Guaranty and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same.
4.2 Financial Covenants . At all times during the term of the Loan, Guarantor shall collectively have an aggregate tangible Net Worth of not less than the Required Minimum Net Worth. In the event that Guarantor has a tangible Net Worth less than the Required Minimum Net Worth, Guarantor shall deliver to Agent Cash or a Letter of Credit equal to $50,000,000 to be held as additional collateral for the Loan in accordance with Section 6.5 of the Loan Agreement. Any such Cash or Letter of Credit will constitute Funds. Provided no Event of Default has occurred and is continuing, in the event Guarantor has a tangible Net Worth of not less than the Required Minimum Net Worth, as of the date of delivery to Agent of its next annual financial statements in accordance with Section 4.1(b) , Agent shall, upon request by Guarantor, return such Cash or Letter of Credit, as applicable, to Guarantor.
4.3 Dissolution . Guarantor shall not engage in any dissolution or liquidation.
4.4 Intentionally Omitted .
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4.5 ERISA . (a) Assuming compliance by Agent with paragraph (c) of this Section 4.5 , Guarantor shall not engage in any transaction contemplated under this Guaranty which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Agent and/or Lenders of any of its rights under the Note, this Guaranty or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under Section 406(a) of the Employee Retirement Income Security Act of 1974, as amended ( ERISA ).
(b) Guarantor agrees that if at such time as any benefit plan investor within the meaning of Section 3(42) of ERISA holds an equity interest in Guarantor, Guarantor shall deliver to Agent such certifications or other evidence from time to time throughout the term of the Loan, as reasonably requested by Agent in its sole discretion, but not more frequently than once per calendar year and on not less than thirty (30) days advance written notice, that (i) Guarantor is not a benefit plan investor within the meaning of Section 3(42) of ERISA, or a governmental plan within the meaning of Section 3(32) of ERISA; (ii) Guarantor is not subject to Similar Laws; and (iii) one or more of the following circumstances is true:
(A) Equity interests in Guarantor are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);
(B) Less than twenty-five percent (25%) of the total value of each outstanding class of equity interests in Guarantor are held by benefit plan investors within the meaning of Section 3(42) of ERISA; or
(C) Guarantor qualifies as an operating company or a real estate operating company within the meaning of 29 C.F.R. §2510.3-101(c) or (e) or another exception to ERISA applies such that Guarantors assets should not constitute plan assets of any benefit plan investor within the meaning of Section 3(42) or ERISA and 29 C.F.R. §2510.3 101(f)(2).
(c) Each Lender hereby represents and warrants that, throughout the term of the Loan, no portion of the assets used by any Lender in connection with the transactions contemplated under this Agreement and the other Loan Documents constitutes assets of a (i) benefit plan investor within the meaning of the Plan Assets Regulations unless the applicable Lender is relying on an available prohibited transaction exemption, all of the conditions of which are and continue to be satisfied or (ii) governmental plan (as defined in Section 3(32) of ERISA) which is subject to any provision which is substantially similar to the prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code ( Applicable Similar Law ), unless the acquisition and holding of the Loan or any interest therein will not give rise to a violation of any such Applicable Similar Law.
ARTICLE V
SUBORDINATION OF CERTAIN INDEBTEDNESS
5.1 Subordination of All Guarantor Claims . As used herein, the term Guarantor Claims shall mean all debts and liabilities of Borrower to Guarantor, whether such
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debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantors payment of all or a portion of the Guaranteed Obligations. During the continuance of an Event of Default or the occurrence of an event which would, with the giving of notice or the passage of time, or both, constitute an Event of Default, Guarantor shall not receive or collect, directly or indirectly, from Borrower any amount upon the Guarantor Claims.
5.2 Claims in Bankruptcy . In the event of receivership, bankruptcy, reorganization, arrangement, debtors relief, or other insolvency proceedings involving Guarantor as debtor, Agent shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such dividends and payments to Agent for the benefit of Lenders. Should Agent receive, for application against the Guaranteed Obligations, any dividend or payment which is otherwise payable to Guarantor and which, as between Borrower and Guarantor, shall constitute a credit against the Guarantor Claims, then, upon payment to Agent in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lenders to the extent that such payments to Agent on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Agent had not received dividends or payments upon the Guarantor Claims.
5.3 Payments Held in Trust . In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Agent an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Agent, and Guarantor covenants promptly to pay the same to Agent.
5.4 Liens Subordinate . Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrowers assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrowers assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Agent or Lenders presently exist or are hereafter created or attach. Without the prior written consent of Agent, Guarantor shall not (a) exercise or enforce any creditors right it may have against Borrower, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtors relief or insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor.
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ARTICLE VI
MISCELLANEOUS
6.1 Waiver . No failure to exercise, and no delay in exercising, on the part of Agent and/or Lenders, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of Agent and Lenders hereunder shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.
6.2 Notices . All notices, demands, requests, consents, approvals or other communications (any of the foregoing, a Notice ) required, permitted, or desired to be given hereunder shall be in writing sent by registered or certified mail, postage prepaid, return receipt requested, or delivered by hand or reputable overnight courier addressed to the party to be so notified at its address hereinafter set forth, or to such other address as such party may hereafter specify in accordance with the provisions of this Section 6.2 . Any Notice shall be deemed to have been received: (a) three (3) days after the date such Notice is mailed, (b) on the date of delivery by hand if delivered during business hours on a Business Day (otherwise on the next Business Day), and (c) on the next Business Day if sent by an overnight commercial courier, in each case addressed to the parties as follows:
If to Agent: | HSBC Bank USA, National Association, as Agent | |
545 Washington Boulevard, 10 th Floor | ||
Jersey City, New Jersey 07310 | ||
Attention: Commercial Mortgage Servicing Department | ||
with a copy to: | HSBC Bank USA, National Association, as Agent | |
452 Fifth Avenue | ||
New York, New York 10018 | ||
Attention: Robert D. Gominiak | ||
with a copy to: | Cadwalader, Wickersham & Taft LLP | |
One World Financial Center | ||
New York, New York 10281 | ||
Attention: Steven M. Herman, Esq. | ||
If to Lenders: | at their respective addresses set | |
forth in the Loan Agreement |
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If to Guarantor: | c/o Hilton Worldwide Inc. | |
7930 Jones Branch Drive | ||
McLean, Virginia 22102 | ||
Attention: General Counsel | ||
With a copy to: | Simpson Thacher & Bartlett LLP | |
425 Lexington Avenue | ||
New York, New York 10017 | ||
Attention: Erik Quarfordt, Esq. |
6.3 Governing Law; Submission to Jurisdiction . This Guaranty shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America. Any legal suit, action or proceeding against Agent and/or Lenders or Guarantor arising out of or relating to this Guaranty may at Agents and/or Lenders option be instituted in any Federal or State court in the City of New York, County of New York, pursuant to Section 5-1402 of the New York General Obligations Law and Guarantor waives any objections which it may now or hereafter have based on venue and/or forum non conveniens of any such suit, action or proceeding, and Guarantor hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. Guarantor does hereby designate and appoint:
Hilton Worldwide Inc.
7930 Jones Branch Drive
McLean, Virginia 22102
Attention: General Counsel
as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any Federal or State court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service mailed or delivered to Guarantor in the manner provided herein shall be deemed in every respect effective service of process upon Guarantor in any such suit, action or proceeding in the State of New York.
6.4 Invalid Provisions . If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.
6.5 Amendments . This Guaranty may be amended only by an instrument in writing executed by the parties hereto.
6.6 Joint and Several; Parties Bound; Assignment; Gender . If Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several. All pronouns and any variations thereof shall be deemed to
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refer to the masculine, feminine, neuter, singular or plural as the identity of the Person or Persons referred to may require. Without limiting the effect of specific references in any provision of this Agreement, the term Guarantor shall be deemed to refer to each and every Person constituting a Guarantor from time to time, as the sense of a particular provision may require, and to include the respective heirs, executors, administrators, legal representatives, successors and assigns of each such Person, all of whom shall be bound by the provisions of this Agreement; provided , however , that no obligation of Guarantor may be assigned except with the prior written consent of Agent. This Agreement shall inure to the benefit of Agent and Lenders and their respective successors and assigns forever.
6.7 Headings . The headings and captions of various paragraphs of this Guaranty are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.
6.8 Recitals . The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.
6.9 Counterparts . To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.
6.10 Rights and Remedies . If Guarantor becomes liable for any Indebtedness owing by Borrower to Lenders, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Agent and Lenders hereunder shall be cumulative of any and all other rights that Agent and/or Lenders may ever have against Guarantor. The exercise by Agent of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.
6.11 Entirety . THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR, AGENT AND LENDERS WITH RESPECT TO GUARANTORS GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR, AGENT AND LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR, AGENT AND LENDERS, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
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DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR, AGENT AND LENDERS.
6.12 Waiver of Right To Trial By Jury . GUARANTOR, AND BY ACCEPTANCE HEREOF AGENT AND LENDERS, EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, THE LOAN AGREEMENT, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AGENT AND LENDERS, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. AGENT IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR, AGENT AND LENDERS.
6.13 Intentionally Omitted.
6.14 Reinstatement in Certain Circumstances . If at any time any payment of the principal of or interest under the Note or any other amount payable by the Borrower under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantors obligations hereunder with respect to such payment shall be reinstated as though such payment has been due but not made at such time.
6.15 Guarantor Release in Connection with Permitted Assumption . In connection with a Permitted Assumption permitted pursuant to and in accordance with Section 8.3(b) of the Loan Agreement, Guarantor shall be released from its obligations under this Guaranty arising out of acts or omissions arising from events or conditions first occurring after such Permitted Assumption; provided that of all of the terms and conditions set forth in Section 8.3(b) of the Loan Agreement shall have been satisfied, including, without limitation, delivery of a replacement guaranty in compliance with Section 8.3(b)(vi).
[NO FURTHER TEXT ON THIS PAGE]
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EXECUTED as of the day and year first above written.
GUARANTOR: | ||||
HILTON DOMESTIC PROPERTY LLC , a Delaware limited liability company | ||||
By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer | |||
HLT OWNED VIII HOLDING LLC , a Delaware limited liability company | ||||
By: |
/s/ Sean DellOrto |
|||
Name: | Sean DellOrto | |||
Title: | Senior Vice President & Treasurer |
Exhibit 10.8
EXECUTION COPY
AMENDMENT NO. 1 TO
RECEIVABLES LOAN AGREEMENT
This AMENDMENT NO. 1 TO RECEIVABLES LOAN AGREEMENT, effective as of July 25, 2013 (this Amendment ), is executed by and among HILTON GRAND VACATIONS TRUST I LLC, a Delaware limited liability company (together with its successors and assigns, the Borrower ), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Paying Agent and Securities Intermediary, DEUTSCHE BANK AG, NEW YORK BRANCH ( DBNY ), as a Committed Lender and as a Managing Agent (in such capacity, the DB Managing Agent ), MONTAGE FUNDING, LLC ( Montage ), as a Conduit Lender, DEUTSCHE BANK SECURITIES, INC., as Administrative Agent, and BANK OF AMERICA, N.A. ( BANA ), as assignee (the Assignee ). Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed thereto in the Receivables Loan Agreement (defined below).
WITNESSETH:
WHEREAS, the Borrower, the DB Managing Agent, the Administrative Agent, the Securities Intermediary, the Paying Agent, the Conduit Lenders party thereto, and the Committed Lenders party thereto are parties to that certain Receivables Loan Agreement dated as of May 9, 2013 (the Receivables Loan Agreement );
WHEREAS, as provided herein, the parties hereto have agreed to amend certain provisions of the Receivables Loan Agreement as described below in order to, among other things, add the Assignees as Committed Lenders and Managing Agents;
NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment to the Receivables Loan Agreement . Effective as of the date hereof (the Effective Date ), and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Receivables Loan Agreement is hereby amended as follow:
1.1 The definitions of Adjusted LIBO Rate, Alternative Rate and LIBO Rate set forth in Section 1.01 are each amended and restated in their entirety as follows:
Adjusted LIBO Rate means, on any day, (a) for any Lender in the Lender Group for which BANA is the Managing Agent, the applicable LIBO Rate in effect on such day for such Lender or (b) for any other Lender, an interest rate per annum obtained by dividing (i) the applicable LIBO Rate in effect on such day for such Lender by (ii) a percentage equal to 100% minus the LIBO Rate Reserve Percentage for such day.
Alternative Rate means, with respect to a Loan on any day, an interest rate per annum equal to the sum of (a) the Used Fee Rate, plus (b) the Adjusted LIBO Rate for such day; provided, however , that if a LIBOR Disruption Event is continuing on such day, the Alternative Rate shall be an interest rate per annum equal to the Prime Rate in effect on such day.
LIBO Rate means (a) with respect to any Loan funded or maintained by a Lender in the Lender Group for which BANA is the Managing Agent, for any day, the one-month Eurodollar Rate for deposits in Dollars as reported on Reuters Screen LIBOR01 Page or any other page that may replace such page from time to time for the purpose of displaying offered rates of leading banks for London interbank deposits in United States dollars, as of 11:00 a.m. (London time) on such date, or if such day is not a Business Day, then the immediately preceding Business Day (or if not so reported, then as determined by BANA from another recognized source for interbank quotation), in each case, changing when and as such rate changes or (b) with respect to any Loan funded or maintained by a Lender in any other Lender Group for any Interest Period, the rate per annum shown on Reuters Screen LIBOR01 (or any successor page as the composite offered rate for London interbank deposits for a one-month period), as shown under the heading USD at approximately 11:00 a.m., London time, on the second Business Day before the first day of such Interest Period; provided, that (x) if the rate referred to in this clause (b) is not available at such time for any reason, then the LIBO Rate shall be determined by reference to such other comparable available service for displaying Eurodollar rates as may be reasonably selected by the Administrative Agent or (y) if no such service is available, the LIBO Rate shall be the rate per annum equal to the average (rounded upward to the nearest 1/16th of 1%) of the respective rates notified to the Administrative Agent by Deutsche Bank AG as the rate at which Deutsche Bank AG offers deposits in Dollars at or about 10:00 a.m., New York City time, two Business Days prior to the beginning of the related Interest Period, in the interbank eurocurrency market where the eurocurrency and foreign currency and exchange operations in respect of its Eurodollar loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the applicable amount of Aggregate Loan Principal Balance to be accruing interest at the LIBO Rate during such Interest Period.
LIBO Rate Reserve Percentage means, for any day on which Interest is computed by reference to the LIBO Rate, the reserve percentage applicable on such day under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the average of such percentages) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Liabilities is determined). The LIBO Rate Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
1.2 Clause (iii) of Section 10.12(b) of the Receivables Loan Agreement is amended and restated in its entirety as follows:
(iii) to the extent requested by any governmental or regulatory authority having, or claiming to have, jurisdiction over the Administrative Agent, the Managing Agents, the Lenders or any Lender Representative,.
1.3 Clause (gg) of Schedule I to the Receivables Loan Agreement is amended and restated in its entirety as follows:
(gg) The related Obligor has equity in the related Timeshare Property of at least 10% of the purchase price for the related Timeshare Property.
1.4 Schedule II to the Receivables Loan Agreement is deleted in its entirety and replaced with Schedule II attached hereto.
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SECTION 2. Assignment .
2.1 Each of DBNY and Montage (each an Assignor and collectively, the Assignors ) hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from each Assignor, a 50.000% interest in and to all of its rights, title, interest and obligations under the Agreement as of the date hereof (including its Commitment and all Loans, if any, or interests therein held by it). By execution and delivery of this Amendment, BANA elects to form a new Lender Group under the Receivables Loan Agreement consisting of BANA, as Committed Lender and Managing Agent. After giving effect to the sale and assignment described in this Section 2.1, the Assignee will be a Committed Lender having the Commitment set forth on Schedule II to this Amendment. As consideration for the sale and assignment contemplated in this Section 1, on the Effective Date the Assignee shall pay to Montage in immediately available funds a purchase price equal to $199,000,000.00 for the interests in the transferred interest sold and assigned to the Assignee under this Section 2.1. On the Effective Date, DBNY shall pay to the Assignee, in immediately available funds a one-time, non-refundable upfront fee equal to $447,222.22.
2.2 Each Assignor: (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it pursuant to this Section 2 and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Facility Document or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Facility Document or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Seller, the Borrower or the Servicer, or the performance or observance by any such party of any of its respective obligations under the Facility Documents or any other instrument or document furnished pursuant thereto.
2.3 The Assignee:
(i) confirms that it has received a copy of the Receivables Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.02(b) of the Receivables Loan Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment;
(ii) agrees that it will, independently and without reliance upon the Administrative Agent, any Managing Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Receivables Loan Agreement;
(iii) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Receivables Loan Agreement and the other Facility Documents as are delegated to the Administrative Agent respectively, by the terms thereof, together with such powers as are reasonably incidental thereto;
(iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Receivables Loan Agreement and Amendment are required to be performed by it as a Committed Lender or a Managing Agent, as applicable;
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(v) specifies as its address for notices the office set forth beneath its name on the signature pages hereof; and
(vi) represents that this Amendment has been duly authorized, executed and delivered by such Assignee or New Managing Agent pursuant to its corporate powers and constitutes the legal, valid and binding obligation of such Assignee or New Managing Agent.
2.4 As of the Effective Date, the Assignee shall be a party to the Receivables Loan Agreement and, to the extent provided in this Section 2, have the rights and obligations of a Committed Lender or a Managing Agent, as applicable, thereunder and hereunder. This Agreement serves as an Assignment and Acceptance and is being executed and delivered in accordance with Section 10.03 of the Receivables Loan Agreement.
2.5 From and after the Effective Date, all payments under the Receivables Loan Agreement in respect of the interests assigned hereby (including all payments of fees with respect thereto) shall be made to the Assignee, for its own account, in accordance with the Receivables Loan Agreement. The Assignors and the Assignee shall make all appropriate adjustments in payments under the Receivables Loan Agreement for periods prior to the Effective Date directly between themselves.
SECTION 3. Conditions Precedent . This Amendment shall become effective on the Effective Date upon the satisfaction of each of the following conditions precedent:
3.1 The Administrative Agent shall have received counterparts of this Amendment executed by each of the parties hereto.
3.2 The Assignors shall have received by wire transfer of immediately available funds from each Assignee the purchase price referred to in Section 2.1.
SECTION 4. Representations, Warranties and Confirmations . The Borrower hereby represents and warrants that:
4.1 It has the power and is duly authorized, including by all corporate or limited liability company action on its part, to execute and deliver this Amendment.
4.2 This Amendment has been duly and validly executed and delivered by it.
4.3 This Amendment and the Receivables Loan Agreement as amended hereby, constitute legal, valid and binding obligations of such parties and are enforceable against the Borrower in accordance with their terms.
4.4 Immediately prior, and after giving all effect, to this Amendment, the covenants, representations and warranties of the Borrower set forth in the Receivables Loan Agreement are true and correct in all material respects as of the date hereof (except to the extent such representations or warranties relate solely to an earlier date and then as of such date).
4.5 Immediately prior, and after giving all effect, to this Amendment, no event, condition or circumstance has occurred and is continuing which constitutes an Servicer Termination Event, Unmatured Servicer Termination Event, Default or Event of Default.
SECTION 5. Delivery of Executed Amendment . The Borrower covenants and agrees that it will deliver an executed copy of this Amendment to the Servicer, the Paying Agent, the Backup Servicer and the Custodian promptly following the effectiveness hereof.
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SECTION 6. Entire Agreement . The parties hereto hereby agree that this Amendment constitutes the entire agreement concerning the subject matter hereof and supersedes any and all written and/or oral prior agreements, negotiations, correspondence, understandings and communications.
SECTION 7. Effectiveness of Amendment . Except as expressly amended by the terms of this Amendment, all terms and conditions of the Receivables Loan Agreement shall remain in full force and effect and are hereby ratified and confirmed. This Amendment shall not operate as a consent, waiver, amendment or other modification of any other term or condition set forth in the Receivables Loan Agreement or any right, power or remedy of the Administrative Agent or any Managing Agent or Lender under the Receivables Loan Agreement, except as expressly modified hereby. Upon the effectiveness of this Amendment, each reference in the Receivables Loan Agreement to this Agreement or this Receivables Loan Agreement or words of like import shall mean and be references to the Receivables Loan Agreement as amended hereby, and each reference in any other Facility Document to the Receivables Loan Agreement or to any terms defined in the Receivables Loan Agreement which are modified hereby shall mean and be references to the Receivables Loan Agreement or to such terms as modified hereby.
SECTION 8. GOVERNING LAW . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK .
SECTION 9. Binding Effect . This Amendment shall be binding upon and shall be enforceable by parties hereto and their respective successors and permitted assigns.
SECTION 10. Headings . The Section headings herein are for convenience only and will not affect the construction hereof.
SECTION 11. Novation . This Amendment does not constitute a novation or termination of the Receivables Loan Agreement or any Facility Document and all obligations thereunder are in all respects continuing with only the terms thereof being modified as provided herein.
SECTION 12. Counterparts . This Amendment may be executed in any number of counterparts, each of which so executed will be deemed to be an original, but all such counterparts will together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or by electronic mail in a .pdf file shall be effective as delivery of a manually executed counterpart of this Amendment.
SECTION 13. Fees, Costs and Expenses . The Borrower agrees to pay on demand all reasonable fees and out-of-pocket expenses of Sidley Austin LLP, counsel for the Administrative Agent, incurred in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered in connection herewith.
Signature Pages Follow
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written.
HILTON GRAND VACATIONS TRUST I LLC, as Borrower |
||
By: |
/s/ Sean M. DellOrto |
|
Name: | Sean M. DellOrto | |
Title: | Senior Vice President and Treasurer |
Signature Page to Amendment No. 1 to Receivables Loan Agreement
DEUTSCHE BANK SECURITIES, INC. as Administrative Agent | ||
By: |
/s/ Colin Bennett |
|
Name: | Colin Bennett | |
Title: | Director | |
By: |
/s/ Billy Strobel |
|
Name: | Billy Strobel | |
Title: | Vice President | |
DEUTSCHE BANK AG, NEW YORK BRANCH as Assignor and Managing Agent |
||
By: |
/s/ Colin Bennett |
|
Name: | Colin Bennett | |
Title: | Director | |
By: |
/s/ Billy Strobel |
|
Name: | Billy Strobel | |
Title: | Vice President | |
MONTAGE FUNDING LLC as Assignor |
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By: |
/s/ Michael R. Newell |
|
Name: | Michael R. Newell | |
Title: | Vice President |
Signature Page to Amendment No. 1 to Receivables Loan Agreement
BANK OF AMERICA, N.A., | ||
as Assignee | ||
By: |
/s/ Brendan Feeney |
|
Name: | Brendan Feeney | |
Title: | Vice President |
Signature Page to Amendment No. 1 to Receivables Loan Agreement
Exhibit 10.9
EXECUTION COPY
OMNIBUS AMENDMENT NO. 2 TO
RECEIVABLES LOAN AGREEMENT,
AMENDMENT NO. 1 TO
SALE AND CONTRIBUTION AGREEMENT
AND
CONSENT TO CUSTODY AGREEMENT
This OMNIBUS AMENDMENT NO. 2 TO RECEIVABLES LOAN AGREEMENT, AMENDMENT NO. 1 TO SALE AND CONTRIBUTION AGREEMENT and CONSENT TO CUSTODY AGREEMENT, effective as of October 25, 2013 (this Amendment ), is executed by and among HILTON GRAND VACATIONS TRUST I LLC, a Delaware limited liability company (together with its successors and assigns, the Borrower ), GRAND VACATIONS SERVICES, LLC, a Delaware limited liability company (the Servicer ), HILTON RESORTS CORPORATION, a Delaware corporation (the Seller ), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Custodian, the financial institutions signatory hereto as Managing Agents, and DEUTSCHE BANK SECURITIES, INC., as Administrative Agent. Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed thereto in the Receivables Loan Agreement (defined below).
WITNESSETH:
WHEREAS, the Borrower, the Managing Agents party thereto, the Administrative Agent, Wells Fargo Bank National Association, as Securities Intermediary and Paying Agent, the Conduit Lenders party thereto, and the Committed Lenders party thereto are parties to that certain Receivables Loan Agreement dated as of May 9, 2013 (as amended as of July 25, 2013, the Receivables Loan Agreement ); and
WHEREAS, the Borrower and the Seller are party to that certain Sale and Contribution Agreement, dated as of May 9, 2013 (the Sale and Contribution Agreement ); and
WHEREAS, the Borrower, the Servicer, the Custodian and the Administrative Agent are party to that certain Custody Agreement, dated as of May 9, 2013 (the Custody Agreement ); and
WHEREAS, as provided herein, the parties hereto have agreed to amend certain provisions of the Receivables Loan Agreement and the Sale and Contribution Agreement, and to consent to certain departures from the requirements of the Custody Agreement, each as further described below;
NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendments to the Receivables Loan Agreement . Effective as of the date hereof (the Effective Date ), and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof (as well as the additional condition set forth in Section 1.7 hereof with respect to the change effected thereby), the Receivables Loan Agreement is hereby amended as follows:
1.1 The definition of Aggregate Commitment set forth in Section 1.01 is amended and restated in its entirety as follows:
Aggregate Commitment means, on any date of determination, the sum of the Commitments then in effect. As of the Amendment No. 2 Effective Date, the Aggregate Commitment is $450,000,000.
1.2 The definitions of Hilton Timeshare Loan Cap, Hilton Mezzanine Loan Agreements, Hilton Mortgage Loan Agreement and Recapitalization Event set forth in Section 1.01 are deleted in their entirety.
1.3 The following definitions of Amendment No. 2 Effective Date and Increase Timeshare Loans are added to Section 1.01 in their appropriate alphabetical order therein:
Amendment No. 2 Effective Date means October 25, 2013.
Increase Timeshare Loans means Timeshare Loans for which the Transfer Date is the Amendment No. 2 Effective Date.
1.4 Section 3.02(e) of the Receivables Loan Agreement is amended and restated in its entirety as follows:
(e) each of the Borrower, the Servicer and the Custodian shall have timely made all of the deliveries required pursuant to the Custody Agreement with respect to the Pledged Timeshare Loans and any Timeshare Loans to become Pledged Timeshare Loans in connection with such Borrowing (other than deliveries required in connection with the Increase Timeshare Loans which shall be made no later than the date that is 90 days after the Amendment No. 2 Effective Date);
1.5 Section 4.01(f)(v) of the Receivables Loan Agreement is amended and restated in its entirety as follows:
(v) All original executed Obligor Notes (or an original lost note affidavit and indemnity from the Seller) that constitute or evidence the Pledged Timeshare Loans have been delivered to the Custodian and the Borrower has received a receipt therefor, which acknowledges that the Custodian is holding the Obligor Notes that constitute or evidence the Pledged Timeshare Loans solely on behalf and for the benefit of the Administrative Agent (other than a receipt to be delivered in connection with the Increase Timeshare Loans which the Borrower shall have received no later than the date that is 90 days after the Amendment No. 2 Effective Date).
1.6 Schedule II to the Receivables Loan Agreement is deleted in its entirety and replaced with Schedule II attached hereto.
1.7 Upon the Administrative Agents receipt of opinions of local counsel to the Seller, in form and substance satisfactory to the Administrative Agent, relating to certain state law matters with respect to the Hokulani Waikiki by Hilton Grand Vacations Club and Hilton Grand Vacations Club at Trump International Hotel Las Vegas Resorts and related Timeshare Interests, Schedule V to the Receivables Loan Agreement is deleted in its entirety and replaced with Schedule V attached hereto.
1.8 Schedule VI to the Receivables Loan Agreement is deleted in its entirety.
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SECTION 2. Amendments to the Sale and Contribution Agreement . Effective as of the Effective Date, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Sale and Contribution Agreement is hereby amended as follows:
2.1 Section 2.1(b)(iii) of the Sale and Contribution Agreement is amended and restated in its entirety as follows:
(iii) the Seller shall have delivered or caused to be delivered the Timeshare Loan File relating to each Timeshare Loan to be transferred on such Transfer Date to the Custodian and the Custodian shall have delivered a Custodial Receipt on or prior to such Transfer Date (or in the case of the Custodial Receipt with respect to the Increase Timeshare Loans, on or prior to the date that is 90 days after the Amendment No. 2 Effective Date).
2.2 Section 2.4(c) of the Sale and Contribution Agreement is amended and restated in its entirety as follows:
(c) Not later than 12:00 p.m. (New York City time) on each Transfer Date, the Seller shall confirm with the Servicer and the Custodian that the Timeshare Loan Files relating to the Timeshare Loans designated by the Seller to become Transferred Timeshare Loans on such Transfer Date are complete and in the possession of the Custodian in accordance with the Custody Agreement (which confirmation, solely in the case of the Timeshare Loan Files with respect to the Increase Timeshare Loans, shall occur no later than the date that is 90 days after the Amendment No. 2 Effective Date). If, at any time, the Purchaser (or its assigns) has found or finds (whether by notice from the Custodian or Servicer or otherwise), that there is a Deficiency with respect to a Timeshare Loan File, the Purchaser (or its assigns) shall inform the Seller and the Administrative Agent promptly, in writing, of such Deficiency.
2.3 Section 2.7(b) of the Sale and Contribution Agreement is amended to amend and restate the first two sentences thereof in their entirety as follows:
Upon (x) discovery by the Seller, the Purchaser, the Administrative Agent or a Managing Agent of a breach of any of the representations and warranties set forth in Section 3.1(f)(i) or Section 3.1(r) which materially and adversely affects the value of a Transferred Timeshare Loan or the interests of the Purchaser or any assignee of the Purchaser therein, without regard to any limitation set forth therein concerning the knowledge of the Seller as to the facts stated therein, or (y) the failure of the Custodian to have (i) possession of complete Timeshare Loan Files with respect to the Increase Timeshare Loans and (ii) delivered a Custodial Receipt with respect to such Timeshare Loan Files with respect to the Increase Timeshare Loans in accordance with the Custody Agreement, in each case, on or prior to the date that is 90 days after the Amendment No. 2 Effective Date, the party discovering such breach or failure shall give prompt written notice to the other parties. Not later than the Distribution Date with respect to the Collection Period during which the Seller discovered such a breach or failure or received written notice thereof, if such breach or failure has not been cured in all material respects, the Seller shall repurchase each Transferred Timeshare Loan affected by such breach or failure from the Purchaser at the Repurchase Price therefor or shall substitute a Qualified Substitute Timeshare Loan for each such Transferred Timeshare Loan and pay any related Substitution Shortfall Amount, in each case, in accordance with Section 2.7(d).
SECTION 3. Custody Agreement Consent . Effective as of the Effective Date, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, each of the Borrower, the Servicer, the Custodian, the Administrative Agent and each Managing Agent agrees and acknowledges that notwithstanding the provisions of Sections 3(b) and 4(a) of the Custody Agreement, the Notice of Purchase, Timeshare Loan Files and Custodial Receipt with respect to the Increase Timeshare Loans shall
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be delivered by the Custodian to the Administrative Agent, the Seller and the Borrower as soon as practicable after the Amendment No. 2 Effective Date, and in any event, not later than 12:00 p.m. (New York City time) on the date that is 90 days after the Amendment No. 2 Effective Date. It is acknowledged and agreed that any Increase Timeshare Loan for which such Custodial Receipt shall not have been delivered by such 90 th day following the Amendment No. 2 Effective Date shall not constitute an Eligible Timeshare Loan for purposes of calculating the Borrowing Base under the Receivables Loan Agreement. Following the Custodians receipt of the Timeshare Loan Files for the Increase Timeshare Loans on the Amendment No. 2 Effective Date (or such other date, as applicable) and until the delivery by the Custodian of the Custodial Receipt therefor, the Custodian shall provide a weekly summary to the Borrower, the Seller, each Managing Agent and the Administrative Agent of any Deficiencies discovered with respect to such Timeshare Loan Files.
SECTION 4. Conditions Precedent . This Amendment shall become effective on the Effective Date upon the satisfaction of each of the following conditions precedent:
4.1 The Administrative Agent and each Managing Agent shall have received counterparts of this Amendment executed by each of the parties hereto.
4.2 (x) The Administrative Agent and each Managing Agent shall have received executed counterparts of that certain Upfront Fee Letter, dated as of the date hereof, among the Administrative Agent, the Managing Agents, the Committed Lenders and the Borrower, from each of the parties thereto, (y) the Administrative Agent shall have received executed counterparts of that certain Structuring Fee Letter, dated as of the date hereof, between Deutsche Bank Securities, Inc., as Structuring Agent, and Hilton Resorts Corporation, from each of the parties thereto, and (z) each of the Borrower and Hilton Resorts Corporation shall have paid all fees required to be paid by it under each of the foregoing fee letters.
4.3 The Administrative Agent shall have received a Secretarys Certificate of the Borrower, certifying its Certificate of Formation, Limited Liability Company Agreement, Resolutions authorizing the Amendment, and Incumbency.
4.4 A Recapitalization Event (as defined in the Receivables Loan Agreement before giving effect to this Amendment) shall have occurred.
SECTION 5. Representations, Warranties and Confirmations . Each of the Borrower and the Seller hereby makes the representations and warranties set forth below, respectively.
5.1 The Borrower hereby represents and warrants that:
(a) It has the power and is duly authorized, including by all limited liability company action on its part, to execute and deliver this Amendment.
(b) This Amendment has been duly and validly executed and delivered by it.
(c) This Amendment and the Receivables Loan Agreement and Sale and Contribution Agreement as amended hereby, each constitute legal, valid and binding obligations of it, as applicable and are enforceable against the Borrower in accordance with their terms.
(d) Immediately prior, and after giving all effect, to this Amendment, the covenants, representations and warranties of the Borrower set forth in the Receivables Loan Agreement and the Sale and Contribution Agreement are true and correct in all material respects as of the date hereof (except to the extent such representations or warranties relate solely to an earlier date and then as of such date).
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(e) Immediately prior, and after giving all effect, to this Amendment, no event, condition or circumstance has occurred and is continuing which constitutes a Servicer Termination Event, Unmatured Servicer Termination Event, Default or Event of Default.
5.2 The Seller hereby represents and warrants that:
(f) It has the power and is duly authorized, including by all corporate action on its part, to execute and deliver this Amendment.
(g) This Amendment has been duly and validly executed and delivered by it.
(h) This Amendment and the Sale and Contribution Agreement as amended hereby, each constitute legal, valid and binding obligations of it, as applicable and are enforceable against the Seller in accordance with their terms.
(i) Immediately prior, and after giving all effect, to this Amendment, the covenants, representations and warranties of the Seller set forth in the Sale and Contribution Agreement are true and correct in all material respects as of the date hereof (except to the extent such representations or warranties relate solely to an earlier date and then as of such date).
(j) Immediately prior, and after giving all effect, to this Amendment, no event, condition or circumstance has occurred and is continuing which constitutes (i) a Servicer Termination Event or Unmatured Servicer Termination Event, (ii) a Default or Event of Default arising under clause (c), (e), (f), (g), (h), (i), (j), (l), (q) or (t) of Section 7.01 of the Receivables Loan Agreement with respect to the Seller or the Performance Guarantor, or (iii) a Default or Event of Default arising under Section 7.01(o) of the Receivables Loan Agreement.
SECTION 6. Delivery of Executed Amendment . The Borrower covenants and agrees that it will deliver an executed copy of this Amendment to the Paying Agent and the Backup Servicer promptly following the effectiveness hereof.
SECTION 7. Entire Agreement . The parties hereto hereby agree that this Amendment constitutes the entire agreement concerning the subject matter hereof and supersedes any and all written and/or oral prior agreements, negotiations, correspondence, understandings and communications.
SECTION 8. Effectiveness of Amendment and Waiver . Except as expressly amended and/or waived by the terms of this Amendment, all terms and conditions of the Receivables Loan Agreement, the Sale and Contribution Agreement and the Custody Agreement shall remain in full force and effect and are hereby ratified and confirmed. This Amendment shall not operate as a consent, waiver, amendment or other modification of any other term or condition set forth in the Receivables Loan Agreement, the Sale and Contribution Agreement or the Custody Agreement, or any right, power or remedy of the Administrative Agent or any Managing Agent or Lender thereunder, except as expressly modified hereby. Upon the effectiveness of this Amendment, each reference in the Receivables Loan Agreement, the Sale and Contribution Agreement or the Custody Agreement to this Agreement, this Receivables Loan Agreement, this Sale and Contribution Agreement, this Custody Agreement or words of like import shall mean and be references to the Receivables Loan Agreement, the Sale and Contribution Agreement or the Custody Agreement, as applicable, as amended and/or waived hereby, and each reference in any other Facility Document to the such agreements or to any terms defined in such agreements which are modified and/or waived hereby shall mean and be references to such agreements or to such terms as modified and/or waived hereby.
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SECTION 9. GOVERNING LAW . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK .
SECTION 10. Binding Effect . This Amendment shall be binding upon and shall be enforceable by parties hereto and their respective successors and permitted assigns.
SECTION 11. Headings . The Section headings herein are for convenience only and will not affect the construction hereof.
SECTION 12. Novation . This Amendment does not constitute a novation or termination of the Receivables Loan Agreement or any Facility Document and all obligations thereunder are in all respects continuing with only the terms thereof being modified as provided herein.
SECTION 13. Counterparts . This Amendment may be executed in any number of counterparts, each of which so executed will be deemed to be an original, but all such counterparts will together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or by electronic mail in a .pdf file shall be effective as delivery of a manually executed counterpart of this Amendment.
SECTION 14. Fees, Costs and Expenses . The Borrower agrees to pay on demand all reasonable fees and out-of-pocket expenses of Sidley Austin LLP, counsel for the Administrative Agent, incurred in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered in connection herewith.
Signature Pages Follow
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written.
HILTON GRAND VACATIONS TRUST I LLC, | ||
as Borrower | ||
By: |
/s/ Sean DellOrto |
|
Name: | Sean DellOrto | |
Title: | Senior Vice President | |
HILTON RESORTS CORPORATION, as Seller |
||
By: |
/s/ Sean DellOrto |
|
Name: | Sean DellOrto | |
Title: | Senior Vice President | |
GRAND VACATIONS SERVICES LLC, as Servicer |
||
By: |
/s/ Sean DellOrto |
|
Name: | Sean DellOrto | |
Title: | Senior Vice President |
Signature Page to Amendment No. 2 to Receivables Loan Agreement,
Amendment No. 1 to Sale and Contribution Agreement and
Consent to Custody Agreement
DEUTSCHE BANK SECURITIES, INC. as Administrative Agent | ||
By: |
/s/ Colin Bennett |
|
Name: | Colin Bennett | |
Title: | Director | |
By: |
/s/ Billy Strobel |
|
Name: | Billy Strobel | |
Title: | Vice President | |
DEUTSCHE BANK AG, NEW YORK BRANCH as a Managing Agent |
||
By: |
/s/ Colin Bennett |
|
Name: | Colin Bennett | |
Title: | Director | |
By: |
/s/ Billy Strobel |
|
Name: | Billy Strobel | |
Title: | Vice President |
Signature Page to Amendment No. 2 to Receivables Loan Agreement,
Amendment No. 1 to Sale and Contribution Agreement and
Consent to Custody Agreement
BANK OF AMERICA, N.A., | ||
as a Managing Agent | ||
By: |
/s/ Steven Maysonet |
|
Name: | Steven Maysonet | |
Title: | Vice President |
Signature Page to Amendment No. 2 to Receivables Loan Agreement,
Amendment No. 1 to Sale and Contribution Agreement and
Consent to Custody Agreement
WELLS FARGO BANK, NATIONAL ASSOCIATION, | ||
as Custodian | ||
By: |
/s/ Jennifer C. Westberg |
|
Name: | Jennifer C. Westberg | |
Title: | Vice President |
Signature Page to Amendment No. 2 to Receivables Loan Agreement,
Amendment No. 1 to Sale and Contribution Agreement and
Consent to Custody Agreement
Exhibit 10.11
EXECUTION VERSION
Joinder Agreement
HILTON WORLDWIDE FINANCE LLC
HILTON WORLDWIDE FINANCE CORP.
$1,500,000,000 of 5.625% Senior Notes due 2021
WHEREAS, Hilton Worldwide Holdings Inc., a Delaware corporation (the Company ), Hilton Worldwide Finance LLC, a Delaware limited liability company (the Issuer ), Hilton Worldwide Finance Corp., a Delaware corporation (the Co-Issuer , and together with the Issuer, the Issuers ), and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Representative ), for itself and the other Initial Purchasers described in the Registration Rights Agreement referenced below (the Initial Purchasers ), heretofore executed and delivered a Registration Rights Agreement, dated as of October 4, 2013 (the Registration Rights Agreement ), pursuant to which each of the Issuers and the Company agreed, under certain circumstances, to file a registration statement with the SEC registering an exchange offer for the Notes and/or the resale of the Issuers 5.625% Senior Notes due 2021 under the Securities Act; and
WHEREAS, in connection therewith, each Subsidiary Guarantor (as defined in the Registration Rights Agreement), which Subsidiary Guarantors are listed on Schedule I hereto, has agreed to join in the Registration Rights Agreement pursuant to this agreement (this Joinder Agreement ) on the Completion Date.
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Registration Rights Agreement.
NOW, THEREFORE, each Subsidiary Guarantor hereby agrees for the benefit of the Initial Purchasers, and, except as otherwise set forth in the Registration Rights Agreement, for the benefit of any subsequent holder or holders of Securities, as follows:
1. Joinder . Each of the undersigned hereby acknowledges that it has received a copy of the Registration Rights Agreement and acknowledges and agrees with the Initial Purchasers that by its execution and delivery hereof it shall: (i) join and become a party to the Registration Rights Agreement; (ii) be bound by all covenants, agreements and acknowledgements applicable to a Subsidiary Guarantor in the Registration Rights Agreement as if made by, and with respect to, such party as set forth in and in accordance with the terms of the Registration Rights Agreement; and (iii) perform all obligations and duties of a Subsidiary Guarantor in accordance with the Registration Rights Agreement.
2. Representations and Warranties . Each of the undersigned hereby represents and warrants to and agrees with the Initial Purchasers that it has all requisite corporate, limited liability company or partnership power and authority to execute, deliver and perform its obligations under this Joinder Agreement and it has duly and validly taken all necessary action for the consummation of the transactions contemplated hereby and by the Registration Rights Agreement.
3. Counterparts . This Joinder Agreement may be executed in two or more counterparts each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of a signature page to this Joinder Agreement by telecopier, facsimile or other electronic transmission (i.e., a pdf or tif) shall be effective as delivery of a manually executed counterpart thereof.
1
4. Amendments . No amendment, modification or waiver of any provision of this Joinder Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by all of the parties thereto.
5. Headings . The section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Joinder Agreement.
6. GOVERNING LAW . THIS JOINDER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[ Remainder of Page Intentionally Blank ]
2
IN WITNESS WHEREOF, the undersigned has executed this agreement this 25th day of October 2013.
SUBSIDIARY GUARANTORS:
90210 BILTMORE MANAGEMENT, LLC |
||
90210 DESERT RESORTS MANAGEMENT CO., LLC |
||
90210 GRAND WAILEA MANAGEMENT CO., LLC |
||
90210 LLC |
||
90210 MANAGEMENT COMPANY, LLC |
||
ANDIAMOS OHARE, LLC |
||
BALLYS GRAND PROPERTY SUB I, INC. |
||
BLUE BONNET SECURITY, LLC |
||
CHESTERFIELD VILLAGE HOTEL, LLC |
||
COMPRIS HOTEL LLC |
||
CONRAD FRANCHISE LLC |
||
CONRAD INTERNATIONAL (BELGIUM) LLC |
||
CONRAD INTERNATIONAL (EGYPT) RESORTS CORPORATION |
||
CONRAD INTERNATIONAL (INDONESIA) CORPORATION |
||
CONRAD INTERNATIONAL INVESTMENT (JAKARTA) CORPORATION |
||
CONRAD INTERNATIONAL MANAGE (CIS) LLC |
||
CONRAD MANAGEMENT LLC |
||
DESTINATION RESORTS LLC |
||
DOUBLETREE DTWC LLC |
||
DOUBLETREE FRANCHISE LLC |
||
DOUBLETREE HOTEL SYSTEMS LLC |
||
DOUBLETREE HOTELS LLC |
||
DOUBLETREE LLC |
||
DOUBLETREE MANAGEMENT LLC |
||
DT MANAGEMENT LLC |
||
DT REAL ESTATE, INC. |
||
DTM ATLANTA/LEGACY, INC. |
||
DTM CAMBRIDGE, INC. |
||
DTM COCONUT GROVE, INC. |
||
DTM LARGO, INC. |
||
DTM MARYLAND, INC. |
||
DTM SANTA CLARA LLC |
||
DTM WALNUT CREEK, INC. |
||
DTR FCH HOLDINGS, INC. |
||
DTR PAH HOLDING, INC., |
||
each as a Subsidiary Guarantor |
||
By: |
/s/ W. Steven Standefer |
|
Name: W. Steven Standefer | ||
Title: Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Joinder Agreement to the Registration Rights Agreement ]
DTR SAN ANTONIO, INC. |
||
DTR TM HOLDINGS, INC. |
||
DTWC SPOKANE CITY CENTER SPE, LLC |
||
EJP CORPORATION |
||
EMBASSY DEVELOPMENT CORPORATION |
||
EMBASSY EQUITY DEVELOPMENT LLC |
||
EMBASSY MEMPHIS CORPORATION |
||
EMBASSY SUITES (ISLA VERDE), INC. |
||
EMBASSY SUITES CLUB NO. 1, INC. |
||
EMBASSY SUITES CLUB NO. THREE, INC. |
||
EMBASSY SUITES CLUB NO. TWO, INC. |
||
EMBASSY SUITES FRANCHISE LLC |
||
EMBASSY SYRACUSE DEVELOPMENT LLC |
||
EPAM CORPORATION |
||
FLORIDA CONRAD INTERNATIONAL CORP. |
||
GRAND VACATIONS REALTY, LLC |
||
GRAND VACATIONS SERVICES LLC |
||
GRAND VACATIONS TITLE, LLC |
||
HAMPTON INNS FRANCHISE LLC |
||
HAMPTON INNS LLC |
||
HAMPTON INNS MANAGEMENT LLC |
||
HAPEVILLE INVESTORS, LLC |
||
HHC BC ORLANDO, LLC |
||
HHC ONE PARK BOULEVARD, LLC |
||
HIC FIRST CORPORATION |
||
HIC GAMING CALIFORNIA, INC |
||
HIC HOLDINGS CORPORATION |
||
HIC HOTELS U.S.A. CORPORATION |
||
HIC RACING CORPORATION |
||
HIC SAN PABLO LIMITED, INC |
||
HIC SAN PABLO, L.P. |
||
HIC SECOND CORPORATION |
||
HILTON BEVERAGE LLC |
||
HILTON CHICAGO BEVERAGE I LLC |
||
HILTON CHICAGO BEVERAGE II LLC |
||
HILTON CHICAGO BEVERAGE III LLC |
||
HILTON CHICAGO BEVERAGE IV LLC |
||
HILTON CORPORATE DIRECTOR LLC |
||
HILTON CP OPERATOR LLC |
||
HILTON EL CON MANAGEMENT LLC, each as a Subsidiary Guarantor |
||
By: |
/s/ W. Steven Standefer |
|
Name: W. Steven Standefer | ||
Title: Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Joinder Agreement to the Registration Rights Agreement ]
HILTON EL CON OPERATOR LLC |
||
HILTON ELECTRONIC DISTRIBUTION SYSTEMS, LLC |
||
HILTON ENERGY INVESTMENTS, LLC |
||
HILTON ESJ OPERATOR LLC |
||
HILTON FRANCHISE HOLDING LLC |
||
HILTON FRANCHISE LLC |
||
HILTON GARDEN INNS FRANCHISE LLC |
||
HILTON GARDEN INNS MANAGEMENT LLC |
||
HILTON GRAND VACATIONS CLUB, LLC |
||
HILTON GRAND VACATIONS COMPANY, LLC |
||
HILTON GRAND VACATIONS FINANCING, LLC |
||
HILTON GRAND VACATIONS MANAGEMENT, LLC |
||
HILTON HAWAII CORPORATION |
||
HILTON HHONORS WORLDWIDE, L.L.C. |
||
HILTON HOLDINGS, LLC |
||
HILTON HOSPITALITY, LLC |
||
HILTON ILLINOIS CORP. |
||
HILTON ILLINOIS HOLDINGS LLC |
||
HILTON INNS LLC |
||
HILTON INTERNATIONAL CO. |
||
HILTON KINGSLAND 1, LLC |
||
HILTON MANAGEMENT LLC |
||
HILTON NEW JERSEY SERVICE CORP. |
||
HILTON OPB, LLC |
||
HILTON ORLANDO PARTNERS II, LLC |
||
HILTON ORLANDO PARTNERS III, LLC |
||
HILTON RECREATION LLC |
||
HILTON RESORTS CORPORATION |
||
HILTON RESORTS MARKETING CORP. |
||
HILTON SAN DIEGO CORPORATION |
||
HILTON SPRING CORPORATION |
||
HILTON SUPPLY MANAGEMENT LLC |
||
HILTON SYSTEMS SOLUTIONS, LLC |
||
HILTON SYSTEMS, LLC |
||
HILTON WORLDWIDE, INC. |
||
HILTON-OCCC HOTEL, LLC, each as a Subsidiary Guarantor |
||
By: |
/s/ W. Steven Standefer |
|
Name: W. Steven Standefer | ||
Title: Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Joinder Agreement to the Registration Rights Agreement ]
HILTON-OCCC MEZZ LENDER, LLC |
||
HLT AUDUBON LLC |
||
HLT CA HILTON LLC |
||
HLT CONRAD DOMESTIC LLC |
||
HLT CONRAD GP LLC |
||
HLT DOMESTIC JV HOLDINGS LLC |
||
HLT DOMESTIC OWNER LLC |
||
HLT ESP FRANCHISE LLC |
||
HLT ESP INTERNATIONAL FRANCHISE LLC |
||
HLT ESP INTERNATIONAL FRANCHISOR CORPORATION |
||
HLT ESP INTERNATIONAL MANAGE LLC |
||
HLT ESP INTERNATIONAL MANAGEMENT CORPORATION |
||
HLT ESP MANAGE LLC |
||
HLT FRANCHISE II BORROWER LLC |
||
HLT HQ SPE LLC |
||
HLT HSM HOLDING LLC |
||
HLT HSS HOLDING LLC |
||
HLT JV ACQUISITION LLC |
||
HLT JV I BORROWER LLC |
||
HLT LIFESTYLE FRANCHISE LLC |
||
HLT LIFESTYLE INTERNATIONAL FRANCHISE LLC |
||
HLT LIFESTYLE INTERNATIONAL FRANCHISOR CORPORATION |
||
HLT LIFESTYLE INTERNATIONAL MANAGE LLC |
||
HLT LIFESTYLE INTERNATIONAL MANAGEMENT CORPORATION |
||
HLT LIFESTYLE MANAGE LLC |
||
HLT MEMPHIS DATA LLC |
||
HLT OHARE LLC |
||
HLT OPERATE DTWC LLC |
||
HLT OWNED II HOLDING LLC |
||
HLT OWNED II-A BORROWER LLC |
||
HLT PALMER LLC |
||
HLT TIMESHARE BORROWER I LLC |
||
HLT TIMESHARE BORROWER II LLC |
||
HOMEWOOD SUITES FRANCHISE LLC |
||
HOMEWOOD SUITES MANAGEMENT LLC, each as a Subsidiary Guarantor |
||
By: |
/s/ W. Steven Standefer |
|
Name: W. Steven Standefer | ||
Title: Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Joinder Agreement to the Registration Rights Agreement ]
HOTEL CLUBS OF CORPORATE WOODS, INC. |
||
HOTELS STATLER COMPANY, INC. |
||
HPP HOTELS USA, INC. |
||
HPP INTERNATIONAL CORPORATION |
||
HRC ISLANDER LLC |
||
HTGV, LLC |
||
INNVISION, LLC |
||
INTERNATIONAL RIVERCENTER LESSEE, L.L.C. |
||
LOCKWOOD PALMER HOUSE, LLC |
||
MERITEX, LLC |
||
PEACOCK ALLEY SERVICE COMPANY, LLC |
||
POTTERS BAR PALMER HOUSE, LLC |
||
PROMUS HOTEL SERVICES, INC. |
||
PROMUS HOTELS FLORIDA LLC |
||
PROMUS HOTELS LLC |
||
PROMUS HOTELS MINNEAPOLIS, INC. |
||
PROMUS HOTELS PARENT LLC |
||
PROMUS OPERATING LLC |
||
PROMUS/KINGSTON DEVELOPMENT CORPORATION |
||
SALC, INC. |
||
SAMANTHA HOTEL LLC |
||
SUITE LIFE, INC. |
||
TEX HOLDINGS, INC. |
||
WA COLLECTION INTERNATIONAL, LLC |
||
WALDORF ASTORIA FRANCHISE LLC |
||
WALDORF=ASTORIA MANAGEMENT LLC |
||
WASHINGTON HILTON, L.L.C., each as a Subsidiary Guarantor |
||
By: |
/s/ W. Steven Standefer |
|
Name: W. Steven Standefer | ||
Title: Senior Vice President |
[ Subsidiary Guarantors Signature Page to the Joinder Agreement to the Registration Rights Agreement ]
The foregoing Joinder Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written.
M ERRILL L YNCH , P IERCE , F ENNER & S MITH | ||||
I NCORPORATED |
||||
Acting on behalf of itself and as the Representative of the several Initial Purchasers |
||||
By: |
Merrill Lynch, Pierce, Fenner & Smith Incorporated |
|||
By: |
/s/ Sarang Gadkari |
|||
Name: | Sarang Gadkari | |||
Title: | Managing Director |
[ Representatives Signature Page to the Joinder Agreement to the Registration Rights Agreement ]
SCHEDULE I
Subsidiary Guarantors
Entity Name | Jurisdiction | |
90210 Biltmore Management, LLC | Delaware | |
90210 Desert Resorts Management Co., LLC | Delaware | |
90210 Grand Wailea Management Co., LLC | Delaware | |
90210 LLC | Delaware | |
90210 Management Company, LLC | Delaware | |
Andiamos OHare, LLC | Delaware | |
Ballys Grand Property Sub I, Inc. | Nevada | |
Blue Bonnet Security, LLC | Delaware | |
Chesterfield Village Hotel, L.L.C. | Missouri | |
Compris Hotel LLC | Delaware | |
Conrad Franchise LLC | Delaware | |
Conrad International (Belgium) LLC | Nevada | |
Conrad International (Egypt) Resorts Corporation | Nevada | |
Conrad International (Indonesia) Corporation | Nevada | |
Conrad International Investment (Jakarta) Corporation | Nevada | |
Conrad International Manage (CIS) LLC | Delaware | |
Conrad Management LLC | Delaware | |
Destination Resorts LLC | Arizona | |
Doubletree DTWC LLC | Delaware | |
Doubletree Franchise LLC | Delaware | |
Doubletree Hotel Systems LLC | Arizona | |
Doubletree Hotels LLC | Arizona | |
Doubletree LLC | Delaware | |
Doubletree Management LLC | Delaware | |
DT Management LLC | Arizona | |
DT Real Estate, Inc. | Arizona | |
DTM Atlanta/Legacy, Inc. | Arizona | |
DTM Cambridge, Inc. | Massachusetts | |
DTM Coconut Grove, Inc. | Arizona | |
DTM Largo, Inc. | Arizona | |
DTM Maryland, Inc. | Arizona | |
DTM Santa Clara LLC | Arizona | |
DTM Walnut Creek, Inc. | Arizona | |
DTR FCH Holdings, Inc. | Arizona | |
DTR PAH Holding, Inc. | Arizona | |
DTR San Antonio, Inc. | Arizona | |
DTR TM Holdings, Inc. | Arizona |
Entity Name | Jurisdiction | |
DTWC Spokane City Center SPE, LLC | Delaware | |
EJP Corporation | Delaware | |
Embassy Development Corporation | Delaware | |
Embassy Equity Development LLC | Delaware | |
Embassy Memphis Corporation | Tennessee | |
Embassy Suites (Isla Verde), Inc. | Delaware | |
Embassy Suites Club No. 1, Inc. | Kansas | |
Embassy Suites Club No. Three, Inc. | Louisiana | |
Embassy Suites Club No. Two, Inc. | Texas | |
Embassy Suites Franchise LLC | Delaware | |
Embassy Syracuse Development LLC | Delaware | |
EPAM Corporation | Delaware | |
Florida Conrad International Corp. | Florida | |
Grand Vacations Realty, LLC | Delaware | |
Grand Vacations Services LLC | Delaware | |
Grand Vacations Title, LLC | Delaware | |
Hampton Inns Franchise LLC | Delaware | |
Hampton Inns LLC | Delaware | |
Hampton Inns Management LLC | Delaware | |
Hapeville Investors, LLC | Delaware | |
HHC BC Orlando, LLC | Delaware | |
HHC One Park Boulevard, LLC | Delaware | |
HIC First Corporation | Delaware | |
HIC Gaming California, Inc | California | |
HIC Holdings Corporation | Delaware | |
HIC Hotels U.S.A. Corporation | Delaware | |
HIC Racing Corporation | Delaware | |
HIC San Pablo Limited, Inc | California | |
HIC San Pablo, L.P. | California | |
HIC Second Corporation | Delaware | |
Hilton Beverage LLC | Delaware | |
Hilton Chicago Beverage I LLC | Delaware | |
Hilton Chicago Beverage II LLC | Delaware | |
Hilton Chicago Beverage III LLC | Delaware | |
Hilton Chicago Beverage IV LLC | Delaware | |
Hilton Corporate Director LLC | Delaware | |
Hilton CP Operator LLC | Delaware | |
Hilton El Con Management LLC | Delaware | |
Hilton El Con Operator LLC | Delaware | |
Hilton Electronic Distribution Systems, LLC | Delaware | |
Hilton Energy Investments, LLC | Delaware |
Entity Name | Jurisdiction | |
Hilton ESJ Operator LLC | Delaware | |
Hilton Franchise Holding LLC | Delaware | |
Hilton Franchise LLC | Delaware | |
Hilton Garden Inns Franchise LLC | Delaware | |
Hilton Garden Inns Management LLC | Delaware | |
Hilton Grand Vacations Club, LLC | Delaware | |
Hilton Grand Vacations Company, LLC | Delaware | |
Hilton Grand Vacations Financing, LLC | Delaware | |
Hilton Grand Vacations Management, LLC | Nevada | |
Hilton Hawaii Corporation | Delaware | |
Hilton HHonors Worldwide, L.L.C. | Delaware | |
Hilton Holdings LLC | Nevada | |
Hilton Hospitality LLC | Nevada | |
Hilton Illinois Corp. | Nevada | |
Hilton Illinois Holdings LLC | Delaware | |
Hilton Inns LLC | Delaware | |
Hilton International Co. | Delaware | |
Hilton Kingsland 1, LLC | Delaware | |
Hilton Management LLC | Delaware | |
Hilton New Jersey Service Corp. | Delaware | |
Hilton OPB, LLC | Delaware | |
Hilton Orlando Partners II, LLC | Delaware | |
Hilton Orlando Partners III, LLC | Delaware | |
Hilton Recreation LLC | Delaware | |
Hilton Resorts Corporation | Delaware | |
Hilton Resorts Marketing Corp. | Delaware | |
Hilton San Diego Corporation | California | |
Hilton Spring Corporation | Delaware | |
Hilton Supply Management LLC | Delaware | |
Hilton Systems Solutions, LLC | Delaware | |
Hilton Systems, LLC | Delaware | |
Hilton Worldwide, Inc. | Delaware | |
Hilton-OCCC Hotel, LLC | Florida | |
Hilton-OCCC Mezz Lender, LLC | Florida | |
HLT Audubon LLC | Delaware | |
HLT CA Hilton LLC | Delaware | |
HLT Conrad Domestic LLC | Delaware | |
HLT Conrad GP LLC | Delaware | |
HLT Domestic JV Holdings LLC | Delaware | |
HLT Domestic Owner LLC | Delaware | |
HLT ESP Franchise LLC | Delaware |
Entity Name | Jurisdiction | |
HLT ESP International Franchise LLC | Delaware | |
HLT ESP International Franchisor Corporation | Delaware | |
HLT ESP International Manage LLC | Delaware | |
HLT ESP International Management Corporation | Delaware | |
HLT ESP Manage LLC | Delaware | |
HLT Franchise II Borrower LLC | Delaware | |
HLT HQ SPE LLC | Delaware | |
HLT HSM Holding LLC | Delaware | |
HLT HSS Holding LLC | Delaware | |
HLT JV Acquisition LLC | Delaware | |
HLT JV I Borrower LLC | Delaware | |
HLT Lifestyle Franchise LLC | Delaware | |
HLT Lifestyle International Franchise LLC | Delaware | |
HLT Lifestyle International Franchisor Corporation | Delaware | |
HLT Lifestyle International Manage LLC | Delaware | |
HLT Lifestyle International Management Corporation | Delaware | |
HLT Lifestyle Manage LLC | Delaware | |
HLT Memphis Data LLC | Delaware | |
HLT OHare LLC | Delaware | |
HLT Operate DTWC LLC | Delaware | |
HLT Owned II Holding LLC | Delaware | |
HLT Owned II-A Borrower LLC | Delaware | |
HLT Palmer LLC | Delaware | |
Homewood Suites Franchise LLC | Delaware | |
HLT Timeshare Borrower I LLC | Delaware | |
HLT Timeshare Borrower II LLC | Delaware | |
Homewood Suites Management LLC | Delaware | |
Hotel Clubs of Corporate Woods, Inc. | Kansas | |
Hotels Statler Company, Inc. | Delaware | |
HPP Hotels USA, Inc. | Delaware | |
HPP International Corporation | Nevada | |
HRC Islander LLC | Delaware | |
HTGV, LLC | Delaware | |
Innvision, LLC | Delaware | |
International Rivercenter Lessee, L.L.C. | Louisiana | |
Lockwood Palmer House, LLC | Delaware | |
Meritex, LLC | Delaware | |
Peacock Alley Service Company, LLC | New York | |
Potters Bar Palmer House, LLC | Delaware | |
Promus Hotel Services, Inc. | Delaware | |
Promus Hotels Florida LLC | Delaware |
Entity Name | Jurisdiction | |
Promus Hotels LLC | Delaware | |
Promus Hotels Minneapolis, Inc. | Delaware | |
Promus Hotels Parent LLC | Delaware | |
Promus Operating LLC | Delaware | |
Promus/Kingston Development Corporation | Delaware | |
SALC, Inc. | Texas | |
Samantha Hotel LLC | Delaware | |
Suite Life, Inc. | Delaware | |
Tex Holdings, Inc. | Delaware | |
WA Collection International, LLC | Delaware | |
Waldorf Astoria Franchise LLC | Delaware | |
Waldorf=Astoria Management LLC | Delaware | |
Washington Hilton, L.L.C. | New York |
Exhibit 10.15
HILTON WORLDWIDE HOLDINGS INC.
2013 OMNIBUS INCENTIVE PLAN
1. Purpose . The purpose of the Hilton Worldwide Holdings Inc. 2013 Omnibus Incentive Plan is to provide a means through which the Company and its Affiliates may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Companys stockholders.
2. Definitions . The following definitions shall be applicable throughout the Plan.
(a) Absolute Share Limit has the meaning given such term in Section 5(b).
(b) Affiliate means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest.
(c) Award means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award and Performance Compensation Award granted under the Plan.
(d) Board means the Board of Directors of the Company.
(e) Cause means, in the case of a particular Award, unless the applicable Award agreement states otherwise, a good faith determination of the Committee or its designee that (i) the Company or an Affiliate has cause to terminate a Participants employment or service, as defined in any employment or consulting agreement between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of Cause contained therein), any of the following has occurred with respect to a Participant: (A) such Participant has failed to reasonably perform his or her duties to the Service Recipient, or has failed to follow the lawful instructions of the Board or his or her direct superiors, in each case other than as a result of his or her incapacity due to physical or mental illness or injury, in a manner that could reasonably be expected to result in harm (whether financially, reputationally or otherwise) to the Company or an Affiliate, following notice by the Company of such failure, (B) such Participant has engaged or is about to engage in conduct harmful (whether financially, reputationally or otherwise) to the Company or an Affiliate, (C) such Participant has been convicted of, or pled guilty or no contest to, a felony or any crime involving as a material element fraud or dishonesty, (D) the willful misconduct or gross neglect of such Participant that could reasonably be expected to result in harm (whether financially, reputationally or otherwise) to the Company or an Affiliate, (E) the willful violation by such Participant of the Companys written policies that could reasonably be expected to result in harm (whether financially, reputationally or otherwise) to the Company or an Affiliate; (F) such Participants fraud or
misappropriation, embezzlement or misuse of funds or property belonging to the Company or an Affiliate (other than good faith expense account disputes); (G) such Participants act of personal dishonesty which involves personal profit in connection with such Participants employment or service with the Company or an Affiliate, or (H) the willful breach by such Participant of fiduciary duty owed to the Company or an Affiliate.
(f) Change in Control means:
(i) the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, the exchange of exchangeable stock or units, and the exercise of any similar right to acquire such Common Stock (the Outstanding Company Common Stock ) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities ); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate, (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate, or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant);
(ii) during any period of twenty-four months, individuals who, at the beginning of such period, constitute the Board (the Incumbent Directors ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
(iii) the sale, transfer or other disposition of all or substantially all of the business or assets of the Company and its Subsidiaries, taken as a whole; or
(iv) the consummation of a reorganization, recapitalization, merger, consolidation, or other similar transaction involving the Company (a Business Combination ), unless immediately following such Business Combination 50% or more of the total voting power of the entity resulting from such Business Combination (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership
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of sufficient voting securities eligible to elect a majority of the board of directors (or the analogous governing body) of such resulting entity), is held by the holders of the Outstanding Company Voting Securities immediately prior to such Business Combination.
Notwithstanding the foregoing, no transaction or series of events shall constitute a Change in Control if The Blackstone Group L.P. and/or its Affiliates directly or indirectly control the Company (including through a group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of which The Blackstone Group L.P. and/or its Affiliates is a member).
(g) Code means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.
(h) Committee means the Compensation Committee of the Board or subcommittee thereof (including without limitation any subcommittee used to comply with Section 162(m) of the Code in respect of Awards) or, if no such Compensation Committee or subcommittee thereof exists, the Board.
(i) Common Stock means the common stock, par value $0.01 per share, of the Company (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).
(j) Company means Hilton Worldwide Holdings Inc. and any successor thereto.
(k) Control (including, with correlative meaning, the terms controlled by and under common control with), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.
(l) Date of Grant means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.
(m) Detrimental Activity means a good faith determination by the Committee or its designee that a Participant has engaged in any of the following: (i) the breach of any covenants relating to disclosure of confidential or proprietary information, noncompetition, nonsolicitation, non-disparagement or other similar restrictions on conduct contained in any agreement between a Participant and the Company or its Affiliates (including any Award Agreement) or any written policies of the Company or its Affiliates; or (ii) any activity, including fraud or other conduct contributing to financial restatement or accounting irregularities, that the Committee determines in good faith is appropriate to include in any incentive compensation clawback policy adopted by the Committee and as in effect from time to time.
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(n) Designated Foreign Subsidiaries means all Affiliates organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time.
(o) Disability means, unless in the case of a particular Award the applicable Award agreement states otherwise, the Company or an Affiliate having cause to terminate a Participants employment or service on account of disability, as defined in any then-existing employment, consulting or other similar agreement between the Participant and the Company or an Affiliate or, in the absence of such an employment, consulting or other similar agreement, a condition entitling the Participant to receive benefits under a long-term disability plan of the Company or an Affiliate, or, in the absence of such a plan, the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or served when such disability commenced. Any determination of whether Disability exists shall be made by the Committee in its sole discretion.
(p) Effective Date means the date the Companys stockholders approve the Plan.
(q) Eligible Person means any (i) individual employed by the Company or an Affiliate; provided , however , that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of the Company or an Affiliate; (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act; or (iv) any prospective employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy from the Company or its Affiliates (and would satisfy the provisions of clauses (i) through (iii) above once he or she begins employment with or providing services to the Company or its Affiliates),. Solely for purposes of this Section 2(q), Affiliate shall be limited to (1) a Subsidiary, (2) any parent corporation of the Company within the meaning of Section 424(e) of the Code ( Parent ), (3) any corporation, trade or business 50% or more of the combined voting power of such entitys outstanding securities is directly or indirectly controlled by the Company or any Subsidiary or Parent, (4) any corporation, trade or business which directly or indirectly controls 50% or more of the combined voting power of the outstanding securities of the Company and (5) any other entity in which the Company or any Subsidiary or Parent has a material equity interest and which is designated as an Affiliate by the Committee.
(r) Employment or employment means, without any inference for federal and other tax purposes, service as a part- or full-time officers, employees, consultants and advisors or Board member of or to the Company or any of its Subsidiaries.
(s) Exchange Act means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.
(t) Exercise Price has the meaning given such term in Section 7(b) of the Plan.
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(u) Fair Market Value means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported; (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock; provided , however , as to any equity-based Awards issued on the date of the Companys initial public offering, Fair Market Value shall be equal to the per share price the Common Stock is offered to the public in connection with such initial public offering.
(v) Immediate Family Members shall have the meaning set forth in Section 14(b).
(w) Incentive Stock Option means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.
(x) Indemnifiable Person shall have the meaning set forth in Section 4(e) of the Plan.
(y) Negative Discretion shall mean the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.
(z) Nonqualified Stock Option means an Option which is not designated by the Committee as an Incentive Stock Option.
(aa) Non-Employee Director means a member of the Board who is not an employee of the Company or any Affiliate.
(bb) NYSE means the New York Stock Exchange.
(cc) Option means an Award granted under Section 7 of the Plan.
(dd) Option Period has the meaning given such term in Section 7(c) of the Plan.
(ee) Other Stock-Based Award means an Award granted under Section 10 of the Plan.
(ff) Participant means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan.
(gg) Performance Compensation Award shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.
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(hh) Performance Criteria shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goals for a Performance Period with respect to any Performance Compensation Award under the Plan.
(ii) Performance Formula shall mean, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.
(jj) Performance Goals shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.
(kk) Performance Period shall mean the one or more periods of time of not less than 12 months, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participants right to, and the payment of, a Performance Compensation Award.
(ll) Permitted Transferee shall have the meaning set forth in Section 14(b) of the Plan.
(mm) Person means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(nn) Plan means this Hilton Worldwide Holdings Inc. 2013 Omnibus Incentive Plan.
(oo) Restricted Period means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned.
(pp) Restricted Stock means Common Stock, subject to certain specified restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.
(qq) Restricted Stock Unit means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.
(rr) SAR Period has the meaning given such term in Section 8(c) of the Plan.
(ss) Securities Act means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.
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(tt) Service Recipient means, with respect to a Participant holding a given Award, either the Company or an Affiliate of the Company by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.
(uu) Special Qualifying Director means a person who is (i) a non-employee director within the meaning of Rule 16b-3 under the Exchange Act, (ii) an outside director within the meaning of Section 162(m) of the Code and (iii) an independent director under the rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation.
(vv) Stock Appreciation Right or SAR means an Award granted under Section 8 of the Plan.
(ww) Strike Price has the meaning given such term in Section 8(b) of the Plan.
(xx) Subsidiary means, with respect to any specified Person:
(i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of such entitys voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(ii) any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
(yy) Substitute Award has the meaning given such term in Section 5(e).
(zz) Sub Plans means, any sub-plan to this Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit shall apply in the aggregate to the Plan and any Sub Plan adopted hereunder.
(aaa) Termination means the termination of a Participants employment or service, as applicable, with the Service Recipient, for any reason (including death or Disability).
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3. Effective Date; Duration . The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided , however , that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.
4. Administration .
(a) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time he or she takes any action with respect to an Award under the Plan that is subject to Rule 16b-3 or Section 162(m), as applicable, be a Special Qualifying Director. However, the fact that a Committee member shall fail to qualify as a Special Qualifying Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
(b) Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.
(c) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of the Company or any Subsidiary the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Committee
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herein, and which may be so delegated as a matter of law, except for grants of Awards to persons (i) who are members of the Board, (ii) who are subject to Section 16 of the Exchange Act or (iii) who are, or who are reasonably expected to be, covered employees for purposes of Section 162(m) of the Code.
(d) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.
(e) No member of the Board, the Committee or any employee or agent of the Company (each such person, an Indemnifiable Person ) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made under the Plan or any Award agreement and against and from any and all amounts paid by such Indemnifiable Person with the Companys approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined as provided below that the Indemnifiable Person is not entitled to be indemnified); provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Companys choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Persons fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Companys Certificate of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Companys Certificate of Incorporation or Bylaws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.
(f) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules
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of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan.
5. Grant of Awards; Shares Subject to the Plan; Limitations .
(a) The Committee may, from time to time, grant Awards to one or more Eligible Persons.
(b) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 12 of the Plan, no more than shares of Common Stock (the Absolute Share Limit ) shall be available for Awards under the Plan (excluding those shares of Restricted Stock received by Participants in exchange for (or redemption of) partnership or limited liability interests contemporaneous with the adoption of the Plan); (ii) subject to Section 12 of the Plan, grants of Options or SARs under the Plan in respect of no more than 5,000,000 shares of Common Stock may be made to any individual Participant during any single fiscal year of the Company (for this purpose, if a SAR is granted in tandem with an Option (such that the SAR expires with respect to the number of shares of Common Stock for which the Option is exercised), only the shares underlying the Option shall count against this limitation); (iii) subject to Section 12 of the Plan, no more than the number of shares of Common Stock equal to the Absolute Share Limit may be delivered in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; (iv) subject to Section 12 of the Plan, no more than 5,000,000 shares of Common Stock (excluding those shares of Restricted Stock received by Participants in exchange for (or redemption of) partnership or limited liability interests contemporaneous with the adoption of the Plan) may be delivered in respect of Performance Compensation Awards denominated in shares of Common Stock granted pursuant to Section 11 of the Plan to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year), or in the event such share denominated Performance Compensation Award is paid in cash, other securities, other Awards or other property, no more than the Fair Market Value of such shares of Common Stock on the last day of the Performance Period to which such Award relates; (v) the maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, shall not exceed $1,000,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes and excluding, for this purpose, the value of any dividend equivalent payments paid pursuant to any Award granted in a previous fiscal year); and (vi) the maximum amount that can be paid to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year) pursuant to a Performance Compensation Award denominated in cash (described in Section 11(a) of the Plan) shall be $15,000,000.
(c) Other than with respect to Substitute Awards, to the extent that an Award (excluding any shares of Restricted Stock received by Participants in exchange for (or redemption of) partnership or limited liability interests contemporaneous with the adoption of the Plan) expires or is canceled, forfeited, terminated, settled in cash, or otherwise is settled without a delivery to the Participant of the full number of shares of Common Stock to which the
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Award related, the undelivered shares will again be available for grant. Shares of Common Stock withheld in payment of the exercise price or taxes relating to an Award and shares equal to the number of shares surrendered in payment of any Exercise Price or Strike Price, or taxes relating to an Award, shall be deemed to constitute shares not delivered to the Participant and shall be deemed to again be available for Awards under the Plan; provided , however , that such shares shall not become available for issuance hereunder if either (i) the applicable shares are withheld or surrendered following the termination of the Plan or (ii) at the time the applicable shares are withheld or surrendered, it would constitute a material revision of the Plan subject to stockholder approval under any then-applicable rules of the national securities exchange on which the Common Stock is listed.
(d) Shares of Common Stock delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing.
(e) Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines ( Substitute Awards ). Substitute Awards shall not be counted against the Absolute Share Limit; provided , that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as incentive stock options within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for delivery under the Plan.
6. Eligibility . Participation in the Plan shall be limited to Eligible Persons.
7. Options .
(a) General . Each Option granted under the Plan shall be evidenced by an Award agreement, in written or electronic form, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock
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Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.
(b) Exercise Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price ( Exercise Price ) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided , however , that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant.
(c) Vesting and Expiration .
(i) Options shall vest and become exercisable in such manner and on such date or dates or upon such events determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the Option Period ); provided , that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Companys insider trading policy (or Company-imposed blackout period), the Option Period shall be automatically extended until the 30 th day following the expiration of such prohibition; provided , however , that in no event shall the Option Period exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate.
(ii) Unless otherwise provided by the Committee, in the event of (A) a Participants Termination by the Company other than for Cause or (B) a Participants Termination by the Company due to death or Disability, in each case within 12 months following a Change in Control, each outstanding Option granted to such Participant shall become fully vested and immediately exercisable as of the date of such Termination; provided , that in the event the vesting or exercisability of any Option would otherwise be subject to the achievement of performance conditions, the portion of any such Option that shall become fully vested and immediately exercisable shall be based on (x) actual performance through the date of termination as determined by the Committee, or (y) if the Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee, in each case prorated based on the time elapsed from the date of grant to the date of Termination.
(iii) Unless otherwise provided by the Committee, in the event of (A) a Participants Termination by the Company for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire, (B) a Participants Termination by the Company due to death or Disability, after taking into account any accelerated
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vesting under the preceding clause (ii), each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the Option Period) and (C) a Participants Termination for any other reason, after taking into account any accelerated vesting under the preceding clause (ii), each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one hundred eighty (180) days thereafter (but in no event beyond the expiration of the Option Period).
(d) Method of Exercise and Form of Payment . No shares of Common Stock shall be delivered pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income and employment taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of such shares to the Company); provided , that such shares of Common Stock are not subject to any pledge or other security interest; (ii) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted cashless exercise pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (iii) by such other method as the Committee may permit in its sole discretion, including without limitation: (A) in other property having a fair market value on the date of exercise equal to the Exercise Price or (B) a net exercise procedure effected by withholding the minimum number of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay the Exercise Price and the minimum amount of statutorily required withholding taxes. Any fractional shares of Common Stock shall be settled in cash.
(e) Notification upon Disqualifying Disposition of an Incentive Stock Option . Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (A) two years after the Date of Grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.
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(f) Compliance With Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.
8. Stock Appreciation Rights .
(a) General . Each SAR granted under the Plan shall be evidenced by an Award agreement, in written or electronic form, which agreement need not be the same for each Participant. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.
(b) Strike Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price ( Strike Price ) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.
(c) Vesting and Expiration .
(i) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates or upon such events determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the SAR Period ); provided , that if the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Companys insider trading policy (or Company-imposed blackout period), the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition.
(ii) Unless otherwise provided by the Committee, in the event of (A) a Participants Termination other than for Cause or (B) a Participants Termination due to death or Disability, in each case within 12 months following a Change in Control, each outstanding SAR granted to such Participant shall become fully vested and immediately exercisable as of the date of such Termination; provided , that in the event the vesting or exercisability of any SAR would otherwise be subject to the achievement of performance conditions, the portion of any such SAR that shall become fully vested and immediately exercisable shall be based on (x) actual performance through the date of termination as determined by the Committee, or (y) if the Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee, in each case prorated based on the time elapsed from the date of grant to the date of Termination.
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(iii) Unless otherwise provided by the Committee, in the event of (A) a Participants Termination by the Company for Cause, all outstanding SARs granted to such Participant shall immediately terminate and expire, (B) a Participants Termination due to death or Disability, after taking into account any accelerated vesting under the preceding clause (ii), each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the SAR Period) and (C) a Participants Termination for any other reason, after taking into account any accelerated vesting under the preceding clause (ii), each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one hundred eighty (180) days thereafter (but in no event beyond the expiration of the SAR Period).
(d) Method of Exercise . SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.
(e) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the exercise date over the Strike Price, less an amount equal to the minimum amount of Federal, state, local and non-U.S. statutory income and employment taxes withholding liability. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.
(f) Substitution of SARs for Nonqualified Stock Options . The Committee shall have the authority in its sole discretion to substitute, without the consent of the affected Participant or any holder or beneficiary of SARs, SARs settled in shares of Common Stock (or settled in shares or cash in the sole discretion of the Committee) for outstanding Nonqualified Stock Options, provided that (i) the substitution shall not otherwise result in a modification of the terms of any such Nonqualified Stock Option, (ii) the number of shares of Common Stock underlying the substituted SARs shall be the same as the number of shares of Common Stock underlying such Nonqualified Stock Options and (iii) the Strike Price of the substituted SARs shall be equal to the Exercise Price of such Nonqualified Stock Options; provided, however , that if, in the opinion of the Companys independent public auditors, the foregoing provision creates adverse accounting consequences for the Company, such provision shall be considered null and void.
9. Restricted Stock and Restricted Stock Units .
(a) General . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award agreement, in written or electronic form, which agreement need not be
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the same for each Participant. Each Restricted Stock and Restricted Stock Unit grant shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement.
(b) Stock Certificates and Book Entry; Escrow or Similar Arrangement . Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Companys directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 14(a) or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock and to receive any dividends payable on such shares of Restricted Stock shall be held by the Company and delivered (without interest) to the Participant within 15 days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted stock to which such dividends relate), provided that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on the satisfaction of performance conditions (other than or in addition to the passage of time) any dividends payable on such restricted shares of common stock will be retained and delivered without interest to the holder of such shares when the restrictions on such shares lapse. To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.
(c) Vesting; Acceleration of Lapse of Restrictions .
(i) The Restricted Period with respect to Restricted Stock and Restricted Stock Units shall lapse in such manner and on such date or dates or upon such events determined by the Committee, and the Committee shall determine the treatment of the unvested portion of Restricted Stock and Restricted Stock Units upon Termination of the Participant granted the applicable Award.
(ii) Unless otherwise provided by the Committee, in the event of (A) a Participants Termination by the Company other than for Cause, or (B) a Participants Termination due to death or Disability, in each case within 12 months following a Change in Control, outstanding Restricted Stock and Restricted Stock Units granted to such Participant shall become fully vested and the restrictions thereon shall immediately lapse as of the date of such Termination; provided , that in the event the vesting or lapse of restrictions of any Restricted Stock or Restricted Stock Units would otherwise be
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subject to the achievement of performance conditions, the portion of any such Restricted Stock or Restricted Stock Units that shall become fully vested and free from such restrictions shall be based on (x) actual performance through the date of termination as determined by the Committee, or (y) if the Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee, in each case prorated based on the time elapsed from the date of grant to the date of Termination.
(d) Delivery of Restricted Stock and Settlement of Restricted Stock Units .
(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.
(ii) Unless otherwise provided by the Committee in an Award agreement, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit granted pursuant to the applicable Award Agreement; provided , however , that the Committee may, in its sole discretion, elect to (i) pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock in respect of such Restricted Stock Units or (ii) defer the delivery of Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted
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Stock Units are settled following the release of restrictions on such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments.
(e) Legends on Restricted Stock . Each certificate representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such Common Stock:
TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE HILTON WORLDWIDE HOLDINGS INC. 2013 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, BETWEEN HILTON WORLDWIDE HOLDINGS INC. AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF HILTON WORLDWIDE HOLDINGS INC.
10. Other Stock-Based Awards .
(a) The Committee may issue unrestricted Common Stock, rights to receive grants of Awards at a future date, or other Awards denominated in Common Stock (including, without limitation, performance shares or performance units), under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award agreement, in written or electronic form, which agreement need not be the same for each Participant. Each Other Stock-Based Award so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement.
(b) Unless otherwise provided by the Committee, in the event of (A) a Participants Termination by the Company other than for Cause, or (B) a Participants Termination due to death or Disability, in each case within 12 months following a Change in Control, outstanding Other Stock-Based Awards granted to such Participant shall become fully vested and the restrictions thereon shall immediately lapse as of the date of such Termination; provided , that in the event the vesting or lapse of restrictions of any Other Stock-Based Awards would otherwise be subject to the achievement of performance conditions, the portion of any such Other Stock-Based Awards that shall become fully vested and free from such restrictions shall be based on (x) actual performance through the date of termination as determined by the Committee, or (y) if the Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee, in each case prorated based on the time elapsed from the date of grant to the date of Termination.
11. Performance Compensation Awards .
(a) General . The Committee shall have the authority, at or before the time of grant of any Award, to designate such Award as a Performance Compensation Award intended to qualify as performance-based compensation under Section 162(m) of the Code. The
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Committee shall also have the authority to make an award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award intended to qualify as performance-based compensation under Section 162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award is not (or is no longer) a covered employee (within the meaning of Section 162(m) of the Code), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 13 of the Plan).
(b) Discretion of Committee with Respect to Performance Compensation Awards . With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply and the Performance Formula. Within the first 90 days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.
(c) Performance Criteria . The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more Affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and shall be limited to the following, which may be determined in accordance with Generally Accepted Accounting Principles (GAAP) or on a non-GAAP basis: (i) net earnings or net income (before or after taxes); (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital), which may but are not required to be measured on a per share basis; (viii) earnings before or after taxes, interest, depreciation and/or amortization (including EBIT and EBITDA); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total stockholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) objective measures of customer satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other value creation metrics; (xvii) inventory control; (xviii) enterprise value; (xix) sales; (xx) stockholder return; (xxi) competitive market metrics; (xxii) employee retention; (xxiii) timely completion of new product rollouts; (xxiv) timely opening of new facilities; (xxv) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, dispositions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (xxvi) system-wide revenues; (xxvii) franchise and/or royalty income; (xxviii) comparisons of continuing operations to other operations; (xxix) market share; (xxx) cost of capital, debt leverage year-end cash position or book value; (xxxi)
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strategic objectives, development of new product lines and related revenue, sales and margin targets; (xxxii) franchisee growth and retention, co-branding or international operations; (xxxiii) management fee or licensing fee growth; (xxxiv) capital expenditures; (xxxv) guest satisfaction; (xxxvi) RevPAR (revenue per available room; or (xxxvii) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of the Company and/or one or more Affiliates as a whole or any divisions or operational and/or business units, product lines, brands, business segments, administrative departments of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph, but solely to the extent such acceleration will not cause the Award to cease to qualify as performance-based compensation that is exempt from Section 162(m). To the extent required under Section 162(m) of the Code, the Committee shall, within the first 90 days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.
(d) Modification of Performance Goal(s) . In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the Committee at the time a Performance Compensation Award is granted, the Committee shall, during the first 90 days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for such Performance Period to fail to qualify as performance-based compensation under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigations, claims, judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in managements discussion and analysis of financial condition and results of operations appearing in the Companys annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) discontinued operations and nonrecurring charges; (x) a change in the Companys fiscal year; (xi) accruals for payments to be made in respect of the Plan or other specified compensation arrangements, and (xi) any other event described in Section 12.
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(e) Payment of Performance Compensation Awards .
(i) Condition to Receipt of Payment . Unless otherwise provided in the applicable Award agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
(ii) Limitation . Unless otherwise provided in the applicable Award agreement, a Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participants Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals; provided , however , that in the event of (x) a Participants Termination by the Company other than for Cause, or (y) a Participants Termination due to death or Disability, in each case within 12 months following a Change in Control, the Participant shall receive payment in respect of a Performance Compensation Award based on (1) actual performance through the date of Termination as determined by the Committee, or (2) if the Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee (but not to the extent that application of this clause (2) would cause Section 162(m) of the Code to result in the loss of the deduction of the compensation payable in respect of such Performance Compensation Award for any Participant reasonably expected to be a covered employee within the meaning of Section 162(m) of the Code), in each case prorated based on the time elapsed from the date of grant to the date of Termination.
(iii) Certification . Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participants Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.
(iv) Use of Negative Discretion . In determining the actual amount of an individual Participants Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion. Unless otherwise provided in the applicable Award agreement, the Committee shall not have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan.
(f) Timing of Award Payments . Unless otherwise provided in the applicable Award agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications
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required by this Section 11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date. Any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(ii)).
12. Changes in Capital Structure and Similar Events . In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the shares of Common Stock, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate, then the Committee shall make any such adjustments in such manner as it may deem equitable, including without limitation, any or all of the following:
(i) adjusting any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder, (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of the Plan) and (C) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals);
(ii) providing for a substitution or assumption of Awards (or awards of an acquiring company), accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and
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(iii) cancelling any one or more outstanding Awards and causing to be paid to the holders holding vested Awards (including any Awards that would vest as a result of the occurrence of such event but for such cancellation) the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor);
provided , however , that in the case of any equity restructuring (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a modification within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Any such adjustment shall be conclusive and binding for all purposes. Payments to holders pursuant to clause (iii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price or Strike Price). In addition, prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (A) represent and warrant as to the unencumbered title to his Awards, (B) bear such Participants pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Stock, (C) deliver customary transfer documentation as reasonably determined by the Committee and (D) satisfy any applicable tax withholding obligations.
13. Amendments and Termination .
(a) Amendment and Termination of the Plan . The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided , that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards, (ii) it would materially increase the number of securities which may be
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issued under the Plan (except for increases pursuant to Section 5 or 12), or (iii) it would materially modify the requirements for participation in the Plan; provided , further , that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) without stockholder approval.
(b) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of any applicable Award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award agreement, prospectively or retroactively (including after a Participants Termination from the Company); provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant; provided, further , that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR, (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the value of the cancelled Option or SAR, and (iii) the Committee may not take any other action which is considered a repricing for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.
14. General .
(a) Award Agreements . Each Award under the Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto, including without limitation, the effect on such Award of the death, Disability or Termination, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award agreement to be signed by the Participant or a duly authorized representative of the Company.
(b) Nontransferability . (i) Each Award shall be exercisable only by a Participant during the Participants lifetime, or, if permissible under applicable law, by the Participants legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
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(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award agreement to preserve the purposes of the Plan, to: (A) any person who is a family member of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the Immediate Family Members ); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as charitable contributions for federal income tax purposes;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a Permitted Transferee ); provided that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.
(iii) The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of the Termination of the Participant from the Company or an Affiliate under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award agreement.
(c) Dividends and Dividend Equivalents . The Committee in its sole discretion may provide a Participant as part of an Award with dividends or dividend equivalents, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided , that no dividends or dividend equivalents shall be payable in respect of outstanding (i) Options or SARs or (ii) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than or in addition to the passage of time) (although dividends and dividend equivalents may be accumulated in respect of unearned Awards and paid within 15 days after such Awards are earned and become payable or distributable).
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(d) Tax Withholding .
(i) A Participant shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, Common Stock, other securities or other property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes.
(ii) Without limiting the generality of clause (i) above, the Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability, provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the minimum required statutory withholding liability.
(e) No Claim to Awards; No Rights to Continued Employment; Waiver . No employee of the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committees determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant.
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(f) International Participants . With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expect to be) covered employees within the meaning of Section 162(m) of the Code, the Committee may in its sole discretion amend the terms of the Plan or Sub-Plans or outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or its Affiliates.
(g) Designation and Change of Beneficiary . Each Participant may file with the Committee a written designation of one or more persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however , that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participants death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate.
(h) Termination . Except as otherwise provided in an Award agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination of employment, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be an Affiliate of the Company (by reason of sale, divestiture, spin-off, or other similar transaction), unless a Participants employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction.
(i) No Rights as a Stockholder . Except as otherwise specifically provided in the Plan or any Award agreement, no person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to that person.
(j) Government and Other Regulations .
(i) The obligation of the Company to settle Awards in Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling,
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any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate delivered under the Plan in book-entry form to be held subject to the Companys instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.
(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Companys acquisition of shares of Common Stock from the public markets, the Companys issuance of Common Stock to the Participant, the Participants acquisition of Common Stock from the Company and/or the Participants sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof.
(k) No Section 83(b) Elections Without Consent of Company . No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in
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writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.
(l) Payments to Persons Other Than Participants . If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.
(m) Nonexclusivity of the Plan . Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.
(n) No Trust or Fund Created . Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.
(o) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself.
(p) Relationship to Other Benefits . No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.
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(q) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.
(r) Severability . If any provision of the Plan or any Award or Award agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
(s) Obligations Binding on Successors . The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
(t) 409A of the Code .
(i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan or any other plan maintained by the Company (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered deferred compensation subject to Section 409A of the Code, references in the Plan to termination of employment (and substantially similar phrases) shall mean separation from service within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments.
(ii) Notwithstanding anything in the Plan to the contrary, if a Participant is a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are deferred compensation subject to Section 409A of the Code and which would otherwise be payable upon the Participants separation from service (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six months after the date of such Participants separation from service or, if earlier, the Participants date of death. Following any applicable six month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.
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(iii) Unless otherwise provided by the Committee, in the event that the timing of payments in respect of any Award (that would otherwise be considered deferred compensation subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of Disability pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder.
(u) Clawback/Forfeiture . Notwithstanding anything to the contrary contained herein, an Award agreement may provide that the Committee may in its sole discretion cancel such Award if the Participant, without the consent of the Company, while employed by or providing services to the Company or any Affiliate or after Termination, has engaged in or engages in any Detrimental Activity. The Committee may also provide in an Award agreement that if the Participant otherwise has engaged in or engages in any Detrimental Activity, the Participant will forfeit any gain realized on the vesting or exercise of such Award, and must repay the gain to the Company. The Committee may also provide in an Award agreement that if the Participant receives any amount in excess of what the Participant should have received under the terms of the Award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law.
(v) Expenses; Gender; Titles and Headings . The expenses of administering the Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.
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Exhibit 10.20
Execution Version
EMPLOYMENT AGREEMENT
( Christopher Nassetta )
EMPLOYMENT AGREEMENT (the Agreement) dated January 4, 2011 by and between HILTON WORLDWIDE, INC. (f/k/a Hilton Hotels Corporation (the Company) and Christopher Nassetta (Executive).
The Company and Executive are party to an Employment Agreement dated as of October , 2007 (the Original Agreement);
The Company desires to continue to employ Executive and to enter into an agreement embodying the terms of such employment to replace in its entirety the Original Agreement;
Executive desires to continue such employment and enter into such an agreement to replace in its entirety the Original Agreement;
In consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:
1. Term of Employment . Subject to the provisions of Section 5 of this Agreement, Executive shall be employed by the Company for a period commencing on the date hereof (the Effective Date) and ending on the fifth anniversary of the Effective Date (the Employment Term) on the terms and subject to the conditions set forth in this Agreement; provided , however , that commencing with the fifth anniversary of the Effective Date and on each such successive anniversary of the Effective Date thereafter (each an Extension Date), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the next Extension Date that the Employment Term shall not be so extended.
2. Position.
(a) During the Employment Term, Executive shall serve as the Companys President and Chief Executive Officer, reporting only to the Board of Directors of the Company (the Board). In such position, Executive shall be the most senior executive of the Company and all other senior executives of the Company shall report to Executive. During the Employment Term, Executive shall have and exercise direct charge of, and general supervision over, the business and affairs of the Company and shall have such other duties, functions, responsibilities and authority consistent with, and customary for, a senior executive holding the title of President and CEO. Executive shall continue to serve as a member of the Board without additional compensation. Notwithstanding the foregoing, Executive will not be appointed to any formal officer positions or as a member of the Board until he has been, to the extent legally required, qualified under applicable law to hold such positions (and the Company will take all reasonable actions necessary to qualify him therefor).
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(b) During the Employment Term, Executive will devote his full working time and reasonable best efforts to the performance of Executives duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Board; provided that nothing herein shall preclude Executive from (i) serving for the organizations, and in the capacities, set forth on Schedule 2(b) attached hereto, (ii) accepting appointment to or continuing to serve on any board of directors or trustees of any business corporation, (iii) serving as an officer or director or otherwise participating in non-profit educational, welfare, social, religious and civil organizations, including, without limitation, all such positions and participation in effect as of the Effective Date, and (iv) managing personal and family investments; provided, however, that any such activities as described in (i), (ii), (iii) or (iv) of the preceding provisions of this paragraph do not significantly interfere with the performance and fulfillment of the Executives duties and responsibilities as an executive or director of the Company in accordance with this Agreement or conflict with Section 6.
3. Compensation.
(a) Base Salary . During the Employment Term, the Company shall pay Executive a base salary (Base Salary) at the annual rate of $850,000, payable in regular installments in accordance with the Companys usual payment practices. Executive shall be entitled to such increases in Executives Base Salary, if any, as may be determined from time to time in the sole discretion of the Board, but in no event shall the Company be entitled to reduce Executives Base Salary.
(b) Annual Bonus . During the Employment Term, Executive shall be eligible to earn an annual bonus award (an Annual Bonus) based on the achievement of performance objectives and targets (including the level of achievement required for Executive to earn the threshold, target and high performance objectives) adopted by the Board within the first three months of each fiscal year during the Employment Term (it being understood that such performance objectives and targets generally will correspond to those established for other members of senior management). During each fiscal year, the minimum bonus payable to Executive if the minimum performance objectives and targets are achieved will be 50% of Executives Base Salary, the target bonus will be 100% of Executives Base Salary if target performance objectives and targets are achieved and the maximum bonus payable to Executive will be 200% of Base Salary if high performance objectives and targets are achieved. The Annual Bonus, if any, shall be paid to Executive within two and one-half (2.5) months after the end of the applicable fiscal year; provided that if the applicable performance objectives and targets have not been verified by audit by such time, then the Annual Bonus shall be payable within 10 days of such verification but no later than December 31 of such year. No Annual Bonus shall be payable in respect of any fiscal year in which Executives employment is terminated (except to the extent expressly provided in Sections 5(b) or 5(c)).
(c) Equity Investments and Incentives . Executive and the Company (and/or one or more of its affiliates) have entered into agreements related to Executives equity investment and incentives, which agreements shall continue in full force and effect pursuant to the terms thereof.
4. Benefits.
(a) General . During the Employment Term, Executive shall be entitled to participate in the Companys employee benefit plans (other than annual bonus and incentive plans and severance plans, the benefits for which will be determined instead in accordance with this Agreement) as in effect from time to time (collectively Employee Benefits), on the same basis as those benefits are generally made available to other senior executives of the Company.
(b) Other Benefits . During the Employment Term:
(i) the Company shall, to the extent permitted by the applicable insurance policy, pay the premiums required to continue life insurance coverage for Executive under Executives existing life insurance policy; provided that in the event the applicable insurance policy does not permit the Company to remit payment of the premiums directly to the insurance carrier, the Company shall reimburse Executive for the cost of such premiums, such reimbursement to be made as soon as reasonably practicable on an annual basis but in no event later than the last day of Executives taxable year following the Executives taxable year in which such premium was incurred by Executive;
(ii) Executive and Executives family shall have access to the Companys aircraft for personal and business travel; provided that personal use shall be limited to such times as the aircraft are not being used for business purposes;
(iii) Executive and Executives family shall be able to stay at any Company branded hotels free of charge; and
(iv) the Company shall reimburse Executive on a grossed up basis for all taxes incurred in connection with the benefits and payments provided pursuant to this Section 4(b). Any such gross-up shall be paid to Executive as soon as possible after the related taxes are incurred but in no event later than the end of Executives taxable year next following Executives taxable year in which Executive remitted the related taxes.
5. Termination . The Employment Term and Executives employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days advance written notice of any resignation of Executives employment (other than as a result of a Constructive Termination). Notwithstanding any other provision of this Agreement, the provisions of this Section 5 shall exclusively govern Executives rights upon termination of employment with the Company and its affiliates (other than with respect to Executives rights with respect to the equity investments and incentives referenced in Section 3(c) which, notwithstanding anything in this Section 5 to the contrary, shall be governed by the terms and conditions of such equity investments and incentives).
(a) By the Company For Cause or By Executive Other Than as a Result of a Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company for Cause and shall terminate automatically upon the effective date of Executives resignation other than as result of a Constructive Termination (as defined in Section 5(c)(ii)).
(ii) For purposes of this Agreement, Cause shall mean (A) Executives theft or embezzlement of Company property, other than with respect to insignificant or immaterial amounts, (B) any act or acts on Executives part that constitute a felony under the laws of the United States or any state thereof (provided, that if Executive is terminated for any action described in this clause (B), then (x) if charges are brought against the Executive by a governmental authority relating to such act(s) and a court of competent jurisdiction (1) convicts Executive of a felony, then such termination shall be deemed a termination for Cause and the Company shall have the right to seek reimbursement from Executive for any payments made to Executive in connection with such termination of employment pursuant to Section 5 of this Agreement that Executive would otherwise not have been entitled pursuant to the terms of this Agreement if terminated for Cause or (2) fails to convict Executive of a felony, then such termination shall be deemed a termination without Cause and the Company shall pay to Executive any applicable payments or benefits provided for upon a termination of Executives employment without Cause under Section 5 of this Agreement (to the extent not previously provided) or (y) if no charges are brought against Executive by a governmental authority relating to such act(s), then the Company will have the burden to prove with clear and convincing evidence that such act(s) constituted a felony and, if publicly disclosed, would be injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries (and if the Company fails to meet such standard, the Company shall, in addition to providing any applicable payments and benefits provided for upon a termination of Executives employment without Cause under Section 5 of this Agreement (to the extent not previously provided), reimburse Executive for his reasonable legal fees in connection with such proceeding)); (C) Executives willful malfeasance or willful misconduct in connection with Executives duties hereunder which is (1) injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries, (D) Executives breach of Section 6 of this Agreement or the representation in Section 10(j) or (E) Executives willful breach of Section 7 of this Agreement in a manner that adversely impacts the Company.
(iii) If Executives employment is terminated by the Company for Cause, Executive shall be entitled to receive:
(A) no later than ten (10) days following the date of termination, the Base Salary through the date of termination;
(B) any Annual Bonus earned, but unpaid, as of the date of termination for the immediately preceding fiscal year, paid in accordance with Section 3(b) (except to the extent payment is otherwise deferred pursuant to any applicable deferred compensation arrangement with the Company, in which case such payment shall be made in accordance with the terms and conditions of such deferred compensation arrangement);
(C) reimbursement, within 60 days following receipt by the Company of Executives claim for such reimbursement (including appropriate supporting documentation), for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to Executives termination; provided that such claims for such reimbursement are submitted to the Company within 90 days following the date of Executives termination of employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms and conditions of such employee benefit plans (the amounts described in clauses (A) through (D) hereof being referred to as the Accrued Rights).
Following such termination of Executives employment by the Company for Cause, except as set forth in this Section 5(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(iv) If Executive resigns other than as a result of a Constructive Termination, Executive shall be entitled to receive Accrued Rights. Following such resignation by Executive other than as a result of a Constructive Termination, except as set forth in this Section 5(a)(iv), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b) Disability or Death .
(i) The Employment Term and Executives employment hereunder shall terminate upon Executives death and may be terminated by the Company if Executive becomes physically or mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an aggregate of twelve (12) months in any twenty-four (24) consecutive month period to perform Executives duties (such incapacity is hereinafter referred to as Disability). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third physician who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement.
(ii) Upon termination of Executives employment hereunder for either Disability or death, Executive or Executives estate (as the case may be) shall be entitled to receive:
(A) the Accrued Rights; and
(B) no later than ten (10) days following the date of termination, a pro rata Annual Bonus equal to the product of (1) 100% of Executives Base Salary in effect immediately prior to the termination of employment and (2) a fraction, the numerator of which is the number of days during the fiscal year up to and including the date of termination of Executives employment and the denominator of which is 365 (the Pro-Rated Bonus).
Following Executives termination of employment due to death or Disability, except as set forth in this Section 5(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c) By the Company Without Cause or Resignation by Executive as a Result of Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company without Cause or by Executive as a result of a Constructive Termination. For purposes of the Agreement, in the event the Company elects not to extend the Employment Term in accordance with Section 1 hereof, Executives employment shall terminate on the last day of the Employment Term and such election shall be deemed a termination by the Company without Cause.
(ii) For purposes of this Agreement, a Constructive Termination shall be deemed to have occurred upon (A) a diminution in Executives Base Salary or Annual Bonus opportunity; (B) a material diminution in Executives authority, duties or responsibilities (including, without limitation, Companys removal of Executive from the Board for any reason other than Cause; it being understood that excluding Executive from Board meetings for regular executive sessions or to discuss matters involving potential conflict involving Executive would not constitute removal); (C) any material adverse change to Executives principal place of employment (which the parties acknowledge is, as of the Effective Date, the greater Washington, D.C. metro area) without Executives prior written consent; (D) any material breach by the Company of this Agreement, and (E) failure of the Company to pay or cause to be paid Executives Base Salary or Annual Bonus; provided that none of the events described in this Section 5(c)(ii) shall constitute Constructive Termination unless the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Constructive Termination; provided further that Constructive Termination shall cease to exist for an event on the 90 th day following the later of its occurrence or Executives knowledge thereof, unless Executive has given the Board written notice thereof prior to such date. Notwithstanding anything herein to the contrary, for purposes of last proviso of the immediately foregoing sentence, a series of related events shall be deemed to have occurred on the date upon which the last event in such series of related events has occurred.
(iii) If Executives employment is terminated by the Company without Cause (other than by reason of death or Disability) or Executive resigns as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) the Pro-Rata Bonus.
Following Executives termination of employment by the Company without Cause (other than by reason of Executives death or Disability) or by Executives resignation as a result of a Constructive Termination, except as set forth in this Section 5(c)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d) Release . Amounts payable to Executive under subparagraph (B) of Sections 5(b)(ii) and 5(c)(iii) above, are subject to Executive and the Company executing a release of claims, substantially in the form attached hereto as Exhibit I, within forty-five (45) days of the date of termination. If the Company fails to countersign the form attached hereto as Exhibit I, then the condition described in the foregoing sentence shall be deemed waived by the Company.
(e) Notice of Termination . Any purported termination of employment by the Company or by Executive (other than due to Executives death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
(f) Board/Committee Resignation . Upon termination of Executives employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Companys affiliates.
(g) Forfeiture . Any determination under this Section 5 of whether the Executive is in compliance with Section 6 hereof and material compliance with Section 7 hereof shall be determined based solely on the contractual provisions provided therein and the facts and circumstances of Executives actions without regard to whether the Company could obtain an injunction or other relief under the law of any particular jurisdiction.
6. Non-Competition.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and, for a period of one year following the date Executive ceases to be employed by the Company (the Restricted Period), Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (Person), directly or indirectly solicit or assist in soliciting in competition with the Restricted Group in the Business, the business of any then current or prospective client or customer with whom Executive (or his direct reports) had personal contact or dealings on behalf of the Company during the one-year period preceding Executives termination of employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in the Business for a Competitor in any geographical area that is within 25 miles of any geographical area where the Restricted Group engages in the Business;
(B) enter the employ of, or render any services to, a Competitor, except where such employment or services do not relate in any manner to the Business;
(C) acquire a financial interest in, or otherwise become actively involved with, a Competitor, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(D) intentionally and adversely interfere with, or attempt to adversely interfere with, business relationships between the members of the Restricted Group and any of their clients, customers, suppliers, partners, members or investors;
provided that this Section 6(a)(ii) shall cease to apply during any time that The Blackstone Group L.P. and its affiliated investment funds beneficially own less than twenty-five percent of the voting power of the Company.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Business (including, without limitation, a Competitor) which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 2% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit or encourage any executive-level employee of the Restricted Group to leave the employment of the Restricted Group; or
(B) hire any such executive-level employee who was employed by the Restricted Group as of the date of Executives termination of employment with the Company or who left the employment of the Restricted Group coincident with, or within one year prior to or after, the termination of Executives employment with the Company.
(v) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly and intentionally encourage any material consultant of the Restricted Group to cease working with the Restricted Group.
(vi) For purposes of this Agreement:
(A) Restricted Group shall mean, collectively, the Company and its subsidiaries and, to the extent engaged in the Business, their respective affiliates (including The Blackstone Group L.P. and its affiliates).
(B) Business shall mean the business of acquiring controlling investments in, owning, operating, managing or franchising hotel and lodging properties and timeshares.
(C) Competitor shall mean (x) during the Employment Term and, for a period of six months following the date Executive ceases to be employed by the Company, any person engaged in the Business and (y) thereafter, any major global hotel brand engaged in the Business (but, for the avoidance of doubt, excluding any private equity firm engaged in the Business).
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) The period of time during which the provisions of this Section 6 shall be in effect shall be extended by the length of time during which Executive is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
7. Confidentiality; Intellectual Property.
(a) Confidentiality .
(i) Executive will not at any time (whether during or after Executives employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or otherwise in performance of Executives duties hereunder and pursuant to customary industry practice), any non-public, proprietary or confidential information including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (Confidential Information) without the prior written authorization of the Board.
(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executives breach of this covenant; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation of which Executive has knowledge; or (c) required by law to be disclosed; provided that with respect to subsection (c) Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Executive will not disclose to anyone, other than Executives family (it being understood that, in this Agreement, the term family refers to Executive, Executives spouse, minor children, parents and spouses parents) and advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 6 and 7 of this Agreement. This Section 7(a)(iii) shall terminate if the Company publicly discloses a copy of this Agreement (or, if the Company publicly discloses summaries or excerpts of this Agreement, to the extent so disclosed).
(iv) Upon termination of Executives employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; and (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executives possession or control (including any of the foregoing stored or located in Executives office, home, laptop or other computer, whether or not Company property) that contain Confidential Information, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.
(b) Intellectual Property .
(i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (Works), either alone or with third parties, prior to Executives employment by the Company, that are relevant to or implicated by such employment (Prior Works), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Companys current and future business.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executives employment by the Company and within the scope of such employment and with the use of any the Company resources (Company Works), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent
permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.
(iii) Executive shall take all reasonably requested actions and execute all reasonably requested documents (including any licenses or assignments required by a government contract) at the Companys expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior Works and Company Works. If the Company is unable for any other reason, after reasonable attempt, to secure Executives signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executives agent and attorney in fact, to act for and in Executives behalf and stead to execute any documents and to do all other lawfully permitted acts required in connection with the foregoing.
(iv) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company that are from time to time previously disclosed to Executive, including regarding the protection of Confidential Information and intellectual property and potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version from time to time previously disclosed to Executive.
(v) The provisions of Section 7 hereof shall survive the termination of Executives employment for any reason (except as otherwise set forth in Section 7(a)(iii) hereof).
8. Specific Performance . Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of Section 6 of this Agreement (or a material breach or material threatened breach of any of the provisions of Section 7 of this Agreement) would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
9. Indemnification .
(a) The Company agrees that if Executive is made a party or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding ), other than any Proceeding related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or any
related matters, including Executives employment relationship or his equity holdings, by reason of the fact that Executive is or was a director or officer of the Company, or any subsidiary of the Company or is or was serving at the request of the Company, as a director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law from and against any and all liabilities, costs, claims and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys fees). Costs and expenses incurred by Executive in defense of such Proceeding (including attorneys fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of (a) a written request for payment, (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought, and (c) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so paid if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company under this Agreement. The Company and Executive will consult in good faith with respect to the conduct of any Proceeding. If the Company or any of its successors or assigns consolidates with or merges into any other entity or transfers all or substantially all of its properties or assets, then in each such case, proper provisions shall be made so that the successors or assigns of the Company shall assume all of the obligations set forth in this Section 9.
(b) During the Employment Term and for a term of six years thereafter, the Company, or any successor to the Company shall purchase and maintain, at its own expense, directors and officers liability insurance providing coverage for Executive in the same amount as the other senior executive officers of the Company.
(c) During the Employment Term and for a term of six years thereafter, the Company shall provide Executive with copies of all binders and policies issued in connection with any directors and officers liability insurance affording coverage to Executive, within 30 days following the Executives request for such documents.
10. Miscellaneous.
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.
(b) Entire Agreement/Amendments . This Agreement (including, without limitation, the schedules and exhibits attached hereto) contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement (including, without limitation, the schedules and exhibits attached hereto) may not be altered, modified, or amended except by written instrument signed by the parties hereto.
(c) No Waiver . The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d) Severability . In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment . This Agreement, and all of Executives rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.
(f) Set Off; No Mitigation . The Companys obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates, except to the extent such set-off would result in a violation of Section 409A of the Code (as defined below). Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment, and such payments shall not be reduced by any compensation or benefits received from any subsequent employer or other endeavor.
(g) Compliance with IRC Section 409A . Notwithstanding anything herein to the contrary, (i) if at the time of Executives termination of employment with the Company Executive is a specified employee as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payments to which Executive would otherwise be entitled during the first six months following his termination of employment shall be deferred and accumulated (without any reduction in such payments or benefits ultimately paid or provided to Executive) for a period of six months from the date of termination of employment and paid in a lump sum on the first day of the seventh month following such termination of employment (or, if earlier, the date of the Executives death), together with interest during such period at a rate computed by adding 2.00% to the Prime Rate as published in the Money Rates section of the Wall Street Journal, or other equivalent publication if the Wall Street Journal no longer publishes such information, on the first publication date of the Wall Street Journal or equivalent publication after the date that such payment would otherwise have been made if not for this provision (provided that if more than one such Prime Rate is published on such date, the highest of such published rates shall be used) and (ii) if any other payments of money or other benefits due to Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax. Furthermore, the Company intends that this Agreement shall comply with Section 409A and shall be interpreted, operated and administered accordingly.
(h) Successors; Binding Agreement . This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(i) Notice . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
Hilton Worldwide, Inc.
7930 Jones Branch Drive,
Suite 1100
McLean, Virginia 22102
Attention: General Counsel
with a copy to:
The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Jonathan Gray
and
Simpson Thacher & Bartlett LLP
425 Lexington Avenue,
New York, New York 10017
Attention: Gregory T. Grogan
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert J. Raymond and Michael J. Albano
(j) Executive Representation . Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executives duties hereunder shall not constitute a breach of the terms of any employment agreement or other agreement or written policy to which Executive is a party or otherwise bound.
(k) Prior Agreements . This Agreement (including, without limitation, the schedules and exhibits attached hereto) supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executives employment with the Company and/or its affiliates (collectively, the Prior Agreements).
(l) Cooperation . Executive shall provide Executives reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment hereunder; provided the Company shall pay Executive a reasonable per diem for his services and shall coordinate with the scheduling of Executive so as to reasonably minimize the extent to which such cooperation interferes with his other full-time employment and business activities. This provision shall survive any termination of this Agreement, without implication of the survival of any other provision of this Agreement.
(m) Withholding Taxes . The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(n) Section 280G .
(i) If the Company is not an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, Executive and the Company shall use their respective best efforts to avoid the imposition of the excise tax imposed by Section 4999 of the Code or a loss of deductibility under Section 280G of the Code, including, to the extent Executive agrees to waive his entitlement to potential parachute payments (as defined under Regulation 1.280G), the Company shall seek to obtain stockholder approval thereof in accordance with the terms of Section 280G(b)(5) of the Code.
(ii) If the Company is an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, the provisions of Exhibit II shall apply in respect of such change of control.
(o) Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
(Remainder of page intentionally left blank.)
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
HILTON WORLDWIDE, INC. | ||
/s/ Matthew Schuyler |
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By: | Matthew Schuyler | |
Title: | Chief Human Resources Officer | |
EXECUTIVE | ||
/s/ Christopher Nassetta |
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Christopher Nassetta |
1
Exhibit I
RELEASE
In exchange for a portion of the benefits described in the Employment Agreement dated January 4, 2010, (the Agreement), to which I agree I am not otherwise entitled, I hereby release HILTON WORLDWIDE, INC. (the Company), its respective affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, stockholders, attorneys, and insurers, past, present and future (the Released Parties) from any and all claims of any kind which I now have or may have against the Released Parties, whether known or unknown to me, by reason of facts which have occurred on or prior to the date that I have signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq ., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq ., the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et seq ., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq ., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq ., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq ., Section 1541 of the California Civil Code and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of my employment with the Company, as well as any and all claims under state contract or tort law or otherwise.
I have read Section 1542 of the California Civil Code, which states in full:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
I expressly waive any rights that I may have under Section 1542 to the full extent that I may lawfully waive such rights pertaining to a general release of claims, and I affirm that I am releasing all known or unknown claims that I have or may have against the Company or any of the Released Parties as stated in this Release.
I hereby represent that I have not filed any action, complaint, charge, grievance or arbitration against the Company or the Released Parties.
I expressly understand and agree that the Companys obligations under this Release are in lieu of any and all other amounts to which I might be, am now or may become entitled to receive from any of the Released Parties upon any claim whatsoever.
I understand that I must not disclose the terms of this Release to anyone other than my immediate family and advisors, that I must immediately inform my immediate family, financial advisors (if any) and legal counsel that they are prohibited from disclosing the terms of this Release; provided that the restrictions of this paragraph shall terminate if the Company publicly discloses a copy of this Release (or, if the Company publicly discloses summaries or excerpts of this Release, to the extent so disclosed).
I have read this Release carefully, acknowledge that I have been given at least 21 days to consider all of its terms, and have been advised to consult with an attorney and any other advisors of my choice prior to executing this Release. I also understand that I have a period of 7 days after signing this Release within which to revoke my agreement, and that neither the Company nor any other person is obligated to provide any benefits to me pursuant to the Agreement until 8 days have passed since my signing of this Release without my signature having been revoked. I understand that any revocation of this Release must be received by the General Counsel of the Company within the seven-day revocation period. Finally, I have not been forced or pressured in any manner whatsoever to sign this Release, and I agree to all of its terms voluntarily. I represent and acknowledge that no representation, statement, promise, inducement, threat or suggestion has been made by any of the Released Parties or by any other individual to influence me to sign this Release except such statements as are expressly set forth herein or in the Agreement.
I fully understand that this Release is a legally binding document and that by signing this Release I am prevented from filing, commencing or maintaining any action against the Company or the Released Parties.
The Company hereby acknowledges that, as of the effective date of this Release, its board of directors (excluding, if applicable, you) has no actual knowledge of any legal claims against you or a set of facts that collectively would give rise to Cause under the Agreement. If, following the Companys counter-signature of this Release, a Released Party commences any legal action against you with regard to your employment or otherwise and fails to obtain a successful judgment against you in such legal action, the Company shall reimburse you for your reasonable out-of-pocket legal fees and expenses in defending such action. Notwithstanding anything to the contrary herein, in the event that a Released Party commences an action against you, you may raise any claim you may have as a counterclaim or defense in such action.
This Release is final and binding and may not be changed or modified.
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DATE | Christopher Nassetta | |||
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DATE | Hilton Worldwide, Inc. |
3
Exhibit II
The provisions in this Exhibit II shall apply in respect of any change of control under Regulation 1.280G that occurs while the Company is an entity whose stock is readily tradable on an established securities market (or otherwise).
Paragraph 1. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a Payment ) is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the Excise Tax ), Executive shall be entitled to receive an additional payment (a Gross-Up Payment ) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Paragraph 2. All determinations required to be made under this Exhibit II, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other nationally recognized certified public accounting firm as may be designated by the Company (the Accounting Firm) which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is reasonably requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executives residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit II, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executives behalf) when due but in no event later than the end of Executives taxable year next following Executives taxable year in which Executive remitted the related taxes. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive (subject to Paragraph 3). As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (Underpayment). In the event that the Company exhausts its remedies pursuant to Paragraph 3 of Exhibit II and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive (no later than the calendar year following the calendar year in which such tax was payable).
Paragraph 3. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided , however , that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Paragraph 3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided , further , that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided , further , that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Companys control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
Paragraph 4. If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Exhibit II, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Companys complying with the requirements
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of Paragraph 3 of this Exhibit II) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Paragraph 3 of this Exhibit II, a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.
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Schedule 2(b)
Other Activities
1. | Member of the Board of Directors of Costar Group Inc. |
2. | Member of the Board of Directors of the Real Estate Roundtable |
3. | Member of the Advisory Board for the University of Virginia, McIntyre School of Commerce |
Exhibit 10.21
Execution Version
EMPLOYMENT AGREEMENT
(Thomas C. Kennedy)
EMPLOYMENT AGREEMENT (the Agreement) dated September 15, 2008 by and between HILTON HOTELS CORPORATION (the Company) and THOMAS C. KENNEDY (Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of such employment;
Executive desires to accept such employment and enter into such an agreement;
In consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:
1. Term of Employment . Subject to the provisions of Section 5 of this Agreement, Executive shall be employed by the Company for a period commencing on September 15, 2008 (the Effective Date) and ending on the fifth anniversary of the Effective Date (the Employment Term) on the terms and subject to the conditions set forth in this Agreement; provided , however , that commencing with the fifth anniversary of the Effective Date and on each such successive anniversary of the Effective Date thereafter (each an Extension Date), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the next Extension Date that the Employment Term shall not be so extended. Executive agrees, promptly following execution of this Agreement, to give notice of his resignation from his current principal employer.
2. Position.
(a) During the Employment Term, Executive shall serve as an Executive Vice President of the Company and Chief Financial Officer of the Company. In such position, Executive shall report directly to the Chief Executive Officer and shall have such duties and authority as shall be determined from time to time by the Chief Executive Officer and the Board of Directors of the Company (the Board). If requested, Executive shall also serve as a member of the Board or other governing bodies of the Company or its subsidiaries without additional compensation.
(b) During the Employment Term, Executive will devote his full working time and reasonable best efforts to the performance of Executives duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Board; provided that nothing herein shall preclude Executive from (i) serving as trustee for certain trusts maintained by personal friends, (ii) accepting appointment to or continuing to serve on any board of directors or trustees of any business corporation, (iii) serving as an officer or director or otherwise participating in non-profit educational, welfare, social, religious and civil organizations, including, without limitation, all
such positions and participation in effect as of the Effective Date, and (iv) managing personal and family investments; provided, however, that any such activities as described in (i), (ii), (iii) or (iv) of the preceding provisions of this paragraph do not significantly interfere with the performance and fulfillment of the Executives duties and responsibilities as an executive of the Company in accordance with this Agreement or conflict with Section 6.
3. Compensation.
(a) Base Salary . During the Employment Term, the Company shall pay Executive a base salary (Base Salary) at the annual rate of $650,000, payable in regular installments in accordance with the Companys usual payment practices. Executive shall be entitled to such increases in Executives Base Salary, if any, as may be determined from time to time in the sole discretion of the Board, but in no event shall the Company be entitled to reduce Executives Base Salary.
(b) Annual Bonus . During the Employment Term, Executive shall be eligible to earn an annual bonus award (an Annual Bonus) based on the achievement of performance objectives and targets (including the level of achievement required for Executive to earn the threshold, target and high performance objectives) adopted by the Board within the first three months of each fiscal year during the Employment Term (it being understood that such performance objectives and targets generally will correspond to those established for other members of senior management). During each fiscal year, the minimum bonus payable to Executive if the minimum performance objectives and targets are achieved will be 60% of Executives Base Salary, the target bonus will be 75% of Executives Base Salary if target performance objectives and targets are achieved and the maximum bonus payable to Executive will be 112.5% of Base Salary if high performance objectives and targets are achieved. The Annual Bonus, if any, shall be paid to Executive within two and one-half (2.5) months after the end of the applicable fiscal year; provided that if the applicable performance objectives and targets have not been verified by audit by such time, then the Annual Bonus shall be payable within 10 days of such verification but no later than December 31 of such year. The Annual Bonus payable to Executive in respect of the 2008 fiscal year shall be no less than, but may be greater than, an amount equal to the product of (i) $487,500 and (ii) a fraction, the numeration of which is the number of days in the period commencing on the Effective Date and ending on December 31, 2008 (inclusive) and the denominator of which is 365. No Annual Bonus shall be payable in respect of any fiscal year in which Executives employment is terminated (except to the extent expressly provided in Section 5(b) or 5(c)).
(c) Sign-On Bonus . As soon as reasonably practicable following the Effective Date (but in no event later than ten (10) business days), the Company shall pay to the Executive, in a cash lump sum, $100,000.
4. Benefits.
(a) General . During the Employment Term, Executive shall be entitled to participate in the Companys employee benefit plans (other than annual bonus and incentive plans and severance plans, the benefits for which will be determined instead in accordance with this Agreement) as in effect from time to time (collectively Employee Benefits), on the same basis as those benefits are generally made available to other senior executives of the Company, including, without limitation, that Executive shall be entitled to four weeks of paid vacation per calendar year in accordance with the Companys vacation policy as may be in effect from time to time.
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(b) Other Benefits . During the Employment Term:
(i) the Company shall reimburse Executive for the cost of continuing coverage for Executive and his immediate family members under Executives current medical and dental group health plans pursuant to COBRA until such time as the Executive and his immediate family members are eligible for full coverage under the applicable medical and dental plans of the Company, with such reimbursement being made as soon as reasonably practicable following Executives incurring the expense, but in no event later than the end of the calendar year immediately following the calendar year in which such expense was incurred;
(ii) during the period commencing on the Effective Date and ending on the earlier of (x) first anniversary of the Effective Date or (y) the date the Company establishes the permanent location for Executives employment in connection with the determination of where to locate its headquarters (the Initial Period), the Company shall provide, at not cost to Executive, a mutually agreeable temporary home in or near the metropolitan Los Angeles area for Executive and Executives immediate family, along with a car allowance as per the terms and conditions of the Companys executive car allowance practice with respect to the Companys executives in the United States; provided, however, until such temporary housing location is available, the Company shall provide Executive and Executives immediate family with accommodations in one of the Companys hotels in or near the metropolitan Los Angeles area; provided, further, that the cost of such temporary housing and car allowance shall not exceed $10,000 per month (excluding the value of any gross-up provided for in Section 4(b)(vi) below).
(iii) during the Initial Period, the Company shall pay or reimburse Executive for reasonable weekly travel and commutation expenses for travel to and from Miami, Florida to the Companys headquarters for Executive and Executives immediate family; provided that such payment shall cease at such time that Executive relocates his primary personal residence to a location near the Companys headquarters.
(iv) in accordance with the terms and conditions of the Company Relocation Policy, Plan A (the Relocation Policy), the Company will reimburse Executive for reasonable and customary relocation expenses (including all closing costs and expenses, and reasonable attorneys fees, incurred in the sale and/or purchase of Executives principal residences) directly related to Executives relocation from Executives personal permanent residence to a location closer to the Companys headquarters; provided that, notwithstanding the foregoing, upon mutual agreement of the Company and the Executive, (A) any cap on benefits or eligibility under the Relocation Policy with respect to the value on a sale of a residence shall be waived for Executive and (B) Executive shall be entitled to use a relocation and/or moving company of his choice in connection with his relocation pursuant to this Section 4(b)(iv) so long as Executive reimburses the Company for any costs incurred in the use of Executives chosen relocation and/or moving company in excess of the projected costs of the Companys preferred providers.
(v) Executive and Executives immediate family shall be able to stay at any Company branded hotels free of charge; and
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(vi) the Company shall reimburse Executive on a grossed up basis for all taxes incurred in connection with the benefits and payments provided pursuant to this Section 4(b) and any income imputed to Executive as a result of the use of the Companys aircraft for personal and/or business travel by Executive and/or Executives family (subject to such usage being approved by the Companys Chief Executive Officer). Any such gross-up shall be paid to Executive as soon as possible after the related taxes are incurred but in no event later than the end of Executives taxable year next following Executives taxable year in which Executive remitted the related taxes.
5. Termination . The Employment Term and Executives employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days advance written notice of any resignation of Executives employment (other than as a result of a Constructive Termination). Notwithstanding any other provision of this Agreement, the provisions of this Section 5 shall exclusively govern Executives rights upon termination of employment with the Company and its affiliates (other than with respect to Executives rights with respect to the investments and awards described in Section 3(c) which, notwithstanding anything in this Section 5 to the contrary, shall be governed by the terms and conditions of such investments and awards).
(a) By the Company For Cause or By Executive Other Than as a Result of a Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company for Cause and shall terminate automatically upon the effective date of Executives resignation other than as result of a Constructive Termination (as defined in Section 5(c)(ii)).
(ii) For purposes of this Agreement, Cause shall mean (A) Executives theft or embezzlement of Company property, other than with respect to insignificant or immaterial amounts, as determined in the reasonable, good faith judgment of the Board, (B) any act or acts on Executives part that constitute a felony under the laws of the United States or any state thereof (provided, that if Executive is terminated for any action described in this clause (B), then (x) if charges are brought against the Executive by a governmental authority relating to such act(s) and a court of competent jurisdiction (1) convicts Executive of a felony, then such termination shall be deemed a termination for Cause and the Company shall have the right to seek reimbursement from Executive for any payments made to Executive in connection with such termination of employment pursuant to Section 5 of this Agreement that Executive would otherwise not have been entitled pursuant to the terms of this Agreement if terminated for Cause or (2) fails to convict Executive of a felony, then such termination shall be deemed a termination without Cause and the Company or its subsidiaries shall pay to Executive any applicable payments or benefits provided for upon a termination of Executives employment without Cause (to the extent not previously provided) or (y) if no charges are brought against Executive by a governmental authority relating to such act(s), then the Company will have the burden to prove with clear and convincing evidence that such act(s)constituted a felony and, if publicly disclosed, would be injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries (and if the Company fails to meet such standard, the Company shall, in addition to providing any applicable payments and benefits provided for upon a termination of Executives employment without Cause (to the
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extent not previously provided), reimburse Executive for his reasonable legal fees in connection with such proceeding)), (C) Executives willful malfeasance or willful misconduct in connection with Executives duties hereunder which, in the reasonable, good faith judgment of the Board, is (1) injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries, (D) Executives breach of Section 6 of this Agreement or the representation in Section 10(j) or (E) Executives willful breach of Section 7 of this Agreement in a manner that adversely impacts the Company.
(iii) If Executives employment is terminated by the Company for Cause or Executive resigns other than as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) no later than ten (10) days following the date of termination, the Base Salary through the date of termination;
(B) any Annual Bonus earned, but unpaid, as of the date of termination for the immediately preceding fiscal year, paid in accordance with Section 3(b) (except to the extent payment is otherwise deferred pursuant to any applicable deferred compensation arrangement with the Company, in which case such payment shall be made in accordance with the terms and conditions of such deferred compensation arrangement);
(C) reimbursement, within 60 days following receipt by the Company of Executives claim for such reimbursement (including appropriate supporting documentation), for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to Executives termination; provided that such claims for such reimbursement are submitted to the Company within 90 days following the date of Executives termination of employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms and conditions of such employee benefit plans (the amounts described in clauses (A) through (D) hereof being referred to as the Accrued Rights).
Following such termination of Executives employment by the Company for Cause, except as set forth in this Section 5(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b) Disability or Death .
(i) The Employment Term and Executives employment hereunder shall terminate upon Executives death and may be terminated by the Company if Executive becomes physically or mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an aggregate of twelve (12) months in any twenty-four (24) consecutive month period to perform Executives duties (such incapacity is hereinafter referred to as Disability). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician
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mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third physician who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement.
(ii) Upon termination of Executives employment hereunder for either Disability or death, Executive or Executives estate (as the case may be) shall be entitled to receive:
(A) the Accrued Rights;
(B) no later than ten (10) days following the date of termination, a pro rata Annual Bonus equal to the product of (1) 100% of Executives Base Salary in effect immediately prior to the termination of employment and (2) a fraction, the numerator of which is the number of days during the fiscal year up to and including the date of termination of Executives employment and the denominator of which is 365 (the Pro-Rated Bonus); and
(C) for a period of twenty four months following the date of termination, the Company shall continue to provide the Executive and the Executives eligible dependents with group health insurance coverage at least equal to that which would have been provided to Executive and Executives eligible dependents had Executives employment with the Company not been terminated; provided, however, that if the Executive becomes employed with another employer and is eligible to receive group health insurance coverage under such employers plans, the Companys obligation to provide such benefits shall be reduced or, if applicable, expire to the extent comparable coverage is actually available and provided to the Executive and Executives eligible dependents without charge.
Following Executives termination of employment due to death or Disability, except as set forth in this Section 5(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c) By the Company Without Cause or Resignation by Executive as a Result of Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company without Cause or by Executive as a result of a Constructive Termination. For purposes of the Agreement, in the event the Company elects not to extend the Employment Term in accordance with Section 1 hereof, Executives employment shall terminate on the last day of the Employment Term and such election shall be deemed a termination by the Company without Cause.
(ii) For purposes of this Agreement, a Constructive Termination shall be deemed to have occurred upon (A) a diminution in Executives Base Salary or Annual Bonus opportunity; (B) any material diminution in Executives authority, duties or responsibilities (including, without limitation, requiring Executive to report to anyone other than the Chief Executive Officer of the Company and/or the Board); (C) any material breach by the Company of this Agreement; (D) a relocation of Executives primary work location more than 35 miles
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without consent, or (E) failure of the Company or its subsidiaries to pay or cause to be paid Executives Base Salary or Annual Bonus, when due, or to permit the investment and make the equity-based grants described in Section 3(c) hereof; provided that (i) the relocation of Executives primary work location in connection with the relocation of the Companys headquarters shall not constitute Constructive Termination and (ii) none of the events described in this Section 5(c)(ii) shall constitute Constructive Termination unless the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Constructive Termination; provided, further, that Constructive Termination shall cease to exist for an event on the 90 th day following the later of its occurrence or Executives knowledge thereof, unless Executive has given the Board written notice thereof prior to such date. Notwithstanding anything herein to the contrary, for purposes of last proviso of the immediately foregoing sentence, a series of related events shall be deemed to have occurred on the date upon which the last event in such series of related events has occurred.
(iii) If Executives employment is terminated by the Company without Cause (other than by reason of death or Disability) or Executive resigns as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) the Pro-Rata Bonus;
(C) if such termination or resignation occurs prior to a Change in Control (as defined in the Amended and Restated Securityholders Agreement, dated as of September 26, 2008, among BH Hotels HoldCo LLC, Executive and such other parties (the Securityholders Agreement)), subject to Executives continued compliance with Section 6 hereof and Executives continued material compliance with Section 7 hereof, payment (payable in 24 monthly installments) in the aggregate equal to the amount, if any, by which the Applicable Severance Amount exceeds the applicable Call Price, as of the date of termination, of the vested portion of the Class B Units granted to Executive pursuant to Management Unit Subscription Agreement (Class B-1 Units and B-2 Units) to be entered into in connection with this Agreement (such agreement, the Subscription Agreement and such Class B Units, the Vested Profits Interests). Applicable Severance Amount means an amount equal to twice the sum of (i) Executives then applicable Base Salary (as of the termination date) and (ii) Executives Annual Bonus for the fiscal year immediately prior to the year of such termination (provided that in respect of any such termination or resignation that occurs in calendar year 2008, Executives Annual Bonus shall be deemed to be, for this purpose, 75% of Executives then applicable Base Salary). Call Price shall mean the price at which the Company or its affiliates has the right to purchase the Vested Profits Interests pursuant to the Securityholders Agreement and the Subscription Agreement (but regardless of whether such right is exercised); and
(D) for a period of twenty four months following the date of termination, the Company shall continue to provide the Executive and the Executives eligible dependents with group health insurance coverage at least equal to that which would have been provided to Executive and Executives eligible dependents had Executives employment with the Company not been terminated; provided,
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however, that if the Executive becomes employed with another employer and is eligible to receive group health insurance coverage under such employers plans, the Companys obligation to provide such benefits shall be reduced or, if applicable, expire to the extent comparable coverage is actually available and provided to the Executive and Executives eligible dependents without charge.
Following Executives termination of employment by the Company without Cause (other than by reason of Executives death or Disability) or by Executives resignation as a result of a Constructive Termination, except as set forth in this Section 5(c)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d) Release . Amounts payable and benefits provided to Executive under subparagraphs (B) and (C) of Section 5(b)(ii) or subparagraphs (B), (C) and (D) of Section 5(c)(iii) above, are subject to Executive and the Company executing a release of claims, substantially in the form attached hereto as Exhibit I, within forty-five (45) days of the date of termination (the Release Period). Any payment that otherwise would be made prior to Executives delivery of such executed release shall be paid to the Executive on the first business day following the conclusion of the Release Period; provided that any in-kind benefit shall continue in effect after separation from service pending the execution and delivery of such release. If the Company fails to countersign the form attached hereto as Exhibit I, then the condition described in the foregoing sentence shall be deemed waived by the Company.
(e) Notice of Termination . Any purported termination of employment by the Company or by Executive (other than due to Executives death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
(f) Board/Committee Resignation . Upon termination of Executives employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Companys affiliates.
(g) Forfeiture . Any determination under this Section 5 of whether the Executive is in compliance with Section 6 hereof and material compliance with Section 7 hereof shall be determined based solely on the contractual provisions provided therein and the facts and circumstances of Executives actions without regard to whether the Company could obtain an injunction or other relief under the law of any particular jurisdiction.
6. Non-Competition.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and, for a period of one year following the date Executive ceases to be employed by the Company (the Restricted Period), Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any person, firm,
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partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (Person), directly or indirectly solicit or assist in soliciting in competition with the Restricted Group in the Business, the business of any then current or prospective client or customer with whom Executive (or his direct reports) had personal contact or dealings on behalf of the Company during the one-year period preceding Executives termination of employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in the Business for a Competitor in any geographical area that is within 25 miles of any geographical area where the Restricted Group engages in the Business;
(B) enter the employ of, or render any services to, a Competitor, except where such employment or services do not relate in any manner to the Business;
(C) acquire a financial interest in, or otherwise become actively involved with, a Competitor, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(D) intentionally and adversely interfere with, or attempt to adversely interfere with, business relationships between the members of the Restricted Group and any of their clients, customers, suppliers, partners, members or investors;
provided that this Section 6(a)(ii) shall cease to apply during any time that The Blackstone Group L.P. and its affiliated investment funds beneficially own less than twenty-five percent of the voting power of the Company.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Business (including, without limitation, a Competitor) which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 2% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit or encourage any executive-level employee of the Restricted Group to leave the employment of the Restricted Group; or
(B) hire any such executive-level employee who was employed by the Restricted Group as of the date of Executives termination of employment with the Company or who left the employment of the Restricted Group coincident with, or within one year prior to or after, the termination of Executives employment with the Company.
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(v) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly and intentionally encourage any material consultant of the Restricted Group to cease working with the Restricted Group.
(vi) For purposes of this Agreement:
(A) Restricted Group shall mean, collectively, the Company and its subsidiaries and, to the extent engaged in the Business, their respective affiliates (including The Blackstone Group L.P. and its affiliates).
(B) Business shall mean the business of acquiring controlling investments in, owning, operating, managing or franchising hotel and lodging properties and timeshares.
(C) Competitor shall mean (x) during the Employment Term and, for a period of six months following the date Executive ceases to be employed by the Company, any person engaged in the Business and (y) thereafter, any major global hotel brand engaged in the Business (but, for the avoidance of doubt, excluding any private equity firm engaged in the Business).
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) The period of time during which the provisions of this Section 6 shall be in effect shall be extended by the length of time during which Executive is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
7. Confidentiality; Intellectual Property.
(a) Confidentiality .
(i) Executive will not at any time (whether during or after Executives employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or otherwise in performance of Executives duties hereunder and pursuant to customary industry practice), any non-public, proprietary or confidential information including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs,
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products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (Confidential Information) without the prior written authorization of the Board.
(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executives breach of this covenant; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation of which Executive has knowledge; or (c) required by law to be disclosed; provided that with respect to subsection (c) Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Executive will not disclose to anyone, other than Executives family (it being understood that, in this Agreement, the term family refers to Executive, Executives spouse, minor children, parents and spouses parents) and advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 6 and 7 of this Agreement. This Section 7(a)(iii) shall terminate if the Company publicly discloses a copy of this Agreement (or, if the Company publicly discloses summaries or excerpts of this Agreement, to the extent so disclosed).
(iv) Upon termination of Executives employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; and (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executives possession or control (including any of the foregoing stored or located in Executives office, home, laptop or other computer, whether or not Company property) that contain Confidential Information, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.
(b) Intellectual Property .
(i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (Works), either alone or with third parties, prior to Executives employment by the Company, that are relevant to or implicated by such employment (Prior Works), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Companys current and future business.
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(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executives employment by the Company and within the scope of such employment and with the use of any the Company resources (Company Works), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.
(iii) Executive shall take all reasonably requested actions and execute all reasonably requested documents (including any licenses or assignments required by a government contract) at the Companys expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior Works and Company Works. If the Company is unable for any other reason, after reasonable attempt, to secure Executives signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executives agent and attorney in fact, to act for and in Executives behalf and stead to execute any documents and to do all other lawfully permitted acts required in connection with the foregoing.
(iv) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company that are from time to time previously disclosed to Executive, including regarding the protection of Confidential Information and intellectual property and potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version from time to time previously disclosed to Executive.
(v) The provisions of Section 7 hereof shall survive the termination of Executives employment for any reason (except as otherwise set forth in Section 7(a)(iii) hereof).
8. Specific Performance . Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of Section 6 of this Agreement (or a material breach or material threatened breach of any of the provisions of Section 7 of this Agreement) would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
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9. Indemnification .
(a) The Company agrees that if Executive is made a party (including, without limitation, being called as a witness or otherwise being asked to testify) or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding ), other than any Proceeding related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or any related matters, including Executives employment relationship or his equity holdings, by reason of the fact that Executive is or was a director or officer of the Company, or any subsidiary of the Company or is or was serving at the request of the Company, as a director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law from and against any and all liabilities, costs, claims and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys fees). Costs and expenses incurred by Executive in defense of such Proceeding (including attorneys fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of (a) a written request for payment, (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought, and (c) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so paid if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company under this Agreement. The Company and Executive will consult in good faith with respect to the conduct of any Proceeding. If the Company or any of its successors or assigns consolidates with or merges into any other entity or transfers all or substantially all of its properties or assets, then in each such case, proper provisions shall be made so that the successors or assigns of the Company shall assume all of the obligations set forth in this Section 9.
(b) During the Employment Term and for a term of six years thereafter, the Company, or any successor to the Company shall purchase and maintain, at its own expense, directors and officers liability insurance providing coverage for Executive in the same amount as the other senior executive officers of the Company.
(c) During the Employment and for a term of six years thereafter, the Company shall provide Executive with copies of all binders and policies issued in connection with any directors and officers liability insurance affording coverage to Executive, within 30 days following the Executives request for such documents.
10. Miscellaneous.
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.
(b) Entire Agreement/Amendments . This Agreement (including, without limitation, the schedules and exhibits attached hereto) contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement (including, without limitation, the schedules and exhibits attached hereto) may not be altered, modified, or amended except by written instrument signed by the parties hereto.
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(c) No Waiver . The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d) Severability . In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment . This Agreement, and all of Executives rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.
(f) Set Off; No Mitigation . The Companys obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates, except to the extent such set-off would result in a violation of Section 409A of the Code (as defined below). Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment, and such payments shall not be reduced by any compensation or benefits received from any subsequent employer or other endeavor.
(g) Compliance with IRC Section 409A . Notwithstanding anything herein to the contrary, (i) if at the time of Executives termination of employment with the Company Executive is a specified employee as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payments to which Executive would otherwise be entitled during the first six months following his termination of employment shall be deferred and accumulated (without any reduction in such payments or benefits ultimately paid or provided to Executive) for a period of six months from the date of termination of employment and paid in a lump sum on the first day of the seventh month following such termination of employment (or, if earlier, the date of the Executives death), together with interest during such period at a rate computed by adding 2.00% to the Prime Rate as published in the Money Rates section of the Wall Street Journal, or other equivalent publication if the Wall Street Journal no longer publishes such information, on the first publication date of the Wall Street Journal or equivalent publication after the date that such payment would otherwise have been made if not for this provision (provided that if more than one such Prime Rate is published on such date, the highest of such published rates shall be used) and (ii) if any other payments of money or other benefits due to Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such
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payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax. Furthermore, the Company intends that this Agreement shall comply with Section 409A and shall be interpreted, operated and administered accordingly.
(h) Successors; Binding Agreement . This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(i) Notice . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Attention: Christopher Nassetta, Chief Executive Officer
with a copy to:
The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Jonathan Gray
and
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Gregory T. Grogan
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company with a copy to:
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attention: Robert J. Raymond
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(j) Executive Representation . Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executives duties hereunder shall not constitute a breach of the terms of any employment agreement or other agreement or written policy to which Executive is a party or otherwise bound.
(k) Prior Agreements . This Agreement (including, without limitation, the schedules and exhibits attached hereto) supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executives employment with the Company and/or its affiliates (collectively, the Prior Agreements).
(l) Legal Fees . The Company shall pay Executives reasonable legal fees and costs associated with negotiating and entering into this Agreement in a timely manner upon receipt from Executive of the appropriate documentation; provided, however, in no event shall such payment exceed $50,000.
(m) Cooperation . Executive shall provide Executives reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment hereunder; provided the Company shall pay Executive a reasonable per diem for his services and shall coordinate with the scheduling of Executive so as to reasonably minimize the extent to which such cooperation interferes with his other full-time employment and business activities. This provision shall survive any termination of this Agreement, without implication of the survival of any other provision of this Agreement.
(n) Withholding Taxes . The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(o) Section 280G .
(i) If the Company is not an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, Executive and the Company shall use their respective best efforts to avoid the imposition of the excise tax imposed by Section 4999 of the Code or a loss of deductibility under Section 280G of the Code, including, to the extent Executive agrees to waive his entitlement to potential parachute payments (as defined under Regulation 1.280G), the Company shall seek to obtain stockholder approval thereof in accordance with the terms of Section 280G(b)(5) of the Code.
(ii) If the Company is an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, the provisions of Exhibit II shall apply in respect of such change of control.
(p) Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
HILTON HOTELS CORPORATION | ||
/s/ Christopher Nassetta |
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By: | Christopher Nassetta | |
Title: | President and Chief Executive Officer | |
EXECUTIVE | ||
/s/ Thomas C. Kennedy |
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Thomas C. Kennedy |
Exhibit I
RELEASE
In exchange for a portion of the benefits described in the Employment Agreement dated September , 2008, (the Agreement), to which I agree I am not otherwise entitled, I hereby release HILTON HOTELS CORPORATION (the Company), its respective affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, stockholders, attorneys, and insurers, past, present and future (the Released Parties) from any and all claims of any kind which I now have or may have against the Released Parties, whether known or unknown to me, by reason of facts which have occurred on or prior to the date that I have signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq ., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq ., the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et seq ., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq ., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq ., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq ., Section 1541 of the California Civil Code and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of my employment with the Company, as well as any and all claims under state contract or tort law or otherwise.
I have read Section 1542 of the California Civil Code, which states in full:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
I expressly waive any rights that I may have under Section 1542 to the full extent that I may lawfully waive such rights pertaining to a general release of claims, and I affirm that I am releasing all known or unknown claims that I have or may have against the Company or any of the Released Parties as stated in this Release.
I hereby represent that I have not filed any action, complaint, charge, grievance or arbitration against the Company or the Released Parties.
I expressly understand and agree that the Companys obligations under this Release are in lieu of any and all other amounts to which I might be, am now or may become entitled to receive from any of the Released Parties upon any claim whatsoever.
I understand that I must not disclose the terms of this Release to anyone other than my immediate family and advisors, that I must immediately inform my immediate family, financial advisors (if any) and legal counsel that they are prohibited from disclosing the terms of this
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Release; provided that the restrictions of this paragraph shall terminate if the Company publicly discloses a copy of this Release (or, if the Company publicly discloses summaries or excerpts of this Release, to the extent so disclosed).
I have read this Release carefully, acknowledge that I have been given at least 21 days to consider all of its terms, and have been advised to consult with an attorney and any other advisors of my choice prior to executing this Release. I also understand that I have a period of 7 days after signing this Release within which to revoke my agreement, and that neither the Company nor any other person is obligated to provide any benefits to me pursuant to the Agreement until 8 days have passed since my signing of this Release without my signature having been revoked. I understand that any revocation of this Release must be received by the General Counsel of the Company within the seven-day revocation period. Finally, I have not been forced or pressured in any manner whatsoever to sign this Release, and I agree to all of its terms voluntarily. I represent and acknowledge that no representation, statement, promise, inducement, threat or suggestion has been made by any of the Released Parties or by any other individual to influence me to sign this Release except such statements as are expressly set forth herein or in the Agreement.
I fully understand that this Release is a legally binding document and that by signing this Release I am prevented from filing, commencing or maintaining any action against the Company or the Released Parties.
The Company hereby acknowledges that, as of the effective date of this Release, its board of directors (excluding, if applicable, you) has no actual knowledge of any legal claims against you or a set of facts that collectively would give rise to Cause under the Agreement. If, following the Companys counter-signature of this Release, a Released Party commences any legal action against you with regard to your employment or otherwise and fails to obtain a successful judgment against you in such legal action, the Company shall reimburse you for your reasonable out-of-pocket legal fees and expenses in defending such action. Notwithstanding anything to the contrary herein, in the event that a Released Party commences an action against you, you may raise any claim you may have as a counterclaim or defense in such action.
Notwithstanding the foregoing, following the Companys execution of this Release, if
This Release is final and binding and may not be changed or modified.
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DATE | Thomas C. Kennedy | |||
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DATE | Hilton Hotels Corporation |
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Exhibit II
The provisions in this Exhibit II shall apply in respect of any change of control under Regulation 1.280G that occurs while the Company is an entity whose stock is readily tradable on an established securities market (or otherwise).
Paragraph 1. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a Payment ) is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the Excise Tax ), Executive shall be entitled to receive an additional payment (a Gross-Up Payment ) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Paragraph 2. All determinations required to be made under this Exhibit II, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other nationally recognized certified public accounting firm as may be designated by the Company (the Accounting Firm) which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is reasonably requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executives residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit II, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executives behalf) when due but in no event later than the end of Executives taxable year next following Executives taxable year in which Executive remitted the related taxes. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive (subject to Paragraph 3). As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (Underpayment). In the event that the Company exhausts its remedies pursuant to Paragraph 3 of Exhibit II and Executive thereafter is
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required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive (no later than the calendar year following the calendar year in which such tax was payable).
Paragraph 3. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided , however , that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Paragraph 3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided , further , that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided , further , that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Companys control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
Paragraph 4. If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Exhibit II, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Companys complying with the requirements of Paragraph 3 of this Exhibit II) promptly pay to the Company the amount of such refund
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received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Paragraph 3 of this Exhibit II, a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.
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Exhibit 10.22
EMPLOYMENT AGREEMENT
(Ian R. Carter)
EMPLOYMENT AGREEMENT (the Agreement) dated as of January 1, 2010 by and between HILTON WORLDWIDE, INC. (the Company) and IAN R. CARTER (Executive).
WHEREAS, the Company and Executive entered into an employment agreement, dated March 10, 2006 and amended on October 11, 2007 under which Executive was employed as the Chief Executive Officer of Hilton International and a prior service agreement, dated January 24, 2005 (collectively and together with all other prior agreements between Executive, on the one hand, and the Company and/or its affiliates from time to time, the Prior Agreements).
WHEREAS, the Company and Executive now desire to enter into this Agreement, which will replace the Prior Agreements as of the Effective Date (as defined below);
WHEREAS, commencing on the Effective Date, the Company desires to continue to employ Executive, and Executive desires to remain employed by the Company, on the terms and subject to the conditions more fully set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual promises, covenants and obligations contained herein and for other good and valuable consideration, the Company and Executive agree as follows:
1. Term of Employment .
(a) Agreement . As of the Effective Date, all Prior Agreements shall terminate; and the Company shall continue Executives employment pursuant to the terms and conditions specified in this Agreement.
(b) Term of Employment . Subject to the provisions of Section 5 of this Agreement, Executive shall be employed by the Company for a period commencing on January 1, 2010 (the Effective Date) and ending on the fifth anniversary of the Effective Date (the Employment Term) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing with the fifth anniversary of the Effective Date and on each such successive anniversary of the Effective Date thereafter (each an Extension Date), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the next Extension Date that the Employment Term shall not be so extended. Executive agrees, promptly following execution of this Agreement, to give notice of his resignation from his current principal employer.
2. Position.
(a) During the Employment Term, Executive shall serve as Executive Vice President and President, Global Operations of the Company. In such position, Executive shall
have such duties and authority as shall be determined from time to time by the Chief Executive Officer of the Company (the Chief Executive Officer) and the Board of Directors of the Company (the Board). If requested, Executive shall also serve as a member of the Board or other governing bodies of the Company or its subsidiaries without additional compensation.
(b) During the Employment Term, Executives principal place of employment shall be the Companys headquarters in McLean, Virginia (the Principal Place of Employment), where he shall spend his full working time in the performance of his duties (subject to customary travel consistent with Executives duties).
(c) During the Employment Term, Executive will devote his full working time and reasonable best efforts to the performance of Executives duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Board; provided that nothing herein shall preclude Executive from (i) accepting appointment to or continuing to serve on any board of directors or trustees of any business corporation, (ii) serving as an officer or director or otherwise participating in non-profit educational, welfare, social, religious and civil organizations, including, without limitation, all such positions and participation in effect as of the Effective Date, and (iii) managing personal and family investments; provided, however, that any such activities as described in (i), (ii) or (iii) of the preceding provisions of this paragraph do not significantly interfere with the performance and fulfillment of Executives duties and responsibilities as an executive of the Company in accordance with this Agreement or conflict with Section 6.
3. Compensation.
(a) Base Salary . During the Employment Term, the Company shall pay Executive a base salary (Base Salary) at the annual rate of $690,000, payable in regular installments in accordance with the Companys usual payment practices. Executive shall be entitled to such increases in Executives Base Salary, if any, as may be determined from time to time in the sole discretion of the Board, but in no event shall the Company be entitled to reduce Executives Base Salary.
(b) Annual Bonus . During the Employment Term, Executive shall be eligible to earn an annual bonus award (an Annual Bonus) based on the achievement of performance objectives and targets (including the level of achievement required for Executive to earn the threshold, target and high performance objectives) adopted by the Board within the first three months of each fiscal year during the Employment Term (it being understood that such performance objectives and targets generally will correspond to those established for other members of senior management). During each fiscal year, Executive shall be eligible to earn a target bonus equal to 60% of Executives Base Salary if target performance objectives and targets are achieved, and a maximum bonus payable to Executive equal to 90% of Base Salary if high performance objectives and targets are achieved. The Annual Bonus, if any, shall be paid to Executive within two and one-half (2.5) months after the end of the applicable fiscal year; provided that if the applicable performance objectives and targets have not been verified by audit by such time, then the Annual Bonus shall be payable within 10 days of such verification but no
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later than December 31 of such year. No Annual Bonus shall be payable in respect of any fiscal year in which Executives employment is terminated (except to the extent expressly provided in Section 5(b) or 5(c)).
4. Benefits.
(a) General . During the Employment Term, Executive shall be entitled to participate in the Companys employee benefit plans (other than annual bonus and incentive plans and severance plans, the benefits for which will be determined instead in accordance with this Agreement) as in effect from time to time (collectively Employee Benefits), on the same basis as those benefits are generally made available to other senior executives of the Company including without limitation, that Executive shall be entitled to health insurance benefits and time-related benefits such as holidays, vacation, personal and sick leave in accordance with the Companys vacation and sick leave policies as may be in effect from time to time; provided that if Executive elects in writing to the Company in respect of any calendar year (with such election made prior to the start of such calendar year) not to participate in the Companys (x) defined contribution plans for employees in the United States or (y) deferred compensation plans for executives in the United States, the Company shall (in lieu of such participation) pay Executive an amount equal to $207,000 (subject to continued employment on December 31 of such year, with such payment being made by January 31 of the subsequent year (Executive must make such election for any calendar year no later than December 31 of the prior calendar year).
(b) Other Benefits .
(i) During the Employment Term, the Company shall reimburse Executive for tuition expenses, but not for expenses related to room, board, books, uniforms and other non-tuition related costs, incurred in connection with the schooling of Executives pre-university aged child at a private educational institution in the United States provided, however, in no event shall such payment exceed $30,000 per year.
(ii) To the extent that Executive is required to file taxes in both the United States and the United Kingdom with respect to Executives employment with the Company prior to April 1, 2010, the Company shall provide tax equalization assistance to Executive in accordance with the terms of the Companys tax equalization practice (a copy of which has been provided to Executive). The Company shall also provide Executive with assistance in the preparation of his tax returns with respect to his employment with the Company prior to December 31, 2009 and will reimburse Executive for the cost of such assistance up to a maximum of $10,000.
(iii) To the extent the Companys payment or reimbursement of any benefits or expenses provided pursuant to this Section 4(b) are required to be included in Executives income for income tax purposes or as wages for employment tax purposes, the Company will pay to Executive an amount necessary to gross up Executive for state, federal and local income and employment tax purposes (and for such taxes on such gross-up payment), which gross up amount shall be paid to Executive no later than the end of the applicable calendar year in which the benefit was provided or the expenses were incurred, as applicable.
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5. Termination . The Employment Term and Executives employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days advance written notice of any resignation of Executives employment (other than as a result of a Constructive Termination (as defined in Section 5(c)(ii))). Notwithstanding any other provision of this Agreement, the provisions of this Section 5 shall exclusively govern Executives rights upon termination of employment with the Company and its affiliates (other than with respect to Executives rights with respect to the investments and awards described in Section 3(c) which, notwithstanding anything in this Section 5 to the contrary, shall be governed by the terms and conditions of such investments and awards).
(a) By the Company For Cause or By Executive Other Than as a Result of a Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company for Cause and shall terminate automatically upon the effective date of Executives resignation other than as a result of a Constructive Termination (as defined in Section 5(c)(ii)).
(ii) For purposes of this Agreement, Cause shall mean (A) Executives theft or embezzlement of Company property, other than with respect to insignificant or immaterial amounts, as determined in the reasonable, good faith judgment of the Board, (B) any act or acts on Executives part that constitute a felony under the laws of the United States or any state thereof (provided, that if Executive is terminated for any action described in this clause (B), then (x) if charges are brought against Executive by a governmental authority relating to such act(s) and a court of competent jurisdiction (1) convicts Executive of a felony, then such termination shall be deemed a termination for Cause and the Company shall have the right to seek reimbursement from Executive for any payments made to Executive in connection with such termination of employment pursuant to Section 5 of this Agreement that Executive would otherwise not have been entitled pursuant to the terms of this Agreement if terminated for Cause or (2) fails to convict Executive of a felony, then such termination shall be deemed a termination without Cause and the Company or its subsidiaries shall pay to Executive any applicable payments or benefits provided for upon a termination of Executives employment without Cause (to the extent not previously provided) or (y) if no charges are brought against Executive by a governmental authority relating to such act(s), then the Company will have the burden to prove with clear and convincing evidence that such act(s) constituted a felony and, if publicly disclosed, would be injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries (and if the Company fails to meet such standard, the Company shall, in addition to providing any applicable payments and benefits provided for upon a termination of Executives employment without Cause (to the extent not previously provided), reimburse Executive for his reasonable legal fees in connection with such proceeding)), (C) Executives willful malfeasance or willful misconduct in connection with Executives duties hereunder which, in the reasonable, good faith judgment of the Board, is (1) injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries, (D) Executives breach of Section 6 of this Agreement or the representation in Section 10(j) or (E) Executives willful breach of Section 7 of this Agreement in a manner that adversely impacts the Company.
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(iii) If Executives employment is terminated by the Company for Cause or Executive resigns other than as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) no later than ten (10) days following the date of termination, the Base Salary through the date of termination;
(B) any Annual Bonus earned, but unpaid, as of the date of termination for the immediately preceding fiscal year, paid in accordance with Section 3(b) (except to the extent payment is otherwise deferred pursuant to any applicable deferred compensation arrangement with the Company, in which case such payment shall be made in accordance with the terms and conditions of such deferred compensation arrangement);
(C) reimbursement, within 60 days following receipt by the Company of Executives claim for such reimbursement (including appropriate supporting documentation), for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to Executives termination; provided that such claims for such reimbursement are submitted to the Company within 90 days following the date of Executives termination of employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms and conditions of such employee benefit plans (the amounts described in clauses (A) through (D) hereof being referred to as the Accrued Rights).
Following such termination of Executives employment by the Company for Cause, except as set forth in this Section 5(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b) Disability or Death .
(i) The Employment Term and Executives employment hereunder shall terminate upon Executives death and may be terminated by the Company if Executive becomes physically or mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an aggregate of twelve (12) months in any twenty-four (24) consecutive month period to perform Executives duties (such incapacity is hereinafter referred to as Disability). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third physician who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement.
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(ii) Upon termination of Executives employment hereunder for either Disability or death, Executive or Executives estate (as the case may be) shall be entitled to receive
(A) the Accrued Rights;
(B) no later than ten (10) days following the date of termination, a pro rata Annual Bonus equal to the product of (1) 60% of Executives Base Salary in effect immediately prior to the termination of employment and (2) a fraction, the numerator of which is the number of days during the fiscal year up to and including the date of termination of Executives employment and the denominator of which is 365 (the Pro-Rated Bonus); and
(C) for a period of twelve months following the date of termination, the Company shall continue to provide the Executive and the Executives eligible dependents with group health insurance coverage at least equal to that which would have been provided to Executive and Executives eligible dependents had Executives employment with the Company not been terminated; provided, however, that if the Executive becomes employed with another employer and is eligible to receive group health insurance coverage under such employers plans, the Companys obligation to provide such benefits shall be reduced or, if applicable, expire to the extent comparable coverage is actually available and provided to the Executive and Executives eligible dependents without charge.
Following Executives termination of employment due to death or Disability, except as set forth in this Section 5(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c) By the Company Without Cause or Resignation by Executive as a Result of Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company without Cause or by Executive as a result of a Constructive Termination. For purposes of the Agreement, in the event the Company elects not to extend the Employment Term in accordance with Section 1 hereof, Executives employment shall terminate on the last day of the Employment Term and such election shall be deemed a termination by the Company without Cause.
(ii) For purposes of this Agreement, a Constructive Termination shall be deemed to have occurred upon (A) a diminution in Executives Base Salary or Annual Bonus opportunity; (B) any material diminution in Executives authority, duties or responsibilities; (C) a relocation of Executives primary work location more than 35 miles without consent, (D) any material breach by the Company of this Agreement or (E) failure of the Company or its subsidiaries to pay or cause to be paid Executives Base Salary or Annual Bonus, when due; provided that none of the events described in this Section 5(c)(ii) shall constitute Constructive Termination unless the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Constructive Termination; provided, further, that Constructive Termination shall cease to exist for an event on the 90 th day
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following the later of its occurrence or Executives knowledge thereof, unless Executive has given the Board written notice thereof prior to such date. Notwithstanding anything herein to the contrary, for purposes of last proviso of the immediately foregoing sentence, a series of related events shall be deemed to have occurred on the date upon which the last event in such series of related events has occurred.
(iii) If Executives employment is terminated by the Company without Cause (other than by reason of death or Disability) or Executive resigns as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) the Pro-Rata Bonus;
(C) if such termination or resignation occurs prior to a Change in Control (as defined in the Amended and Restated Securityholders Agreement, dated as of September 26, 2008, among BH Hotels HoldCo LLC, Executive and such other parties (the Securityholders Agreement)), subject to Executives continued compliance with Section 6 hereof and Executives continued material compliance with Section 7 hereof, payment (payable in 12 monthly installments) in the aggregate equal to the amount, if any, by which the Applicable Severance Amount exceeds the applicable Call Price, as of the date of termination, of the vested portion of the Class B Units granted to Executive pursuant to Management Unit Subscription Agreement (Class B-1 Units and B-2 Units) to be entered into in connection with this Agreement (such agreement, the Subscription Agreement and such Class B Units, the Vested Profits Interests). Applicable Severance Amount means an amount equal to the sum of (i) Executives then applicable Base Salary (as of the termination date) and (ii) Executives Annual Bonus for the fiscal year immediately prior to the year of such termination. Call Price shall mean the price at which the Company or its affiliates has the right to purchase the Vested Profits Interests pursuant to the Securityholders Agreement and the Subscription Agreement (but regardless of whether such right is exercised); and
(D) for a period of twelve months following the date of termination, the Company shall continue to provide the Executive and the Executives eligible dependents with group health insurance coverage at least equal to that which would have been provided to Executive and Executives eligible dependents had Executives employment with the Company not been terminated; provided, however, that if the Executive becomes employed with another employer and is eligible to receive group health insurance coverage under such employers plans, the Companys obligation to provide such benefits shall be reduced or, if applicable, expire to the extent comparable coverage is actually available and provided to the Executive and Executives eligible dependents without charge.
Following Executives termination of employment by the Company without Cause (other than by reason of Executives death or Disability) or by Executives resignation as a result of a Constructive Termination, except as set forth in this Section 5(c)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
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(d) Release . Amounts payable and benefits provided to Executive under subparagraphs (B) and (C) of Section 5(b)(ii) or subparagraphs (B), (C) and (D) of Section 5(c)(iii) above, are subject to Executive and the Company executing a release of claims, substantially in the form attached hereto as Exhibit I, within forty-five (45) days of the date of termination (the Release Period). Any payment that otherwise would be made prior to Executives delivery of such executed release shall be paid to the Executive on the first business day following the conclusion of the Release Period; provided that any in-kind benefit shall continue in effect after separation from service pending the execution and delivery of such release. If the Company fails to countersign the form attached hereto as Exhibit I, then the condition described in the foregoing sentence shall be deemed waived by the Company.
(e) Notice of Termination . Any purported termination of employment by the Company or by Executive (other than due to Executives death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
(f) Board/Committee Resignation . Upon termination of Executives employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Companys affiliates.
(g) Forfeiture . Any determination under this Section 5 of whether Executive is in compliance with Section 6 hereof and material compliance with Section 7 hereof shall be determined based solely on the contractual provisions provided therein and the facts and circumstances of Executives actions without regard to whether the Company could obtain an injunction or other relief under the law of any particular jurisdiction.
6. Non-Competition.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and, for a period of one year following the date Executive ceases to be employed by the Company (the Restricted Period), Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (Person), directly or indirectly solicit or assist in soliciting in competition with the Restricted Group (defined below) in the Business (defined below), the business of any then current or prospective client or customer with whom Executive (or his direct reports) had personal contact or dealings on behalf of the Company during the one-year period preceding Executives termination of employment.
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(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in the Business for a Competitor in any geographical area that is within 25 miles of any geographical area where the Restricted Group engages in the Business;
(B) enter the employ of, or render any services to, a Competitor, except where such employment or services do not relate in any manner to the Business;
(C) acquire a financial interest in, or otherwise become actively involved with, a Competitor, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(D) intentionally and adversely interfere with, or attempt to adversely interfere with, business relationships between the members of the Restricted Group and any of their clients, customers, suppliers, partners, members or investors;
provided that this Section 6(a)(ii) shall cease to apply during any time that The Blackstone Group L.P. and its affiliated investment funds beneficially own less than 25% of the voting power of the Company.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly, own, solely as an investment, securities of any Person engaged in a Business (including, without limitation, a Competitor (defined below)) which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 2% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit or encourage any executive-level employee of the Restricted Group to leave the employment of the Restricted Group; or
(B) hire any such executive-level employee who was employed by the Restricted Group as of the date of Executives termination of employment with the Company or who left the employment of the Restricted Group coincident with, or within one year prior to or after, the termination of Executives employment with the Company.
(v) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly and intentionally encourage any material consultant of the Restricted Group to cease working with the Restricted Group.
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(vi) For purposes of this Agreement:
(A) Restricted Group shall mean, collectively, the Company and its subsidiaries and, to the extent engaged in the Business, their respective affiliates (including The Blackstone Group L.P. and its affiliates).
(B) Business shall mean the business of acquiring controlling investments in, owning, operating, managing or franchising hotel and lodging properties and timeshares.
(C) Competitor shall mean (x) during the Employment Term and, for a period of six months following the date Executive ceases to be employed by the Company, any person engaged in the Business and (y) thereafter, any major global hotel brand engaged in the Business (but, for the avoidance of doubt, excluding any private equity firm engaged in the Business).
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) The period of time during which the provisions of this Section 6 shall be in effect shall be extended by the length of time during which Executive is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
7. Confidentiality; Intellectual Property.
(a) Confidentiality .
(i) Executive will not at any time (whether during or after Executives employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or otherwise in performance of Executives duties hereunder and pursuant to customary industry practice), any non-public, proprietary or confidential information including, without limitation, trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (Confidential Information) without the prior written authorization of the Board.
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(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executives breach of this covenant; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation of which Executive has knowledge; or (c) required by law to be disclosed; provided that with respect to subsection (c) Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Executive will not disclose to anyone, other than Executives family (it being understood that, in this Agreement, the term family refers to Executive, Executives spouse, minor children, parents and spouses parents) and advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 6 and 7 of this Agreement. This Section 7(a)(iii) shall terminate if the Company publicly discloses a copy of this Agreement (or, if the Company publicly discloses summaries or excerpts of this Agreement, to the extent so disclosed).
(iv) Upon termination of Executives employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including, without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; and (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executives possession or control (including any of the foregoing stored or located in Executives office, home, laptop or other computer, whether or not Company property) that contain Confidential Information, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.
(b) Intellectual Property .
(i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including, without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (Works), either alone or with third parties, prior to Executives employment by the Company, that are relevant to or implicated by such employment (Prior Works), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Companys current and future business.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executives employment by the
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Company and within the scope of such employment and with the use of any the Company resources (Company Works), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.
(iii) Executive shall take all reasonably requested actions and execute all reasonably requested documents (including any licenses or assignments required by a government contract) at the Companys expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior Works and Company Works. If the Company is unable for any other reason, after reasonable attempt, to secure Executives signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executives agent and attorney in fact, to act for and in Executives behalf and stead to execute any documents and to do all other lawfully permitted acts required in connection with the foregoing.
(iv) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company that are from time to time previously disclosed to Executive, including regarding the protection of Confidential Information and intellectual property and potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version from time to time previously disclosed to Executive.
(v) The provisions of Section 7 hereof shall survive the termination of Executives employment for any reason (except as otherwise set forth in Section 7(a)(iii) hereof).
8. Specific Performance . Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of Section 6 of this Agreement (or a material breach or material threatened breach of any of the provisions of Section 7 of this Agreement) would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
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9. Indemnification .
(a) The Company agrees that if Executive is made a party (including, without limitation, being called as a witness or otherwise being asked to testify) or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding), other than any Proceeding related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or any related matters, including Executives employment relationship or his equity holdings, by reason of the fact that Executive is or was a director or officer of the Company, or any subsidiary of the Company or is or was serving at the request of the Company, as a director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law from and against any and all liabilities, costs, claims and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys fees). Costs and expenses incurred by Executive in defense of such Proceeding (including attorneys fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of (a) a written request for payment, (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought, and (c) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so paid if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company under this Agreement. The Company and Executive will consult in good faith with respect to the conduct of any Proceeding. If the Company or any of its successors or assigns consolidates with or merges into any other entity or transfers all or substantially all of its properties or assets, then in each such case, proper provisions shall be made so that the successors or assigns of the Company shall assume all of the obligations set forth in this Section 9.
(b) During the Employment Term and for a term of six years thereafter, the Company, or any successor to the Company shall purchase and maintain, at its own expense, directors, and officers, liability insurance providing coverage for Executive in the same amount as the other senior executive officers of the Company.
(c) During the Employment Term and for a term of six years thereafter, the Company shall provide Executive with copies of all binders and policies issued in connection with any directors and officers liability insurance affording coverage to Executive, within 30 days following Executives request for such documents.
10. Miscellaneous.
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.
(b) Entire Agreement/Amendments . This Agreement (including, without limitation, the schedules and exhibits attached hereto) contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to
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the subject matter herein other than those expressly set forth herein. This Agreement (including, without limitation, the schedules and exhibits attached hereto) may not be altered, modified, or amended except by written instrument signed by the parties hereto.
(c) No Waiver . The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d) Severability . In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment . This Agreement, and all of Executives rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.
(f) Set-Off; No Mitigation . The Companys obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates, except to the extent such set-off would result in a violation of Section 409A of the Code (as defined below). Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment, and such payments shall not be reduced by any compensation or benefits received from any subsequent employer or other endeavor.
(g) Compliance with IRC Section 409A . Notwithstanding anything herein to the contrary, (i) if at the time of Executives termination of employment with the Company Executive is a specified employee as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payments to which Executive would otherwise be entitled during the first six months following his termination of employment shall be deferred and accumulated (without any reduction in such payments or benefits ultimately paid or provided to Executive) for a period of six months from the date of termination of employment and paid in a lump sum on the first day of the seventh month following such termination of employment (or, if earlier, the date of Executives death), together with interest during such period at a rate computed by adding 2.00% to the Prime Rate as published in the Money Rates section of The Wall Street Journal, or other equivalent publication if The Wall Street Journal no longer publishes such information, on the first publication date of The Wall Street Journal or equivalent publication after the date that such payment would otherwise have been made if not for this provision (provided that if more than
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one such Prime Rate is published on such date, the highest of such published rates shall be used) and (ii) if any other payments of money or other benefits due to Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax. Furthermore, the Company intends that this Agreement shall comply with Section 409A and shall be interpreted, operated and administered accordingly.
(h) Successors; Binding Agreement . This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(i) Notice . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
Hilton Worldwide, Inc.
7930 Jones Branch Drive
Suite 110
McLean, Virginia 22102
Attention: Christopher Nassetta, Chief Executive Officer
with a copy to:
The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Jonathan Gray
and
Simpson Thacher & Bartlett LLP
425 Lexington Avenue,
New York, New York 10017
Attention: Gregory T. Grogan
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If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Michael Albano
(j) Executive Representation . Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executives duties hereunder shall not constitute a breach of the terms of any employment agreement or other agreement or written policy to which Executive is a party or otherwise bound.
(k) Prior Agreements . This Agreement (including, without limitation, the schedules and exhibits attached hereto) supersedes all prior agreements and understandings (including the Prior Agreements and any verbal agreements) between Executive and the Company and/or its affiliates (other than the Relocation Letter) regarding the terms and conditions of Executives employment with the Company and/or its affiliates (collectively, the Prior Agreements).
(l) Legal Fees . The Company shall pay Executives reasonable legal fees and costs associated with negotiating and entering into this Agreement in a timely manner upon receipt from Executive of the appropriate documentation; provided, however, in no event shall such payment exceed $10,000.
(m) Cooperation . Executive shall provide Executives reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment hereunder; provided the Company shall pay Executive a reasonable per diem for his services and shall coordinate with the scheduling of Executive so as to reasonably minimize the extent to which such cooperation interferes with his other full-time employment and business activities. This provision shall survive any termination of this Agreement, without implication of the survival of any other provision of this Agreement.
(n) Withholding Taxes . The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(o) Section 280G . If the Company is not an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, Executive and the Company shall use their respective best efforts to avoid the imposition of the excise tax imposed by Section 4999 of the Code or a loss of deductibility under Section 280G of the Code, including, to the extent Executive agrees to waive his entitlement to potential parachute payments (as defined under Regulation 1.280G), the Company shall seek to obtain stockholder approval thereof in accordance with the terms of Section 280G(b)(5) of the Code.
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(p) Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
(Remainder of page intentionally left blank.)
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
HILTON WORLDWIDE, INC. | ||
/s/ Christopher Nassetta |
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By: | Christopher Nassetta | |
Title: | President and Chief Executive Officer | |
EXECUTIVE | ||
/s/ Ian R. Carter |
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Ian R. Carter |
Exhibit I
RELEASE
In exchange for a portion of the benefits described in the Employment Agreement dated January 1, 2010, (the Agreement), to which I agree I am not otherwise entitled, I hereby release HILTON WORLDWIDE, INC. (the Company), its respective affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, stockholders, attorneys, and insurers, past, present and future (the Released Parties) from any and all claims of any kind which I now have or may have against the Released Parties, whether known or unknown to me, by reason of facts which have occurred on or prior to the date that I have signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including the Age Discrimination in Employment Act of 1967, as amended, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq ., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq ., the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Section 12101 et seq ., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq ., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq ., the Family and Medical Leave Act of 1993, 29 U.S.C. Section 2601 et seq ., Section 1541 of the California Civil Code and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of my employment with the Company, as well as any and all claims under state contract or tort law or otherwise.
I have read Section 1542 of the California Civil Code, which states in full:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
I expressly waive any rights that I may have under Section 1542 to the full extent that I may lawfully waive such rights pertaining to a general release of claims, and I affirm that I am releasing all known or unknown claims that I have or may have against the Company or any of the Released Parties as stated in this Release.
I hereby represent that I have not filed any action, complaint, charge, grievance or arbitration against the Company or the Released Parties.
I expressly understand and agree that the Companys obligations under this Release are in lieu of any and all other amounts to which I might be, am now or may become entitled to receive from any of the Released Parties upon any claim whatsoever.
I understand that I must not disclose the terms of this Release to anyone other than my immediate family and advisors, that I must immediately inform my immediate family, financial advisors (if any) and legal counsel that they are prohibited from disclosing the terms of this
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Release; provided that the restrictions of this paragraph shall terminate if the Company publicly discloses a copy of this Release (or, if the Company publicly discloses summaries or excerpts of this Release, to the extent so disclosed).
I have read this Release carefully, acknowledge that I have been given at least 21 days to consider all of its terms, and have been advised to consult with an attorney and any other advisors of my choice prior to executing this Release. I also understand that I have a period of seven days after signing this Release within which to revoke my agreement, and that neither the Company nor any other person is obligated to provide any benefits to me pursuant to the Agreement until eight days have passed since my signing of this Release without my signature having been revoked. I understand that any revocation of this Release must be received by the General Counsel of the Company within the seven-day revocation period. Finally, I have not been forced or pressured in any manner whatsoever to sign this Release, and I agree to all of its terms voluntarily. I represent and acknowledge that no representation, statement, promise, inducement, threat or suggestion has been made by any of the Released Parties or by any other individual to influence me to sign this Release except such statements as are expressly set forth herein or in the Agreement.
I fully understand that this Release is a legally binding document and that by signing this Release I am prevented from filing, commencing or maintaining any action against the Company or the Released Parties.
The Company hereby acknowledges that, as of the effective date of this Release, its board of directors (excluding, if applicable, you) has no actual knowledge of any legal claims against you or a set of facts that collectively would give rise to Cause under the Agreement. If, following the Companys counter-signature of this Release, a Released Party commences any legal action against you with regard to your employment or otherwise and fails to obtain a successful judgment against you in such legal action, the Company shall reimburse you for your reasonable out-of-pocket legal fees and expenses in defending such action. Notwithstanding anything to the contrary herein, in the event that a Released Party commences an action against you, you may raise any claim you may have as a counterclaim or defense in such action.
This Release is final and binding and may not be changed or modified except by written agreement by both the Company and you.
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DATE | Ian R. Carter | |||
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DATE | Hilton Worldwide, Inc. |
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Exhibit 10.23
Execution Version
EMPLOYMENT AGREEMENT
(Paul Brown)
EMPLOYMENT AGREEMENT (the Agreement) dated November 13, 2008 by and between HILTON HOTELS CORPORATION (the Company) and PAUL BROWN (Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of such employment;
Executive desires to accept such employment and enter into such an agreement;
In consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:
1. Term of Employment . Subject to the provisions of Section 5 of this Agreement, Executive shall be employed by the Company for a period commencing on December 1, 2008 (or such earlier date as Executive and the Company mutually agree upon) (the Effective Date) and ending on the fifth anniversary of the Effective Date (the Employment Term) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing with the fifth anniversary of the Effective Date and on each such successive anniversary of the Effective Date thereafter (each an Extension Date), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the next Extension Date that the Employment Term shall not be so extended. Executive agrees, promptly following execution of this Agreement, to give notice of his resignation from his current principal employer.
2. Position.
(a) During the Employment Term, Executive shall serve as an Executive Vice President of the Company and President, Global Brands and Shared Services of the Company. In such position, Executive shall report directly to the Companys Chief Executive Officer and shall have such duties and authority as shall be determined from time to time by the Chief Executive Officer and the Board of Directors of the Company (the Board). If requested, Executive shall also serve as a member of the Board or other governing bodies of the Company or its subsidiaries without additional compensation.
(b) Unless otherwise mutually agreed to by Executive and the Company, for the period commencing on the Effective Date and ending when the Company establishes the permanent location for Executives position (the Initial Period), Executives principal place of employment shall be the Companys headquarters in the Los Angeles metropolitan area (the Initial Principal Place of Employment). After the Initial Period, Executive shall relocate his primary personal residence, and principal place of employment to a location determined by the Chief Executive Officer and the Board (the Subsequent Principal Place of Employment), where he shall spend his full working time in the performance of his duties (subject to customary travel consistent with Executives duties).
(c) During the Employment Term, Executive will devote his full working time and reasonable best efforts to the performance of Executives duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Board; provided that nothing herein shall preclude Executive from (i) serving as trustee for certain trusts maintained by personal friends, (ii) accepting appointment to or continuing to serve on any board of directors or trustees of any business corporation, including without limitation, those directorships set forth on Schedule A attached hereto, (iii) serving as an officer or director or otherwise participating in non-profit educational, welfare, social, religious and civil organizations, including, without limitation, all such positions and participation in effect as of the Effective Date, and (iv) managing personal and family investments; provided, however, that any such activities as described in (i), (ii), (iii) or (iv) of the preceding provisions of this paragraph do not significantly interfere with the performance and fulfillment of the Executives duties and responsibilities as an executive of the Company in accordance with this Agreement or conflict with Section 6.
3. Compensation.
(a) Base Salary . During the Employment Term, the Company shall pay Executive a base salary (Base Salary) at the annual rate of $600,000, payable in regular installments in accordance with the Companys usual payment practices. Executive shall be entitled to such increases in Executives Base Salary, if any, as may be determined from time to time in the sole discretion of the Board, but in no event shall the Company be entitled to reduce Executives Base Salary.
(b) Annual Bonus . During the Employment Term, Executive shall be eligible to earn an annual bonus award (an Annual Bonus) based on the achievement of performance objectives and targets (including the level of achievement required for Executive to earn the threshold, target and high performance objectives) adopted by the Board within the first three months of each fiscal year during the Employment Term (it being understood that such performance objectives and targets generally will correspond to those established for other members of senior management). During each fiscal year, the minimum bonus payable to Executive if the minimum performance objectives and targets are achieved will be 60% of Executives Base Salary, the target bonus will be 75% of Executives Base Salary if target performance objectives and targets are achieved and the maximum bonus payable to Executive will be 112.5% of Base Salary if high performance objectives and targets are achieved. The Annual Bonus, if any, shall be paid to Executive within two and one-half (2.5) months after the end of the applicable fiscal year; provided that if the applicable performance objectives and targets have not been verified by audit by such time, then the Annual Bonus shall be payable within 10 days of such verification but no later than December 31 of such year. No Annual Bonus shall be payable in respect of 2008 or any fiscal year in which Executives employment is terminated (except to the extent expressly provided in Section 5(b) and Section 5(c)).
(c) Make-whole Payment . No later than ten (10) business days following the Effective Date, the Company shall pay to the Executive, in a cash lump sum, $500,000 (the Make-whole Payment); provided, however, in the event that, prior to the second anniversary of the Effective Date, the Executives employment is terminated by the Company with Cause or by Executive other than as a result of a Constructive Termination, then Executive shall repay to the Company the entire amount of the Make-whole Payment.
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4. Benefits.
(a) General . During the Employment Term, Executive shall be entitled to participate in the Companys employee benefit plans (other than annual bonus and incentive plans and severance plans, the benefits for which will be determined instead in accordance with this Agreement) as in effect from time to time (collectively Employee Benefits), on the same basis as those benefits are generally made available to other senior executives of the Company, including, without limitation, that Executive shall be entitled to four weeks of paid vacation per calendar year in accordance with the Companys vacation policy as may be in effect from time to time (but excluding participation in the Companys executive vehicle use/allowance program, which is being discontinued for new executives).
(b) Other Benefits . During the Employment Term:
(i) the Company shall reimburse Executive for the cost of continuing coverage for Executive and his immediate family members under Executives current medical and dental group health plans pursuant to COBRA until such time as the Executive and his immediate family members are eligible for full coverage under the applicable medical and dental plans of the Company, with such reimbursement being made as soon as reasonably practicable following Executives incurring the expense, but in no event later than the end of the calendar year immediately following the calendar year in which such expense was incurred;
(ii) during the Initial Period, the Company shall provide, at no cost to Executive, (A) mutually agreeable temporary housing near the Initial Principal Place of Employment for Executive and Executives family; (B) notwithstanding anything in Section 4(a) above to the contrary, a car allowance as per the terms and conditions of the Companys executive car allowance practice with respect to the Companys executives in the United States and (C) professional real estate rental and home finding services (with knowledge of the greater Los Angeles area); provided that in no event shall the cost of such accommodation, allowance and services exceed $8,000 per month (excluding the value of any gross-up provided for in Section 4(b)(vi) below). Until such temporary housing location is available, the Company shall provide Executive and Executives immediate family with accommodations in one of the Companys hotels in or near the metropolitan Los Angeles area;
(iii) during the Initial Period, the Company shall pay or reimburse Executive for reasonable travel and commutation expenses, up to $5,000 per month, for travel to and from Seattle, Washington to the Companys headquarters for Executive and Executives immediate family; provided that such payment shall cease at such time that Executive relocates his primary personal residence to a location near the Companys headquarters;
(iv) Following the Initial Period, pursuant to the terms and conditions of the Companys domestic relocation policy, the Company shall reimburse Executive for reasonable and customary relocation expenses directly related to Executives relocation from both the Executives temporary housing in or near the Initial Principal Place of Employment and the
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Executives current primary residence in Seattle, Washington, to a permanent residence located in or near the Subsequent Principal Place of Employment; provided, that reimbursement for relocation expenses related to the items listed on Appendix A shall be subject to pre-approval by the Chief Executive Officer following Executives submission of cost estimates for such services to the Chief Executive Officer. In addition, the Company shall provide Executive with assistance for a suitable introduction and orientation to the area of the Subsequent Principal Place of Employment in order to facilitate the timely applications for school enrollment of Executives children;
(v) Executive and Executives immediate family shall be able to stay at any Company branded hotels free of charge; and
(vi) the Company shall reimburse Executive on a grossed up basis for all taxes incurred in connection with the benefits and payments provided pursuant to this Section 4(b) and any income imputed to Executive as a result of the use of the Companys aircraft for personal and/or business travel by Executive and/or Executives family (subject to such usage being approved by the Companys Chief Executive Officer). Any such gross-up shall be paid to Executive as soon as possible after the related taxes are incurred but in no event later than the end of Executives taxable year next following Executives taxable year in which Executive remitted the related taxes.
5. Termination . The Employment Term and Executives employment hereunder may be terminated by either party at any time and for any reason; provided that Executive will be required to give the Company at least 60 days advance written notice of any resignation of Executives employment (other than as a result of a Constructive Termination). Notwithstanding any other provision of this Agreement, the provisions of this Section 5 shall exclusively gover] Executives rights upon termination of employment with the Company and its affiliates (other than with respect to Executives rights with respect to Executives investments and equity-based awards which, notwithstanding anything in this Section 5 to the contrary, shall be governed by the terms and conditions of such investments and awards).
(a) By the Company For Cause or By Executive Other Than as a Result of a Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company for Cause and shall terminate automatically upon the effective date of Executives resignation other than as result of a Constructive Termination (as defined in Section 5(c)(ii)).
(ii) For purposes of this Agreement, Cause shall mean (A) Executives theft or embezzlement of Company property, other than with respect to insignificant or immaterial amounts, as determined in the reasonable, good faith judgment of the Board, (B) any act or acts on Executives part that constitute a felony under the laws of the United States or any state thereof (provided, that if Executive is terminated for any action described in this clause (B), then (x) if charges are brought against the Executive by a governmental authority relating to such act(s) and a court of competent jurisdiction (1) convicts Executive of a felony, then such termination shall be deemed a termination for Cause and the Company shall have the right to
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seek reimbursement from Executive for any payments made to Executive in connection with such termination of employment pursuant to Section 5 of this Agreement that Executive would otherwise not have been entitled pursuant to the terms of this Agreement if terminated for Cause or (2) fails to convict Executive of a felony, then such termination shall be deemed a termination without Cause and the Company or its subsidiaries shall pay to Executive any applicable payments or benefits provided for upon a termination of Executives employment without Cause (to the extent not previously provided) or (y) if no charges are brought against Executive by a governmental authority relating to such act(s), then the Company will have the burden to prove with clear and convincing evidence that such act(s) constituted a felony and, if publicly disclosed, would be injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries (and if the Company fails to meet such standard, the Company shall, in addition to providing any applicable payments and benefits provided for upon a termination of Executives employment without Cause (to the extent not previously provided), reimburse Executive for his reasonable legal fees in connection with such proceeding)), (C) Executives willful malfeasance or willful misconduct in connection with Executives duties hereunder which, in the reasonable, good faith judgment of the Board, is (1) injurious to the financial condition of the Company or its subsidiaries to the extent impacting the Company or its subsidiaries by in excess of $1,000,000 or (2) materially injurious to the business reputation of the Company or any of its subsidiaries, (D) Executives breach of Section 6 of this Agreement or the representation in Section 10(j) or (E) Executives willful breach of Section 7 of this Agreement in a manner that adversely impacts the Company.
(iii) If Executives employment is terminated by the Company for Cause or Executive resigns other than as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) no later than ten (10) days following the date of termination, the Base Salary through the date of termination;
(B) any Annual Bonus earned, but unpaid, as of the date of termination for the immediately preceding fiscal year, paid in accordance with Section 3(b) (except to the extent payment is otherwise deferred pursuant to any applicable deferred compensation arrangement with the Company, in which case such payment shall be made in accordance with the terms and conditions of such deferred compensation arrangement);
(C) reimbursement, within 60 days following receipt by the Company of Executives claim for such reimbursement (including appropriate supporting documentation), for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to Executives termination; provided that such claims for such reimbursement are submitted to the Company within 90 days following the date of Executives termination of employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms and conditions of such employee benefit plans (the amounts described in clauses (A) through (D) hereof being referred to as the Accrued Rights).
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Following such termination of Executives employment by the Company for Cause, except as set forth in this Section 5(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b) Disability or Death .
(i) The Employment Term and Executives employment hereunder shall terminate upon Executives death and may be terminated by the Company if Executive becomes physically or mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an aggregate of twelve (12) months in any twenty-four (24) consecutive month period to perform Executives duties (such incapacity is hereinafter referred to as Disability). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third physician who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement.
(ii) Upon termination of Executives employment hereunder for either Disability or death, Executive or Executives estate (as the case may be) shall be entitled to receive:
(A) the Accrued Rights;
(B) no later than ten (10) days following the date of termination, a pro rata Annual Bonus equal to the product of (1) 75% of Executives Base Salary in effect immediately prior to the termination of employment and (2) a fraction, the numerator of which is the number of days during the fiscal year up to and including the date of termination of Executives employment and the denominator of which is 365 (the Pro-Rated Bonus); and
(C) for a period of twenty four months following the date of termination, the Company shall continue to provide the Executive and the Executives eligible dependents with group health insurance coverage at least equal to that which would have been provided to Executive and Executives eligible dependents had Executives employment with the Company not been terminated; provided, however, that if the Executive becomes employed with another employer and is eligible to receive group health insurance coverage under such employers plans, the Companys obligation to provide such benefits shall be reduced or, if applicable, expire to the extent comparable coverage is actually available and provided to the Executive and Executives eligible dependents without charge.
Following Executives termination of employment due to death or Disability, except as set forth in this Section 5(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
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(c) By the Company Without Cause or Resignation by Executive as a Result of Constructive Termination .
(i) The Employment Term and Executives employment hereunder may be terminated by the Company without Cause or by Executive as a result of a Constructive Termination. For purposes of the Agreement, in the event the Company elects not to extend the Employment Term in accordance with Section 1 hereof, Executives employment shall terminate on the last day of the Employment Term and such election shall be deemed a termination by the Company without Cause.
(ii) For purposes of this Agreement, a Constructive Termination shall be deemed to have occurred upon (A) a diminution in Executives Base Salary or Annual Bonus opportunity; (B) any material diminution in Executives authority, duties or responsibilities (including, without limitation, requiring Executive to report to anyone other than the Chief Executive Officer of the Company and/or the Board); (C) any material breach by the Company of this Agreement; (D) a relocation of Executives primary work location more than 35 miles without consent, or (E) failure of the Company or its subsidiaries to pay or cause to be paid Executives Base Salary or Annual Bonus, when due, or to permit Executive to make an investment or grant any equity-based awards to which Executive is entitled; provided that (i) the relocation of Executives primary work location in connection with the relocation of the Companys headquarters shall not constitute Constructive Termination and (ii) none of the events described in this Section 5(c)(ii) shall constitute Constructive Termination unless the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Constructive Termination; provided, further, that Constructive Termination shall cease to exist for an event on the 90 th day following the later of its occurrence or Executives knowledge thereof, unless Executive has given the Board written notice thereof prior to such date. Notwithstanding anything herein to the contrary, for purposes of last proviso of the immediately foregoing sentence, a series of related events shall be deemed to have occurred on the date upon which the last event in such series of related events has occurred.
(iii) If Executives employment is terminated by the Company without Cause (other than by reason of death or Disability) or Executive resigns as a result of a Constructive Termination, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) the Pro-Rata Bonus;
(C) if such termination or resignation occurs prior to a Change in Control (as defined in the Amended and Restated Securityholders Agreement, dated as of September 26, 2008, among BH Hotels Holdco LLC, Executive and such other parties (the Securityholders Agreement)), subject to Executives continued compliance with Section 6 hereof and Executives continued material compliance with Section 7 hereof, payment (payable in 24 monthly installments) in the aggregate equal to the amount, if any, by which the Applicable Severance Amount exceeds the applicable Call Price, as of the date of termination, of the vested portion of the Class B Units granted to Executive pursuant to Management
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Unit Subscription Agreement (Class B-1 Units and B-2 Units) to be entered into in connection with this Agreement (such agreement, the Subscription Agreement and such Class B Units, the Vested Profits Interests). Applicable Severance Amount means an amount equal to two times the sum of (i) Executives then applicable Base Salary (as of the termination date) and (ii) Executives Annual Bonus for the fiscal year immediately prior to the year of such termination (provided that in respect of any such termination or resignation that occurs in calendar year 2008 or 2009, Executives Annual Bonus shall be deemed to be, for this purpose, 75% of Executives then applicable Base Salary). Call Price shall mean the price at which the Company or its affiliates has the right to purchase the Vested Profits Interests pursuant to the Securityholders Agreement and the Subscription Agreement (but regardless of whether such right is exercised); and
(D) for a period of 24 months following the date of termination, the Company shall continue to provide the Executive and the Executives eligible dependents with group health insurance coverage at least equal to that which would have been provided to Executive and Executives eligible dependents had Executives employment with the Company not been terminated; provided, however, that if the Executive becomes employed with another employer and is eligible to receive group health insurance coverage under such employers plans, the Companys obligation to provide such benefits shall be reduced or, if applicable, expire to the extent comparable coverage is actually available and provided to the Executive and Executives eligible dependents without charge.
Following Executives termination of employment by the Company without Cause (other than by reason of Executives death or Disability) or by Executives resignation as a result of a Constructive Termination, except as set forth in this Section 5(c)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d) Release . Amounts payable and benefits provided to Executive under subparagraphs (B) and (C) of Section 5(b)(ii) or subparagraphs (B), (C) and (D) of Section 5(c)(iii) above, are subject to Executive and the Company executing a release of claims, substantially in the form attached hereto as Exhibit I, within forty-five (45) days of the date of termination (the Release Period). Any payment that constitutes non-qualified deferred compensation subject to Section 409A of the Code (as defined below) and that otherwise would be made prior to Executives delivery of such executed release shall be paid to the Executive on the first business day following the conclusion of the Release Period; provided that any in kind benefit shall continue in effect after separation from service pending the execution and delivery of such release. If the Company fails to countersign the form attached hereto as Exhibit I, then the condition described in the foregoing sentence shall be deemed waived by the Company.
(e) Notice of Termination . Any purported termination of employment by the Company or by Executive (other than due to Executives death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
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(f) Board/Committee Resignation . Upon termination of Executives employment for any reason, Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Companys affiliates.
(g) Forfeiture . Any determination under this Section 5 of whether the Executive is in compliance with Section 6 hereof and material compliance with Section 7 hereof shall be determined based solely on the contractual provisions provided therein and the facts and circumstances of Executives actions without regard to whether the Company could obtain an injunction or other relief under the law of any particular jurisdiction.
6. Non-Competition.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and, for a period of one year following the date Executive ceases to be employed by the Company (the Restricted Period), Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (Person), directly or indirectly solicit or assist in soliciting in competition with the Restricted Group in the Business, the business of any then current or prospective client or customer with whom Executive (or his direct reports) had personal contact or dealings on behalf of the Company during the one-year period preceding Executives termination of employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in the Business for a Competitor in any geographical area that is within 25 miles of any geographical area where the Restricted Group engages in the Business;
(B) enter the employ of, or render any services to, a Competitor, except where such employment or services do not relate in any manner to the Business;
(C) acquire a financial interest in, or otherwise become actively involved with, a Competitor, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(D) intentionally and adversely interfere with, or attempt to adversely interfere with, business relationships between the members of the Restricted Group and any of their clients, customers, suppliers, partners, members or investors.
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provided that this Section 6(a)(ii) shall cease to apply during any time that The Blackstone Group L.P. and its affiliated investment funds beneficially own less than 25% of the voting power of the Company.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, (A) directly or indirectly own, solely as an investment, securities of any Person engaged in a Business (including, without limitation, a Competitor) which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 2% or more of any class of securities of such Person or (B) enter the employ of any private law firm and, in such capacity, render services to any Competitor of the Business (so long as services for a single Competitor (together with its Affiliates) of the Business do not represent all or substantially all of the services provided by Executive at such law firm).
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit or encourage any executive-level employee of the Restricted Group to leave the employment of the Restricted Group; or
(B) hire any such executive-level employee who was employed by the Restricted Group as of the date of Executives termination of employment with the Company or who left the employment of the Restricted Group coincident with, or within one year prior to or after, the termination of Executives employment with the Company.
(v) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly and intentionally encourage any material consultant of the Restricted Group to cease working with the Restricted Group.
(vi) For purposes of this Agreement:
(A) Restricted Group shall mean, collectively, the Company and its subsidiaries and, to the extent engaged in the Business, their respective affiliates (including The Blackstone Group L.P. and its affiliates).
(B) Business shall mean the business of acquiring controlling investments in, owning, operating, managing or franchising hotel and lodging properties and timeshares.
(C) Competitor shall mean (x) during the Employment Term and, for a period of six months following the date Executive ceases to be employed by the Company, any person engaged in the Business and (y) thereafter, any major global hotel brand engaged in the Business (but, for the avoidance of doubt, excluding any private equity firm engaged in the Business).
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 6 to be reasonable, if a final judicial
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determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) The period of time during which the provisions of this Section 6 shall be in effect shall be extended by the length of time during which Executive is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
7. Confidentiality; Intellectual Property.
(a) Confidentiality .
(i) Executive will not at any time (whether during or after Executives employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or otherwise in performance of Executives duties hereunder and pursuant to customary industry practice), any non-public, proprietary or confidential information (including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals) concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (Confidential Information) without the prior written authorization of the Board.
(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executives breach of this covenant; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation of which Executive has knowledge; or (c) required by law to be disclosed; provided that with respect to subsection (c) Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Executive will not disclose to anyone, other than Executives family (it being understood that, in this Agreement, the term family refers to Executive, Executives spouse, minor children, parents and spouses parents) and advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective
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future employer the provisions of Sections 6 and 7 of this Agreement. This Section 7(a)(iii) shall terminate if the Company publicly discloses a copy of this Agreement (or, if the Company publicly discloses summaries or excerpts of this Agreement, to the extent so disclosed).
(iv) Upon termination of Executives employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; and (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executives possession or control (including any of the foregoing stored or located in Executives office, home, laptop or other computer, whether or not Company property) that contain Confidential Information, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.
(b) Intellectual Property .
(i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (Works), either alone or with third parties, prior to Executives employment by the Company, that are relevant to or implicated by such employment (Prior Works), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Companys current and future business.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executives employment by the Company and within the scope of such employment and with the use of any the Company resources (Company Works), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.
(iii) Executive shall take all reasonably requested actions and execute all reasonably requested documents (including any licenses or assignments required by a government contract) at the Companys expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior Works and Company Works. If the Company is unable for any other reason, after reasonable attempt, to secure Executives signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executives agent and attorney in fact, to act for and in Executives behalf and stead to execute any documents and to do all other lawfully permitted acts required in connection with the foregoing.
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(iv) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company that are from time to time previously disclosed to Executive, including regarding the protection of Confidential Information and intellectual property and potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version from time to time previously disclosed to Executive.
(v) The provisions of Section 7 hereof shall survive the termination of Executives employment for any reason (except as otherwise set forth in Section 7(a)(iii) hereof).
8. Specific Performance . Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of Section 6 of this Agreement (or a material breach or material threatened breach of any of the provisions of Section 7 of this Agreement) would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
9. Indemnification .
(a) The Company agrees that if Executive is made a party (including, without limitation, being called as a witness or otherwise being asked to testify) or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding), other than any Proceeding related to any contest or dispute between Executive and the Company or any of its affiliates with respect to this Agreement or any related matters, including Executives employment relationship or his equity holdings, by reason of the fact that Executive is or was a director or officer of the Company, or any subsidiary of the Company or is or was serving at the request of the Company, as a director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law from and against any and all liabilities, costs, claims and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys fees). Costs and expenses incurred by Executive in defense of such Proceeding (including attorneys fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of (a) a written request for payment, (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought, and (c) an undertaking adequate under applicable law made by or on behalf of Executive to repay the
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amounts so paid if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company under this Agreement. The Company and Executive will consult in good faith with respect to the conduct of any Proceeding. If the Company or any of its successors or assigns consolidates with or merges into any other entity or transfers all or substantially all of its properties or assets, then in each such case, proper provisions shall be made so that the successors or assigns of the Company shall assume all of the obligations set forth in this Section 9.
(b) During the Employment Term and for a term of six years thereafter, the Company, or any successor to the Company shall purchase and maintain, at its own expense, directors and officers liability insurance providing coverage for Executive in the same amount as the other senior executive officers of the Company.
(c) During the Employment and for a term of six years thereafter, the Company shall provide Executive with copies of all binders and policies issued in connection with any directors and officers liability insurance affording coverage to Executive, within 30 days following the Executives request for such documents.
10. Miscellaneous.
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.
(b) Entire Agreement/Amendments . This Agreement (including, without limitation, the schedules and exhibits attached hereto) contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement (including, without limitation, the schedules and exhibits attached hereto) may not be altered, modified, or amended except by written instrument signed by the parties hereto.
(c) No Waiver . The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d) Severability . In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment . This Agreement, and all of Executives rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement shall be assigned by the Company to a person or entity which is a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.
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(f) Set Off; No Mitigation . The Companys obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates, except to the extent such set-off would result in a violation of Section 409A of the Code (as defined below). Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment, and such payments shall not be reduced by any compensation or benefits received from any subsequent employer or other endeavor.
(g) Compliance with IRC Section 409A . Notwithstanding anything herein to the contrary, (i) if at the time of Executives termination of employment with the Company Executive is a specified employee as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the payments to which Executive would otherwise be entitled during the first six months following his termination of employment shall be deferred and accumulated (without any reduction in such payments or benefits ultimately paid or provided to Executive) for a period of six months from the date of termination of employment and paid in a lump sum on the first day of the seventh month following such termination of employment (or, if earlier, the date of the Executives death), together with interest during such period at a rate computed by adding 2.00% to the Prime Rate as published in the Money Rates section of the Wall Street Journal, or other equivalent publication if the Wall Street Journal no longer publishes such information, on the first publication date of the Wall Street Journal or equivalent publication after the date that such payment would otherwise have been made if not for this provision (provided that if more than one such Prime Rate is published on such date, the highest of such published rates shall be used) and (ii) if any other payments of money or other benefits due to Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax. Furthermore, the Company intends that this Agreement shall comply with Section 409A and shall be interpreted, operated and administered accordingly.
(h) Successors; Binding Agreement . This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(i) Notice . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
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If to the Company:
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Attention: Christopher Nassetta, Chief Executive Officer
with a copy to:
The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Jonathan Gray
and
Simpson Thacher & Bartlett LLP
425 Lexington Avenue,
New York, New York 10017
Attention: Gregory T. Grogan
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company with a copy to:
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attention: Robert J. Raymond
(j) Executive Representation . Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executives duties hereunder shall not constitute a breach of the terms of any employment agreement or other agreement or written policy to which Executive is a party or otherwise bound (except to the extent previously disclosed in writing by Executive to the Company).
(k) Prior Agreements . This Agreement (including, without limitation, the schedules and exhibits attached hereto) supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executives employment with the Company and/or its affiliates (collectively, the Prior Agreements).
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(l) Legal Fees . The Company shall pay Executives reasonable legal fees and costs associated with negotiating and entering into this Agreement in a timely manner upon receipt from Executive of the appropriate documentation; provided, however, in no event shall such payment exceed $25,000. The Company shall also reimburse Executive for legal expenses incurred up to an additional $2,000 in connection with Executives departure from his present employer.
(m) Cooperation . Executive shall provide Executives reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment hereunder; provided the Company shall pay Executive a reasonable per diem for his services and shall coordinate with the scheduling of Executive so as to reasonably minimize the extent to which such cooperation interferes with his other full-time employment and business activities. This provision shall survive any termination of this Agreement, without implication of the survival of any other provision of this Agreement.
(n) Withholding Taxes . The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(o) Section 280G .
(i) If the Company is not an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, Executive and the Company shall use their respective best efforts to avoid the imposition of the excise tax imposed by Section 4999 of the Code or a loss of deductibility under Section 280G of the Code, including, to the extent Executive agrees to waive his entitlement to potential parachute payments (as defined under Regulation 1.280G), the Company shall seek to obtain stockholder approval thereof in accordance with the terms of Section 280G(b)(5) of the Code.
(ii) If the Company is an entity whose stock is readily tradable on an established securities market (or otherwise) at the time that a change of control under Regulation 1.280G occurs, the provisions of Exhibit II shall apply in respect of such change of control.
(p) Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
(Remainder of page intentionally left blank.)
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
HILTON HOTELS CORPORATION | ||
/s/ Christopher Nassetta |
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By: | Christopher Nassetta | |
Title: | President and Chief Executive Officer | |
EXECUTIVE | ||
/s/ Paul Brown |
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Paul Brown |
SCHEDULE A
1. | Board of Directors, Lanier Parking Systems, Inc. |
2. | Board of Advisors, Wimberly Allison Tong and Goo, LLP |
Exhibit I
RELEASE
In exchange for a portion of the benefits described in the Employment Agreement dated November , 2008, (the Agreement), to which I agree I am not otherwise entitled, I hereby release HILTON HOTELS CORPORATION (the Company), its respective affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, stockholders, attorneys, and insurers, past, present and future (the Released Parties) from any and all claims of any kind which I now have or may have against the Released Parties, whether known or unknown to me, by reason of facts which have occurred on or prior to the date that I have signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq ., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq ., the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et seq ., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq ., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq ., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq ., Section 1541 of the California Civil Code and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of my employment with the Company, as well as any and all claims under state contract or tort law or otherwise.
I have read Section 1542 of the California Civil Code, which states in full:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
I expressly waive any rights that I may have under Section 1542 to the full extent that I may lawfully waive such rights pertaining to a general release of claims, and I affirm that I am releasing all known or unknown claims that I have or may have against the Company or any of the Released Parties as stated in this Release.
I hereby represent that I have not filed any action, complaint, charge, grievance or arbitration against the Company or the Released Parties.
I expressly understand and agree that the Companys obligations under this Release are in lieu of any and all other amounts to which I might be, am now or may become entitled to receive from any of the Released Parties upon any claim whatsoever.
I understand that I must not disclose the terms of this Release to anyone other than my immediate family and advisors, that I must immediately inform my immediate family, financial advisors (if any) and legal counsel that they are prohibited from disclosing the terms of this
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Release; provided that the restrictions of this paragraph shall terminate if the Company publicly discloses a copy of this Release (or, if the Company publicly discloses summaries or excerpts of this Release, to the extent so disclosed).
I have read this Release carefully, acknowledge that I have been given at least 21 days to consider all of its terms, and have been advised to consult with an attorney and any other advisors of my choice prior to executing this Release. I also understand that I have a period of 7 days after signing this Release within which to revoke my agreement, and that neither the Company nor any other person is obligated to provide any benefits to me pursuant to the Agreement until 8 days have passed since my signing of this Release without my signature having been revoked. I understand that any revocation of this Release must be received by the General Counsel of the Company within the seven-day revocation period. Finally, I have not been forced or pressured in any manner whatsoever to sign this Release, and I agree to all of its terms voluntarily. I represent and acknowledge that no representation, statement, promise, inducement, threat or suggestion has been made by any of the Released Parties or by any other individual to influence me to sign this Release except such statements as are expressly set forth herein or in the Agreement.
I fully understand that this Release is a legally binding document and that by signing this Release I am prevented from filing, commencing or maintaining any action against the Company or the Released Parties.
The Company hereby acknowledges that, as of the effective date of this Release, its board of directors (excluding, if applicable, you) has no actual knowledge of any legal claims against you or a set of facts that collectively would give rise to Cause under the Agreement. If, following the Companys counter-signature of this Release, a Released Party commences any legal action against you with regard to your employment or otherwise and fails to obtain a successful judgment against you in such legal action, the Company shall reimburse you for your reasonable out-of-pocket legal fees and expenses in defending such action. Notwithstanding anything to the contrary herein, in the event that a Released Party commences an action against you, you may raise any claim you may have as a counterclaim or defense in such action.
Notwithstanding the foregoing, following the Companys execution of this Release, if
This Release is final and binding and may not be changed or modified.
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DATE | Paul Brown | |||
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DATE | Hilton Hotels Corporation |
Exhibit II
The provisions in this Exhibit II shall apply in respect of any change of control under Regulation 1.280G that occurs while the Company is an entity whose stock is readily tradable on an established securities market (or otherwise).
Paragraph 1. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a Payment) is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the Excise Tax), Executive shall be entitled to receive an additional payment (a Gross-Up Payment) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Paragraph 2. All determinations required to be made under this Exhibit II, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other nationally recognized certified public accounting firm as may be designated by the Company (the Accounting Firm) which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is reasonably requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executives residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit II, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executives behalf) when due but in no event later than the end of Executives taxable year next following Executives taxable year in which Executive remitted the related taxes. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive (subject to Paragraph 3). As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due (Underpayment). In the event that the Company exhausts its remedies pursuant to Paragraph 3 of Exhibit II and Executive thereafter is
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required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive (no later than the calendar year following the calendar year in which such tax was payable).
Paragraph 3. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Paragraph 3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Companys control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
Paragraph 4. If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Exhibit II, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Companys complying with the requirements of Paragraph 3 of this Exhibit II) promptly pay to the Company the amount of such refund
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received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Paragraph 3 of this Exhibit II, a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.
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Exhibit 10.24
Execution Version
SEPARATION AGREEMENT AND RELEASE
This Separation Agreement and Release (this Agreement ) is entered into as of the 24th day of September, 2013, between Thomas C. Kennedy ( Executive ), on the one hand, and Hilton Worldwide, Inc. f/k/a Hilton Hotels Corporation ( Hilton ) and BH Hotels Holdco LLC ( Holdings ) (Hilton and Holdings are collectively referred to herein as the Company ) on the other hand (each a Party and, collectively, the Parties ):
WHEREAS, Executive has been employed by Hilton from on or about September 15, 2008 through August 8, 2013 as Executive Vice President and Chief Financial Officer;
WHEREAS, in connection with Hiltons and Executives mutual decision for Executive to separate from his employment with Hilton, Executive and Hilton desire to enter into this Agreement with respect to the Parties respective rights and obligations in connection with such separation from employment, including under Executives employment agreement dated September 15, 2008 (as amended, modified or supplemented from time to time, the Employment Agreement );
WHEREAS, because the value of certain equity granted to Executive during December 2010 exceeds the value of the Applicable Severance Amount as defined in and provided under Section 5(c) of the Employment Agreement, no severance amounts are payable under the Employment Agreement;
WHEREAS, Executive, on the one hand, and Hilton and Holdings, on the other hand, wish to compromise and fully and finally settle any and all claims and potential claims of any type between them, including but not limited to any claims for compensation or benefits under the Employment Agreement, and any other plans, agreements, or understandings related to Executives compensation for services performed for Hilton during the period of his employment, and under any contract, plan, policy, practice, or arrangement, past or present, of Hilton and any of its parents, subsidiaries and affiliates; and
WHEREAS, Executive, on the one hand, and the Company, on the other, recognize Executives ongoing value to Hilton, in an initial period, and that Executives knowledge of Hilton, the industry, and talent, will be in demand by key competitors, and that those competitors use of Executives knowledge would be damaging for Hilton;
NOW, THEREFORE, the Parties, intending to be legally bound, and in consideration of the mutual covenants and other good and valuable consideration set forth herein below, do hereby agree as follows:
1. Advisory Services; Separation Date .
(a) Effective August 8, 2013 (the Transition Date ), Executive resigned from the positions of Executive Vice President and Chief Financial Officer of Hilton, and any and all other officer and director positions with Hilton or any of its parent companies, subsidiaries, divisions or affiliates.
(b) During the period beginning on August 8, 2013 and ending on the earlier of: (i) December 31, 2013; or (ii) the date Executive commences employment with a subsequent employer other than Sponsor and its affiliates (such period, the Interim Period , and such date, the Separation Date ), Executive shall be employed by Hilton as a Special Advisor to the CEO of Hilton, and shall be available to the CEO of Hilton for consultation and advice. Executive agrees that from and after the Separation Date, Executive shall no longer be an employee of Hilton, and shall not hold himself out as an employee or agent of Hilton or any of its parent companies, subsidiaries, divisions or affiliates.
(c) The parties acknowledge and agree that as of the Effective Date (as hereinafter defined), the Employment Agreement is deemed null, void, and of no force and effect.
2. Equity Based Property . Provided that this Agreement becomes effective pursuant to Section 19 below, and subject to Executives continued material compliance with Appendix I attached hereto, the Company agrees to pay, or cause to be paid, to Executive:
(a) $3,187,363, representing the New Tier I Equity Award that was adopted as a cash incentive program by Hilton in December 2010 (the New Tier I Equity Award ). Such amount shall be paid to Executive as soon as practicable following January 1, 2014, but in no event later than January 10, 2014;
(b) $6,699,938 representing payment for the cancellation of Executives Class B units that were granted to Executive pursuant to the terms of the New Tier II Award that was adopted by Hilton in December 2010 ( the New Tier II Award ). Such amount shall be paid to Executive as soon as practicable following January 1, 2014, but in no event later than January 10, 2014;
(c) $1,600,000 as consideration for the repurchase, redemption and/or cancellation of Executives September 2008 $1,000,000 investment in Class A-2 Units of Holdings, payable to Executive as soon as practicable following January 1, 2014, but in no event later than January 10, 2014; and
(d) $172,448 as consideration for the repurchase, redemption and/or cancellation of Executives May 18, 2010 $107,780 investment, in Class A-2 Units of Holdings, payable to Executive as soon as practicable following January 1, 2014, but in no event later than January 10, 2014.
3. Interim Period Consideration . Provided that this Agreement becomes effective pursuant to Section 19 below, subject to Executives continued material compliance with Appendix I attached hereto, the Company agrees to pay or provide, or cause to be paid or provided, to Executive:
(a) an annualized amount equal to $650,000 as continued base salary during the Interim Period and ending on the Separation Date, paid in accordance with the normal payroll practices of the Company;
(b) during the Interim Period and ending on the Separation Date, (i) all other benefits Executive received generally during his capacity of Executive Vice President and Chief Financial Officer and (ii) access to an office and secretarial support and continued access to and usage of Executives Hilton Worldwide e-mail account; and
(c) a special fee of $2,275,000 in recognition of Executives knowledge, extensive experience, involvement with and value to Hilton (representing two times the Executives base salary and target annual incentive compensation), payable in one lump sum to Executive as soon as practicable following December 31, 2014, but in no event later than ten (10) business days following such date.
If Executive unjustly refuses to provide services during the Interim Period, any unpaid portion of such compensation shall be forfeited (except the special fee).
4. Restrictive Covenant Consideration . Provided that this Agreement becomes effective pursuant to Section 19 below, subject to Executives continued material compliance with Appendix I attached hereto, and in recognition of Executives knowledge, extensive experience and involvement with and value to Hilton and the damages Hilton may incur if Executive were to be employed by a Competitor (as that term is defined in Appendix I attached hereto), Hilton shall pay Executive the sum of $1,058,500 annually for a period of three years (representing approximately Executives current base salary and target annual incentive compensation). These payments are in consideration for Executives additional agreement not to become employed, without Hiltons prior written consent, by a Competitor for a period of three (3) years following the Separation Date. Such amounts shall be paid to Executive as soon as practicable following each of the first, second, and third anniversaries of the Separation Date (i.e., December 31, 2014; December 31, 2015; and December 31, 2016, respectively), but in no event later than ten (10) business days following such date.
5. Additional Consideration . Provided that this Agreement becomes effective pursuant to Section 19 below:
(a) 2013 Annual Bonus . Subject to Executives continued material compliance with Appendix I attached hereto, Hilton agrees to pay, or cause to be paid, to Executive the Annual Bonus (as defined in the Employment Agreement) in respect of the 2013 fiscal year which Executive would have been entitled to had Executive continued to be employed as Executive Vice President and Chief Financial Officer through the expected annual bonus payment date, determined based on the actual performance of Hilton (where applicable, discretionary targets established for the Executive shall be scored at the maximum payout value), and payable at such time as annual bonuses are calculated and paid to other executives (but no later than March 15, 2014). Any such Annual Bonus payment shall be reduced by any and all applicable federal, state and local withholding taxes and any other authorized or legally required deductions.
(b) 401(k) Match . Executive shall be eligible for and receive Hiltons maximum allowable match under the Hilton defined contribution program for 2013.
(c) Accrued but Unused Vacation . Hilton agrees to pay Executive no later than ten (10) days after the Separation Date $87,500 for the unused vacation time accrued by Executive through the Separation Date.
(d) Reimbursable Expenses . Executive shall be entitled to reimbursement no later than 90 days after the Effective Date, upon receipt by Hilton of suitable documentation, for all reasonable and necessary business expenses incurred prior to the Separation Date and submitted to Hilton on or prior to January 31, 2014. Executive shall continue to be entitled to reimbursement for all reasonable and necessary business expenses incurred during the Interim Period, so long as such expenses are approved by Hilton. Such expenses shall be reimbursed to him on an ongoing basis, within 30 days of receipt by Hilton of suitable documentation for the expenses.
(e) Healthcare Benefits Payment . Subject to Executives material compliance with Appendix I attached hereto, as soon as practicable following the Separation Date, but no later than ten (10) business days thereafter, Hilton shall pay, or cause to be paid, to Executive a lump sum amount equal to $50,000, which represents the estimated before tax monthly health care insurance premiums that Executive will incur, for twenty-four months commencing after the Separation Date for group health coverage for Executive and his family.
(f) Other Benefits . Hilton shall: (i) pay up to $75,000 in the Executives documented reasonable attorneys fees of Executives counsel, Troutman Sanders LLP, incurred in connection with the execution of this Agreement; (ii) allow the Executive to continue to utilize his personal travel benefits provided in the Employment Agreement through the Separation Date; (iii) continue to provide Executive with Hiltons highest elite rewards status, for all Hilton hotel brands, for the remainder of Executives life and so long as such programs shall remain in effect; and (iv) use commercially reasonable efforts to obtain Executive an opportunity to purchase up to $1 million in Hilton stock at its initial public offering price if Hilton adopts a directed share program in connection with its initial public offering (provided such offering occurs prior to December 31, 2014).
6. No Other Claims . (a) The Parties represent and warrant that they have filed no claims, and know of no claims filed in court, administrative agencies, arbitration, or in any other forum between the Parties pertaining to the subject matter of this Agreement, and in the event that any such claims do exist, the Parties agree to withdraw and dismiss them with prejudice immediately in connection with this settlement. Executive represents and agrees that:
(i) Executive has suffered no specific injuries while employed by Hilton that Executive did not report to Hilton.
(ii) Executive fully understands all terms of this Agreement and is signing it voluntarily and with full knowledge of its significance.
(iii) By signing this Agreement, Executive does not rely and has not relied upon any representation or statement made by Hilton or by Hiltons agents, representatives or attorneys, with regard to the subject matter, basis or effect of this Agreement or otherwise, other than as specifically stated in this written Agreement.
(b) Taxes . The Company, as applicable, will provide the Internal Revenue Service and Executive with appropriate Form W-2s, 1099s and/or any other required additional tax reporting or information forms reflecting the payments and arrangements described in Section 2.
Executive agrees that he is solely responsible for the reporting and payment of federal, state and/or local taxes payable by him with respect to the payments and benefits provided for herein. The Company may withhold any amounts required to be withheld or deducted for any taxes. The Company acknowledges that Executive has informed it that he has chosen to establish his primary residency in Plantation, Florida, effective September 1, 2013. The Company makes no representations and warrantees as to any tax position taken by Executive.
(c) No Further Rights . Executive acknowledges that the amounts payable pursuant to Sections 2, 3, 4, and 5 of this Agreement are in lieu of and in full satisfaction of any amounts that might otherwise be payable under any contract, plan, policy, or practice, past or present, of the Company, including, but not limited to, under the Employment Agreement and the Companys equity plans for its senior executives, and that the Company will have no further obligation to Executive, except as provided in this Agreement and in any related agreements, if any, entered into connection herewith.
7. Executives Release and Covenant Not to Sue .
(a) As a material inducement for Hilton and Holdings to enter into this Agreement and to pay the amounts specified in Sections 2 through 6 above, Executive hereby releases Hilton, its respective affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, stockholders, attorneys, and insurers, past, present and future (the Released Parties ) from any and all claims of any kind which Executive now has or may have against the Released Parties, whether known or unknown to Executive, by reason of facts which have occurred on or prior to the date that Executive has signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq., the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et seq., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq., Section 1541 of the California Civil Code, The Virginia Human Rights Act Va. Code § 2.2-3900 et seq., any regulations thereunder, and any human rights law of any Virginia county or municipality, Virginia Statutory Provisions Regarding Retaliation/Discrimination for exercising rights under the Workers Compensation Act Va. Code §65.2-308(A) and (B), The Virginia Equal Pay Act Va. Code § 40.1-28.6, The Virginians Disabilities Act Va. Code §51.5-1 et seq., Virginia statutory provisions regarding AIDS testing Va. Code Ann. §32.1-36.1, Virginia statutory provisions regarding wage payments Va. Code §40.1-28.8 et seq., Virginia statutory provisions regarding occupational safety and health Va. Code § 401-49.3 et seq., Virginia Code § 8.01-40 regarding unauthorized use of name or picture of any person, Virginia Code §40.1-27 regarding preventing employment by others of former employee, and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of my employment with Hilton, as well as any and all claims under state contract or tort law or otherwise.
(b) Executive has read Section 1542 of the California Civil Code, which states in full:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
(c) Executive expressly waives any rights that Executive may have under Section 1542 to the full extent that Executive may lawfully waive such rights pertaining to a general release of claims, and Executive affirms that Executive is releasing all known or unknown claims that Executive has or may have against Hilton or any of the Released Parties as stated in this Release.
(d) Notwithstanding anything to the contrary contained in this Agreement, nothing herein is intended to release or waive Executives rights: (i) under COBRA, (ii) to unemployment insurance benefits (it being understood that Hilton shall not contest Employees application for unemployment insurance benefits), (iii) to any accrued and vested pension benefits, (iv) to commence an action or proceeding to enforce the terms of this Agreement, (v) to any right to indemnification for attorneys fees, costs, and/or expenses pursuant to applicable statutes, corporate documents, Certificates of Incorporation and/or By-laws of Hilton, its affiliates or subsidiaries, or (vi) to coverage under any errors and omissions insurance policy maintained by Hilton for its officers and directors.
(e) Executive hereby represents that Executive has not filed any action, complaint, charge, grievance or arbitration against Hilton or the Released Parties.
(f) Executive expressly understands and agrees that Hiltons obligations under this Agreement are in lieu of any and all other amounts to which Executive might be, is now or may become entitled to receive from any of the Released Parties upon any claim whatsoever.
(g) Executive understands that Executive must not disclose the terms of this Section 7 (the Release ) to anyone other than Executives immediate family and advisors, that Executive must immediately inform Executives immediate family (including his former spouse), financial advisors (if any) and legal counsel (including his former spouses legal counsel) that they are prohibited from disclosing the terms of this Release; provided that the restrictions of this paragraph shall terminate if Hilton publicly discloses a copy of this Release (or, if Hilton publicly discloses summaries or excerpts of this Release, to the extent so disclosed).
(h) Executive has read this Release carefully, acknowledges that Executive has been given at least 21 days to consider all of its terms, and has been advised to consult with an attorney and any other advisors of Executives choice prior to executing this Release. Executive also understands that Executive has a period of 7 days after signing this Agreement within which to revoke Executives agreement, and that neither Hilton nor any other person is obligated to provide any benefits to Executive pursuant to the Agreement until 7 days have passed since his signing of this Agreement without his signature having been revoked. Executive understands that any revocation of this Release must be received by the General Counsel of Hilton within the
seven (7) day revocation period. Finally, Executive has not been forced or pressured in any manner whatsoever to sign this Release, and Executive agrees to all of its terms voluntarily. Executive represents and acknowledges that no representation, statement, promise, inducement, threat or suggestion has been made by any of the Released Parties or by any other individual to influence Executive to sign this Release except such statements as are expressly set forth herein or in the Agreement.
(i) Executive fully understands that this Release is a legally binding document and that, except as described above, by signing this Release Executive is prevented from filing, commencing or maintaining any action against Hilton or the Released Parties.
(j) Hilton hereby acknowledges that, as of the date of this Agreement, its board of directors does not have actual knowledge of any legal claims against Executive, or a set of facts that collectively would give rise to Cause under the Employment Agreement. If, following the Companys counter-signature of this Agreement, any of the Released Parties (i) commence any legal action against Executive with regard to Executives employment; and (ii) fails to obtain a successful judgment against Executive in such legal action, the Company shall reimburse Executive for his reasonable out-of-pocket legal fees and expenses in defending such action.
8. Non-Admission of Liability . This Agreement and the Release contained herein effect the compromise and settlement of, among other things, all disputed and contested claims between the Parties, and the Parties understand and agree that neither the execution of this Agreement, nor any of the terms of this Agreement, shall be construed as an admission by any Party hereto of any liability of any kind to any other Party.
9. Governing Law; Dispute Resolution . This Agreement and any other documents referred to herein shall be governed by, construed and enforced in accordance with the laws of the State of New York without reference to conflicts of law principles.
10. Benefit and Burden . This Agreement shall be binding upon, and inure to the benefit of, the Parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.
11. Amendments; Waivers . This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by an authorized representative of each of the Parties. No failure to exercise and no delay in exercising any right, remedy or power under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power under this Agreement preclude any other or further exercise thereof, or the exercise of any other right, remedy or power provided herein or by law or in equity.
12. Voluntary Agreement . Executive understands and agrees that he is under no obligation to consent to this Agreement or the Release set forth in Section 7 above, and that he has entered into this Agreement freely and voluntarily, and that Hilton and Holdings are under no obligation to offer him the payments set forth above.
13. Severability . It is the desire and intent of the Parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If for any reason any
provision of this Agreement is determined to be invalid or unenforceable, or excessively broad as to duration, scope, activity or subject, the Parties shall negotiate in good faith for a substitute provision to effectuate the Agreement as presently written, including but not limited to amending the Agreement to modify, limit or reduce any such invalid, unenforceable or excessively broad provision so as to be enforceable to the maximum extent compatible with applicable law. The Parties hereto shall reasonably cooperate to provide full effect to this Section 13 and the consent to any amendment described in the preceding sentence shall not be unreasonably withheld by any Party.
14. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, and all counterparts so executed shall constitute one agreement binding on all of the Parties hereto, notwithstanding that all of the Parties are not signatory to the same counterpart. This Agreement may be executed either by original or facsimile, either of which will be equally binding.
15. Entire Agreement . All agreements, covenants, representations and warranties, express or implied, oral or written, of the Parties hereto concerning the subject matter hereof are contained herein. Except as contained in this Agreement or Exhibits to this Agreement, no other agreements, covenants, representations or warranties, express or implied, oral or written have been made by any Party to any other Party concerning the subject matter hereof. All prior and contemporaneous conversations, negotiations, possible and alleged agreements, representations, covenants and warranties concerning the subject matter hereof are merged herein and shall be superseded.
16. Confidentiality . Executive, Hilton, and Holdings agree to keep secret and strictly confidential the terms of this Agreement and further agree not to disclose, make known, discuss or relay any information concerning this Agreement, the circumstances leading up to this Agreement or the contents thereof to anyone except, in the case of Executive, his immediate family members (including his former spouse and her lawyers, if any), his lawyers, his accountants and his financial advisors, all of whom will be informed of and bound by this confidentiality clause, and, in the case of Hilton or Holdings, senior executives with a business-related need to know, except to the extent compelled to do so by any governmental agency or by legal or administrative process. In the event any Party is required to so disclose any such information, such Party agrees, unless prohibited to do so by law, to notify the other Party/Parties immediately within three (3) business days of receipt, in writing, by overnight mail and facsimile, and to provide a copy of any such legal or administrative process or other government communication to the other Party/Parties so that it may seek a protective order or other appropriate remedy, and each Party agrees to reasonably cooperate with the other Parties in any effort undertaken to obtain a protective order or other remedy. In the event any Party is compelled to provide testimony or other information pursuant to legal or administrative process, it must be truthful and accurate. Notwithstanding the foregoing, for the purpose of effectuating the terms of this Agreement, Executive may inform third parties that he remains subject to certain post-employment restrictive covenants under this Agreement. On or before the Separation Date, Executive will return to Hilton all records or property of Hilton in Executives possession including, without limitation, ID cards, keys, credit cards, personal computers, cell phones, pagers, files, software, business equipment and instruction manuals.
17. No Disparaging Conduct . Executive agrees not to make any disparaging remarks or send any disparaging communications, directly or indirectly, concerning Hilton, Holdings, or their respective subsidiaries, parents, members, shareholders, partners and affiliates, their products, their reputations and their business and each of its and their respective officers, directors, partners and employees to any person or entity. Hilton agrees that it shall cause the members of its Board of Directors and its Executive Committee to not make any disparaging remarks or send any disparaging communications, directly or indirectly, concerning Executive (other than internal business communications among senior executives of Hilton and/or the Sponsor). Nothing in this Agreement shall affect the Parties obligations to provide truthful information as may be required by law, rule, regulation or legal process or as requested by any legal or regulatory authority (including the United States Attorneys Office), or any Partys ability to communicate between or among his or its legal advisors and/or the legal advisors of its subsidiaries, parents and/or affiliates and/or the legal advisors for any defendant, subject or target of, or witness in, or any threatened action relating to Executives duties at Hilton, or as may be required by counsel to any Party consistent with his or her ethical responsibilities to defend his or her client in any action or proceeding and, to the extent possible, consistent with the other provisions of this Agreement.
18. Injunctive Relief . The Parties agree and acknowledge that Hilton and Holdings may be irreparably harmed by any breach, or threatened breach, by Executive of Sections 4, 16, or 17, or Appendix I, of this Agreement and that monetary damages may be inadequate. The Parties also agree and acknowledge that Executive may be irreparably harmed by any breach, or threatened breach, by Hilton or Holdings of Appendix I of this Agreement, and that monetary damages may be inadequate. Accordingly, the Parties agree that in the event of a breach, or threatened breach, by any other Party of such provisions of this Agreement, the aggrieved Party shall be entitled to petition for immediate injunctive or other preliminary or equitable relief, as appropriate, in addition to all other remedies available at law and equity.
19. Consultation with Attorney; Time to Consider Agreement; Effective Date . Executive acknowledges and agrees with the following: (i) that this Agreement is written in a manner calculated to be understood by Executive and that Executive in fact understands the terms, conditions and effect of this Agreement; (ii) Executive is waiving rights or claims only in exchange for consideration in addition to anything of value to which Executive is already entitled; (iii) Executive is hereby advised in writing to consult with an attorney prior to executing the Agreement, and (iv) that Executive has had adequate opportunity to consult with an attorney prior to executing the Agreement. Executive further acknowledges and agrees that he has been given at least twenty-one (21) days during which to review and consider the provisions of this Agreement and, specifically, the Release set forth in Section 4 above, although he may sign and return it sooner if he so desires. Executive further acknowledges and agrees that he has been advised by Hilton that he has the right to revoke this Agreement for a period of seven (7) days after signing it. Executive further acknowledges and agrees that, if he wishes to revoke this Agreement, he must do so in writing, signed by him and received by Hilton no later than 5:00 p.m. Eastern Time on the seventh (7th) day of the revocation period. If no such revocation occurs, the Release and this Agreement shall become effective on the eighth (8th) day following Executives execution and delivery of this Agreement (the Effective Date ). Executive further acknowledges and agrees that, in the event that he revokes this Agreement within the time period specified herein, it shall have no force or effect, and he shall have no right to receive any of the payments provided for hereunder.
20. Calculation of Equity Based Property . The payments made to Executive in Sections 2(b),(c), and (d) of this Agreement are based upon Blackstones valuation of Hilton as of June 30, 2013, the most recent valuation of Hilton as of the Separation Date. The Parties acknowledge that on the Separation Date, Executive is vested in 60% of the New Tier II Award.
21. Notice . All notices, requests or other communications to any Party hereunder shall be sent by overnight courier, hand delivery or U.S. certified mail, as follows:
(a) | if to Executive: |
Thomas C. Kennedy
380 Sweet Bay Avenue
Plantation, Florida 33324
(b) | if to Hilton: |
Hilton Worldwide, Inc.
7930 Jones Branch Drive
Suite 1100
McLean, VA 22102
Attention: Matt Schuyler, Chief Human Resources Officer
or such other address(es) as either Party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
22. It is intended that this Agreement comply with or be exempt from Section 409A of the Code and the Treasury Regulations and IRS guidance thereunder (collectively referred to as Section 409A ). Notwithstanding anything to the contrary in this Agreement, this Agreement shall, to the maximum extent possible, be administered, interpreted, and construed in a manner consistent with Section 409A. If any provision of this Agreement (or of any award of compensation due to Executive under this Agreement) would cause Executive to incur any additional tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, Hilton shall modify this Agreement to make it compliant with Section 409A and maintain the value of the payments and benefits under this Agreement.
23. Authorized Signatories . Each Party whose signature is affixed hereto in a representative capacity represents and warrants that he or she is authorized to execute this Separation Agreement on behalf of the entity on whose behalf his or her signature is affixed.
24. Signatures . The Parties hereby signify their Agreement to the above terms by their signatures below. Executive represents that he has had an opportunity to consult with his attorneys prior to signing this Agreement and has availed himself of such opportunity, that he has read and understands the foregoing Agreement and that he has affixed his signature hereto voluntarily and without coercion.
25. Future Cooperation; Privilege . The Parties acknowledge and agree that Executive has been integrally involved in many sensitive legal matters on behalf of Hilton during the term of his employment. Subject to Executives ongoing personal and professional obligations following the Separation Date, Executive agrees to be reasonably available to Hilton from and after the Separation Date to provide assistance and legal advice in connection with matters arising during the term of Executives employment by Hilton. All expenses incurred by Executive in connection with such assistance shall be paid or reimbursed by Hilton, including Executives reasonable attorneys fees incurred in connection with such cooperation. It is the intention of the Parties that all communications between Hilton and Executive with respect to such matters shall be privileged and confidential to Hilton.
[ Signature page follows ]
WHEREFORE, the Parties hereto have caused this Agreement to be signed as of the date written below.
Dated: September 25, 2013
/s/ Matthew W. Schuyler |
HILTON WORLDWIDE, INC. |
Name: Matthew W. Schuyler |
Title: Chief Human Resources Officer |
/s/ Bill Stein |
BH HOTELS HOLDCO LLC |
Name: Bill Stein |
Title: Managing Director |
/s/ Thomas C. Kennedy |
Thomas C. Kennedy |
Appendix I
Covenants Regarding Competitive Conduct, Confidentiality, Intellectual Property
Executive acknowledges and recognizes the highly competitive nature of the businesses of Hilton and Holdings (collectively, the Company ) and their respective affiliates and accordingly agrees as follows:
1. Competitive Conduct.
(a) During a period of one year beginning on the Separation Date (the Non-Solicitation Restricted Period ), Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever ( Person ), directly or indirectly solicit or assist in soliciting in competition with the Restricted Group in the Business, the business of any then current or prospective client or customer with whom Executive (or his direct reports) had personal contact or dealings on behalf of the Company during the one-year period preceding Executives termination of employment.
(b) During a period of three years beginning on the Separation Date (the Non-Compete Restricted Period ), without prior consent of the Company, Executive will not directly or indirectly:
(i) engage in the Business for a Competitor in any geographical area that is within 25 miles of any geographical area where the Restricted Group engages in the Business;
(ii) enter the employ of, or render any services to, a Competitor, except where such employment or services do not relate in any manner to the Business;
(iii) acquire a financial interest in, or otherwise become actively involved with, a Competitor, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(iv) intentionally and adversely interfere with, or attempt to adversely interfere with, business relationships between the members of the Restricted Group and any of their clients, customers, suppliers, partners, members or investors
provided that this Section 1(b) shall cease to apply during any time that The Blackstone Group L.P. and its affiliated investment funds (Sponsor) beneficially own less than 25% of the voting power of the Company.
(c) Notwithstanding anything to the contrary in this Agreement, during the Non-Compete Restricted Period, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Business (including, without limitation, a Competitor) that are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 2% or more of any class of securities of such Person.
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(d) During the Non-Solicit Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(i) knowingly solicit or encourage any executive-level employee of the Restricted Group to leave the employment of the Restricted Group, provided, however, that this Section 1(d)(i) shall not apply with respect to executive-level employees of the Restricted Group who were (a) no longer employed by the Restricted Group as of the Separation Date, or (b) who respond to advertisements directed at the general public.
(e) During the Non-Compete Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly and intentionally interfere with any material consultants relationship with the Restricted Group and cause such consultant to cease working with the Restricted Group.
(f) For purposes of this Agreement:
(i) Restricted Group shall mean, collectively, the Company and its subsidiaries and, to the extent engaged in the Business, their respective affiliates (including Sponsor and its affiliates).
(ii) Business shall mean the business of acquiring controlling investments in, owning, operating, managing or franchising hotel and lodging properties and timeshares.
(i) Competitor shall mean (A) until the one-year anniversary following the Separation Date, any person engaged in the Business and (B) thereafter, Marriott International, Inc., Starwood Hotels and Resorts Worldwide, Inc., Intercontinental Hotels Group PLC, and Accor SA.
(g) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 1 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(h) The period of time during which the provisions of this Section 1 shall be in effect shall be extended by the length of time during which Executive is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
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2. Confidentiality; Intellectual Property.
(a) Confidentiality .
(i) Executive will not at any time (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or otherwise in performance of Executives duties hereunder and pursuant to customary industry practice), any non-public, proprietary or confidential information (including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals) concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis ( Confidential Information ) without the prior written authorization of the Board.
(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executives breach of this covenant; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation of which Executive has knowledge; (c) is located on Executives rolodex (whether paper or electronic) or was in Executives possession prior to his commencing employment with the Company; or (d) required by law to be disclosed; provided that with respect to subsection (d) Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Executive will not disclose to anyone, other than Executives family (it being understood that, in this Agreement, the term family refers to Executive, Executives spouse and former spouse, minor children, parents and the parents of Executives spouse and former spouse) and advisors (including such former spouses legal advisors, if any), the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of this Appendix I. This Section 2(a) (iii) shall terminate if the Company publicly discloses a copy of this Agreement (or, if the Company publicly discloses summaries or excerpts of this Agreement, to the extent so disclosed).
(iv) On the Separation Date, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; and (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executives possession or control (including any of the foregoing stored or located in Executives
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office, home, laptop or other computer, whether or not Company property) that contain Confidential Information, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.
(b) Intellectual Property .
(i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) ( Works ), either alone or with third parties, prior to Executives employment by the Company, that are relevant to or implicated by such employment ( Prior Works ), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sub-licensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Companys current and future business.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executives employment by the Company and within the scope of such employment and with the use of any the Company resources ( Company Works ), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.
(iii) Executive shall take all reasonably requested actions and execute all reasonably requested documents (including any licenses or assignments required by a government contract) at the Companys expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior Works and Company Works. If the Company is unable for any other reason, after reasonable attempt, to secure Executives signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executives agent and attorney in fact, to act for and in Executives behalf and stead to execute any documents and to do all other lawfully permitted acts required in connection with the foregoing.
(iv) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company that are from time to time previously disclosed to Executive, including regarding the protection of Confidential Information and intellectual
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property and potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version from time to time previously disclosed to Executive.
3. Specific Performance . Executive acknowledges and agrees that the Companys remedies at law for a material breach or threatened material breach of any of the provisions of this Appendix I may be inadequate and the Company may suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and seek to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
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Exhibit 10.25
SEPARATION AGREEMENT AND RELEASE
This Separation Agreement and Release (this Agreement ) is entered into as of the 31 st day of October, 2012, between Paul J. Brown ( Executive ), on the one hand, and Hilton Worldwide, Inc. f/k/a Hilton Hotels Corporation ( Hilton ) and BH Hotels Holdco LLC ( Holdings ) on the other hand (each a Party and, collectively, the Parties ):
WHEREAS, Executive has been employed by Hilton from on or about November 1, 2008 through the present as President, Global Brands and Commercial Services; and
WHEREAS, in connection with Hiltons and Executives mutual decision for Executive to separate from his employment with Hilton, Executive and Hilton desire to enter into this Agreement with respect to the Parties respective rights and obligations, including under Executives employment agreement dated November 13, 2008 (as amended, modified or supplemented from time to time, the Employment Agreement );
WHEREAS, because the value of the vested portion of the Class B-1 and Class B-2 Units granted to Executive pursuant to Management Unit Subscription Agreement exceeds the value of the Applicable Severance Amount provided under Section 5(c) of the Employment Agreement, no severance amounts are payable under the Employment Agreement; and
WHEREAS, Executive, on the one hand, and Hilton and Holdings, on the other hand, wish to compromise and fully and finally settle any and all claims and potential claims of any type between them, including but not limited to any claims for compensation or benefits under the Employment Agreement and the Promote Documents (as defined below) (collectively the Claims );
NOW, THEREFORE, the Parties, intending to be legally bound, and in consideration of the mutual covenants and other good and valuable consideration set forth herein below, do hereby agree as follows:
1. | Advisory Services; Separation Date . |
(a) Effective October 31, 2012 (the Transition Date ), Executive hereby resigns from the position of President, Global Brands and Commercial Services of Hilton, and any and all other officer and director positions with Hilton or any of its parent companies, subsidiaries, divisions or affiliates.
(b) During the period beginning on November 1, 2012 and ending on the earlier of (i) April 30, 2013 or (ii) the date Executive commences employment with a subsequent employer (such period, the Advisory Period , and such date, the Separation Date ), Executive shall serve as a Special Advisor to the CEO of Hilton, and shall be available to the CEO of Hilton for consultation and advice in accordance with the terms set forth in Schedule I . Executive agrees that from and after the Separation Date, Executive shall no longer be an employee of Hilton, and shall not hold himself out as, an employee or agent of Hilton or any of its parent companies, subsidiaries, divisions or affiliates. Subject to the foregoing, Executive will be entitled to continued access to and usage of his Hilton Worldwide e-mail account until April 30, 2013, whether or not the Separation Date occurs prior to such date.
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2. | Severance . Provided that this Agreement becomes effective pursuant to Section 20 below: |
(a) Payments.
(i) Severance Payments . Subject to Executives continued compliance with Section 6 of the Employment Agreement and Section 1 of the Appendix I attached hereto, and Executives continued material compliance with Section 7 of the Employment Agreement and Section 2 of the Appendix I attached hereto, Hilton agrees to pay, or cause to be paid, to Executive:
(A) $8,500,000, paid as soon as practicable following the Effective Date (as defined in Section 20 below), but no later than ten (10) days thereafter (or if such day falls on a weekend or holiday, the next business day following the 10th day);
(B) $2,000,000, paid as soon as practicable following the earlier of (1) the date Executive commences employment with a subsequent employer, but no earlier than January 1, 2013, or (2) October 31, 2013; and
(C) $2,000,000, paid as soon as practicable following the earlier of (1) the one year anniversary of the date Executive commences employment with a subsequent employer, but no earlier than January 1, 2014, or (2) April 30, 2014;
(ii) 2012 Annual Bonus . Hilton agrees to pay, or cause to be paid, to Executive the Annual Bonus (as defined in the Employment Agreement) in respect of the 2012 fiscal year which Executive would have been entitled to had Executive continued to be employed as President, Global Brands and Commercial Services through the expected annual bonus payment date, determined based on the actual performance of Hilton, and payable at such time as annual bonuses are calculated paid to other executives (but no later than March 15, 2013). Any such Annual Bonus payment shall be reduced by any and all applicable federal, state and local withholding taxes and any other authorized or legally required deductions.
(iii) Salary and Benefits during Advisory Period . Hilton agrees to pay Executive at a rate of pay equal to his current base salary rate on the Transition Date less any and all applicable federal, state and local withholding taxes and any other authorized or legally required deductions. Executive will be entitled to these monthly payments from November 1, 2012 through April 30, 2013, whether or not the Separation Date occurs prior to such date. Additionally, Executive will continue to vest in his equity grants through April 30, 2013, whether or not the Separation Date occurs prior to such date.
(iv) Full Satisfaction . The amounts in clause (i) and (ii) above constitute full payment and satisfaction by Hilton of all amounts payable under the Employment Agreement, including any Applicable Severance Amount and Pro-Rata Bonus (as such terms are defined under the Employment Agreement) and in full settlement of the Claims, in consideration of the releases and covenants given by Executive as set forth in this Agreement.
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(v) Accrued but Unused Vacation . In addition, Hilton agrees to pay Executive no later than ten (10) days after the Effective Date for all unused vacation time accrued by Executive through the Separation Date.
(vi) Reimbursable Expenses . Executive shall be entitled to reimbursement no later than 90 days after the Effective Date, upon receipt by Hilton of suitable documentation, for all reasonable and necessary business expenses incurred prior to the Transition Date and submitted to Hilton on or prior to May 30, 2013. Executive shall continue to be entitled to reimbursement for all reasonable and necessary business expenses incurred during the Advisory Period prior to the Separation Date, so long as such expenses are approved by Hilton. Such expenses shall be reimbursed to him on an ongoing basis, within 30 days of receipt by Hilton of suitable documentation for the expenses.
(b) Healthcare Benefits Payment. As soon as practicable following the Separation Date, but no later than ten (10) days thereafter (or if such day falls on a weekend or holiday, the next business day following the 10th day), Hilton shall pay, or cause to be paid, to Executive a lump sum amount equal to $40,000, which represents the portion of the monthly premiums for group health coverage for Executive and his family currently paid by Hilton, multiplied by 24.
(c) Equity Arrangements.
(i) Promote Units . Executive agrees and affirms that his Management Unit Subscription Agreement (Class B-1 Units and Class B-2 Units) (together with the documents referenced therein, the Subscription Agreement ) entered into between Executive and Holdings, and his Equity Incentive Award Agreement (as amended or supplemented from time to time, the Tier I Award Agreement , and together with the Subscription Agreement, collectively the Promote Documents ) govern all rights and obligations with respect to Executives Class B-1 and Class B-2 equity holdings in Hilton and Executives Tier I Equity Award (as defined in the Tier I Award Agreement), respectively, provided , however , that notwithstanding any provision in the Promote Documents to the contrary, the Parties hereby agree that all Vested Units (as defined in the Subscription Agreement), all Unvested Units (as defined in the Subscription Agreement), and the Tier I Equity Award held by Executive as of the Separation Date shall be cancelled on the Separation Date for no further payment.
(ii) Co-Investment Units . Holdings agrees to repurchase, redeem and/or cancel Executives equity investment (Class A Units) of $220,000 for an amount equal to $275,000, less any and all applicable federal, state and local withholding taxes. Hilton and/or Holdings will take such further actions as may be necessary or desirable to effectuate the foregoing. Such amount shall be paid to Executive no later than ten (10) days after the Effective Date.
(iii) No Further Rights . Executive acknowledges and agrees that he has no further rights or entitlements under the terms of the Promote Documents and neither Hilton nor Holdings has any further obligations under the terms of the Promote Documents with respect to any of Executives Vested Units, Unvested Units, or Tier I
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Equity Award, or otherwise. Executive further acknowledges and agrees that Hilton and Holdings shall have satisfied all obligations they may have to Executive under the Promote Documents and that Executive will be entitled to no other or further compensation, remuneration, payments or benefits of any kind in connection with the Subscription Agreement or Tier I Equity Award Agreement or any other equity or governing document of Holdings or its affiliates. Executive further acknowledges and affirms that his obligations and Holdings rights under the confidentiality provisions contained and/or referenced in the Promote Documents shall remain in full force and effect.
(d) Other Benefits . Notwithstanding Section 2(a)(iv), Hilton shall (i) directly pay to Crenshaw Associates an amount equal to the cost of executive outplacement services fees that are incurred during the 12-month period following the Transition Date, (ii) pay an amount equal to up to $10,000 for reasonable attorneys fees for Executive that are incurred in connection with the execution of this Agreement, and (iii) provide Executive with lifetime benefits in Hiltons Hilton Honors Program at the highest level (currently Diamond Status).
(e) Taxes . Hilton and/or Holdings, as applicable, will provide the Internal Revenue Service and Executive with appropriate Form W-2s, 1099s and/or any other required additional tax reporting or information forms reflecting the payments and arrangements described in this Section 2. Executive agrees that he is solely responsible for the reporting and payment of federal, state and/or local taxes payable by him with respect to the payments and benefits provided for herein.
(f) No Other Payments . Executive understands and agrees that he is not entitled to, and will not receive, any payment, compensation or benefit of any kind from Hilton or Holdings except as set forth in this Section 2, and Executive acknowledges that the payments referred to above are in lieu of and in full satisfaction of any amounts that might otherwise be payable under any contract, plan, policy or practice, past or present, of Hilton and any of its parents, subsidiaries and affiliates, including but not limited to the Employment Agreement.
3. No Other Claims . The Parties represent and warrant that they have filed no claims, and know of no claims filed in court, administrative agencies, arbitration, or in any other forum between the Parties pertaining to the subject matter of this Agreement, and in the event that any such claims do exist, the Parties agree to withdraw and dismiss them with prejudice immediately in connection with this settlement. Executive represents and agrees that:
(a) Executive has suffered no specific injuries while employed by Hilton that Executive did not report to Hilton.
(b) Executive fully understands all terms of this Agreement and is signing it voluntarily and with full knowledge of its significance.
(c) By signing this Agreement, Executive does not rely and has not relied upon any representation or statement made by Hilton or by Hiltons agents, representatives or attorneys, with regard to the subject matter, basis or effect of this Agreement or otherwise, other than as specifically stated in this written Agreement.
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4. Release by Executive and Covenant Not to Sue .
(a) As a material inducement for Hilton and Holdings to enter into this Agreement and to pay the amounts specified in Section 2 above, Executive hereby releases Hilton, its respective affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, stockholders, attorneys, and insurers, past, present and future (the Released Parties) from any and all claims of any kind which Executive now has or may have against the Released Parties, whether known or unknown to Executive, by reason of facts which have occurred on or prior to the date that Executive has signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq., the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et seq., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq., Section 1541 of the California Civil Code and any and all state or local laws regarding employment discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited to any claims arising from or derivative of my employment with Hilton, as well as any and all claims under state contract or tort law or otherwise.
(b) Executive has read Section 1542 of the California Civil Code, which states in full:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
(c) Executive expressly waives any rights that Executive may have under Section 1542 to the full extent that Executive may lawfully waive such rights pertaining to a general release of claims, and Executive affirms that Executive is releasing all known or unknown claims that Executive has or may have against Hilton or any of the Released Parties as stated in this Release.
(d) Notwithstanding anything to the contrary contained in this Agreement, nothing herein is intended to release or waive Executives rights (i) under COBRA, (ii) to unemployment insurance benefits (it being understood that Hilton shall not contest Employees application for unemployment insurance benefits), (iii) to any accrued and vested pension benefits, (iv) to commence an action or proceeding to enforce the terms of this Agreement, or (v) to any right to indemnification for attorneys fees, costs, and/or expenses pursuant to applicable statutes, corporate documents, Certificates of Incorporation and/or By-laws of Hilton, its affiliates or subsidiaries.
(e) Executive hereby represents that Executive has not filed any action, complaint, charge, grievance or arbitration against Hilton or the Released Parties.
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(f) Executive expressly understands and agrees that Hiltons obligations under this Agreement are in lieu of any and all other amounts to which Executive might be, am now or may become entitled to receive from any of the Released Parties upon any claim whatsoever.
(g) Executive understands that Executive must not disclose the terms of this Section 4 (the Release) to anyone other than Executives immediate family and advisors, that Executive must immediately inform Executives immediate family, financial advisors (if any) and legal counsel that they are prohibited from disclosing the terms of this Release; provided that the restrictions of this paragraph shall terminate if Hilton publicly discloses a copy of this Release (or, if Hilton publicly discloses summaries or excerpts of this Release, to the extent so disclosed).
(h) Executive has read this Release carefully, acknowledge that Executive has been given at least 21 days to consider all of its terms, and have been advised to consult with an attorney and any other advisors of Executives choice prior to executing this Release. Executive also understands that Executive has a period of 7 days after signing this Agreement within which to revoke Executives agreement, and that neither Hilton nor any other person is obligated to provide any benefits to Executive pursuant to the Agreement until 8 days have passed since my signing of this Agreement without my signature having been revoked. Executive understands that any revocation of this Release must be received by the General Counsel of Hilton within the seven-day revocation period. Finally, Executive has not been forced or pressured in any manner whatsoever to sign this Release, and Executive agrees to all of its terms voluntarily. Executive represents and acknowledges that no representation, statement, promise, inducement, threat or suggestion has been made by any of the Released Parties or by any other individual to influence Executive to sign this Release except such statements as are expressly set forth herein or in the Agreement.
(i) Executive fully understands that this Release is a legally binding document and that, except as described above, by signing this Release Executive is prevented from filing, commencing or maintaining any action against Hilton or the Released Parties.
5. Representations of Hilton . Hilton hereby acknowledges that, as of the effective date of this Release, its board of directors (excluding, if applicable, Executive) has no actual knowledge of any legal claims against Executive or a set of facts that collectively would give rise to Cause under the Employment Agreement. If, following Hiltons counter-signature of this Release, a Released Party commences any legal action against Executive with regard to Executives employment or otherwise and fails to obtain a successful judgment against Executive in such legal action, Hilton shall reimburse Executive for Executives reasonable out-of-pocket legal fees and expenses in defending such action. Notwithstanding anything to the contrary herein, in the event that a Released Party commences an action against Executive, Executive may raise any claim Executive may have as a counterclaim or defense in such action.
6. Restrictive Covenants . Executive hereby acknowledges and agrees that Sections 6 (Non-Competition), 7 (Confidentiality; Intellectual Property), 8 (Specific Performance) and 9 (Indemnification) of the Employment Agreement and corresponding provisions, if any, under the Promote Documents shall continue in full force and effect, in addition to the covenants set forth in Appendix I hereto.
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7. Non-Admission of Liability . This Agreement and the Release contained herein effect the compromise and settlement of, among other things, all disputed and contested claims between the Parties, and the Parties understand and agree that neither the execution of this Agreement, nor any of the terms of this Agreement, shall be construed as an admission by any Party hereto of any liability of any kind to any other Party.
8. Governing Law; Dispute Resolution . This Agreement and any other documents referred to herein shall be governed by, construed and enforced in accordance with the laws of the State of New York without reference to conflicts of law principles.
9. Benefit and Burden . This Agreement shall be binding upon, and inure to the benefit of, the Parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.
10. Amendments; Waivers . This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by an authorized representative of each of the Parties. No failure to exercise and no delay in exercising any right, remedy or power under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power under this Agreement preclude any other or further exercise thereof, or the exercise of any other right, remedy or power provided herein or by law or in equity.
11. Voluntary Agreement . Executive understands and agrees that he is under no obligation to consent to this Agreement or the Release set forth in Section 4 above, and that he has entered into this Agreement freely and voluntarily, and that Hilton and Holdings are under no obligation to offer him the payments set forth above.
12. Severability . It is the desire and intent of the Parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If for any reason any provision of this Agreement is determined to be invalid or unenforceable, or excessively broad as to duration, scope, activity or subject, the Parties shall negotiate in good faith for a substitute provision to effectuate the Agreement as presently written, including but not limited to amending the Agreement to modify, limit or reduce any such invalid, unenforceable or excessively broad provision so as to be enforceable to the maximum extent compatible with applicable law. The Parties hereto shall reasonably cooperate to provide full effect to this Section 12 and the consent to any amendment described in the preceding sentence shall not be unreasonably withheld by any Party.
13. Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, and all counterparts so executed shall constitute one agreement binding on all of the Parties hereto, notwithstanding that all of the Parties are not signatory to the same counterpart. This Agreement may be executed either by original or facsimile, either of which will be equally binding.
14. Entire Agreement . All agreements, covenants, representations and warranties, express or implied, oral or written, of the Parties hereto concerning the subject matter hereof are contained herein. No other agreements, covenants, representations or warranties,
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express or implied, oral or written have been made by any Party to any other Party concerning the subject matter hereof. All prior and contemporaneous conversations, negotiations, possible and alleged agreements, representations, covenants and warranties concerning the subject matter hereof are merged herein and shall be superseded; provided, however, that the Parties hereby acknowledge and agree that Sections 6 (Non-Competition), 7 (Confidentiality; Intellectual Property), 8 (Specific Performance) and 9 (Indemnification) of the Employment Agreement and corresponding provisions, if any, under the Promote Documents, shall not be superseded but rather shall remain in full force and effect as if restated herein. This is an Integrated Agreement.
15. Confidentiality . Executive, Hilton and Holdings agree to keep secret and strictly confidential the terms of this Agreement and further agree not to disclose, make known, discuss or relay any information concerning this Agreement, the circumstances leading up to this Agreement or the contents thereof to anyone except, in the case of Executive, his immediate family members, his lawyers, his accountants and his financial advisors, all of whom will be informed of and bound by this confidentiality clause, and, in the case of Hilton or Holdings, senior executives with a business-related need to know, except to the extent compelled to do so by any governmental agency or by legal or administrative process. In the event any Party is required to so disclose any such information, such Party agrees, unless prohibited to do so by law, to notify the other Party/Parties immediately within three (3) business days of receipt, in writing, by overnight mail and facsimile, and to provide a copy of any such legal or administrative process or other government communication to the other Party/Parties so that it may seek a protective order or other appropriate remedy, and each Party agrees to reasonably cooperate with the other Parties in any effort undertaken to obtain a protective order or other remedy. In the event any Party is compelled to provide testimony or other information pursuant to legal or administrative process, it must be truthful and accurate. Notwithstanding the foregoing, for the purpose of effectuating the terms of this Agreement, Executive may inform third parties that he remains subject to certain post-employment restrictive covenants under this Agreement. On or before the Separation Date, Executive will return to Hilton all records or property of Hilton in Executives possession including, without limitation, ID cards, keys, credit cards, personal computers, cell phones, pagers, files, software, business equipment and instruction manuals.
16. No Disparaging Conduct . Executive agrees not to make any disparaging remarks or send any disparaging communications, directly or indirectly, concerning Hilton, Holdings, or their respective subsidiaries, parents and affiliates, their products, their reputations, their business and their respective officers, directors, partners and employees to any person or entity. Likewise, Hilton, on behalf of its employees and executives able to speak on the matter, specifically agrees not to make any disparaging remarks or send any disparaging communications, directly or indirectly, concerning Executive, his goodwill or reputation. Nothing in this Agreement shall affect the Parties obligations to provide truthful information as may be required by law, rule, regulation or legal process or as requested by any legal or regulatory authority (including the United States Attorneys Office), or any Partys ability to communicate between or among his or its legal advisors and/or the legal advisors of its subsidiaries, parents and/or affiliates and/or the legal advisors for any defendant, subject or target of, or witness in, or any threatened action relating to Executives duties at Hilton, or as may be required by counsel to any Party consistent with his or her ethical responsibilities to defend his or her client in any action or proceeding and, to the extent possible, consistent with the other provisions of this Agreement.
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17. Internal and External Announcements. The Parties have agreed that an internal and external announcement about Executives separation from Hilton will be distributed. These releases will state that Executive resigned but has agreed to stay on through a transition period. Executive and Hilton will mutually agree on the timing and the content of any release about Executives separation from Hilton or other official Hilton announcements made regarding Executives separation from Hilton prior to its release. In this regard, Executive will have an opportunity to speak with his direct employees on his own prior to the release of any announcement regarding Executives separation from Hilton. The announcements shall be distributed during the week of October 29, 2012 and shall be in the form attached hereto as Exhibit II (internal announcement) and Exhibit III (external announcement).
18. References . Hilton agrees that any inquiries for employment references or any other inquiries concerning Executives employment with Hilton shall be directed to Matt Schuyler, Chief Human Resources Officer. If Mr. Schuyler is contacted by third parties concerning Executives employment, his response will be limited to the sum and substance of the information contained in Exhibit IV (attached hereto). If Mr. Schuyler is no longer with Hilton the Parties will agree to another representative specifically to be contacted. If asked by any third parties about Executives employment with Hilton, Executive may respond that he resigned from employment with Hilton and if specifically asked, Hilton will confirm that Executive resigned
19. Injunctive Relief . The Parties agree and acknowledge that Hilton and Holdings may be irreparably harmed by any breach, or threatened breach, by Executive of Sections 4, 15, or 16, or Appendix I, of this Agreement and that monetary damages may be inadequate. The Parties also agree and acknowledge that Executive may be irreparably harmed by any breach, or threatened breach, by Hilton or Holdings of Section 5, of this Agreement and that monetary damages may be inadequate. Accordingly, the Parties agree that in the event of a breach, or threatened breach, by any other Party of such provisions of this Agreement, the aggrieved Party shall be entitled to petition for immediate injunctive or other preliminary or equitable relief, as appropriate, in addition to all other remedies available at law and equity.
20. Consultation with Attorney; Time to Consider Agreement; Effective Date . Executive acknowledges and agrees with the following: (i) that this Agreement is written in a manner calculated to be understood by Executive and that Executive in fact understands the terms, conditions and effect of this Agreement; (ii) Executive is waiving rights or claims only in exchange for consideration in addition to anything of value to which Executive is already entitled; (iii) Executive is hereby advised in writing to consult with an attorney prior to executing the Agreement, and (iv) that Executive has had adequate opportunity to consult with an attorney prior to executing the Agreement. Executive further acknowledges and agrees that he has been given at least twenty-one (21) days during which to review and consider the provisions of this Agreement and, specifically, the Release set forth in Section 4 above, although he may sign and return it sooner if he so desires. Executive further acknowledges and agrees that he has been advised by Hilton that he has the right to revoke this Agreement for a period of seven (7) days after signing it. Executive further acknowledges and agrees that, if he wishes to revoke this
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Agreement, he must do so in writing, signed by him and received by Hilton no later than 5:00 p.m. Eastern Time on the seventh (7th) day of the revocation period. If no such revocation occurs, the Release and this Agreement shall become effective on the eighth (8th) day following Executives execution and delivery of this Agreement (the Effective Date). Executive further acknowledges and agrees that, in the event that he revokes this Agreement within the time period specified herein, it shall have no force or effect, and he shall have no right to receive any of the payments provided for hereunder.
21. Notice . All notices, requests or other communications to any Party hereunder shall be sent by overnight courier, hand delivery or U.S. certified mail, as follows:
(a) | if to Executive: |
Paul J. Brown
6022 Orris Street
McLean VA 22101
(b) | if to Hilton: |
Hilton Worldwide, Inc.
7930 Jones Branch Drive
Suite 1100
McLean, VA 22102
Attention: Matt Schuyler, Chief Human Resources Officer
or such other address(es) as either Party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
22. It is intended that this Agreement comply with or be exempt from Section 409A of the Code and the Treasury Regulations and IRS guidance thereunder (collectively referred to as Section 409A). Notwithstanding anything to the contrary in this Agreement, this Agreement shall, to the maximum extent possible, be administered, interpreted, and construed in a manner consistent with Section 409A. If any provision of this Agreement (or of any award of compensation due to Executive under this Agreement) would cause Executive to incur any additional tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, Hilton shall modify this Agreement to make it compliant with Section 409A and maintain the value of the payments and benefits under this Agreement.
24. Authorized Signatories . Each Party whose signature is affixed hereto in a representative capacity represents and warrants that he or she is authorized to execute this Separation Agreement on behalf of the entity on whose behalf his or her signature is affixed.
25. Signatures . The Parties hereby signify their Agreement to the above terms by their signatures below. Executive represents that he has had an opportunity to consult with his attorneys prior to signing this Agreement and has availed himself of such opportunity, that he has read and understands the foregoing Agreement and that he has affixed his signature hereto voluntarily and without coercion.
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26. Future Cooperation; Privilege . The Parties acknowledge and agree that Executive has been integrally involved in many sensitive legal matters on behalf of Hilton during the term of his employment. Subject to Executives ongoing personal and professional obligations following the Separation Date, Executive agrees to be reasonably available to Hilton from and after the Separation Date to provide assistance and legal advice in connection with matters arising during the term of Executives employment by Hilton. All expenses incurred by Executive in connection with such assistance shall be paid or reimbursed by Hilton, including Executives reasonable attorneys fees incurred in connection with such cooperation. It is the intention of the Parties that all communications between Hilton and Executive with respect to such matters shall be privileged and confidential to Hilton.
[ Signature page follows ]
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WHEREFORE, the Parties hereto have caused this Agreement to be signed as of the date written below.
Dated: October 26, 2012, McLean, Virginia
/s/ Matthew W. Schuyler |
HILTON WORLDWIDE, INC. F/K/A HILTON HOTELS CORPORATION |
Name: Matthew W. Schuyler |
Title: Chief Human Resources Officer
|
/s/ Bill Stein |
BH HOTELS HOLDCO LLC |
Name: Bill Stein |
Title: Managing Director |
/s/ Paul J. Brown |
Paul J. Brown |
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Schedule I
Terms of Advisory Services
1. | During the Advisory Period: |
a. | Executive will continue in the employment of Hilton, at a rate of pay equal to his base salary rate on the Transition Date paid in accordance with the normal payroll practices of the Company, and Executive continue to be eligible to participate in the medical, health, and welfare benefit insurance plans in which Executive participated on the Transition Date. Additionally, Executive will continue to vest in his equity grants through April 30, 2013, whether or not the Separation Date occurs prior to such date. |
b. | Hilton will provide Executive with access to an office and secretarial support. |
c. | Executive can participate in the Senior Executive Travel Program as described in the original offer letter from November 2008. |
2. | Following the Advisory Period, Executive will be entitled to keep the cellular phone, iPad and computer provided to the Executive by Hilton, provided, that Executive will be responsible for transferring the voice, data, and text message plan and the phone number associated with such device to his own account effective on or prior to the last day of the Advisory Period, and Hilton shall have no further responsibility in respect of any usage rates and fees associated with such device. |
3. | Following the Advisory Period, Executive will be entitled to lifetime benefits in the Hilton Honors program at the highest level (currently Diamond Status) assuming Executive remains in satisfactory customer status according to the terms of the program. |
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Appendix I
Covenants Regarding Competitive Conduct, Confidentiality, Intellectual Property
Executive acknowledges and recognizes the highly competitive nature of the businesses of Hilton and Holdings (collectively, the Company ) and their respective affiliates and accordingly agrees as follows:
1. Competitive Conduct.
(a) During the period of one year beginning on the Separation Date (the Restricted Period ), Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever ( Person ), directly or indirectly solicit or assist in soliciting in competition with the Restricted Group in the Business, the business of any then current or prospective client or customer with whom Executive (or his direct reports) had personal contact or dealings on behalf of the Company during the one-year period preceding Executives termination of employment.
(b) During the Restricted Period, Executive will not directly or indirectly:
(i) engage in the Business for a Competitor in any geographical area that is within 25 miles of any geographical area where the Restricted Group engages in the Business;
(ii) enter the employ of, or render any services to, a Competitor, except where such employment or services do not relate in any manner to the Business;
(iii) acquire a financial interest in, or otherwise become actively involved with, a Competitor, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or
(iv) intentionally and adversely interfere with, or attempt to adversely interfere with, business relationships between the members of the Restricted Group and any of their clients, customers, suppliers, partners, members or investors
provided that this Section 1(b) shall cease to apply during any time that The Blackstone Group L.P. and its affiliated investment funds beneficially own less than 25% of the voting power of the Company.
(c) Notwithstanding anything to the contrary in this Agreement, during the Restricted Period, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Business (including, without limitation, a Competitor) which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 2% or more of any class of securities of such Person.
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(d) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(i) knowingly solicit or encourage any executive-level employee of the Restricted Group to leave the employment of the Restricted Group; or
(ii) hire any such executive-level employee who was employed by the Restricted Group as of the date of Executives termination of employment with the Company or who left the employment of the Restricted Group coincident with, or within one year prior to or after, the termination of Executives employment with the Company.
(e) During the Restricted Period, Executive will not, whether on Executives own behalf or on behalf of or in conjunction with any Person, directly and intentionally encourage any material consultant of the Restricted Group to cease working with the Restricted Group.
(f) For purposes of this Agreement:
(i) Restricted Group shall mean, collectively, the Company and its subsidiaries and, to the extent engaged in the Business, their respective affiliates (including The Blackstone Group L.P. and its affiliates).
(ii) Business shall mean the business of acquiring controlling investments in, owning, operating, managing or franchising hotel and lodging properties and timeshares.
(i) Competitor shall mean (x) during the period beginning on January 1,2013 and ending on June 30, 2013, any person engaged in the Business and (y) thereafter, any major global hotel brand engaged in the Business (but, for the avoidance of doubt, excluding any private equity firm engaged in the Business).
(g) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 1 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(h) The period of time during which the provisions of this Section 1 shall be in effect shall be extended by the length of time during which Executive is in breach of the terms hereof as determined by any court of competent jurisdiction on the Companys application for injunctive relief.
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2. Confidentiality; Intellectual Property.
(a) Confidentiality.
(i) Executive will not at any time (x) retain or use for the benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations or otherwise in performance of Executives duties hereunder and pursuant to customary industry practice), any non-public, proprietary or confidential information (including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals) concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis ( Confidential Information ) without the prior written authorization of the Board.
(ii) Confidential Information shall not include any information that is (a) generally known to the industry or the public other than as a result of Executives breach of this covenant; (b) made legitimately available to Executive by a third party without breach of any confidentiality obligation of which Executive has knowledge; (c) is located on Executives rolodex (whether paper or electronic) or was in Executives possession prior to his commencing employment with the Company; or (d) required by law to be disclosed; provided that with respect to subsection (d) Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and reasonably cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii) Except as required by law, Executive will not disclose to anyone, other than Executives family (it being understood that, in this Agreement, the term family refers to Executive, Executives spouse, minor children, parents and spouses parents) and advisors, the existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of this Appendix I. This Section 2(a)(iii) shall terminate if the Company publicly discloses a copy of this Agreement (or, if the Company publicly discloses summaries or excerpts of this Agreement, to the extent so disclosed).
(iv) On Separation Date, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; and (y) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executives possession or control (including any of the foregoing stored or located in Executives office, home, laptop or other computer, whether or not Company property) that contain Confidential Information, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information.
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(b) Intellectual Property.
(i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship, inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems, applications, presentations, textual works, content, or audiovisual materials) (Works), either alone or with third parties, prior to Executives employment by the Company, that are relevant to or implicated by such employment ( Prior Works ), Executive hereby grants the Company a perpetual, non-exclusive, royalty-free, worldwide, assignable, sub-licensable license under all rights and intellectual property rights (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Companys current and future business.
(ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with third parties, at any time during Executives employment by the Company and within the scope of such employment and with the use of any the Company resources ( Company Works ), Executive shall promptly and fully disclose same to the Company and hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property, copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally in the Company.
(iii) Executive shall take all reasonably requested actions and execute all reasonably requested documents (including any licenses or assignments required by a government contract) at the Companys expense (but without further remuneration) to assist the Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the Companys rights in the Prior Works and Company Works. If the Company is unable for any other reason, after reasonable attempt, to secure Executives signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executives agent and attorney in fact, to act for and in Executives behalf and stead to execute any documents and to do all other lawfully permitted acts required in connection with the foregoing.
(iv) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Executive shall comply with all relevant policies and guidelines of the Company that are from time to time previously disclosed to Executive, including regarding the protection of Confidential Information and intellectual property and potential conflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains at all times bound by their most current version from time to time previously disclosed to Executive.
(v) The provisions of Section 2 hereof shall survive the termination of Executives employment for any reason (except as otherwise set forth in Section 2(a)(iii) hereof).
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3. Specific Performance . Executive acknowledges and agrees that the Companys remedies at law for a breach or threatened breach of any of the provisions of Section 6 of the Employment Agreement or Section 1 of this Appendix I (or a material breach or material threatened breach of any of the provisions of Section 7 of the Employment Agreement or Section 2 of this Appendix I) may be inadequate and the Company may suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and seek to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our report dated September 6, 2013, in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-191110) and related Prospectus of Hilton Worldwide Holdings Inc. for the registration of its common stock.
/s/ Ernst & Young LLP
McLean, Virginia
November 6, 2013