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Exhibit 10.2
SENIOR SUBORDINATED INCREASING RATE NOTES:
SUMMARY OF TERMS AND CONDITIONS
ISSUER: Doubletree Corporation (the "Company").
PURCHASERS: Morgan Stanley Group Inc. ("Morgan Stanley"), The Bank
of Nova Scotia, First Union Corporation and Societe
Generale Investment Corporation or, in any such case,
one of its affiliates designated by it and one or more
other purchasers (collectively, the "Purchasers"), in
each case in the proportions set forth in the
Commitment Letter.
FEES: As set forth in the Commitment Letter.
ISSUE: Senior Subordinated Increasing Rate Notes (the "Bridge
Notes") issued pursuant to a Securities Purchase
Agreement (the "Securities Purchase Agreement") among
the Company and the Purchasers.
USE OF PROCEEDS: The proceeds of the Bridge Notes will be used (i) to
finance, in part, the consideration payable in
connection with the Acquisition and the Refinancing
and (ii) to pay costs and expenses in connection with
the Acquisition and the Refinancing.
PRINCIPAL AMOUNT: Up to $150,000,000, as determined by the Company.
PRICE: 100% of principal amount.
INTEREST RATE: Interest on the Bridge Notes shall be paid at the
Applicable Interest Rate (as defined below) and
payable quarterly in arrears. "Applicable Interest
Rate" means the highest of the following, as
determined as of the beginning of each three-month
period: (i) the prime rate (as announced from time to
time by Citibank N.A.) plus 300 basis points, (ii)
three-month U.S. Dollar LIBOR (as determined from
specified sources) plus 575 basis points and (iii) the
highest yield on any of the 1, 3, 5 and 10-year direct
obligations issued by the United States plus 475 basis
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points; provided that if the Bridge Notes are not
retired in whole by the end of the first six months
following the issuance date, the Applicable Interest
Rate otherwise in effect will increase by 100 basis
points and shall thereafter increase by an additional
50 basis points at the end of each subsequent
three-month period for so long as the Bridge Notes are
outstanding (the "Incremental Spread"); and provided,
further, that (A) in no event shall the Applicable
Interest Rate exceed 19.0% and (B) the amount of cash
interest paid will be subject to a cap of 16.0%, with
the excess (if any) of the Applicable Interest Rate
over such cash interest cap to be paid in additional
Bridge Notes.
MATURITY: One year from the date of issuance.
SUBORDINATION: The Bridge Notes, and the guarantees thereof by
subsidiaries of the Company, will be subordinated to
the Credit Facility (including interest hedging
arrangements entered into in connection therewith and
an additional principal amount thereunder to be
negotiated), certain existing indebtedness of the
Company and the Target and certain refinancings
thereof on terms to be agreed.
GUARANTEES: Each of the Company's direct and indirect subsidiaries
that is a borrower or guarantor with respect to the
Credit Facility or any refinancing thereof will, so
long as it is a borrower or guarantor with respect to
the Credit Facility or such a refinancing, guarantee
the Company's obligations under the Bridge Notes and
the Securities Purchase Agreement.
MANDATORY REDEMPTION: The Company will redeem the Bridge Notes with, subject
to certain agreed exceptions, (i) the net proceeds
from the issuance of any equity or subordinated debt
securities (the "Permanent Financing"), (ii) the net
proceeds from the incurrence of any other debt to the
extent permitted by the Credit Facility, and (iii) the
net proceeds from asset sales in excess of the amount
thereof required to be paid to the banks under the
Credit Facility other than asset sales in the ordinary
course of business and asset sales the proceeds of
which are reinvested in like assets (subject, in each
case to size and other limitations to be mutually
agreed upon); in each case, the
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redemption price shall be at par plus accrued
interest; provided, that the redemption price shall be
104.167% of par plus accrued interest if the Bridge
Notes are redeemed with or in anticipation of funds
raised by any means other than a transaction in which
Morgan Stanley or any of its affiliates has been given
an opportunity to act as lead agent or lead
underwriter on market terms and has declined for
reasons other than then existing market conditions.
CHANGE-OF-CONTROL The Company will redeem, subject to certain
conditions, the Bridge Notes upon any
change-of-control of the Company at a redemption price
of 104.167% of par plus accrued interest (or, if
Morgan Stanley or any of its affiliates shall have
been offered an opportunity to act as lead agent or
lead underwriter on market terms with respect to the
offering, the funds from which shall have been used to
so redeem the Bridge Notes, and has declined for
reasons other than then existing market conditions
100% of par plus accrued interest).
INTEREST PAYMENT: Quarterly in arrears.
OPTIONAL REDEMPTION: The Bridge Notes will be callable, in whole or in
part, upon not less than 3 business days' written
notice, at the option of the Company, at any time at
par plus accrued interest to the redemption date;
provided that the redemption price shall be 104.167%
of par plus accrued interest if the Bridge Notes are
refunded (whether at the time of redemption or
maturity) with or in anticipation of funds raised by
any means other than a transaction in which Morgan
Stanley or any of its affiliates has been given an
opportunity to act as lead agent or lead underwriter
on market terms and has declined for reasons other
than then existing market conditions.
MANDATORY EXCHANGE: If the Bridge Notes have not been previously redeemed
in full for cash on or prior to maturity, the
principal of the Bridge Notes outstanding at maturity
may, subject to certain conditions precedent, be
satisfied at maturity through the issuance and
delivery of the Rollover Notes described in Exhibit B
to the Commitment Letter. The Rollover Notes will be
issued at the same
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time as the Bridge Notes and held in escrow, as
described below, pending such mandatory exchange.
RIGHT TO RESELL
BRIDGE NOTES: The Purchasers shall have the absolute and
unconditional right to resell the Bridge Notes to one
or more third parties, whether by assignment or
participation, in compliance with applicable law.
EXPIRATION DATE: The obligations of the Purchasers to purchase Bridge
Notes will expire upon the earlier of (i) immediately
prior to the consummation of the Acquisition or
another transaction or series of transactions (other
than the Transaction) in which the Company or any of
its affiliates acquires any stock or assets of the
Target, including, without limitation, the Alternate
Transaction, (ii) termination of the Acquisition
Agreement, and (iii) December 1, 1996 (or, if the
Company shall have made a Commitment Extension
Election and paid the Additional Commitment Fee on or
prior to November 28, 1996, January 31, 1997).
EQUITY AMOUNT; ESCROW: On the date of the issuance of the Bridge Notes,
warrants ("Warrants") representing 3.5% of the common
stock of the Company (the "Escrowed Warrant Amount"),
which Warrants shall contain reasonable anti-dilution
provisions, will be placed in an escrow account with a
mutually agreeable escrow agent and will be released
either (i) at the direction of the Company and Morgan
Stanley or one of its affiliates, as the lead agent or
lead underwriter (the "Placement Agent") with respect
to the Permanent Financing (as referred to in the
Commitment Letter), to the purchasers purchasing the
securities issued in such refinancing, in amounts
agreed by the Placement Agent and the Company to be
reasonably necessary to facilitate the sale of such
securities or (ii) to the holders of the Bridge Notes
(or Rollover Notes, if any are issued) (A) 2.5% upon
the first anniversary of the issuance of the Bridge
Notes and (B) 0.25% upon each third month thereafter
through the second anniversary of the issuance of the
Bridge Notes, in each case if any Bridge Notes or
Rollover Notes are then outstanding, with all such
amounts pursuant to this clause (ii) being reduced pro
rata (or in such other proportion as the Company and
the Purchasers shall mutually agree) if less than 100%
of the Bridge Notes
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or Rollover Notes originally issued are then
outstanding.
All Warrants will be exercisable at a nominal price
for a period of five years from the date such warrants
are released from the Escrow and will have customary
anti-dilution provisions and demand and "piggy back"
(subject to reasonable "cut-back" and other customary
provisions) registration rights.
In addition, the Rollover Notes will be held, undated,
in escrow by the same escrow agent from the date that
the Bridge Notes are purchased.
CONDITIONS TO FUNDING: In addition to conditions precedent typical for
leveraged financings similar to the Bridge Financing
that are mutually acceptable to the Company and the
Purchasers, the execution and closing of the
Securities Purchase Agreement and the funding of the
Bridge Notes will be subject to satisfaction of the
following conditions precedent:
1. The Acquisition shall have been consummated in
accordance with the Acquisition Agreement, and the
Acquisition Agreement and other documentation
shall be satisfactory in form and substance to the
Purchasers, without any amendment, modification or
waiver of any of the terms or conditions thereof
except with the prior written consent of the
Purchasers (which will not be unreasonably
withheld).
2. The other financings and transactions contemplated
to be consummated on the closing date in
connection with the Transaction, including,
without limitation, the Refinancing, the Private
Equity Offering, the Equity Rollover and the
Credit Facility, shall have been consummated prior
to (or shall be consummated simultaneously with)
the issuance of the Bridge Notes, all on terms and
conditions reasonably satisfactory to the
Purchasers, it being understood that (x) the form
of the Merger Agreement (including the exhibits
thereto) and the structure of the Acquisition, in
each case as in effect on the date hereof, are
satisfactory, (y) the pricing, maturity and
general structure of the Credit Facility as in
effect on the date hereof are satisfactory and (z)
the general terms of the Private Equity Offering,
as in effect on the date hereof, are satisfactory;
provided that notwithstanding (x),
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(y) and (z) above, (A) the definitive
documentation for the Credit Facility (including,
but not limited to, the specific terms and
provisions of the covenants, representations and
warranties, events of default, remedies,
guaranties and security interests) is still
required to be in form and substance reasonably
satisfactory to the Purchasers and (B) the
definitive documentation evidencing the Private
Equity Offering is still required to be reasonably
satisfactory to the Purchasers.
3. Receipt by the Purchasers of evidence satisfactory
to them that the Company and the Target have cash
(other than proceeds from the Credit Facility, the
Private Equity Offering and the Bridge Financing)
on hand in an amount sufficient, together with the
proceeds of the Term Facility, the Private Equity
Offering, the Bridge Financing and not more than
$15 million in borrowings under the Revolving
Facility, to consummate the Acquisition and the
Refinancing and to pay all fees and expenses
incurred in connection with the Transaction.
4. The Purchasers shall have received copies of a
comfort letter from the Company's accountants.
5. Receipt by the Purchasers of solvency certificates
to the extent required by the lenders under the
Credit Facility.
6. Satisfactory completion of the Securities Purchase
Agreement and all other documentation relating to
the Bridge Notes in form and substance
satisfactory to the Purchasers, including issuance
of appropriate guarantees, and receipt by the
Purchasers of satisfactory opinions of counsel to
the Company and to the Purchasers as to the
transactions contemplated thereby (including,
without limitation, compliance with all applicable
securities laws), together with customary closing
documentation.
7. All necessary governmental approvals (other than
approvals required to effect the transfer of
liquor licenses), all necessary shareholder and
board of director approvals and the approval of
the lender to Red Lion Inns Operating L.P. (or (x)
the written acknowledgment by such lenders that
such approval is not necessary or (y) the issuance
of an opinion of counsel to the Company,
satisfactory in form and substance to the
Purchasers, that no such approval is necessary),
in each case necessary in
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connection with the Transaction and the other
transactions contemplated by the Bridge Financing
and otherwise referred to herein, shall have been
obtained and remain in effect, and all applicable
waiting periods shall have expired without any
action being taken by any competent authority
which restrains, prevents or imposes materially
adverse conditions upon the consummation of the
Transaction or the other transactions contemplated
by the Bridge Financing or otherwise referred to
herein.
8. Nothing shall have occurred (and (x) the
Purchasers shall not have become aware of any
facts or conditions not previously disclosed to
them and (y) no information previously submitted
to the Purchasers by or on behalf of the Company
(including, without limitation, financial,
accounting and tax information) is inaccurate,
incomplete or misleading) which (in any such case)
could reasonably be expected to have a material
adverse effect on the Transaction or the business,
property, assets, operations, liabilities or
financial condition of the Company, the Target and
their respective subsidiaries taken as a whole.
9. Absence of any material adverse change in or
material disruption of financial, syndication or
capital markets, that would have a material
adverse effect on the Permanent Financing, as
determined by the Purchasers in their reasonable
discretion.
10. Absence of any material pending or threatened
litigation or other proceedings by any entity
(private or governmental) with respect to the
Transaction, the Bridge Financing, the Permanent
Financing or any documentation executed in
connection therewith or which the Purchasers
reasonably determine could be reasonably be
expected to have a material adverse effect on the
business, property, assets, operations,
liabilities or financial condition of the Company,
the Target or the Company and its subsidiaries
taken as a whole.
11. Absence of any default or event of default.
12. Absence of any change of control of the Company.
13. There shall have been no material changes to
corporate and capital structure (and all
agreements related thereto)
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of the Company and its subsidiaries, or to any
organizational documents of such entities.
14. The Purchasers shall have received consent from
the Credit Facility lenders, if any, concerning
the anticipated terms and conditions of the Bridge
Notes, the Rollover Notes and the Permanent
Financing, including the application of the
proceeds from any such financing. Such terms will
include usual and customary terms for securities
of this type.
15. All costs, fees, expenses (including, without
limitation, legal fees and expenses) and other
compensation contemplated hereby payable to the
Purchasers on or prior to the Closing Date shall
have been paid.
REPRESENTATIONS AND
WARRANTIES: The Securities Purchase Agreement will contain
representations and warranties to the holders of the
Bridge Notes which are usual and customary for
transactions of this nature or reasonably required by
the Purchasers for this transaction, including, but not
limited to, the following:
1. Corporate existence.
2. Corporate and governmental authorizations; no
contravention; binding and enforceable agreements.
3. Financial information.
4. No material adverse change.
5. Environmental matters.
6. Compliance with laws, including ERISA and
environmental laws.
7. No material litigation.
8. Existence, incorporation, etc., of subsidiaries.
9. Payment of taxes and other material obligations.
10. No default or event of default.
11. Full disclosure.
12. Other deal specific representations.
COVENANTS: The Securities Purchase Agreement will contain usual
and customary covenants for securities of this nature
or reasonably required by the Purchasers for this
transaction, including, without limitation, the
following:
1. Furnishing of information.
2. Maintenance of property; insurance coverage.
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3. Compliance with laws; conduct of business;
inspection of properties.
4. Use of proceeds.
5. Restrictions on indebtedness.
6. Negative pledge.
7. Restrictions on dividends and other restricted
payments (including redemptions and prepayment of
junior or pari passu indebtedness).
8. Restrictions on asset sales, including
sale-leasebacks.
9. Restrictions on transactions with affiliates.
10. Restrictions on mergers and consolidations.
11. Refinancing of Bridge Notes.
12. Limitation on investments.
13. Other deal specific covenants.
EVENTS OF DEFAULT: The Securities Purchase Agreement will contain usual
and customary events of default for securities of this
nature or reasonably required by the Purchasers for
this transaction, including, without limitation, the
following:
1. Failure to pay any principal when due or any
interest or fees payable within 10 days of when
due.
2. Failure to meet covenants, with grace periods
where appropriate.
3. Representations or warranties false in any
material respect when made.
4. Cross acceleration to other material debt of the
Company and its subsidiaries.
5. Material judgment defaults.
6. Change-of-control of the Company.
7. Other usual defaults, including, without
limitation, insolvency, bankruptcy and ERISA.
INDEMNIFICATION: The Company will indemnify the Purchasers against all
losses, liabilities, claims, damages or expenses
relating to the Bridge Notes, the Securities Purchase
Agreement and the Company's use of the Bridge Note
proceeds or the commitments, including, but not limited
to, reasonable attorney's fees and settlement costs,
substantially on the terms set forth in the Commitment
Letter.
EXPENSES: The Company will pay all reasonable legal and other
out-of-pocket expenses of the Purchasers promptly upon
receipt of reasonably detailed invoices therefor,
including reasonable travel costs, document production
and other
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expenses of this type, and the reasonable fees of
outside counsel and fees of other professional
advisors engaged with the Company's consent.
GOVERNING LAW: State of New York.
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SENIOR SUBORDINATED ROLLOVER NOTES:
SUMMARY OF TERMS AND CONDITIONS
ISSUER: Doubletree Corporation (the "Company").
PURCHASERS: The Purchasers and any other holder or holders of the
Bridge Notes.
ISSUE: Senior Subordinated Rollover Notes (the "Rollover
Notes")
PRINCIPAL AMOUNT: Up to the outstanding principal amount of the Bridge
Notes plus an amount equal to 4.167% of such principal
amount, representing a funding fee payable to the
Purchasers.
PURPOSE: The Rollover Notes will be used in their entirety to
redeem 100% of the outstanding principal amount of the
Bridge Notes.
MATURITY: 8 years after the issuance date of the Rollover Notes.
INTEREST RATE: Interest on the Rollover Notes shall be paid at the
Applicable Interest Rate (as defined below) and
payable quarterly in arrears. "Applicable Interest
Rate" means the sum of (A) the Incremental Spread (as
defined in the Summary of Terms and Conditions for the
Bridge Notes) as of the date of the issuance of the
Rollover Notes, which shall (for so long as the
Rollover Notes are held by the Purchasers) increase by
an additional 50 basis points at the end of each
three-month period for so long as the Rollover Notes
are outstanding, plus (B) the highest of the
following, as determined as of the beginning of each
three-month period: (i) the prime rate (as announced
from time to time by Citibank N.A.) plus 300 basis
points, (ii) three-month U.S. Dollar LIBOR (as
determined from specified sources) plus 575 basis
points and (iii) the highest yield on any of the 1, 3,
5 and 10-year direct obligations issued by the United
States plus 475 basis points; provided that (A) in no
event shall the Applicable Interest Rate exceed 19.0%
and (B) the amount of cash interest paid will be
subject to a cap of 16.0%, with the excess (if any) of
the Applicable Interest Rate over such cash interest
cap to be paid in additional Rollover Notes.
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OPTIONAL REDEMPTION: For so long as they are held by the Purchasers, the
Rollover Notes will be redeemable at the option of the
Company, in whole or in part, at any time at par plus
accrued and unpaid interest to the redemption date;
provided, however, that if the Rollover Notes are sold
to unaffiliated third party purchasers on a fixed rate
basis no less favorable to the Company than the then
applicable rate of interest (it being understood that
the Purchasers shall have the right to unilaterally
fix the Interest Rate on the Rollover Notes in
conjunction with such third party sales and it also
being understood that no such third party sales shall
take place unless the Company has been given 30 days'
prior notice), the Rollover Notes will be non-callable
for 5 years from the date of issuance and will be
callable thereafter at par plus accrued interest plus
a premium equal to 50% of the coupon in effect on the
date of issuance of the Rollover Notes, declining
ratably on each yearly anniversary to par one year
prior to the maturity of the Rollover Notes.
MANDATORY REDEMPTION: Same as Bridge Notes, except that the redemption price
shall be at par plus accrued interest.
CHANGE-OF-CONTROL: The Company will redeem, subject to the certain
conditions, the Rollover Notes upon any
change-of-control of the Company at a redemption price
of 101% of par plus accrued interest.
SUBORDINATION: Same as Bridge Notes.
GUARANTEES: Same as Bridge Notes.
REGISTRATION RIGHTS: The Company will file, and will use its best efforts
to cause to become effective, a "shelf" registration
statement with respect to the Rollover Notes as soon
as practicable after the issuance of the Rollover
Notes. The Company will keep the registration
statement for the Rollover Notes effective until the
Rollover Notes shall have been redeemed. If a "shelf"
registration statement for the Rollover Notes has
either (i) not been filed within 60 days from the date
of issuance of the Rollover Notes, or (ii) not been
declared effective within 120 days from the date of
issuance of the Rollover Notes, the Company will pay
liquidated damages of $.192 per week per $1,000
principal amount of Rollover Notes until such time as
such registration statement has become effective. The
Company will also pay such liquidated damages for any
period of time following the effectiveness of such
registration statement that the registration statement
is not available for
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resales thereunder. In addition, the holders of the
Rollover Notes will have the right to "piggy-back" on
the registration of any debt securities which are
registered by the Company unless all of the Rollover
Notes will be redeemed from the proceeds of such
securities.
RIGHT TO RESELL
ROLLOVER NOTES
AND WARRANTS: The Purchasers shall have the absolute and
unconditional right to resell Rollover Notes and
Warrants in compliance with applicable law to any
third parties.
RELEASE OF EQUITY
FROM ESCROW: In the event that the Rollover Notes are exchanged for
the Bridge Notes, the Purchasers shall be entitled to
receive and retain the Warrants held in escrow at the
times and in the amounts described in the Summary of
Terms and Conditions for the Bridge Notes.
DEFEASANCE PROVISIONS: None.
CONDITIONS TO ISSUANCE: The right to issue the Rollover Notes will be subject
to satisfaction of the following conditions precedent:
(i) at the time of issuance, there shall exist no
bankruptcy or payment default or cross acceleration
under the Securities Purchase Agreement, (ii) all fees
and other amounts owing to the Purchasers and then
payable shall have been paid in full and (iii) no
injunction, decree, order or judgment enjoining such
issuance shall be in effect.
REPRESENTATIONS,
WARRANTIES, COVENANTS,
EVENTS OF DEFAULT,
INDEMNITIES AND
EXPENSES: As in the Securities Purchase Agreement (see above).
GOVERNING LAW: State of New York.
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