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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 1-11903
MERISTAR HOSPITALITY CORPORATION
(Exact name of issuer as specified in its charter)
MARYLAND 75-2648842
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1010 WISCONSIN AVENUE, N.W., 20007
WASHINGTON, D.C. (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 295-1000
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Title of each class Name of each exchange on which registered:
-------------------- ------------------------------------------
<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
- ----------------------------------------------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K___.
- -------------------------------
Based on the average sale price at March 13, 2000, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$504,763,294.
The number of shares of the Registrant's common stock outstanding as of
March 13, 2000 was 47,456,455.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III - Those portions of the Registrant's definitive proxy statement
relating to Registrant's 2000 Annual Meeting of Stockholders which are
incorporated into Items 10, 11, 12, and 13.
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PART I
ITEM 1. BUSINESS
THE COMPANY
MeriStar Hospitality Corporation (the "Company") is a comprehensive real
estate investment trust ("REIT"), which owns a portfolio of primarily upscale,
full-service hotels, diversified by franchise and brand affiliations, in the
United States and Canada. As of December 31, 1999, the Company owned 116 hotels
that contain 29,348 rooms (the "Hotels"). The Hotels are located in major
metropolitan areas or rapidly growing secondary markets and are well located
within these markets. A majority of the Hotels are operated under nationally
recognized brand names such as Hilton(R), Sheraton(R), Westin(R), Marriott(R),
Radisson(R), Doubletree(R) and Embassy Suites(R). All of the Hotels and the
Company's other assets are held by, and all of the Company's operations are
conducted by, MeriStar Hospitality Operating Partnership, L.P. (the "Operating
Partnership"). The Company is the sole general partner of the Operating
Partnership and controls its operations.
The Company was created on August 3, 1998, when American General Hospitality
Corporation ("AGH"), a Maryland corporation operating as a REIT, and its
affiliated entities merged with CapStar Hotel Company ("CapStar"), a Delaware
corporation, and its affiliated entities pursuant to an Agreement and Plan of
Merger, dated as of March 15, 1998 (the "Merger").
At the Merger, through a series of transactions, CapStar transferred or
caused to be transferred certain assets and liabilities to MeriStar Hotels &
Resorts, Inc. ("OPCO"), a Delaware corporation and a wholly owned subsidiary of
CapStar, so that OPCO would own the hotel management and leasing business
previously operated by CapStar and its subsidiaries, and CapStar then
distributed to its stockholders on a share-for-share basis (the "Spin-Off") all
of the outstanding capital stock of OPCO. Immediately following the Merger, OPCO
acquired 100% of the partnership interests in AGH Leasing, L.P., the third-party
lessee that leased most of the hotels owned by AGH, and substantially all of the
assets and certain liabilities of American General Hospitality, Inc., the third-
party manager that managed most of the hotels owned by AGH. OPCO is the lessee
and manager of 108 of the Hotels as well as properties of other hotel owners.
The eight Hotels not leased by OPCO are leased by affiliates of Prime
Hospitality Corp. ("Prime"). The Company and OPCO share certain key officers and
four board members. An intercompany agreement aligns the Company's interests
with the interests of OPCO (the "Intercompany Agreement"), with the objective of
benefiting both companies' shareholders. See "The Intercompany Agreement."
Each of the Company's leases is a participating lease ("Participating Lease")
designed to allow the Company to achieve substantial participation in any future
growth of revenues generated at the Hotels. Each Participating Lease has an
initial term of twelve years from the inception of the lease, subject to earlier
termination upon the occurrence of certain events. Under each Participating
Lease, the lessee is obligated to pay the Company the greater of fixed base rent
or participating rent based on a percentage of revenues at each of the Hotels.
See "The Participating Leases."
The Company's business strategy is to opportunistically acquire hotel
properties and related businesses with the potential for cash flow growth, and
to renovate and reposition each hotel according to the characteristics of the
hotel and its market. During the year ended December 31, 1999, the Company
spent a total of $160 million on renovations at the Hotels and intends to spend
an additional $40 million during 2000 completing its renovation programs. See
"Special Note Regarding Forward-Looking Statements."
The Company believes that the upscale, full-service segment of the lodging
industry is the most attractive segment in which to own hotels. The upscale,
full-service segment is attractive for several reasons. First, the development
pipeline of upscale, full-service hotels has slowed over the past year compared
to limited service hotels, thereby reducing the rate of supply growth in the
full-service segment. Second, upscale, full-service hotels appeal to a wide
variety of customers, thus reducing the risk of decreasing demand from any
particular customer group. Additionally, such hotels have particular appeal to
both business executives and upscale leisure travelers, customers who are
generally less price sensitive than
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travelers who use limited-service hotels.
BUSINESS
The Company seeks to increase shareholder value by maintaining its close
relationship with OPCO, a successful hotel operator, to increase the current and
future potential economic returns from its hotel assets.
The Intercompany Agreement
Rights of First Refusal
The Intercompany Agreement provides that OPCO has a right of first refusal to
become the lessee of any real property acquired by the Company if the Company
determines that, consistent with its status as a REIT, the Company is required
to enter into a lease; provided that OPCO or an entity controlled by OPCO is
qualified to be the lessee based on experience in the industry and financial and
legal qualifications.
The Intercompany Agreement provides that the Company must provide OPCO with
written notice of a lessee opportunity. During the 30 days following such
notice, OPCO has a right of first refusal with regard to the offer to become a
lessee and the right to negotiate with the Company on an exclusive basis
regarding the terms and conditions of the lease. If after 30 days, the Company
and OPCO are unable to agree on the terms of a lease or if OPCO indicates that
it is not interested in pursuing the opportunity, the Company may offer the
opportunity to other hotel operators for a period of one year thereafter, at a
price and on terms and conditions that are not more favorable than the price and
terms and conditions proposed to OPCO. After this one-year period, if the
Company has not leased the property, the Company must again offer the
opportunity to OPCO in accordance with the procedures specified above.
Each company has established a leasing committee which reviews all hotel
leases to be entered into between the companies. Both leasing committees consist
of directors that are not directors of the other company.
OPCO has agreed not to acquire or make (i) investments in real estate or (ii)
any other investments that may be made by a REIT under the federal income tax
rules governing REITs unless they have provided written notice to the Company of
the material terms and conditions of the acquisition or investment opportunity,
and the Company has determined not to pursue such acquisitions or investments
either by providing written notice to OPCO rejecting the opportunity within 20
days or by allowing such 20-day period to lapse. OPCO has also agreed to assist
the Company in structuring and consummating any acquisition or investment which
the Company elects to pursue.
The Intercompany Agreement provides the Company and OPCO with a symbiotic
relationship so that investors in both companies may enjoy the economic benefit
of the entire enterprise. Investors should be aware, however, that because of
the independent trading of the shares of the Company and the shares of OPCO,
stockholders of each company may develop divergent interests which could lead to
conflicts of interest. This divergence of interests could also reduce the
anticipated benefits of the relationship between the two companies.
Provision of Services
OPCO provides the Company with certain services as the Company may reasonably
request from time to time, including administrative, renovation supervision,
corporate, accounting, financial, insurance, legal, tax, information technology,
human resources, acquisition identification and due diligence, and operational
services. The Company compensates OPCO for services provided in an amount
determined in good faith by OPCO as the amount an unaffiliated third party would
charge the Company for comparable services.
Equity Offerings
If either the Company or OPCO desires to engage in a securities issuance,
such issuing party will give
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notice to such other party as promptly as practicable of its desire to engage in
a securities issuance. Any such notice will include the proposed material terms
of such issuance, to the extent determined by the issuing party, including
whether such issuance is proposed to be pursuant to public or private offering,
the amount of securities proposed to be issued and the manner of determining the
offering price and other terms thereof. The non-issuing party will cooperate
with the issuing party in every way to effect any securities issuance of the
issuing party by assisting in the preparation of any registration statement or
other document required in connection with such issuance and, in connection
therewith, providing the issuing party with such information as may be required
to be included in such registration statement or other document.
Term
The Intercompany Agreement will terminate upon the earlier of (a) August 3,
2008, or (b) a change in ownership or control of OPCO.
The Company may lend OPCO up to $75 million for general corporate purposes
pursuant to a revolving credit agreement. Amounts outstanding under the
facility bear interest at the rate of the 30-day London Interbank Offered Rate
("LIBOR") plus 350 basis points. As of December 31, 1999, OPCO had drawn $57
million on the facility at an interest rate of 9.98%.
REIT Modernization Act
In order to maintain its tax status as a REIT, the Company has not been
permitted to engage in the operations of its hotel properties. To comply with
this requirement, the Company has leased all of its real property to third-party
lessee/managers - OPCO and Prime Hospitality. In December 1999, the REIT
Modernization Act (the "RMA") became law. The RMA now permits the REIT to
create a taxable REIT subsidiary (the "TRS"), which will be subject to taxation
similar to a C-Corporation. The TRS will be allowed to lease the real property
owned by the REIT.
The RMA does not permit a REIT to establish a TRS until January 1, 2001.
Also, although a TRS can lease real property from a REIT, it will be restricted
from being involved in certain activities prohibited by the RMA. First, a TRS
will not be permitted to manage the properties itself; it will need to enter
into an "arms length" management agreement with an independent third-party
manager that is actively involved in the trade or business of hotel management
and manages properties on behalf of other owners. Second, the TRS will not be
permitted to lease a property that contains gambling operations. Third, the TRS
will be restricted from owning a brand or franchise.
The Company believes that establishing a TRS to lease its properties will
provide a more efficient alignment of and ability to capture the economic
interests of property ownership. The Company has established a subcommittee of
independent members of the Board of Directors to negotiate the transfer of its
existing leases with OPCO to the Company's TRS. Since this process is a
significant change from the business structure the Company has maintained as a
REIT, it is not currently possible to predict the outcome of these negotiations.
The amount of consideration, if any, to be exchanged between the Company and
OPCO is subject to completion of these negotiations. The Company is aiming to
conclude these negotiations during 2000 and transfer those leases to its TRS
effective January 1, 2001. Concurrent with the transfer of the leases to the
TRS, the Company expects to enter into management agreements with OPCO to manage
its properties in accordance with the RMA rules described above.
Acquisition Strategy
In order to maintain its qualification as a REIT, the Company must make
annual distributions to its stockholders of at least 95% of its taxable income
(excluding net capital gains). As a result, in order to complete acquisitions,
the Company relies heavily on its ability to raise new capital through debt and
equity offerings; that ability is dependent on the then current status of the
capital markets. Currently, equity capital is not available at prices that make
it beneficial to acquire new assets.
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Although the Company is not currently pursuing direct acquisition
opportunities due to the lack of available capital, it continues to be aware of
acquisition opportunities in the upscale, full-service hotel market. During
1999, the Company made a $40 million preferred equity investment in Meristar
Investment Partners, a joint venture established to acquire upscale, full-
service hotels. The Company continues to explore additional investments in
hotels through joint ventures with strategic partners or through equity
contributions, sales and leasebacks, or secured loans.
The Company focuses its attention on investments in hotels located in markets
with economic, demographic and supply dynamics favorable to hotel owners.
Through its extensive due diligence process, the Company selects those
acquisition targets where it believes selective capital improvements and well
selected third-party management will increase the hotel's ability to attract key
demand segments, enhance hotel operations and increase long-term value. In order
to evaluate the relative merits of each investment opportunity, senior
management of the Company together with OPCO create detailed plans covering all
areas of renovation and operation. These plans serve as the basis for the
Company's acquisition decisions and guide subsequent renovation and operating
plans which will be carried out by a third-party hotel operator.
Competition
The Company competes primarily in the upscale and mid-priced sectors of the
full-service segment of the lodging industry. In each geographic market in which
the Hotels are located, there are other full- and limited-service hotels that
compete with the Hotels. Competition in the U.S. lodging industry is based
generally on convenience of location, brand affiliation, price, range of
services and guest amenities offered, and quality of customer service and
overall product.
Employees
As of December 31, 1999, the Company employed ten persons. All of the
Company's employees work at the corporate headquarters.
Franchises
The Company employs a flexible branding strategy based on a particular
hotel's market environment and the hotel's unique characteristics. Accordingly,
the Company uses various national trade names pursuant to licensing arrangements
with national franchisors.
Governmental Regulation
Americans with Disability Act - Under the Americans with Disabilities Act
(the "ADA"), all public accommodations are required to meet certain requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Although significant amounts have been and continue to be
invested in ADA required upgrades to the Hotels, a determination that the
Company is not in compliance with the ADA could result in a judicial order
requiring compliance, imposition of fines or an award of damages to private
litigants. The Company is likely to incur additional costs of complying with the
ADA; however, such costs are not expected to have a material adverse effect on
the Company's results of operations or financial condition.
Environmental Laws - Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be liable for the costs of removal or remediation of hazardous
or toxic substances on, under or in such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. In addition, the presence
of hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to use the property, sell the
property or borrow by using such real property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances may also
be liable for the costs of removal or remediation of such substances at the
disposal or treatment facility, whether or not such facility is or ever was
owned or operated by such person. The operation and removal of certain
underground storage tanks are also regulated by federal and state laws. In
connection with the ownership of the Hotels, the Company could be
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liable for the costs of remedial action with respect to such regulated
substances and storage tanks and claims related thereto. Certain environmental
laws and common law principles could also be used to impose liability for
releases of hazardous materials, including asbestos-containing materials
("ACMs"), into the environment, and third parties may seek recovery from owners
or operators of real properties for personal injury associated with exposure to
released ACMs or other hazardous materials.
Phase I environmental site assessments ("ESA") have been conducted at all of
the Hotels, and Phase II ESAs have been conducted at some of the Hotels by
qualified independent environmental engineers. The purpose of the ESA is to
identify potential sources of contamination for which the Hotels may be
responsible and to assess the status of environmental regulatory compliance. The
ESAs have not revealed any environmental liability or compliance concerns that
the Company believes would have a material adverse effect on the Company's
business, assets, results of operations or liquidity, nor is the Company aware
of any material environmental liability or concerns. Nevertheless, it is
possible that these ESAs did not reveal all environmental liabilities or
compliance concerns or that material environmental liabilities or compliance
concerns exist of which the Company is currently unaware.
In reliance upon the Phase I and Phase II ESAs, the Company believes the
Hotels are in material compliance with all federal, state and local ordinances
and regulations regarding hazardous or toxic substances and other environmental
matters. The Company has not been notified by any governmental authority of any
material noncompliance, liability or claim relating to hazardous or toxic
substances or other environmental substances in any of the Hotels.
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THE OPERATING PARTNERSHIPS
The following summary information is qualified in its entirety by the
provisions of the MeriStar Hospitality Operating Partnership, L.P. limited
partnership agreement, a copy of which has been filed as an exhibit to this Form
10-K.
Substantially all of the Company's assets are held indirectly by MeriStar
Hospitality Operating Partnership, L.P., the Company's subsidiary operating
partnership. The Company is the sole general partner of the Operating
Partnership, and the Company and approximately 114 independent third parties
are limited partners of the Operating Partnership. The partnership agreement of
the Operating Partnership gives the general partner full control over the
business and affairs of the Operating Partnership. The general partner is also
given the right, in connection with the contribution of property to the
Operating Partnership or otherwise, to issue additional partnership interests in
the Operating Partnership in one or more classes or series, with such
designations, preferences and participating or other special rights and powers
(including rights and powers senior to those of the existing partners) as the
general partner may determine.
The Operating Partnership's partnership agreement provides for four classes
of partnership interests ("OP Units"): Common OP Units, Class B OP Units,
Class C OP Units and Class D OP Units. As of March 13, 2000, the partners of the
Operating Partnership own the following aggregate numbers of OP Units: (i) the
Company and its wholly-owned subsidiaries own a number of Common OP Units equal
to the number of issued and outstanding shares of the Company's common stock,
par value $0.01, (the "Common Stock") and (ii) independent third parties own
4,861,474 OP Units (consisting of 3,437,541 Common OP Units, 1,031,776 Class C
OP Units and 392,157 Class D OP Units). Common OP Units and Class B OP Units
receive quarterly distributions per OP Unit equal to the dividend paid on each
of the Company's Common Shares. Class C OP Units receive a non-cumulative,
quarterly distribution equal to $0.5575 per Class C OP Unit until such time as
the dividend rate on the Company's Common Shares exceeds $0.5575 whereupon the
Class C OP Units automatically convert into Common OP Units. Class D OP Units
pay a 6.5% cumulative annual preferred return based on an assumed price per
Common Share of $22.16, compounded quarterly to the extent not paid on a current
basis, and are entitled to a liquidation preference of $22.16 per Class D OP
Unit. All net income and capital proceeds earned by the Operating Partnership,
after payment of the annual preferred return and, if applicable, the liquidation
preference, will be shared by the holders of the Common OP Units in proportion
to the number of Common OP Units in the relevant Operating Partnership owned by
each such holder.
Each OP Unit held by the independent third-parties is redeemable by the
holder for one share of Common Stock (or, at the Company's option, for cash in
an amount equal to the market value of a share of Common Stock). In addition,
the Class D OP Units may be redeemed by the Operating Partnership at a price of
$22.16 per Class D OP Unit (or, at the Company's option, for a number of shares
of Common Stock having a value equal to such redemption price) at any time after
April 1, 2000 or by the holders of the Class D OP Units at a price of $22.16 per
Class D OP Unit (in cash or, at the holder's option, for a number of shares of
Common Stock having a value equal to the redemption price) at any time after
April 1, 2004.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information both included and incorporated by reference in this
Prospectus may contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of our company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Forward-looking statements, which are based
on certain assumptions and describe our future plans, strategies and
expectations are generally identifiable by use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend" or "project"
or the negative thereof or other variations thereon or comparable terminology.
Factors which could have a material adverse effect on the operations and future
prospects of our Company include, but are not limited to, changes in: economic
conditions generally and
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the real estate market specifically, legislative/regulatory changes (including
changes to laws governing the taxation of real estate investment trusts),
availability of capital, interest rates, competition, supply and demand for
hotel rooms in our current and proposed market areas and general accounting
principles, policies and guidelines applicable to real estate investment trusts.
These risks and uncertainties should be considered in evaluating any forward-
looking statements contained or incorporated by reference herein.
ITEM 2. PROPERTIES
The Company maintains its corporate headquarters in Washington, D.C. and owns
hotel properties throughout the United States and Canada. As of December 31,
1999, the Company owned 116 Hotels. The Company leases land for seven of its
Hotels (Hilton Hotel, Washington, DC; Hilton Hotel, San Pedro, California; Doral
Palm Springs, Palm Springs, California; Jekyll Inn, Jekyll Island, Georgia;
Hilton Hotel, Clearwater, Florida; Courtyard by Marriott, Lake Buena Vista,
Florida; and Radisson Hotel, Rochester, New York). The Company also leases part
of the land for six of the Hotels (Westin Morristown, Morristown, New Jersey;
Courtyard by Marriott Meadowlands, Secaucus, New Jersey; Wyndham Hotel
Albuquerque, Albuquerque, New Mexico; Hilton Hotel Toledo, Toledo, Ohio; Wyndham
Airport Hotel, San Jose, California; and Westin Resort Key Largo, Key Largo,
Florida). No one hotel property is material to the Company's operations. A
typical Hotel has meeting and banquet facilities, food and beverage facilities
and guest rooms and suites.
The Hotels generally feature, or after the Company's renovation programs have
been completed will feature, comfortable, modern guest rooms, extensive meeting
and convention facilities and full-service restaurant and catering facilities
that attract meeting and convention functions from groups and associations,
upscale business and vacation travelers as well as banquets and receptions from
the local community.
The following table sets forth certain information with respect to the Hotels
for the year ended December 31, 1999:
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Average
Guest Daily Average
Hotel Location Rooms Rate (2) Occupancy (2)
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Sheraton Hotel.................... Mesa, AZ 273 $ 86.26 55.4%
Crowne Plaza Hotel................ Phoenix, AZ 250 77.71 55.4
Embassy Suites.................... Tucson, AZ 204 82.53 78.2
Courtyard by Marriott............. Century City, CA 134 116.07 79.5
Hilton Hotel...................... Irvine, CA 289 110.61 67.9
Marriott Hotel.................... Los Angeles, CA 469 116.40 75.6
Courtyard by Marriott............. Marina Del Rey, CA 276 96.19 91.9
Hilton Hotel...................... Monterey, CA 204 113.38 76.4
Doral Palm Springs................ Palm Springs, CA 285 104.48 59.1
Hilton Hotel...................... Sacramento, CA 331 102.93 69.4
Holiday Inn Select................ San Diego, CA 317 80.92 84.0
Sheraton Hotel.................... San Francisco, CA 525 154.71 83.6
Crowne Plaza Hotel................ San Jose, CA 239 131.66 75.8
Wyndham Hotel..................... San Jose, CA 355 127.52 72.6
Hilton Hotel...................... San Pedro, CA 226 77.06 83.9
Santa Barbara Inn................. Santa Barbara, CA 71 162.43 78.1
Holiday Inn....................... Colorado Springs, CO 200 70.24 68.0
Sheraton Hotel.................... Colorado Springs, CO 500 75.61 67.6
Embassy Suites.................... Englewood, CO 236 104.81 78.6
Hilton Hotel...................... Hartford, CT 388 108.56 72.6
Ramada Hotel...................... Meriden, CT 150 78.96 71.8
</TABLE>
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<S> <C> <C> <C> <C>
Ramada Hotel...................... Shelton, CT 155 110.93 61.7
Doubletree Bradley Airport........ Windsor Locks, CT 200 88.14 79.4
Hilton Hotel...................... Washington, DC 193 131.05 76.3
Georgetown Inn.................... Washington, DC 96 143.96 81.1
The Latham Hotel.................. Washington, DC 143 136.29 77.3
South Seas Resort................. Captiva, FL 579 248.77 63.4
Hilton Hotel...................... Clearwater, FL 426 109.59 76.8
Ramada Hotel...................... Clearwater, FL 289 79.31 75.6
Hilton Hotel...................... Cocoa Beach, FL 296 83.08 75.8
Holiday Inn....................... Ft. Lauderdale, FL 240 83.81 81.9
Howard Johnson Resort............. Key Largo, FL 100 87.13 82.5
Westin Hotel...................... Key Largo, FL 200 133.80 79.8
Courtyard by Marriott............. Lake Buena Vista, FL 314 101.36 88.4
Sheraton Hotel.................... Lake Buena Vista, FL 489 81.38 83.5
Radisson Hotel.................... Marco Island, FL 268 147.00 75.9
Holiday Inn....................... Madeira Beach, FL 149 80.81 76.6
Radisson Hotel.................... Orlando, FL 742 92.61 69.5
Best Western Hotel................ Sanibel Island, FL 46 161.10 80.0
Sanibel Inn....................... Sanibel Island, FL 96 172.78 85.8
Seaside Inn....................... Sanibel Island, FL 32 179.56 79.7
Song of the Sea................... Sanibel Island, FL 30 203.81 87.8
Sundial Beach Resort.............. Sanibel Island, FL 243 219.51 72.9
Doubletree Hotel.................. Tampa, FL 496 62.47 67.7
Doubletree Guest Suites........... Atlanta, GA 155 106.94 65.4
Westin Atlanta Airport............ Atlanta, GA 495 90.71 76.8
Jekyll Inn........................ Jekyll Island, GA 262 69.86 56.0
Wyndham Hotel..................... Marietta, GA 218 75.58 63.4
Radisson Hotel.................... Arlington Heights, IL 201 86.41 68.3
Radisson Hotel & Suites........... Chicago, IL 350 150.24 80.2
Holiday Inn....................... Rosemont, IL 507 107.5 72.3
Radisson Hotel.................... Schaumburg, IL 200 89.27 74.3
Doubletree Guest Suites........... Indianapolis, IN 137 91.92 72.7
Radisson Plaza.................... Lexington, KY 367 84.46 59.5
Hilton Hotel...................... Louisville, KY 321 113.78 65.6
Holiday Inn Select................ Kenner, LA 303 80.62 76.3
Hilton & Towers................... Lafayette, LA 327 75.73 70.6
Maison de Ville................... New Orleans, LA 23 286.79 72.8
Radisson Hotel.................... Annapolis, MD 219 91.98 63.1
Radisson Hotel.................... Baltimore, MD 148 111.75 69.0
Sheraton Hotel.................... Columbia, MD 287 108.51 70.5
Holiday Inn Express............... Hanover, MD 159 84.70 82.4
Hampton Inn....................... Ocean City, MD 168 80.41 56.3
Hilton Hotel...................... Detroit, MI 151 98.70 86.5
Hilton Hotel...................... Grand Rapids, MI 224 79.71 75.0
Holiday Inn Sports Complex........ Kansas City, MO 163 77.40 58.1
Sheraton Airport Plaza............ Charlotte, NC 222 91.59 76.3
Hilton Hotel...................... Durham, NC 194 84.17 62.9
Courtyard by Marriott............. Durham, NC 146 80.45 69.5
Four Points Hotel................. Cherry Hill, NJ 213 81.68 63.3
Ramada Hotel...................... Mahwah, NJ 128 98.98 69.1
Sheraton Hotel.................... Mahwah, NJ 225 131.40 75.4
Westin Hotel...................... Morristown, NJ 199 134.76 68.6
Four Points Hotel................. Mt. Arlington, NJ 124 107.68 71.0
Doral Forrestal................... Princeton, NJ 290 173.87 65.0
Courtyard by Marriott............. Secaucus, NJ 165 119.02 89.8
</TABLE>
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Marriott Hotel.................... Somerset, NJ 440 132.40 75.7
Doubletree Hotel.................. Albuquerque, NM 295 73.46 70.6
Wyndham Hotel..................... Albuquerque, NM 276 69.98 76.2
Crowne Plaza Hotel................ Las Vegas, NV 201 88.16 81.9
St. Tropez Suites................. Las Vegas, NV 149 91.06 72.3
Radisson Hotel.................... Rochester, NY 171 72.57 65.5
Radisson Hotel.................... Middleburg Heights, OH 237 76.76 65.7
Hilton Hotel...................... Toledo, OH 213 72.93 63.5
Westin Hotel...................... Oklahoma City, OK 395 71.64 66.3
Crowne Plaza Hotel................ Lake Oswego, OR 161 102.52 55.7
Sheraton Hotel.................... Frazer, PA 198 111.82 75.1
Embassy Suites.................... Philadelphia, PA 288 135.42 76.5
Holiday Inn Select................ Trevose, PA 215 92.60 72.2
Hilton Hotel...................... Arlington, TX 309 85.78 72.9
Doubletree Hotel.................. Austin, TX 350 92.23 72.8
Hilton & Towers................... Austin, TX 320 78.14 65.4
Holiday Inn Select................ Bedford, TX 243 62.87 81.7
Radisson Hotel.................... Dallas, TX 304 64.37 63.4
Renaissance Hotel................. Dallas, TX 289 95.34 62.8
Sheraton Hotel.................... Dallas, TX 348 75.87 54.8
Hilton Hotel...................... Houston, TX 292 68.79 57.3
Marriott Hotel.................... Houston, TX 302 117.45 72.0
Hilton Hotel...................... Houston, TX 295 106.55 74.5
Sheraton Hotel.................... Houston, TX 382 80.11 60.5
Holiday Inn ...................... Irving, TX 409 72.11 83.8
Hilton Hotel...................... Midland, TX 249 66.63 52.3
Hilton Hotel...................... Salt Lake City, UT 287 78.75 76.1
Holiday Inn....................... Alexandria, VA 178 108.18 80.7
Radisson Hotel.................... Alexandria, VA 253 103.34 63.4
Hilton Hotel...................... Arlington, VA 209 127.79 80.4
Hilton Hotel...................... Arlington, VA 386 109.66 75.9
Hampton Inn....................... Richmond, VA 124 62.38 68.5
Richmond Hotel and Conference
Center........................... Richmond, VA 280 57.07 32.3
Hilton Hotel...................... Bellevue, WA 179 119.51 73.5
Crowne Plaza Hotel (1)............ Madison, WI 226 88.44 75.7
Holiday Inn....................... Madison, WI 194 71.67 73.1
Holiday Inn....................... Calgary, Alberta, Canada 170 48.10 82.3
Sheraton Hotel.................... Guildford, B.C., Canada 278 65.95 73.0
Holiday Inn....................... Vancouver, B.C., Canada 100 74.20 85.8
Ramada Hotel...................... Vancouver, B.C., Canada 118 67.81 81.6
------- ------- -------
Total Weighted Average 29,348 $101.14 71.6%
======= ======= =======
</TABLE>
(1) Acquired on January 11, 1999.
(2) Average Daily Rate and Average Occupancy include Holiday Inn, St. Louis,
Missouri which was sold on November 30, 1999.
10
<PAGE>
THE PARTICIPATING LEASES
Subsidiaries of OPCO (the "Lessee") lease 108 of the 116 Hotels. Each
Participating Lease provides for an initial term of 12 years. Each
Participating Lease provides OPCO with three renewal options of five years each
(except in the case of properties with ground leases having a remaining term of
less than 40 years), provided that (a) the Lessee will not have the right to a
renewal if a change in the tax law has occurred that would permit the Company to
operate the hotel directly; (b) if the Lessee elects not to renew a
Participating Lease for any applicable hotel, then the Company has the right to
reject the exercise of a renewal right on a Participating Lease of a comparable
hotel; and (c) the rent for each renewal term is adjusted to reflect the then
fair market rental value of the hotel. If the Company and the Lessee are unable
to agree upon the then fair market rental value of a hotel, the Participating
Lease terminates upon the expiration of the then current term and the Lessee
then has a right of first refusal to lease the hotel from the Company on such
terms as the Company may have agreed upon with a third-party lessee.
Base Rent; Participating Rent; Additional Charges
Each Participating Lease requires the Lessee to pay (i) fixed monthly base
rent (the "Base Rent"), (ii) participating rent ("Participating Rent") which is
payable monthly and based on certain percentages of room revenue, food and
beverage revenue and telephone and other revenue at each hotel in excess of Base
Rent, and (iii) certain other amounts, including interest accrued on any late
payments or charges ("Additional Charges"). Base Rent and Participating Rent
departmental thresholds (departmental revenue on which the rent percentage is
based) are increased annually by a percentage equal to the percentage increase
in the Consumer Price Index (CPI percentage increase plus 0.75% in the case of
the Participating Rent departmental revenue threshold) compared to the prior
year. In addition, under certain circumstances, a reduced percentage rate will
apply to the revenues attributable to certain "discounted rates" that the Lessee
may offer. Base Rent is payable monthly in arrears. Participating Rent is
payable in arrears based on a monthly schedule adjusted to reflect the seasonal
variations in the hotel's revenue.
Other than real estate and personal property taxes and assessments, rent
payable under ground leases, casualty insurance, including loss of income
insurance, capital impositions and capital replacements and refurbishments
(determined in accordance with generally accepted accounting principles), that
are obligations of the Company, the Participating Leases require the Lessee to
pay rent, liability insurance, all costs and expenses and all utility and other
charges incurred in the operation of the hotels. The Participating Leases also
provide for rent reductions and abatements in the event of damage or destruction
or a partial taking of any hotel.
The Participating Leases also provide for a rental adjustment under certain
circumstances in the event of (a) a major renovation of the hotel, or (b) a
change in the franchisor of the hotel.
Lessee Capitalization
The Participating Leases require OPCO, as guarantor of the Participating
Leases, to maintain a book net worth of not less than $40 million. Further, as
of January 1, 1999, for so long as the tangible net worth of OPCO is less than
17.5% of the aggregate rents payable under the Participating Leases for the
prior calendar year, OPCO is prohibited from paying dividends or making
distributions other than dividends or distributions made for the purpose of
permitting the partners of the Operating Partnership to pay taxes on the taxable
income of the Operating Partnership attributable to its partners plus any
required preferred distributions existing to partners.
Termination
The Company has the right to terminate the applicable Participating Lease
upon the sale of a hotel to a third party or, upon the Company's determination
not to rebuild after a casualty, upon payment to the Lessee of the fair market
value of the leasehold estate (except for properties initially identified by the
Company and OPCO as properties slated to be sold). The fair market value of the
leasehold estate is
11
<PAGE>
determined by discounting to present value at a discount rate of 10% per annum
the cash flow for each remaining year of the then current lease term, which cash
flow will be deemed to be the cash flow realized by the Lessee under the
applicable Participating Lease for the 12-month period preceding the termination
date. The Company will receive as a credit against any such termination payments
an amount equal to any outstanding "New Lease Credits," which means the
projected cash flow (determined on the same basis as the termination payment) of
any new Participating Leases entered into between the Company and OPCO after the
effective date for the initial term of such new Participating Lease amortized on
a straight-line basis over the initial term of the new Participating Lease.
Performance Standards
The Company has the right to terminate the applicable Participating Lease if,
in any calendar year, the gross revenues from a hotel are less than 95% of the
projected gross revenues for such year as set forth in the applicable budget
unless (a) the Lessee can reasonably demonstrate that the gross revenue
shortfall was caused by general market conditions beyond the Lessee's control or
(b) the Lessee "cures" the shortfall by paying to the Company the difference
between the rent that would have been paid to the Company had the property
achieved gross revenues of 95% of the budgeted amounts and the rent paid based
on actual gross revenues. The Lessee does not have such a cure right for more
than two consecutive years.
The Participating Leases also require that the Lessee spend in each calendar
year at least 95% of the amounts budgeted for marketing expenses and for repair
and maintenance expenses.
Assignment and Subleasing
The Lessees do not have the right to assign a Participating Lease or sublet a
hotel without the prior written consent of the Company. For purposes of the
Participating Lease, a change in control of OPCO or the Lessees will be deemed
an assignment of the Participating Lease and will require the Company's consent,
which may be granted or withheld in its sole discretion.
REIT Modernization Act
In order to maintain its tax status as a REIT, the Company has not been
permitted to engage in the operations of its hotel properties. To comply with
this requirement, the Company has leased all of its real property to third-party
lessee/managers - OPCO and Prime Hospitality. In December 1999, the REIT
Modernization Act (the "RMA") became law. The RMA now permits the REIT to
create a taxable REIT subsidiary (the "TRS"), which will be subject to taxation
similar to a C-Corporation. The TRS will be allowed to lease the real property
owned by the REIT.
The RMA does not permit a REIT to establish a TRS until January 1, 2001.
Also, although a TRS can lease real property from a REIT, it will be restricted
from being involved in certain activities prohibited by the RMA. First, a TRS
will not be permitted to manage the properties itself; it will need to enter
into an "arms length" management agreement with an independent third-party
manager that is actively involved in the trade or business of hotel management
and manages properties on behalf of other owners. Second, the TRS will not be
permitted to lease a property that contains gambling operations. Third, the TRS
will be restricted from owning a brand or franchise.
The Company believes that establishing a TRS to lease its properties will
provide a more efficient alignment of and ability to capture the economic
interests of property ownership. The Company has established a subcommittee of
independent members of the Board of Directors to negotiate the transfer of its
existing leases with OPCO to the Company's TRS. Since this process is a
significant change from the business structure the Company has maintained as a
REIT, it is not currently possible to predict the outcome of these negotiations.
The amount of consideration, if any, to be exchanged between the Company and
OPCO is subject to completion of these negotiations. The Company is aiming to
conclude these negotiations during 2000 and transfer those leases to its TRS
effective January 1, 2001. Concurrent with the transfer of the leases to the
TRS, the Company expects to enter into management agreements with OPCO to manage
its properties in accordance with the RMA rules described above.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In the course of the Company's normal business activities, various lawsuits,
claims and proceedings have been or may be instituted or asserted against the
Company. Based on currently available facts, management believes that the
disposition of matters that are pending or asserted will not have a material
adverse effect on the consolidated financial position, results of operations or
liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders during the
fourth quarter of 1999.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "MHX." The following table sets forth for the periods indicated the high
and low closing sale prices for the Common Stock on the NYSE.
<TABLE>
<CAPTION>
Price
-----
High Low
---- ---
<S> <C> <C>
2000:
First Quarter (through March 13, 2000) $17 1/4 $15 1/16
1999:
Fourth Quarter (ended December 31, 1999) 16 3/4 14 3/4
Third Quarter (ended September 30, 1999) 22 5/16 15 1/4
Second Quarter (ended June 30, 1999) 24 1/16 18 7/16
First Quarter (ended March 31, 1999) 19 3/8 16 1/6
1998:
Fourth Quarter (ended December 31, 1998) 20 1/4 12 15/16
Third Quarter (from Merger on August 3, 1998 through September 30, 1998) 21 3/8 14 9/16
Third Quarter (from July 1, 1998 through August 2, 1998) (1) 29 7/8 25 1/16
Second Quarter (ended June 30, 1998) (1) 34 7/16 27 1/8
First Quarter (ended March 31, 1998) (1) 36 1/2 31 1/8
</TABLE>
_____________
(1) Represents the share prices of CapStar Hotel Company which, pursuant to
generally accepted accounting principles, is the predecessor of the
Company.
The last reported sale price of the Common Stock on the NYSE on March 13,
2000 was $15 1/16. As of March 13, 2000, there were approximately 353 holders
of record of the Common Stock.
On December 6, 1999, the Company declared a dividend of $0.505 per share
relating to the fourth quarter of 1999 that was paid on January 31, 2000 to
stockholders of record as of December 31, 1999.
The Company intends to make regular quarterly distributions to its
stockholders. Future distributions by the Company will be at the discretion of
the Board of Directors and will depend on the Company's financial condition, its
capital requirements, the annual distribution requirements under the REIT
provisions of the Internal Revenue Code and such other factors as the Board of
Directors deems relevant. There can be no assurance that any such distributions
will be made by the Company.
In order to maintain its qualification as a REIT, the Company must make
annual distributions to its stockholders of at least 95% of its taxable income
(excluding net capital gains). Under certain circumstances, the Company may be
required to make distributions in excess of cash available for distribution in
order to meet these distribution requirements. In that event, the Company would
seek to borrow the amount to obtain the cash necessary to make distributions to
retain its qualification as a REIT for Federal income tax purposes. The
distributions made in 1999 represent a 0% return of capital.
Recent Sales of Unregistered Securities
CapStar Hotel Company
Each of CapStar's private issuances of shares of common stock and its
operating partnership's private
14
<PAGE>
issuances of OP Units has been in reliance on an exemption from registration
under Section 4(2) of the Act in the amounts and for the consideration set forth
below.
On April 1, 1997, CapStar issued 809,523 Common OP Units and 392,157 Class D
OP Units to affiliates of Highgate Hotels, Inc. ("Highgate") in connection with
CapStar's purchase of a portfolio of six hotels from certain affiliates of
Highgate.
On November 17, 1997, CapStar issued 674,236 Common OP Units to affiliates of
Winston Hospitality, Inc. ("Winston") in connection with CapStar's acquisition
of substantially all of the assets of Winston.
American General Hospitality Corporation
Each of AGH's private issuances of shares of common stock and its operating
partnership's private issuances of OP Units has been in reliance on an exemption
from registration under Section 4(2) of the Act in the amounts and for the
consideration set forth below.
On June 27, 1997, AGH privately issued 225,690 Class B OP Units as part of
the purchase of the Hilton Hotel Cocoa Beach. On July 16, 1997 the Class B OP
Units automatically converted into Common OP Units.
On July 14, 1997, as part of the terms of the strategic alliance between
Wyndham International and AGH, an affiliate of Wyndham purchased 95,741 shares
of restricted common stock. The shares were purchased in connection with the
conversion of the LeBaron Airport Hotel to the Wyndham San Jose Airport Hotel.
On October 14, 1997, AGH issued under AGH's Non-Employee Directors' Incentive
Plan, 1,109 shares of common stock to the Board of Directors for compensation in
accordance with their agreement to serve as directors of AGH.
On November 30, 1997, AGH privately issued 11,568 Class B OP Units as part of
the purchase of the Courtyard by Marriott Durham. On December 31, 1997, these
Class B OP Units automatically converted into Common OP Units.
On December 31, 1997, AGH privately sold an additional 1,159,546 shares of
its common stock to certain investment funds and separate accounts advised by
ABKB/LaSalle Securities Limited Partnership and LaSalle Advisors Limited
Partnership.
On January 2, 1998, AGH privately sold an additional 420,106 shares of common
stock to certain investment funds and separate accounts advised by ABKB/LaSalle
Securities Limited Partnership and LaSalle Advisors Limited Partnership.
On January 8, 1998, AGH privately issued 439,375 Class B OP Units as part of
the purchase price of a portfolio hotels owned by Prime. On April 16, 1998 the
Class B OP Units converted into Common OP Units.
On January 15, 1998, AGH privately sold the balance of 100,829 shares of its
common stock to certain investment funds and separate accounts advised by
ABKB/LaSalle Securities Limited Partnership and LaSalle Advisors Limited
Partnership.
On February 3, 1998, AGH privately issued 1,108,874 Class C OP Units as part
of the purchase price of the Holiday Inn O'Hare International Hotel. The Class C
OP Units bear a preferred annual distribution rate of $2.23 per Class C OP Unit
until such time as the dividend distribution rate for the Class C OP Units will
equal the distribution rate on the Common Stock. In addition, the holders of the
Class C OP Units received an additional 974,588 Class A OP Units due to the fact
that the fair market value of the common stock (as reported on the New York
Stock Exchange, Inc.) was trading below $35 per share on the first
15
<PAGE>
anniversary date of the closing of the acquisition.
The Company
On August 21, 1998, the Company privately issued 46,628 Class B OP Units as
part of the purchase of the land under the Four Points Hotel in Mt. Arlington,
New Jersey. On October 14, 1998 the Class B OP Units automatically converted
into Common OP Units.
On October 1, 1998, the Company privately issued 916,230 Common OP Units as
part of the purchase of a portfolio of assets from South Seas Properties Company
Limited Partnership and its affiliates.
On January 7, 1999, the Company privately issued 65,875 Common OP Units as
part of the purchase of the Holiday Inn Madison, Wisconsin.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial
information for the Company. The selected operating results and balance
sheet data have been extracted from the consolidated financial statements
for each of the periods presented. The following information should be read
in conjunction with the consolidated financial statements and notes thereto
for the Company and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------ ----------- ------------
(dollars in thousands, except per share amounts and operating data)
<S> <C> <C> <C> <C> <C>
Revenue:
Hotel operations:
Participating lease revenue............................... $ 368,012 $ 135,994 $ - $ - $ -
Rooms..................................................... - 275,610 207,736 68,498 14,456
Food, beverage, office rental and other................... 6,892 110,519 103,521 36,949 7,471
Management services and other revenues...................... - 3,174 5,136 4,345 4,436
---------- ---------- ---------- --------- ---------
Total revenues............................................ 374,904 525,297 316,393 109,792 26,363
---------- ---------- ---------- --------- ---------
Operating expenses:
Departmental expenses:
Rooms....................................................... - 65,048 51,075 17,509 4,190
Food, beverage and other.................................... 1,964 80,327 77,373 27,102 5,437
Undistributed operating expenses:
Administrative and general.................................. 5,749 62,350 50,332 20,448 8,078
Property and other operating costs.......................... 47,027 122,963 55,111 17,151 3,934
Depreciation and amortization............................... 103,099 60,703 20,990 8,248 2,097
---------- ---------- ---------- --------- ---------
Total operating expenses.................................. 157,839 391,391 254,881 90,458 23,736
---------- ---------- ---------- --------- ---------
Net operating income......................................... 217,065 133,906 61,512 19,334 2,627
Interest expense, net........................................ 100,398 64,378 21,024 12,346 2,414
Minority interests........................................... 11,069 5,121 1,425 (39) (18)
Provision for income taxes (A)............................... 2,102 15,699 14,911 2,674 -
---------- ---------- ---------- --------- ---------
Income before extraordinary loss............................. 103,496 48,708 24,152 4,353 231
Extraordinary loss, net of tax (B)........................... (4,532) (4,080) (4,092) (1,956) (888)
Cumulative effect of accounting change, net of tax (C)....... - (921) - - -
---------- ---------- ---------- --------- ---------
Net income (loss)......................................... $ 98,964 $ 43,707 $ 20,060 $ 2,397 $ (657)
========== ========== ========== ========= =========
Basic earnings per share before extraordinary loss (D)....... $2.19 $1.45 $1.29 $0.31 $ -
Diluted earnings per share before extraordinary loss (D)..... $2.11 $1.40 $1.27 $0.31 $ -
Dividends per common share (E)............................... $2.02 $0.82 $ - $ - $ -
Number of shares of common stock issued and outstanding (F).. 47,257 46,718 24,867 12,754 -
Other Financial Data:
EBITDA (G)................................................... $ 320,164 $ 194,609 $ 82,502 $ 27,582 $ 4,724
Net cash provided by operating activities.................... 229,193 162,796 59,882 13,373 4,357
Net cash used in investing activities........................ (187,952) (785,505) (586,259) (225,251) (116,573)
Net cash (used in) provided by financing activities.......... (42,812) 543,256 588,428 226,830 119,048
Balance Sheet Data:
Investments in hotel properties, gross....................... $3,118,723 $2,957,543 $ 950,052 $ 343,092 $ 110,883
Total assets................................................. 3,094,201 2,998,460 1,124,642 379,161 132,650
Long term debt............................................... 1,676,771 1,602,352 492,771 200,361 73,574
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
Owned Hotels and Properties:
Number of hotels (F)...................................... 116 117 47 19 6
Number of guest rooms (in thousands) (F).................. 29,348 29,351 12,019 5,166 2,101
Total revenues (in thousands)............................. $374,904 $522,123 $311,257 $105,447 $21,927
Average occupancy (H)..................................... 71.6% 71.5% 72.0% 71.6% 72.3%
ADR (I)................................................... $ 101.14 $ 95.00 $ 86.87 $ 82.84 $ 71.58
RevPAR (J)................................................ $ 72.44 $ 67.90 $ 62.55 $ 59.31 $ 51.75
</TABLE>
__________
(A) No provision for federal income taxes was included prior to the August
1996 initial public offering as the Company's predecessor entities
were partnerships and all Federal income tax liabilities were passed
through to the individual partners.
(B) During 1995, 1996, 1997, 1998 and 1999 certain loan facilities were
refinanced and the write-offs of deferred costs associated with the
prior facilities were recorded as extraordinary losses in accordance
with generally accepted accounting principles.
(C) Pursuant to AICPA Statement of Position ("SOP") 98-5, "Reporting on
the Costs of Start-Up Activities" which the Company adopted on July 1,
1998, the effect of this accounting change was a pre-tax charge
against income for the year ended December 31, 1998 of $1,485 ($921
net of tax effect).
(D) Basic and diluted earnings per share before extraordinary item for the
year ended December 31, 1996 is based on earnings for the period from
August 20, 1996 (date of the Company's initial public offering)
through December 31, 1996.
(E) No dividends were declared prior to August 3, 1998 (date of the
merger).
(F) As of December 31 for the periods presented.
(G) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. Management believes that EBITDA is a
useful measure of operating performance because (i) it is industry
practice to evaluate hotel properties based on operating income before
interest, depreciation and amortization and minority interests of
common and preferred OP Unit holders, which is generally equivalent to
EBITDA, and (ii) EBITDA is unaffected by the debt and equity structure
of the entity. EBITDA does not represent cash flow from operations as
defined by generally accepted accounting principles ("GAAP"), is not
necessarily indicative of cash available to fund all cash flow needs,
and should not be considered as an alternative to net income under
GAAP for purposes of evaluating the Company's results of operations
and may not be comparable to other similarly titled measures used by
other companies.
(H) Represents total number of rooms occupied by hotel guests on a paid
basis divided by total available rooms.
(I) Represents total room revenues divided by total number of rooms
occupied by hotel guests on a paid basis.
(J) Represents total room revenues divided by total available rooms.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
MeriStar Hospitality Corporation (the "Company") owns a portfolio of
primarily upscale, full-service hotels, diversified by franchise and brand
affiliations, in the United States and Canada. Substantially all of the
Company's hotels are leased to and operated by MeriStar Hotels & Resorts, Inc.
("OPCO"). As of December 31, 1999, the Company owned 116 hotels (with 29,348
rooms), 108 of which are leased and operated by OPCO.
The Company was formed on August 3, 1998, as a result of the merger (the
"Merger") of CapStar Hotel Company ("CapStar") with and into American General
Hospitality Corporation ("AGH"), a Maryland corporation operating as a real
estate investment trust ("REIT").
The Merger was accounted for as a purchase for financial reporting purposes.
In accordance with the provisions of Accounting Principles Board Opinion No. 16,
"Business Combinations," CapStar was considered the acquiring enterprise for
financial reporting purposes. The Company established a new accounting basis
for AGH's assets and liabilities based on their fair values. For financial
reporting purposes, the results of operations of AGH were included in the
Company's statement of operations from August 3, 1998.
The Company purchased AGH for approximately $1.3 billion through the issuance
of 23.9 million shares of common stock and units of limited partnership interest
("OP Units") in the Company's subsidiary operating partnership, valued at $795
million and assumption of debt and other liabilities of $550 million. The
acquisition has been recorded at the fair value of the net assets acquired.
Prior to August 3, 1998, the Company's consolidated financial statements
included the operating results for its owned and leased hotels as well as
management fees from hotels managed for third-party owners. Subsequent to
August 3, 1998, the Company owns certain hotels that are leased to hotel
operators and no longer manages hotels. Also, the Company has had acquisitions
and dispositions of certain properties during the periods presented. Therefore,
the financial statements for the periods ended December 31, 1999, 1998, and 1997
reflect differing numbers of owned, leased, and managed hotels throughout the
periods. The following table outlines the Company's portfolio of owned, leased
and managed hotels as of December 31:
<TABLE>
<CAPTION>
Owned Leased Managed Total
------------------------ ---------------------- ----------------------- ----------------------
Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 116 29,348 - - - - 116 29,348
1998 117 29,351 - - - - 117 29,351
1997 47 12,019 40 5,687 27 4,631 114 22,337
</TABLE>
Financial Condition
December 31, 1999 compared with December 31, 1998
Total assets increased by $95.7 million to $3,094.2 million at December 31,
1999 from $2,998.5 million at December 31, 1998. This growth was due mainly to
the Company's investment of $40.0 million in MeriStar Investment Partners, LP
("MIP") and net additional investments in hotel properties including renovations
to hotel properties.
Total liabilities increased by $93.6 million to $1,802.5 million at December
31, 1999 from $1,708.9 million at December 31, 1998 due mainly to an increase in
long-term debt. Long-term debt increased by $74.4 million to $1,676.8 million at
December 31, 1999 from $1,602.4 million at December 31, 1998 as a result of
borrowing $330 million under a new secured credit facility and the issuance of
$55
19
<PAGE>
million of subordinated notes, offset by net repayments of $307.5 million on the
Company's credit facilities.
Minority interests decreased $17.4 million to $121.1 million at December 31,
1999 from $138.5 million at December 31, 1998, due to the net redemptions of OP
Units into shares of the Company's common stock. The increase in additional
paid-in capital resulted primarily from the redemption of OP Units.
Results of Operations
Year Ended December 31, 1999 compared with the Year Ended December 31, 1998
Substantially all of the Company's hotels are leased to and operated by OPCO.
Participating lease revenue represents lease payments to the Company from the
lessees pursuant to the Company's participating lease agreements. Total revenue
decreased by $150.4 million to $374.9 million in 1999 compared to $525.3 million
in 1998. This decrease was primarily attributable to the change in the types of
revenues recorded in the Company's financial statements in periods before and
after the Merger.
On a pro forma basis, which reflects the Merger, Spin-Off and other hotel
acquisitions as if they had occurred on January 1, revenue per available room
("RevPAR"), same-store average daily rate ("ADR") and occupancy were as follows:
1999 1998 Change
---------- ---------- ----------
RevPAR $ 74.05 $ 71.80 3.1%
ADR $102.39 $100.96 1.4%
Occupancy 72.3% 71.1% 1.7%
Hotel department operating expenses were $0 in 1999 compared to $145.4
million in 1998. This decrease was the result of the hotel operations being
leased to OPCO after August 2, 1998, in conjunction with the Merger and Spin-
Off.
Undistributed operating expenses decreased significantly in 1999 as a result
of the Merger and Spin-Off. Prior to the Spin-Off, the Company was responsible
for all hotel operating expenses. Subsequent to August 3, 1998, the Company, as
owner, is only responsible for real estate taxes, property insurance and various
other undistributed expenses. Depreciation and amortization increased $42.4
million to $103.1 million in 1999 from $60.7 million in 1998 as a result of the
assets acquired in the Merger.
Net interest expense increased $36.0 million to $100.4 million for the year
ended December 31, 1999, from $64.4 million in 1998. This increase was
attributable to the borrowings made to finance the acquisition of hotels during
1998 and the renovations of hotels during 1998 and 1999. In addition, the new
debt associated with the Merger, higher average interest rates, and 1999
borrowings made to finance real estate ventures increased overall interest
expense.
Minority interests increased $6.0 million to $11.1 million in 1999 from $5.1
million in 1998 due to the issuance of OP Units in conjunction with the Merger
and the acquisition of certain hotels and a higher amount of income before
minority interests in 1999 allocated to minority interest holders. Income taxes
decreased $13.6 million in 1999 to $2.1 million from $15.7 million in 1998. In
1999, the Company's overall effective tax rate decreased to 2% as a result of
the effective elimination of Federal income taxes when the Company became a
REIT. Prior to the Merger, the Company's overall effective tax rate was 38.2%
in 1998.
In 1999, the Company recognized extraordinary losses of $4.5 million (net of
a tax benefit of $0.1 million), due to the write-off of unamortized deferred
financing fees in conjunction with refinancing certain credit facilities.
20
<PAGE>
Earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA") grew $125.6 million to $320.2 million in 1999 from
$194.6 million in 1998. This growth reflects the Merger, Spin-Off and other
hotel acquisitions which occurred during 1998.
The White Paper on Funds From Operations ("FFO") approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in October 1999 defines FFO as net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")), excluding
gains (or losses) from sales of properties, plus real estate related
depreciation and amortization and after comparable adjustments for the Company's
portion of these items related to unconsolidated partnerships and joint
ventures. The Company believes that FFO is helpful to investors as a measure of
the performance of an equity REIT because, along with cash flow from operating
activities, financing activities and investing activities, it provides investors
with an indication of the ability of the Company to incur and service debt, to
make capital expenditures and to fund other cash needs. FFO does not represent
cash generated from operating activities determined by GAAP and should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Company's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make cash distributions. FFO may
include funds that may not be available for management's discretionary use due
to functional requirements to conserve funds for capital expenditures and
property acquisitions, and other commitments and uncertainties.
Pro forma information for the Company for 1998 is presented as if the
Merger, the Spin-Off, and the acquisition of all hotels of CapStar and AGH had
occurred as of the beginning of 1998. The following is a reconciliation between
income before extraordinary item and diluted FFO for the year ended December 31,
1999 and between pro forma income before extraordinary item and cumulative
effect of accounting change and pro forma diluted FFO for the year ended
December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
------------- ------------------
<S> <C> <C>
Income before extraordinary item and cumulative effect $103,496 $ 96,232
of accounting change
Minority interest to Common OP Unit Holders 10,504 9,883
Interest on convertible debt 8,303 8,194
Hotel depreciation and amortization 99,955 85,117
------------- ------------------
Diluted FFO $222,258 $199,426
============= ==================
</TABLE>
As required by the Emerging Issues Task Force ("EITF") Issue No. 98-9,
"Accounting for Contingent Rent in Interim Financial Periods", the Company
recognized $45,894 of additional contingent rental income for the three months
ended December 31, 1999. There is no year-to-date effect of EITF No. 98-9.
Diluted FFO for the fourth quarter of 1999 before the effect of deferring
contingent rent was $50,549 and was $95,555 after the effect of deferring
contingent rent.
Year Ended December 31, 1998 compared with the Year Ended December 31, 1997
Subsequent to August 3, 1998, the Company earned participating lease
revenue of $136.0 million. Substantially all of the Company's Hotels are leased
to and operated by OPCO. Participating lease revenue represents lease payments
to the Company from the lessees pursuant to the Company's participating lease
agreements. Total revenue increased by $208.9 million or 66% to $525.3 million
in 1998 compared to $316.4 million in 1997. This increase was primarily
attributable to the Merger, the acquisition of new hotels and revenue growth
from hotels in the Company's portfolio that benefited from renovation and
repositioning programs.
Hotel departmental operating expenses increased slightly for the year ended
December 31, 1998 compared to the prior year. Hotel operations for the year are
only reflected through August 3, 1998. Subsequent to that date, in conjunction
with the Merger and Spin-Off, hotel operations were leased to
21
<PAGE>
OPCO. The increase in hotel department operating expenses is primarily due to an
increase in the number of owned and leased hotels in 1998 prior to the Merger
and Spin-Off.
Undistributed operating expenses increased significantly in 1998 as a
result of the acquisition of new properties in 1998 and the Merger. Hotel
operations for the year are only reflected through August 3, 1998. Subsequent to
August 3, 1998, the Company is responsible for real estate taxes, property
insurance and various other undistributed expenses that are not included in
hotel operations which are leased to OPCO.
Net interest expense increased $43.4 million to $64.4 million for the year
ended December 31, 1998, from $21.0 million in 1997. This increase was
attributable to the borrowings made to finance the acquisition and renovation of
hotels during 1998 and the debt assumed in connection with the Merger.
Minority interests increased $3.7 million to $5.1 million from $1.4 million
in 1997 due to the issuance of OP Units in conjunction with the Merger and the
acquisition of certain hotels. Income taxes increased $0.8 million in 1998 to
$15.7 million from $14.9 million in 1997. Subsequent to August 3, 1998, the
Company's overall effective tax rate decreased to 3% as a result of the
elimination of federal income taxes when the Company became a REIT. The slight
increase in income taxes compared to prior year is a result of the substantial
increase in pre-tax income in 1998 coupled with an overall effective tax rate of
38.2% through August 2, 1998.
On August 3, 1998, the Company recognized extraordinary losses of $4.1 (net
of a tax benefit of $2.1 million), due to the write-off of unamortized deferred
financing fees in conjunction with refinancing certain credit facilities.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," which requires that all non-governmental entities expense costs of
start-up activities, including organizational costs, as those costs are incurred
and requires the write-off of any unamortized balances upon implementation. SOP
98-5 is effective for financial statements issued for periods beginning after
December 15, 1998. The Company chose to adopt SOP 98-5 effective July 1, 1998.
The cumulative effect of this accounting change was a charge against income for
the year ended December 31, 1998 of $0.9 million (net of tax benefit of $0.6
million).
Earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA") grew $112.1 million to $194.6 million in 1998 from $82.5
million in 1997. This growth reflects both the increases in the number of hotels
owned and improved operating margins on the Company's overall hotel portfolio.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash on hand, cash
generated from operations, and funds from external borrowings and debt and
equity offerings. The Company expects to fund its continuing operations through
cash generated by its participating leases. The Company also expects to finance
hotel acquisitions, hotel renovations and joint venture investments through a
combination of internally generated cash, external borrowings, and the issuance
of OP Units and/or common stock. Additionally, the Company must, in order to
maintain favorable tax treatment accorded to a REIT under the Internal Revenue
Code, distribute to stockholders at least 95% of its REIT taxable income. The
Company expects to fund such distributions through cash generated from
operations, borrowings on the Company's credit facilities or through its
preferred return on its investment in MIP.
Operating activities provided $229.2 million of net cash for the year ended
December 31, 1999 mainly due to higher levels of net income, depreciation and
amortization, minority interests and accrued expenses and other liabilities. The
Company used $188.0 million of cash in investing activities during the year
ended December 31, 1999, primarily for capital expenditures and a preferred
equity investment in MIP, a joint venture established to acquire upscale, full-
service hotels. Net cash used in financing activities of $42.8 million
22
<PAGE>
resulted primarily from dividends paid, partially offset by net borrowings under
the Company's credit facilities.
In conjunction with the Merger, CapStar terminated its existing credit
facility effective August 3, 1998, and the Company entered into a $1.0 billion
senior secured credit facility (the "New Credit Facility"). The New Credit
Facility is structured as a $300 million, five-year term loan facility; a $200
million, five-and-a-half year term loan facility; and a $500 million, three-year
revolving credit facility with two one-year optional extensions. The interest
rate on the term loans and revolving facility ranges from 100 to 200 basis
points over 30-day LIBOR, depending on certain financial performance covenants
and long-term senior unsecured debt ratings. The weighted average interest rate
on borrowings outstanding under the New Credit Facility as of December 31, 1999
was 8.4%. The initial proceeds from the New Credit Facility were used to
refinance CapStar's and AGH's existing credit facilities. As of December 31,
1999, the Company had $90.0 million available under the New Credit Facility's
revolving facility.
On March 18, 1999, the Company sold $55.0 million aggregate principal
amount (issue price of $51.9 million, net of discount) of 8.75% senior
subordinated notes due 2007, generating net proceeds of $51.2 million to the
Company. The Company used the net proceeds to repay indebtedness under its New
Credit Facility and to invest in MIP, a joint venture established to acquire
upscale, full-service hotels. The Company's investment is in the form of a
preferred partnership interest.
On August 12, 1999, the Company completed a $330.0 million 10-year non-
recourse financing ("New Secured Facility") secured by a portfolio of 19 hotels.
The loan bears a fixed interest rate 8.01% and matures in 2009. The Company used
the net proceeds to repay its $250 million secured facility ("Secured Facility")
and its $100 million non-recourse facility ("Non-Recourse Facility").
During 1999, the Company acquired one hotel for a purchase price of $10.6
million of cash and $1.5 million of OP Units. The acquisition was funded using
existing cash and borrowings on the New Credit Facility. The Company also sold
two hotels during 1999 for a total price of $8.9 million. The resulting gain on
the sales was not material to the Company's financial statements.
Capital for renovation work has historically been and is expected to
continue to be provided by a combination of internally generated cash and
external borrowings. Once initial renovation programs for a hotel are completed,
the Company expects to spend approximately 4% annually of hotel revenues for
ongoing capital expenditure programs, including room and facilities
refurbishments, renovations, and furniture and equipment replacements. For the
year ended December 31, 1999, the Company spent $160.0 million on initial
renovation and ongoing capital expenditure programs. The Company expects to
spend $40 million in 2000 on renovations and recurring refurbishment projects.
The Company's Board of Directors has authorized the repurchase of up to
five million shares of its common stock from time to time in open market or
privately negotiated transactions. The stock repurchase is subject to prevailing
market conditions and other considerations. The Company expects the program to
be funded primarily through selected asset sales. As of December 31, 1999, the
Company has repurchased a total of 407,400 shares for $6.3 million.
The Company believes cash generated by operations, together with
anticipated borrowing capacity under the New Credit Facility, will be sufficient
to fund its existing working capital distributions, ongoing capital
expenditures, and debt service requirements. The Company believes, however, that
its future capital decisions will also be made in response to specific
acquisition and/or investment opportunities, depending on conditions in the
capital and/or other financial markets. Accordingly, the Company may consider
increasing its borrowing capacity or issuing additional debt or equity
securities, the proceeds of which could be used to finance acquisitions or
investments, refinance existing debt, or repurchase common stock.
Seasonality
Demand in the lodging industry is affected by recurring seasonal patterns.
For non-resort properties, demand is lower in the winter months due to decreased
travel and higher in the spring and summer months
23
<PAGE>
during peak travel season. For resort properties, demand is generally higher in
winter and early spring. Since the majority of the Company's hotels are non-
resort properties, the Company's operations generally reflect non-resort
seasonality patterns. Excluding the effect of Emerging Issues Task Force
("EITF") Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial
Periods", the Company has lower revenue, operating income and cash flow in the
first and fourth quarters and higher revenue, operating income and cash flow in
the second and third quarters.
Year 2000 Conversion
The Company has reviewed its computer systems to identify the systems that
could be affected by the "Year 2000" problem and implemented a plan to address
the problem. The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. If not corrected, this
could result in a major systems failure or miscalculations.
The Company's hotel properties contain various information technology and
embedded technology systems. Both types of systems contain microprocessors and
microcontrollers that must be assessed for Year 2000 compliance. The Company
identified the following six phases in its Year 2000 remediation programs: (1)
increase awareness of issue; (2) assign responsibility for coordinating response
to issue; (3) information collection; (4) analysis; (5) modification, repair or
replacement and (6) testing. The Company completed all six phases and believes
these systems are Year 2000 compliant.
As an additional part of its implementation plan to address the Year 2000
problem, the Company also initiated communications with third parties with which
it has material relationships to determine the extent of potential Year 2000
problems with these parties' services provided to the Company. The most critical
of these services involve such items as reservations systems for the Company's
hotels. Without such systems, the Company could suffer a material decline in
business at many of its properties. The Company completed its communications and
assessment of these outside parties' services in September 1999. As of March 13,
2000, the Company had encountered no significant Year 2000 problems related to
third parties' services provided to the Company.
The Company incurred costs for outside consultants and capital expenditures
in 1999 and 1998 related to Year 2000 which aggregated approximately $3.6
million. Future consulting and capital acquistion costs are expected to be
insignificant. These costs, which were expensed as incurred, have been funded
from operations. The costs through December 31, 1999 did not have a material
affect on the Company's financial position or results of operations.
As of March 13, 2000, the Company had encountered no significant Year 2000
related problems.
24
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on
long-term debt obligations that impact the fair value of these obligations. The
Company's policy is to manage interest rates through the use of a combination of
fixed and variable rate debt. The Company's interest rate risk management
objective is to limit the impact of interest rate changes on earnings and cash
flows and to lower its overall borrowing costs. To achieve its objectives, the
Company borrows at a combination of fixed and variable rates, and may enter into
derivative financial instruments such as interest rate swaps, caps and treasury
locks in order to mitigate its interest rate risk on a related financial
instrument. The Company does not enter into derivative or interest rate
transactions for speculative purposes. The Company has no cash flow exposure due
to general interest rate changes for its fixed long-term debt obligations.
The table below presents the principal amounts (in thousands of dollars),
weighted average interest rates, and fair values by year of expected maturity to
evaluate the expected cash flows and sensitivity to interest rate changes. The
Company considers all of its debt instruments as non-trading.
<TABLE>
<CAPTION>
Long-term Debt
------------------------------------------------------------------------------------
Average Interest Average
Expected Maturity Fixed Rate Rate Variable Rate Interest Rate
- -------------------------- ------------------ ------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
2000 $ 8,694 8.0% $ 2,000 7.4%
2001 11,534 8.1% 17,000 7.4%
2002 16,179 8.1% 32,000 7.4%
2003 8,872 7.9% 667,000 8.0%
2004 189,652 5.1% 190,000 7.4%
Thereafter 533,840 8.1% - N/A
------------------ ------------------- ---------------- ---------------
Total $768,771 7.4% $908,000 7.8%
================== =================== ================ ===============
Fair Value at 12/31/99 $717,411 $908,000
================== ================
</TABLE>
In anticipation of the August 1999 completion of the New Secured Facility,
the Company entered into two separate hedge transactions during July 1999. Upon
completion of the New Secured Facility, the Company terminated the underlying
treasury lock agreements, resulting in a net payment to the Company of $5.1
million. This amount was deferred and is being recognized as a reduction to
interest expense over the life of the underlying debt. As a result, the
effective interest rate on the New Secured Facility has been reduced to 7.76%.
During September 1999, the Company entered into two separate $100 million
swap agreements with financial institutions in order to hedge against the impact
future interest rate fluctuations may have on the Company's existing floating
rate debt instruments. The swap agreements effectively replaced two $100 million
swap agreements that were to expire in November 1999. The swap agreements
effectively fix 30-day LIBOR at 6.0%. During the period ended December 31, 1999,
the Company made payments totaling $278,000 relating to these hedges. These
amounts are included in interest expense. The hedge agreements terminate in
September 2001.
During 1998, the Company entered into six separate $100 million swap
agreements. The swap agreements effectively fix 30-day LIBOR at between 4.9% and
5.4%. During the periods ended December 31, 1999 and 1998, the Company made
(received ) net payments of $(729,000) and $211,000, respectively, relating to
these hedges. These amounts are included in interest expense. The hedge
agreements terminate at various times between November 1999 and September 2000.
On February 18, 1997, the Company entered into a $40 million swap agreement
and a $40 million collar agreement with Lehman Brothers Special Financing, Inc.
and Canadian Imperial Bank of Commerce, respectively. The swap agreement
effectively fixed 30-day LIBOR at 5.9% while the collar agreement created a 30-
day LIBOR floor of 5.1% and ceiling of 7.5%. During the years ended December 31,
1999
25
<PAGE>
and 1998 the Company made payments totaling $246,000 and $56,000, respectively,
relating to these hedges. These amounts are included in interest expense. Both
hedge agreements terminated in September 1999.
Additionally, in anticipation of the August 1997 offering of $150 million
aggregate principal amount of its 8.75% senior subordinated notes due 2007 (the
"Subordinated Notes"), the Company entered into separate hedge transactions
during June and July 1997. Upon completion of the Subordinated Notes offering,
the Company terminated the underlying swap agreements, resulting in a net
payment to the Company of $836,000. This amount was deferred and is being
recognized as a reduction to interest expense over the life of the underlying
debt. As a result, the effective interest rate on the Subordinated Notes has
been reduced to 8.69%.
Although the Company conducts business in Canada, the Canadian operations
were not material to the Company's consolidated financial position, results of
operations or cash flows as of December 31, 1999 and 1998. Additionally, foreign
currency transaction gains and losses were not material to the Company's results
of operations for the years ended December 31, 1999 and 1998. Accordingly, the
Company was not subject to material foreign currency exchange rate risk from the
effects that exchange rate movements of foreign currencies would have on the
Company's future costs or on future cash flows it would receive from its foreign
subsidiaries. To date, the Company has not entered into any significant foreign
currency forward exchange contracts or other derivative financial instruments to
hedge the effects of adverse fluctuations in foreign currency exchange rates.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements, Supplementary Data and
Financial Statement Schedules are filed as part of this Annual Report on
Form 10-K:
<TABLE>
<S> <C>
MeriStar Hospitality Corporation
Independent Auditors' Report............................................................................................ 28
Consolidated Balance Sheets as of December 31, 1999 and 1998............................................................ 29
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997.............................. 30
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997.................... 31
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.............................. 32
Notes to the Consolidated Financial Statements.......................................................................... 33
Schedule III - Real Estate and Accumulated Depreciation................................................................. 48
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MeriStar Hospitality Corporation:
We have audited the accompanying consolidated balance sheets of MeriStar
Hospitality Corporation and subsidiaries (the "Company) as of December 31, 1999
and 1998 and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1999, and the supplementary schedule. These consolidated financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and schedule presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MeriStar
Hospitality Corporation and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles. Also in our opinion, the supplementary schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
Washington, D.C.
January 28, 2000
28
<PAGE>
MERISTAR HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Investments in hotel properties $3,118,723 $2,957,543
Accumulated depreciation (182,430) (83,797)
----------- -----------
2,936,293 2,873,746
Cash and cash equivalents 2,556 4,180
Accounts receivable, net 1,328 3,044
Income taxes receivable - 339
Prepaid expenses, inventory and other 9,137 3,877
Note receivable from Lessee 57,110 67,000
Due from Lessee 11,476 7,437
Investments in and advances to affiliates 40,085 8,787
Restricted cash 17,188 11,879
Intangible assets, net of accumulated amortization of $5,742 and $2,666 19,028 18,171
------------ -----------
$3,094,201 $2,998,460
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 886 $ 2,111
Accrued expenses and other liabilities 57,169 45,549
Accrued interest 31,380 24,472
Income taxes payable 730 -
Dividends and distributions payable 26,263 25,988
Deferred income taxes 9,345 8,453
Long-term debt 1,676,771 1,602,352
------------ -----------
Total liabilities 1,802,544 1,708,925
------------ -----------
Minority interests 121,055 138,543
Stockholders' Equity:
Common stock, par value $0.01 per share
Authorized- 250,000 shares
Issued - 47,664 and 46,718 shares 477 467
Additional paid-in capital 1,164,750 1,133,357
Retained earnings 16,874 23,655
Accumulated other comprehensive income (5,247) (6,487)
Less common stock held in treasury - 407 shares (6,252) -
------------ -----------
Total stockholders' equity 1,170,602 1,150,992
------------ -----------
$3,094,201 $2,998,460
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
MERISTAR HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Revenue:
Participating lease revenue $368,012 $135,994 $ -
Hotel operations:
Rooms - 275,610 207,736
Food and beverage - 85,374 86,298
Other operating departments - 19,496 15,049
Office rental, parking and other revenue 6,892 5,649 2,174
Hotel management and other fees - 3,174 5,136
------------ ------------ -----------
Total revenue 374,904 525,297 316,393
------------ ------------ -----------
Hotel operating expenses by department:
Rooms - 65,048 51,075
Food and beverage - 67,493 68,036
Other operating departments - 10,121 8,492
Office rental, parking and other operating expenses 1,964 2,713 845
Undistributed operating expenses:
Administrative and general 5,749 62,350 50,332
Property operating costs - 50,027 38,437
Property taxes, insurance and other 47,027 29,814 12,558
Lease expense - 34,641 4,116
Depreciation and amortization 103,099 60,703 20,990
Spin-off costs - 8,481 -
------------ ----------- -----------
Total operating expenses 157,839 391,391 254,881
------------ ----------- -----------
Net operating income 217,065 133,906 61,512
Interest expense, net 100,398 64,378 21,024
------------ ------------ -------------
Income before minority interests, income taxes, extraordinary
loss and cumulative effect of accounting change 116,667 69,528 40,488
Minority interests 11,069 5,121 1,425
------------ ------------ -------------
Income before income taxes, extraordinary loss and cumulative
effect of accounting change 105,598 64,407 39,063
Income taxes 2,102 15,699 14,911
------------ ------------ -------------
Income before extraordinary loss and cumulative effect of
accounting change 103,496 48,708 24,152
Extraordinary loss on early extinguishment of debt, net of tax
benefit of $93 in 1999, $2,083 in 1998, and $2,508 in 1997 4,532 4,080 4,092
Cumulative effect of accounting change, net of tax benefit of $564 - 921 -
------------ ----------- -----------
Net income $ 98,964 $ 43,707 $ 20,060
============ =========== ===========
Earnings per share:
Basic:
Income before extraordinary loss and cumulative
effect of accounting change $ 2.19 $ 1.45 $ 1.29
Extraordinary loss (0.10) (0.12) (0.22)
Cumulative effect of accounting change - (0.03) -
------------ ----------- -----------
Net income $ 2.09 $ 1.30 $ 1.07
============ =========== ============
Diluted:
Income before extraordinary loss and cumulative
effect of accounting change $ 2.11 $ 1.40 $ 1.27
Extraordinary loss (0.08) (0.11) (0.21)
Cumulative effect of accounting change - (0.03) -
------------ ----------- -----------
Net income $ 2.03 $ 1.26 $ 1.06
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
MERISTAR HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------------------------
Issued Treasury
--------------------------------------- Accumlated
Additional Other
Paid In Retained Comprehensive
Shares Amount Shares Amount Capital Earnings Income Total
-------- -------- -------- -------- ------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 12,754 $128 - $ - $ 158,533 $ 2,054 $ - $ 160,715
- - -
Net income for the year - - - - - 20,060 - 20,060
Foreign currency translation
adjustment - - - - - - (2,527) (2,527)
-------- -------- -------- -------- ---------- --------- ------ ----------
Comprehensive income 17,533
-------- -------- -------- -------- ---------- --------- ------ ----------
Issuances of common stock 11,713 117 - - 330,047 - - 330,164
Redemption of OP Units 400 4 - - 10,996 - - 11,000
-------- -------- -------- -------- ---------- --------- ------ ----------
Balance, December 31, 1997 24,867 249 - - 499,576 22,114 (2,527) 519,412
Net income for the year - - - - - 43,707 - 43,707
Foreign currency translation
adjustment - - - - - - (3,960) (3,960)
-------- -------- -------- -------- ---------- --------- ------ ----------
Comprehensive income 39,747
-------- -------- -------- -------- ---------- --------- ------ ----------
Issuances of common stock 20,839 208 - - 654,671 - - 654,879
Distribution to spun-off - - - - (52,310) - - (52,310)
affiliate
Redemption of OP Units 1,012 10 - - 31,420 - - 31,430
Dividends declared - - - - - (42,166) - (42,166)
-------- -------- -------- -------- ---------- --------- ------ ----------
Balance, December 31, 1998 46,718 467 - - 1,133,357 23,655 (6,487) 1,150,992
Net income for the year - - - - - 98,964 - 98,964
Foreign currency translation
adjustment - - - - - - 1,240 1,240
-------- -------- -------- -------- ---------- --------- ------ ----------
Comprehensive income 100,204
-------- -------- -------- -------- ---------- --------- ------ ----------
Issuances of common stock 95 1 - - 1,990 - - 1,991
Share repurchase - - (407) (6,252) - - - (6,252)
Redemption of OP Units 851 9 - - 29,403 - - 29,412
Dividends declared - - - - - (105,745) - (105,745)
-------- -------- -------- -------- ---------- --------- ------- ----------
Balance, December 31, 1999 47,664 $477 407 $(6,252) $1,164,750 $ 16,874 $(5,247) $1,170,602
======== ======== ======== ======== ========== ========= ======= ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
31
<PAGE>
MERISTAR HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
--------- ----------- ---------
<S> <C> <C> <C>
Operating activities:
Net income $ 98,964 $ 43,707 $ 20,060
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 103,099 60,703 20,990
Extraordinary loss on early extinguishment of debt, before tax effect 4,625 6,163 6,600
Cumulative effect of accounting change, before tax effect - 1,485 -
Minority interests 11,069 5,121 1,425
Non-cash spin-off costs - 3,205 -
Deferred income taxes 892 (4,445) 4,917
Changes in operating assets and liabilities:
Accounts receivable, net 1,716 29,673 (17,900)
Deposits, prepaid expenses, inventory and other (5,260) 24,760 (17,449)
Income tax receivable 339 - -
Intangible assets (245) - -
Accounts payable (1,225) (7,100) 12,601
Accrued expenses, accrued interest and other liabilities 18,528 7,865 29,509
Due from lessee (4,039) (7,437) -
Income taxes payable 730 (904) (871)
--------- --------- ---------
Net cash provided by operating activities 229,193 162,796 59,882
--------- --------- ---------
Investing activities:
Investments in hotel properties (170,063) (701,710) (558,265)
Sales of hotel properties 8,900 - -
Purchases of intangible assets - (5,584) (13,476)
Investments in and advances to affiliates (31,298) (2,320) (11,320)
Purchases of minority interests (72) (44) (87)
Repayments (funding) of notes receivable 9,890 (67,000) -
Change in restricted cash (5,309) (8,847) (3,111)
--------- --------- ---------
Net cash used in investing activities (187,952) (785,505) (586,259)
--------- --------- ---------
Financing activities:
Proceeds from issuance of long-term debt 484,924 1,407,261 844,192
Principal payments on long-term debt (410,217) (821,051) (568,828)
Deferred costs (6,899) (4,251) (16,612)
Proceeds from issuances of common stock, net 1,991 1,870 330,164
Purchases of treasury stock (6,252) - -
Spin-off to stockholders - (23,745) -
Dividends paid to stockholders (105,773) (16,178) -
Distributions to minority investors (586) (650) (488)
--------- --------- ---------
Net cash (used in) provided by financing activities (42,812) 543,256 588,428
--------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents (53) 204 (406)
Net (decrease) increase in cash and cash equivalents (1,624) (79,249) 61,645
Cash and cash equivalents, beginning of year 4,180 83,429 21,784
--------- --------- ----------
Cash and cash equivalents, end of year $ 2,556 $ 4,180 $ 83,429
========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
MERISTAR HOSPITALITY CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(dollars in thousands, except per share amounts)
1. Organization
MeriStar Hospitality Corporation (the "Company") was formed on August 3,
1998, as a result of the merger (the "Merger") of CapStar Hotel Company
("CapStar") with and into American General Hospitality Corporation ("AGH"), a
Maryland corporation operating as a real estate investment trust ("REIT"). The
Company owns a portfolio of primarily upscale, full-service hotels, diversified
by franchise and brand affiliations, in the United States and Canada.
Substantially all of the Company's hotels are leased to and operated by MeriStar
Hotels & Resorts, Inc. ("OPCO"). As of December 31, 1999, the Company owned 116
hotels with 29,348 rooms located in 27 states, the District of Columbia and
Canada.
The following table outlines the Company's portfolio of owned, leased and
managed hotels:
<TABLE>
<CAPTION>
Owned Leased Managed Total
------------------------ ------------------------ ------------------------ ----------------------
Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1999 116 29,348 - - - - 116 29,348
December 31, 1998 117 29,351 - - - - 117 29,351
December 31, 1997 47 12,019 40 5,687 27 4,631 114 22,337
</TABLE>
On March 15, 1998, CapStar and AGH entered into a definitive agreement (the
"Merger Agreement") pursuant to which the parties agreed, subject to stockholder
approval and other conditions and covenants, to the Merger, with the surviving
entity being named "MeriStar Hospitality Corporation." The Merger was approved
at a special meeting of stockholders of CapStar and the annual meeting of
stockholders of AGH on July 28, 1998. The Merger and related transactions became
effective August 3, 1998.
Pursuant to the Merger Agreement, CapStar also distributed on a pro rata
basis to its stockholders all of the capital stock of OPCO (the "Spin-Off"),
whose assets consisted of CapStar's hotel operations (including leased hotels)
and management business. The Spin-Off occurred on August 3, 1998. On August 3,
1998, the Company's common stock, par value $0.01 per share ("Common Stock"),
and the common stock of OPCO began trading on the New York Stock Exchange.
The Merger was accounted for as a purchase for financial reporting purposes
and, accordingly, the operating results of AGH have been included in the
Company's consolidated financial statements since August 3, 1998, the date of
acquisition. In accordance with the provisions of Accounting Principles Board
Opinion No. 16, "Business Combinations," CapStar was considered the acquiring
enterprise for financial reporting purposes. The Company established a new
accounting basis for AGH's assets and liabilities based on their fair values.
Prior to August 3, 1998, the financial statements of the Company included hotel
operations and operations of OPCO; subsequent to August 3, 1998, the hotel
operations are leased to OPCO following the Spin-Off and are no longer reflected
in the Company's operating results. The Company has included expenditures
related directly to the acquisition of AGH as part of the cost of acquiring AGH
and those expenditures relating to the Spin-Off as expenses as incurred.
2. Summary of Significant Accounting Policies
Principles of Consolidation- The consolidated financial statements include
the accounts of the Company and all of its majority owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
Investments in unconsolidated joint ventures and affiliated companies in
which the Company holds a voting interest of 50% or less and exercises
significant influence are accounted for using the equity method.
33
<PAGE>
The Company uses the cost method to account for its investment in entities in
which it does not have the ability to exercise significant influence.
Cash Equivalents and Restricted Cash- The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Restricted cash represents amounts required to be maintained in
escrow under certain of the Company's credit facilities.
Investments in Hotel Properties- Investments in hotel properties are recorded
at cost, which includes the allocated purchase price for hotel acquisitions, or
at fair value at the time of contribution for contributed property. Property and
equipment balances are depreciated using the straight-line method over lives
ranging from five to 40 years. For the years ended December 31, 1999, 1998 and
1997, the Company capitalized interest of $12,540, $5,182, and $442,
respectively. Properties held for sale are carried at the lower of their
carrying values or estimated fair values less costs to sell. Depreciation of
these properties is discontinued when an operating property is classified as
held for sale. Properties held for sale are not material and, therefore, are
included in investments in hotel properties.
Intangible Assets- Intangible assets consist primarily of deferred financing
fees. These deferred fees are amortized on a straight-line basis over the lives
of the related borrowings for up to 10 years. Total accumulated amortization at
December 31, 1999 and 1998 was $5,742 and $2,666, respectively. In 1999, 1998
and 1997, the Company recognized extraordinary losses of $4,532, $4,080, and
$4,092, (net of tax benefits of $93, $2,083, and $2,508), respectively, due to
the write-off of unamortized deferred financing fees in conjunction with
refinancing certain credit facilities.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of- The
carrying values of long-lived assets, which include property and equipment and
all intangibles, are evaluated periodically in relation to the operating
performance and future undiscounted cash flows of the underlying assets.
Adjustments are made if the sum of expected undiscounted future net cash flows
is less than book value. No impairment losses were recorded during 1999, 1998 or
1997.
Income Taxes-The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Deferred income taxes reflect the tax
consequences on future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts.
In conjunction with the Merger on August 3, 1998, the Company became a REIT
and is therefore no longer subject to federal income taxes, provided that it
complies with various requirements necessary to maintain REIT status. The
Company is subject to state and local taxes in certain jurisdictions.
Foreign Currency Translation- Results of operations for the Company's
Canadian hotels are maintained in Canadian dollars and translated using the
average exchange rates during the period. Assets and liabilities are translated
to U.S. dollars using the exchange rate in effect at the balance sheet date.
Resulting translation adjustments are reflected in stockholders' equity as a
cumulative foreign currency translation adjustment.
Revenue Recognition- Prior to the Merger, revenue was earned through the
operations and management of the hotel properties and was recognized when
earned. Subsequent to the Merger, the Company earns participating lease revenue.
Participating lease revenue represents lease payments from lessees pursuant to
participating lease agreements. Office, retail and parking rental is generally
recognized on a straight-line basis over the terms of the respective leases.
34
<PAGE>
2. Summary of Significant Accounting Policies (Continued)
Participating Lease Agreements- The Company's participating leases have non-
cancelable remaining terms ranging from 9 to 11 years, subject to earlier
termination on the occurrence of certain contingencies, as defined. The rent
due under each percentage lease is the greater of base rent or percentage rent,
as defined. Percentage rent applicable to room and food and beverage revenue
varies by lease and is calculated by multiplying fixed percentages by the total
amounts of such revenues over specified threshold amounts. Both the minimum
rent and the revenue thresholds used in computing percentage rents are subject
to annual adjustments based on increases in the United States Consumer Price
Index. Percentage rent applicable to other revenues is calculated by
multiplying fixed percentages by the total amounts of such revenues. During
interim reporting periods, the Company defers recognition of revenue for lease
payments considered to be contingent until specified percentage rent thresholds
are met.
Financial Instruments- From time to time the Company enters into swap and
collar agreements that are designated as, and are effective as, hedges against
the impact of interest rate fluctuation on certain of the Company's existing and
probable future long-term debt instruments. Because these agreements qualify for
hedge accounting treatment, any gains or losses are recognized as adjustments to
interest expense over the lives of the underlying debt instruments. For hedge
agreements that are terminated early or that are associated with anticipated
future debt instruments, gains or losses are deferred until those debt
instruments are entered into. If the Company determines it is no longer
probable that the Company will enter into an anticipated debt instrument, any
related deferred gains or losses are recognized in the current period.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Segment Information- SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" requires a public entity to report selected
information about operating segments in financial reports issued to
shareholders. It also establishes standards for related disclosures about
product and services, geographic areas and major customers. Based on the
guidance provided in the standard, the Company has determined that its business
is conducted in one operating segment.
The following table summarizes geographic information required to be disclosed
under SFAS No. 131:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ---------
<S> <C> <C> <C>
Revenue:
U.S. $ 367,893 $ 510,344 $300,028
Foreign 7,011 14,953 16,365
---------- ---------- --------
$ 374,904 $ 525,297 $316,393
========== ========== ========
Investments in hotel
properties, net:
U.S. $2,876,909 $2,817,974
Foreign 59,384 55,772
---------- ----------
$2,936,293 $2,873,746
========== ==========
</TABLE>
35
<PAGE>
2. Summary of Significant Accounting Policies (Continued)
Comprehensive Income-SFAS No. 130, "Reporting Comprehensive Income," requires
an enterprise to display comprehensive income and its components in a financial
statement to be included in an enterprise's full set of annual financial
statements or in the notes to financial statements. Comprehensive income
represents a measure of all changes in equity of an enterprise that result from
recognized transactions and other economic events for the period other than
transactions with owners in their capacity as owners. Comprehensive income of
the Company includes net income and other comprehensive income from foreign
currency items. For the year ended December 31, 1999, net income was $98,964,
other comprehensive income, net of tax, was $1,240 and comprehensive income was
$100,204. For the year ended December 31, 1998, net income was $43,707, other
comprehensive income, net of tax, was $ (3,960) and comprehensive income was
$39,747. For the year ended December 31, 1997, net income was $20,060, other
comprehensive income, net of tax, was $ (2,527) and comprehensive income was
$17,533.
Cumulative Effect of Accounting Change-In April 1998, the American Institute
of Certified Public Accountants issued Statement of Position ("SOP") No. 98-5,
"Reporting on the Costs of Start-Up Activities," which requires that all non-
governmental entities expense costs of start-up activities, including
organizational costs, as those costs are incurred and requires the write-off of
any unamortized balances upon implementation. SOP No. 98-5 is effective for
financial statements issued for periods beginning after December 15, 1998. The
Company chose to adopt SOP No.98-5 effective July 1, 1998. The effect of this
accounting change was a charge against income for the year ended December 31,
1998 of $921 (net of tax benefit of $564).
New Accounting Pronouncements- In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires that an entity recognize all
derivatives as either assets or liabilities in statements of financial position
and measure those instruments at fair value. In June 1999, the FASB issued SFAS
No. 137 which amended SFAS No. 133 to defer the effective date to all fiscal
quarters of fiscal years beginning after June 15, 2000. The Company is currently
in the process of evaluating the effect this new standard will have on its
financial statements.
Reclassifications- Certain 1998 and 1997 amounts have been reclassified to
conform to 1999 presentation.
3. Investments in Hotel Properties
Investments in hotel properties consists of the following:
December 31,
---------------------------------
1999 1998
----------- -----------
Land $ 318,360 $ 314,503
Buildings 2,378,318 2,294,130
Furniture, fixtures and equipment 320,787 234,403
Construction-in-progress 101,258 114,507
---------- ----------
Total $3,118,723 $2,957,543
========== ==========
4. Investments in and Advances to Affiliates
The Company has ownership interests in certain unconsolidated corporate joint
ventures and affiliated companies. In 1999, the Company also invested $40,000 in
MeriStar Investment Partners, LP ("MIP"), a joint venture established to acquire
upscale, full-service hotels. The Company's investment is in the form of a
preferred partnership interest. The Company receives a 16% preferred return on
its investment. The Company's ultimate equity investment in this partnership
may be up to $60,000.
As of December 31, 1998, the Company had an investment in one joint venture
in which it had a 50% ownership interest. In 1999, the Company sold its 50%
ownership interest in that joint venture to OPCO at net book value.
36
<PAGE>
5. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
New Credit Facility................................... $ 908,000 $ 910,000
New Secured Facility.................................. 328,954 -
Secured Facility...................................... - 250,000
Subordinated Notes.................................... 202,041 149,826
Convertible Notes..................................... 172,500 172,500
Non-Recourse Facility................................. - 52,750
Mortgage Debt and Other............................... 65,276 67,276
---------- ----------
$1,676,771 $1,602,352
========== ==========
</TABLE>
New Credit Facility-In conjunction with the Merger, the Company entered into
a $1,000,000 senior secured credit facility (the "New Credit Facility"). The New
Credit Facility is structured as a $300,000, five-year term loan facility; a
$200,000, five-and-a-half year term loan facility; and a $500,000, three-year
revolving credit facility with two one-year optional extensions. The New Credit
Facility is secured by the Company's Common Stock and its general partnership,
limited partnership and limited liability company ownership interests in its
subsidiaries. The interest rate on the term loans and revolving facility ranges
from 100 to 200 basis points over the 30-day London Interbank Offered Rate
("LIBOR"), depending on certain financial performance covenants and long-term
senior unsecured debt ratings. The weighted average interest rate on borrowings
outstanding under the New Credit Facility as of December 31, 1999 was 8.4%. As
of December 31, 1999, the Company had $90.0 million available under the New
Credit Facility's revolving facility.
New Secured Facility- In 1999, the Company completed a $330,000 10-year non-
recourse financing ("New Secured Facility") secured by a portfolio of 19 hotels.
The loan bears a fixed interest rate of 8.01% and matures in 2009. The Company
used most of the net proceeds to repay the Secured Facility and the Non-Recourse
Facility.
Secured Facility - Effective August 3, 1998, the Company entered into an 18-
month, $250,000 secured loan facility ("Secured Facility"), which was expected
to be converted into a commercial mortgage-backed security secured by sixteen
hotels. The interest rate on the Secured Facility was 110 basis points over 30-
day LIBOR. The loan was repaid in 1999 with proceeds from the New Secured
Facility.
Subordinated Notes- In 1999, the Company sold $55,000 aggregate principal
amount (issue price of $51,906, net of discount) of 8.75% senior subordinated
notes ("Subordinated Notes") due 2007, generating net proceeds of $51,219
million to the Company. The Company used the net proceeds to repay indebtedness
under its New Credit Facility and to invest in MIP. These notes are unsecured
obligations of the Company and provide for semi-annual payments of interest on
February 15 and August 15, commencing on August 15, 1999.
In 1997, the Company completed the offering of $150,000 aggregate principal
amount (issue price of $149,799, net of discount) of its 8.75% senior
subordinated notes due 2007 (the "Subordinated Notes"), generating net proceeds
to the Company of $144,620. The indenture pursuant to which the Subordinated
Notes were issued contains certain covenants, including maintenance of certain
financial ratios, reporting requirements, and other customary restrictions. The
Subordinated Notes are unsecured obligations of the Company and provide for
semi-annual payments of interest on February 15 and August 15, commencing on
February 15, 1998.
Convertible Notes- In 1997, the Company completed the offering of $172,500
aggregate principal amount of its 4.75% convertible subordinated notes due 2004
(the "Convertible Notes"), generating net proceeds to the Company of $167,581.
The proceeds were used to repay outstanding indebtedness under a prior credit
facility and to finance certain hotel acquisitions. The Convertible Notes are
unsecured
37
<PAGE>
obligations of the Company and provide for semi-annual payments of interest on
April 15 and October 15, commencing on April 15, 1998.
Mortgage Debt- In connection with the Merger, the Company assumed mortgage
debt secured by seven hotels. The mortgage debt matures between 2001 and 2012
and the interest rates on the mortgages range from 7.5% to 10.5%.
Non-Recourse Facility- In 1997, the Company entered into a $100,000 non-
recourse facility (the "Non-Recourse Facility"). The Non-Recourse Facility was
secured by three hotels owned by the Company and bore interest at a rate of
between 1.75% and 2.70% over 30-day LIBOR, based upon compliance with certain
ratios. In 1999, the loan was repaid with proceeds from the New Secured
Facility.
Hedge Agreements- In anticipation of the August 1999 completion of the New
Secured Facility, the Company entered into two separate hedge transactions
during July 1999. Upon completion of the New Secured Facility, the Company
terminated the underlying treasury lock agreements, resulting in a net payment
to the Company of $5,142. This amount was deferred and is being recognized as a
reduction to interest expense over the life of the underlying debt. As a
result, the effective interest rate on the New Secured Facility has been reduced
to 7.76%.
During September 1999, the Company entered into two separate $100,000 swap
agreements with financial institutions in order to hedge against the impact
future interest rate fluctuations may have on the Company's existing floating
rate debt instruments. These swap agreements effectively replaced two $100,000
swap agreements that were to expire in November 1999. The swap agreements
effectively fix 30-day LIBOR at 6.0%. During the year ended December 31, 1999,
the Company made payments totaling $278 relating to these hedges. These amounts
are included in interest expense. The hedge agreements terminate in September
2001.
During 1998, the Company entered into six separate $100,000 swap agreements.
The swap agreements effectively fixed 30-day LIBOR at between 4.9% and 5.4%.
During the years ended December 31, 1999 and 1998, the Company (received) made
net payments of ($729) and $211, respectively, relating to these hedges. These
amounts are included in interest expense. The hedge agreements terminate at
various times between November 1999 and September 2000.
Future Maturities- Aggregate future maturities of the above obligations are
as follows:
<TABLE>
<S> <C>
2000............................................................... $ 10,694
2001............................................................... 28,534
2002............................................................... 48,179
2003............................................................... 675,872
2004............................................................... 379,652
Thereafter......................................................... 533,840
----------
$1,676,771
==========
</TABLE>
Management has determined that the fair value of the outstanding balance of
the Company's long-term debt approximates $1,625,411 at December 31, 1999.
6. Income Taxes
The Company's income taxes were allocated as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Taxes on income before extraordinary loss and
cumulative effect of accounting change................ $2,102 $15,699 $14,911
Tax benefit on extraordinary loss...................... (93) (2,083) (2,508)
Tax benefit on cumulative effect of accounting change.. - (564) -
------------ ------------ ------------
$2,009 $13,052 $12,403
============ ============ ============
</TABLE>
38
<PAGE>
The Company's effective income tax rate differs from the federal statutory
income tax rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
Effect of REIT dividends paid deduction (35.0) (35.0) -
Effect of federal taxes in pre-REIT period - 17.9 -
State and local taxes 1.7 2.1 2.6
Difference in effective rate on foreign subsidiaries 0.3 2.8 0.6
Other - 0.2 -
------------ ------------ ------------
2.0% 23.0% 38.2%
============ ============ ============
</TABLE>
The components of income tax expense related to income before extraordinary
loss and cumulative effect of accounting change are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ - $14,873 $ 7,542
State 1,020 3,771 899
Foreign 190 1,500 1,553
------ ------- -------
1,210 20,144 9,994
Deferred:
Federal - (3,546) 4,243
State 842 (899) 505
Foreign 50 - 169
------ ------- -------
892 (4,445) 4,917
------ ------- -------
$2,102 $15,699 $14,911
====== ======= =======
</TABLE>
The tax effects of the principal temporary differences that give rise to the
Company's net deferred tax liability are as follows:
December 31,
------------------------------
1999 1998
---------- -----------
Accelerated depreciation $1,846 $1,111
Fair market value of hotel assets acquired 6,800 6,800
Allowance for doubtful accounts (30) (29)
Accrued vacation (15) (14)
Accrued expenses 482 311
Other 262 274
------ ------
Net deferred tax liability $9,345 $8,453
====== ======
There is no valuation allowance for deferred tax assets as of December 31,
1999 or 1998 as management believes it is more likely than not that these
deferred tax assets will be fully realized.
In conjunction with the Merger and related transactions, the Company had
several significant events that affect income tax-related balances for the year
ended December 31, 1998. These events are summarized below:
. The Spin-Off was treated as a taxable event to the Company and CapStar's
shareholders. As a result, the Company experienced a taxable gain equal to
the excess of the fair market value of the OPCO stock over the Company's tax
basis in that stock. The taxable gain associated with this transaction was
$35,181.
39
<PAGE>
. As a result of the Merger, the Company will continue to file as a REIT. REITs
are generally not subject to federal income taxes, provided that they comply
with various requirements necessary to maintain REIT status. Since the
Company expects to maintain its REIT status, the tax effect of cumulative
temporary differences as of August 3, 1998 has been reversed as a credit to
deferred income tax expense and reduction in deferred income taxes payable.
This reversal reduced deferred income taxes payable by approximately $19,290
as of August 3, 1998.
. REITs are subject to federal income taxes in certain instances for asset
dispositions occurring within 10 years of electing REIT status. The Company
does not expect to incur federal tax liability resulting from the disposition
of assets with built-in gain.
. As described above, for purposes of preparing the Company's financial
statements, the Company established a new accounting basis for AGH's assets
and liabilities based on their fair values. In accordance with generally
accepted accounting principles, the Company has provided a deferred income
tax liability for the estimated future tax effect of differences between the
accounting and tax bases of assets acquired from AGH. This deferred income
tax liability, related to future state and local income taxes, is estimated
as $6,800, based on information available at the date of the Merger and
subsequently.
7. Stockholders' Equity and Minority Interests
Common Stock Transactions- On March 12, 1997, the Company completed an
offering of 5,750,000 shares of Common Stock at a price of $24.75 per share.
After underwriting discounts, commissions and other offering expenses, net
proceeds to the Company were $134,051, and were used to fund certain hotel
acquisitions and repay a portion of the Company's outstanding indebtedness.
On October 9, 1997, the Company completed an additional offering of 5,953,722
shares of common stock at $34.625 per share. Concurrent with the common stock
offering, the Company also completed the Convertible Notes offering. The notes
were initially convertible into shares of the Company's common stock, any time
after 90 days following issuance, at the option of the holders at $43 per share.
After underwriting discounts, commissions and other offering expenses, net
proceeds to the Company from the Convertible Notes offering and the common stock
offering were $167,581 and $195,766, respectively. In conjunction with the
Merger, the conversion price was adjusted to $34 per share.
On March 15, 1998, CapStar and AGH entered into the Merger Agreement.
Pursuant to the Merger, CapStar shareholders received one share each in the
Company and OPCO, for each CapStar share owned. AGH shareholders received
0.8475 shares of the Company for each AGH share owned. To effect the Merger,
the Company issued 20,607,611 shares valued at $755,907 to former AGH
shareholders.
CapStar also distributed on a pro rata basis to its stockholders all of the
capital stock of OPCO, which consisted of CapStar's hotel operations (including
leased hotels) and management business. In conjunction with the Spin-Off, the
Company distributed $23,745 of cash and $28,565 of net assets to the new
shareholders of OPCO.
In May 1997, CapStar implemented a stock purchase plan that allowed eligible
employees to purchase the Company's common stock at a discount to market value.
The Company had reserved 500,000 shares of common stock for issuance under this
plan. In June 1998, the plan was terminated in accordance with the Merger
Agreement.
During the 1999 Annual Meeting of Stockholders, the shareholders authorized
100,000,000 shares of preferred stock, par value $0.01 per share, of the Company
to be issued from time to time with such rights, preferences and priorities as
the Board of Directors shall designate.
In September 1999, the Company's Board of Directors authorized the repurchase
of up to five million shares of its Common Stock from time to time in open
market or privately negotiated transactions. As of December 31, 1999, the
Company has repurchased a total of 407,400 shares for $6,252.
40
<PAGE>
OP Units- Substantially all of the Company's assets are held indirectly by
and operated through MeriStar Hospitality Operating Partnership, L.P. (the
"Operating Partnership"), the Company's subsidiary operating partnership.
The Operating Partnership's partnership agreement provides four classes of
partnership interests ("OP Units"): Common OP Units, Class B OP Units, Class C
OP Units and Class D OP Units. Common OP Units and Class B OP Units receive
quarterly distributions per OP Unit equal to the dividend paid on each share of
the Company's Common Stock. Class C OP Units receive a non-cumulative,
quarterly distribution equal to $0.5575 per Class C OP Unit until such time as
the dividend rate on the Company's Common Stock exceeds $0.5575 whereupon the
Class C OP Units automatically convert into Common OP Units. Class D OP Units
pay a 6.5% cumulative annual preferred return and are entitled to a liquidation
preference of $22.16 per Class D OP Unit. All net income earned and capital
proceeds received by the Operating Partnership, after payment of the annual
preferred return and, if applicable, the liquidation preference, are shared by
the holders of the Common OP Units.
During 1999, 65,875 Common OP Units were issued to partially finance the
purchase of a hotel and 974,588 Common OP units were issued as a conditional
component of a purchase agreement for a hotel purchased in 1998. During 1998,
962,858 Common and Class B OP Units were issued to partially finance the
purchases of certain hotels and 3,305,175 Common OP Units were issued to former
holders of AGH OP Units. During 1997, the Company issued 1,483,759 Common and
Class B OP Units and 392,157 Class D OP Units to partially finance the purchases
of both certain hotels and lease contracts on hotels.
Each OP Unit is redeemable by the holder for one share of Common Stock (or,
at the Company's option, for cash in an amount equal to the market value of a
share of Common Stock). In addition, the Class D OP Units may be redeemed by the
Operating Partnership at a price of $22.16 per Class D OP Unit (or, at the
Company's option, for a number of shares of Common Stock having a value equal to
such redemption price) at any time after April 1, 2000 or by the holders of the
Class D OP Units at a price of $22.16 per Class D OP Unit (in cash or, at the
holder's option, for a number of shares of Common Stock having a value equal to
the redemption price) at any time after April 1, 2004.
On September 2, 1998 and November 4, 1998, respectively, the Company declared
its third and fourth quarter dividends, equivalent to an annual rate of $2.02
per share of Common Stock and OP Unit in the Operating Partnership. The third
quarter dividend was paid on a prorated basis from August 4, 1998 (the first day
of operations following the Merger) through September 30, 1998. The amount of
the dividend was $0.31837 per share of Common Stock and OP Unit and was paid on
October 30, 1998. The fourth quarter dividend of $0.505 per share of Common
Stock and OP Unit and was paid on January 29, 1999.
On March 17, 1999, June 21, 1999, September 15, 1999 and December 6, 1999,
the Company declared its first, second, third and fourth quarter dividends,
respectively, equivalent to an annual rate of $2.02 per share of Common Stock
and OP Unit in the Operating Partnership. The amount of the dividend for each
quarter was $0.505 per share of Common Stock and OP Unit and was paid on April
30, 1999, July 30, 1999, October 29, 1999 and January 31, 2000, respectively.
41
<PAGE>
8. Earnings Per Share
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for income before
extraordinary loss and cumulative effect of accounting change ("EPS"):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1999 1998 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
Basic EPS Computation:
Net income before extraordinary loss and
cumulative effect of accounting change $ 103,496 $ 48,708 $ 24,152
Weighted average number of shares of Common
Stock outstanding 47,276 33,653 18,785
-------------- --------------- ---------------
Basic EPS $ 2.19 $ 1.45 $ 1.29
============== =============== ===============
Diluted EPS Computation:
Net income before extraordinary loss and
cumulative effect of accounting change $ 103,496 $ 48,708 $ 24,152
Minority interest, net of tax 10,143 2,633 368
Interest on convertible debt, net of tax 8,137 - -
-------------- --------------- ---------------
Adjusted net income $ 121,776 $ 51,341 $ 24,520
-------------- --------------- ---------------
Weighted average number of shares
of Common Stock outstanding 47,276 33,653 18,785
Common Stock equivalents:
Stock options 102 383 189
OP Units 5,205 2,624 380
Convertible debt 5,066 - -
-------------- --------------- ---------------
Total weighted average number of diluted
shares of Common Stock outstanding 57,649 36,660 19,354
-------------- --------------- ---------------
Diluted EPS $ 2.11 $ 1.40 $ 1.27
============== =============== ===============
</TABLE>
In certain years, the effects of certain OP Units and convertible debt were
not included in the computation of diluted EPS as their effect was anti-
dilutive.
9. Related-Party Transactions
Pursuant to an intercompany agreement, the Company and OPCO provide each
other with, among other things, reciprocal rights to participate in certain
transactions entered into by each party. In particular, OPCO has a right of
first refusal to become the lessee of any real property acquired by the Company.
OPCO also provides the Company with certain services including administrative,
renovation supervision, corporate, accounting, finance, insurance, legal, tax,
information technology, human resources, acquisition identification and due
diligence, and operational services, for which OPCO is compensated in an amount
that the Company would be charged by an unaffiliated third party for comparable
services. During the years ended December 31, 1999 and 1998, the Company paid
OPCO $1,600 and $781, respectively, for such services.
42
<PAGE>
Summarized financial information of the Company's significant lessee, OPCO,
is as follows:
<TABLE>
<CAPTION>
Balance sheet data: 1999 1998
----------------- -----------------
<S> <C> <C>
Total assets $ 258,931 $247,529
Total liabilities $ 179,168 $183,102
Operating data:
Revenue $1,292,114 $562,437
Net income $ 6,685 $ 3,950
</TABLE>
OPCO has a $75,000 revolving credit facility with the Company. Borrowings
by OPCO bear interest at 30-day LIBOR plus 350 basis points. During 1999 and
1998, the Company earned interest of $4,907 and $1,967, respectively, from this
facility. As of December 31, 1999, $57,000 was outstanding on the facility. The
Company has determined that the fair value of this note receivable approximates
its carrying value.
In order for AGH to qualify as a REIT prior to the Merger, AGH's operating
partnership sold certain personal property relating to certain of the hotels
acquired by AGH in connection with its initial public offering to AGH Leasing,
L.P. (which has since come under the control of OPCO) for $315, which amount was
paid by issuance of a promissory note to AGH's operating partnership. The note
was transferred to the Company in connection with the Merger. The promissory
note bears interest at the rate of 10.0% per annum and requires the payment of
quarterly installments of principal and interest over a five-year period ending
on July 31, 2001. At December 31, 1999, the balance outstanding on the note was
$110.
Certain members of management and their respective affiliates owned equity
interests relating to a hotel which was acquired by the Company in January 1999.
Such persons and affiliates received an aggregate of $1,488 of the Company's OP
Units in exchange for such interests in the hotel.
Certain members of management and their respective affiliates owned equity
interests relating to a hotel which was acquired by AGH in November 1997. Such
persons and affiliates received an aggregate of $13,650 operating partnership
units in AGH's operating partnership ("AGH OP Units") in exchange for such
interests in the hotel; which converted to 11,568 OP Units at the Merger. The
AGH OP Units were converted into 11,568 shares of Common Stock in December 1998.
Of the $150,000 aggregate principal amount of Subordinated Notes sold by
the Company in August 1997, $50,000 principal amount was sold at a price of
97.866% to an affiliate of an investment company, one of the principal
stockholders of which is a director of the Company. The Subordinated Notes
purchased are identical to those purchased by third parties, including voting
rights.
10. Stock-Based Compensation
At the date of the Merger, CapStar had outstanding approximately 1,758,000
options (the "CapStar Options") under an equity incentive plan. As a result of
the Merger, all holders of CapStar Options received one option in the Company
and one option of OPCO, and the original exercise price of the CapStar Options
was allocated between the two companies. In addition, approximately 1,060,000 of
the CapStar Options became fully vested as of the Merger date.
In connection with the Merger, a new equity incentive plan (the "Equity
Incentive Plan") was adopted. This plan authorizes 4,549,561 shares of common
stock to be awarded. Awards may be granted to officers or other key employees of
the Company or an affiliate. These shares are exercisable in three annual
installments and expire ten years from the grant date.
In addition, the Company adopted a new equity incentive plan for non-
employee directors (the "Directors' Plan"). The Directors' Plan authorizes up to
125,000 options to be awarded. These shares are
43
<PAGE>
exercisable in three annual installments and expire ten years from the grant
date. As of December 31, 1999, 80,000 options had been awarded.
In conjunction with the Merger, holders of CapStar options were granted a
total of 150,000 shares of stock with a value of $3,205. This restricted stock
vests ratably over a three-year period.
In addition, during 1999, the Company has granted a total of 92,500 shares
of restricted stock with a value of $1,775. This restricted stock vests
ratably over a five-year period.
Stock option activity for 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Equity Incentive Plan Directors' Plan
--------------------------------------- --------------------------------------
Number of Average Number of Average
Shares Option Price Shares Option Price
--------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 764,841 $18.00 - $ -
Granted 855,050 33.11 - -
Exercised (235) 18.00 - -
Forfeited (18,250) 18.00 - -
--------------- ------------------ --------------- ------------------
Balance, December 31, 1997 1,601,406 26.28 - -
Granted 2,171,796 24.78 45,000 21.38
Exercised (37,823) 17.45 - -
Forfeited (32,000) 29.44 - -
--------------- ------------------ --------------- ------------------
Balance, December 31, 1998 3,703,379 24.80 45,000 21.38
Granted 1,015,750 19.37 35,000 23.63
Exercised (109,012) 15.64 - -
Forfeited (264,064) 27.87 - -
--------------- ------------------ --------------- ------------------
Balance, December 31, 1999 4,346,053 $23.56 80,000 $22.36
=============== ================== =============== ==================
Shares exercisable at December 31, 1997 291,116 $18.00 - $ -
=============== ================== =============== ==================
Shares exercisable at December 31, 1998 2,231,072 $24.63 - $ -
=============== ================== =============== ==================
Shares exercisable at December 31, 1999 2,577,620 $24.53 15,000 $21.38
=============== ================== =============== ==================
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------- -----------------------------------
Weighted Weighted
Average Weighted Average
Range of exercise Number Remaining Average Number Exercise
prices outstanding Contractual Life Exercise Price exercisable Price
- ------------------ --------------- --------------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$15.64 to $19.19 1,582,791 8.16 $17.74 617,041 $15.65
$20.53 to $25.31 1,147,502 7.82 21.72 645,904 21.69
$25.80 to $31.42 1,484,780 7.05 29.98 1,252,815 29.96
$31.51 to $32.08 210,980 8.00 32.05 76,860 32.01
--------------- --------------------- ------------------- --------------- ---------------
$15.64 to $32.08 4,426,053 7.69 $23.56 2,592,620 $24.55
=============== ===================== =================== =============== ===============
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, the Company applies
Accounting Principles Board Opinion No. 25 in accounting for the Equity
Incentive Plan and therefore no compensation cost has been recognized for the
Equity Incentive Plan.
44
<PAGE>
Pro forma information regarding net income and diluted EPS is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ------------------ -----------------
<S> <C> <C> <C>
Risk-free interest rate 6.70% 5.51% 5.81%
Dividend rate $2.02 $2.02 -
Volatility factor 0.31 0.35 0.26
Weighted average expected life 3.07 years 6.09 years 3.72 years
</TABLE>
The Company's pro forma net income and diluted EPS as if the fair value
method had been applied were $98,273 and $2.02 for 1999, $32,402 and $0.96 for
1998, and $18,273 and $0.96 for 1997. The effects of applying SFAS No. 123 for
disclosing compensation costs may not be representative of the effects on
reported net income and diluted EPS for future years.
11. Commitments and Contingencies
The Company leases land at certain hotels from third parties. Certain
leases contain contingent rent features based on gross revenues at the
respective property. Future minimum lease payments required under these
operating leases as of December 31, 1999 were as follows:
2000 $ 1,773
2001 1,773
2002 1,773
2003 1,773
2004 1,773
Thereafter 67,638
-------
$76,503
=======
The Company leases its hotels to OPCO and one other lessee under
noncancellable participating leases that expire from 2008 to 2011. The Company
also leases certain office, retail and parking space to outside parties under
non-cancelable operating leases with initial or remaining terms in excess of one
year. Future minimum rental receipts under these leases as of December 31, 1999
were as follows:
2000 $ 228,652
2001 227,647
2002 227,165
2003 226,870
2004 226,430
Thereafter 1,372,800
----------
$2,509,564
==========
In the course of the Company's normal business activities, various
lawsuits, claims and proceedings have been or may be instituted or asserted
against the Company. Based on currently available facts, management believes
that the disposition of matters that are pending or asserted will not have a
material adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
45
<PAGE>
12. Acquisitions
During 1999, the Company acquired one hotel for a purchase price of $10,642
of cash and $1,488 of OP Units. The acquisition was funded using existing cash
and borrowings on the New Credit Facility. The Company also sold 2 hotels during
1999 for a total price of $8,900. The resulting gain on the sales was immaterial
to the Company's financial statements.
During 1998, the Company acquired 70 hotels (containing 17,332 rooms), of
which 53 were acquired pursuant to the Merger. The Company purchased AGH for
approximately $1,306,000 through the issuance of approximately 23,913,000 shares
of Common Stock and OP Units in the Company's subsidiary operating partnership.
The total purchase price for the remaining 17 acquired hotels during 1998 was
$549,068 of cash and $16,932 of OP Units. The cash portions of these
acquisitions were funded through borrowings on the New Credit Facility and a
prior credit facility.
The following unaudited pro forma summary presents information as if the
Merger, the Spin-Off and all 117 hotels owned at December 31, 1998 had been
acquired at the beginning of the periods presented. The pro forma information is
provided for informational purposes only. It is based on historical information
and does not necessarily reflect the actual results that would have occurred nor
is it necessarily indicative of future results of operations of the Company.
PRO FORMA INFORMATION (UNAUDITED)
1998 1997
---------------------------------
Total revenue................... $332,632 $280,482
Net income...................... $ 96,232 $ 67,487
Diluted EPS..................... $ 2.05 $ 1.48
13. Quarterly Financial Information (Unaudited)
The following is a summary of the Company's quarterly results of operations:
<TABLE>
<CAPTION>
1999 1998
------- --------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- -------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue................... $64,093 $74,055 $103,214 $133,542 $143,602 $184,145 $104,301 $93,249
Total operating expenses........ 39,521 38,687 37,727 41,904 125,890 147,209 81,827 36,465
Net operating income............ 24,572 35,368 65,487 91,638 17,712 36,936 22,474 56,784
Income before extraordinary
loss and cumulative effect of
accounting change............. 267 7,179 37,709 58,341 4,451 14,905 3,868 25,484
Net income ..................... 267 7,179 33,177 58,341 4,451 14,905 (1,133) 25,484
Diluted earnings per share...... $ - $ 0.15 $ 0.67 $ 1.14 $0.18 $ 0.55 $ (0.03) $ 0.54
</TABLE>
46
<PAGE>
As required by the Emerging Issues Task Force Issue No. 98-9, Accounting
for Contingent Rent in Interim Financial Periods, the Company recognized $45,894
of additional contingent rental income for the three months ended
December 31, 1999. There is no year-to-date effect of EITF No. 98-9.
The effect of EITF No. 98-9 on the Company's financial statements is as
follows:
<TABLE>
<CAPTION>
Three Months Ended December 31, 1999
------------------------------------
Prior to Effect Effect After Effect
of of of
EITF No. 98-9 EITF No. 98-9 EITF No. 98-9
--------------- ------------- -------------
<S> <C> <C> <C>
Net operating income $ 45,744 $45,894 $ 91,638
Interest expense ( 25,777) - (25,777)
Minority interests (1,865) (4,382) ( 6,247)
Income taxes (385) (888) (1,273)
Extraordinary loss, net of tax - - -
--------- ------- --------
Net income $ 17,717 $40,624 $ 58,341
========= ======= ========
</TABLE>
14. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- -------------
<S> <C> <C> <C>
Cash paid for interest and income taxes:
Interest, net of capitalized interest of $12,540, $5,182, and $442,
respectively 93,491 $ 48,156 $ 15,734
Income taxes 1,261 18,591 7,606
Non-cash investing and financing activities:
Additions to equipment through capital leases - - $ 40
Long-term debt assumed in purchase of property and equipment - 543 16,478
OP Units issued in purchase of property and equipment 1,488 16,932 32,264
OP Units issued in purchase of intangible assets - - 24,000
Redemption of OP Units 29,412 31,430 11,000
Deferred financing fees not yet paid - - 528
Book value of assets distributed to spun-off affiliate - $ 41,449 -
Book value of liabilities distributed to spun-off affiliate - (11,768) -
Book value of debt distributed to spun-off affiliate - (1,116) -
----------- ------------- -------------
Book value of net assets distributed to spun-off affiliate - $ 28,565 -
=========== ============= =============
Fair value of assets acquired in Merger - $ 1,306,018 -
Fair value of liabilities assumed in Merger - (26,167) -
Fair value of debt assumed in Merger - (523,944) -
----------- ------------- -------------
Fair value of net assets acquired in Merger - $ 755,907 -
=========== ============= =============
</TABLE>
47
<PAGE>
MERISTAR HOSPITALITY CORPORATION
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Costs
subsequent
Initial cost to to
Company acquisition Gross amount at end of year
----------------- -------------- ---------------------------
Building Building Building Accum-
and and and ulated Year of
Encum- Improve- Improve- Improve- Deprecia- Construc- Date
Description brances Land ments Land ments Land ments tion tion Acquired Life
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hotel Assets:
Salt Lake Airport Hilton, UT - $ 770 $12,828 $ - $2,812 $ 770 $15,640 $1,763 1980 3/3/95 40
Radisson Hotel,
Schaumburg, IL - 1,080 5,131 - 1,881 1,080 7,012 723 1979 6/30/95 40
Sheraton Hotel, Colorado
Springs, CO (1) 1,071 14,592 1 3,642 1,072 18,234 1,906 1974 6/30/95 40
Hilton Hotel, Bellevue, WA 48 5,211 6,766 - 1,516 5,211 8,282 861 1979 8/4/95 40
Marriott Hotel, Somerset, NJ (1) 1,978 23,001 - 3,979 1,978 26,980 2,664 1978 10/3/95 40
Westin Atlanta Airport,
Atlanta, GA - 2,650 15,926 (300) 9,258 2,350 25,184 2,431 1982 11/15/95 40
Sheraton Hotel,
Charlotte, NC (1) 4,700 11,057 - 3,375 4,700 14,432 1,358 1985 2/2/96 40
Radisson Hotel Southwest,
Cleveland, OH - 1,330 6,353 - 4,547 1,330 10,900 906 1978 2/16/96 40
Orange County Airport
Hilton, Irvine, CA (1) 9,990 7,993 - 3,133 9,990 11,126 967 1976 2/22/96 40
The Latham Hotel,
Washington, DC - 6,500 5,320 - 3,566 6,500 8,886 685 1981 3/8/96 40
Hilton Hotel, Arlington, TX (1) 1,836 14,689 79 2,819 1,915 17,508 1,555 1983 4/17/96 40
Hilton Hotel, Arlington, VA - 4,000 15,069 - 323 4,000 15,392 1,315 1990 8/23/96 40
Southwest Hilton,
Houston, TX - 2,300 15,665 - 959 2,300 16,624 1,295 1979 10/31/96 40
Embassy Suites,
Englewood, CO (1) 2,500 20,700 - 2,782 2,500 23,482 1,769 1986 12/12/96 40
Holiday Inn,
Colorado Springs, CO - 1,600 4,232 - 978 1,600 5,210 349 1974 12/17/96 40
Embassy Row Hilton,
Washington, DC - 2,200 13,247 - 2,240 2,200 15,487 1,085 1969 12/17/96 40
Hilton Hotel & Towers,
Lafayette, LA (1) 1,700 16,062 - 1,284 1,700 17,346 1,256 1981 12/17/96 40
Hilton Hotel, Sacramento, CA (1) 4,000 16,013 - 1,658 4,000 17,671 1,296 1983 12/17/96 40
Santa Barbara Inn, Santa
Barbara, CA - 2,600 5,141 - 1,110 2,600 6,251 446 1959 12/17/96 40
San Pedro Hilton,
San Pedro, CA - 640 6,047 - 2,300 640 8,347 545 1989 1/28/97 40
Doubletree Hotel,
Albuquerque, NM (1) 2,700 15,075 - 801 2,700 15,876 1,136 1975 1/31/97 40
Westchase Hilton & Towers,
Houston, TX (1) 3,000 23,991 - 1,364 3,000 25,355 1,827 1980 1/31/97 40
Four Points Hotel,
Cherry Hill, NJ - 1,700 4,178 - 2,040 1,700 6,218 394 1991 3/20/97 40
Sheraton Great Valley Inn,
Frazer, PA - 2,150 11,653 11 2,712 2,161 14,365 831 1971 3/27/97 40
Holiday Inn Calgary Airport,
Calgary, Alberta, Canada - 751 5,011 (7) 1,553 744 6,564 551 1981 4/1/97 40
Sheraton Hotel Dallas,
Dallas, TX - 1,300 17,268 - 2,358 1,300 19,626 1,273 1974 4/1/97 40
Radisson Hotel Dallas,
Dallas, TX - 1,800 17,580 - 1,177 1,800 18,757 1,259 1972 4/1/97 40
Sheraton Hotel Guildford,
Surrey, BC, Canada - 2,366 24,008 (24) 789 2,342 24,797 2,403 1992 4/1/97 40
Doubletree Guest Suites,
Indianapolis, IN 1,000 8,242 - 821 1,000 9,063 595 1987 4/1/97 40
Ramada Vancouver Centre,
Vancouver, BC, Canada - 4,400 7,840 (43) 2,613 4,357 10,453 921 1968 4/1/97 40
Holiday Inn Sports
Complex, Kansas City, MO - 420 4,742 - 1,551 420 6,293 380 1975 4/30/97 40
Hilton Crystal City,
Arlington, VA - 5,800 29,879 - 790 5,800 30,669 1,890 1974 7/1/97 40
Doubletree Resort Hotel,
Cathedral City, CA - 1,604 16,141 - 2,598 1,604 18,739 1,073 1985 7/1/97 40
Radisson Hotel & Suites,
Chicago, IL 4,870 39,175 - 1,793 4,870 40,968 2,485 1971 7/15/97 40
Georgetown Inn,
Washington, DC - 6,100 7,103 - 712 6,100 7,815 454 1962 7/15/97 40
Embassy Suites Center City,
Philadelphia, PA (1) 5,500 26,763 - 1,442 5,500 28,205 1,627 1963 8/12/97 40
Doubletree Hotel Austin,
Austin, TX (1) 2,975 25,678 - 2,501 2,975 28,179 1,569 1984 8/14/97 40
Radisson Plaza Hotel,
Lexington, KY 240 1,100 30,375 - 3,759 1,100 34,134 2,006 1982 8/14/97 40
Jekyll Inn,
Jekyll Island, GA 850 - 7,803 - 2,782 - 10,585 575 1971 8/20/97 40
Holiday Inn Metrotown,
Burnaby, BC, Canada - 1,115 5,303 (11) 1,292 1,104 6,595 502 1989 8/22/97 40
Embassy Suites
International Airport,
Tucson, AZ - 1,640 10,444 - 1,401 1,640 11,845 585 1982 10/23/97 40
Westin Morristown, NJ - 2,500 19,128 100 4,171 2,600 23,299 1,047 1962 11/20/97 40
Doubletree Hotel Bradley
International Airport,
Windsor Locks, CT - 1,013 10,228 87 1,422 1,100 11,650 547 1985 11/24/97 40
Sheraton Hotel, Mesa, AZ - 1,850 16,938 - 1,303 1,850 18,241 897 1985 12/5/97 40
Metro Airport Hilton &
Suites, Detroit, MI - 1,750 12,639 - 1,033 1,750 13,672 647 1989 12/16/97 40
Marriott Hotel,
Los Angeles, CA - 5,900 48,250 - 5,457 5,900 53,707 2,584 1983 12/18/97 40
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Initial cost to Costs subsequent to
Company acquisition Gross amount at end of year
-----------------------------------------------------------------------------
Building Building Building Accum-
and and and ulated Year of
Encum- Improve- Improve- Improve- Deprecia- Construc- Date
Description brances Land ments Land ments Land ments tion tion Acquired Life
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Austin Hilton & Towers, TX - 2,700 15,852 - 2,013 2,700 17,865 822 1974 1/6/98 40
Dallas Renaissance North, TX - 3,400 20,813 - 2,751 3,400 23,564 1,104 1979 1/6/98 40
Houston Sheraton
Brookhollow Hotel, TX - 2,500 17,609 - 2,148 2,500 19,757 953 1980 1/6/98 40
Seelbach Hilton,
Louisville, KY - 1,400 38,462 - 2,096 1,400 40,558 1,940 1905 1/6/98 40
Midland Hilton & Towers, TX - 150 8,487 - 1,416 150 9,903 459 1976 1/6/98 40
Westin Oklahoma, OK - 3,500 27,588 - 1,683 3,500 29,271 1,408 1977 1/6/98 40
Sheraton Hotel, Columbia,
MD - 3,600 21,393 - 1,195 3,600 22,588 939 1972 3/27/98 40
Radisson Cross Keys,
Baltimore, MD - 1,500 5,615 - 446 1,500 6,061 246 1973 3/27/98 40
Sheraton Fisherman's
Wharf, San Francisco, CA (1) 19,708 61,751 - 2,599 19,708 64,350 2,701 1975 4/2/98 40
Hartford Hilton, CT - 4,073 24,458 - 131 4,073 24,589 968 1975 5/21/98 40
Holiday Inn Dallas DFW
Airport South, TX 13,021 3,388 28,847 - (6) 3,388 28,841 1,016 1974 8/3/98 -
Courtyard by Marriott
Meadowlands, NJ 4,529 - 9,649 - 45 - 9,694 338 1993 8/3/98 40
Hampton Inn Richmond
Airport, VA - 534 3,653 - 473 534 4,126 460 1972 8/3/98 -
Hotel Maison de Ville, New
Orleans, LA - 292 3,015 - (2) 292 3,013 106 1778 8/3/98 40
Hilton Hotel Toledo, OH - - 11,708 - 18 - 11,726 414 1987 8/3/98 40
Holiday Inn Select Dallas
DFW Airport West, TX - 947 8,346 - 26 947 8,372 812 1974 8/3/98 40
Holiday Inn Select New
Orleans International
Airport, LA (1) 3,040 25,616 - 76 3,040 25,692 910 1973 8/3/98 40
Hampton Inn Ocean City, MD - 384 4,940 - 40 384 4,980 608 1989 8/3/98 -
Crowne Plaza Madison, WI (1) 2,629 21,634 - 176 2,629 21,810 770 1987 8/3/98 40
Wyndham Albuquerque
Airport Hotel, NM - - 18,889 - 112 - 19,001 669 1972 8/3/98 40
Wyndham San Jose Airport
Hotel, CA - - 35,743 - 997 - 36,740 1,260 1974 8/3/98 40
Holiday Inn Select Mission
Valley, CA 2,410 20,998 - 155 2,410 21,153 745 1970 8/3/98 40
Sheraton Safari Hotel,
Lake Buena Vista, FL - 4,103 35,263 - 8,305 4,103 43,568 1,288 1985 8/3/98 40
Hilton Monterey, CA - 2,141 17,666 - 5,165 2,141 22,831 651 1971 8/3/98 40
Hilton Hotel Durham, NC - 1,586 15,577 - 1,022 1,586 16,599 559 1987 8/3/98 40
Wyndham Garden Hotel
Marietta, GA - 1,900 17,077 - 83 1,900 17,160 597 1985 8/3/98 40
Westin Resort Key Largo, FL - 3,167 29,190 - 260 3,167 29,450 1,038 1985 8/3/98 40
Doubletree Guest Suites
Atlanta, GA 8,915 2,236 18,514 - 3,209 2,236 21,723 744 1985 8/3/98 40
Radisson Hotel Arlington
Heights, IL - 1,540 12,645 - 2,093 1,540 14,738 457 1981 8/3/98 40
Holiday Inn Select Bucks
County, PA - 2,610 21,744 - 324 2,610 22,068 773 1987 8/3/98 40
Hilton Hotel Cocoa Beach, FL - 2,783 23,076 - 1,647 2,783 24,723 863 1986 8/3/98 40
Radisson Twin Towers
Orlando, FL - 9,555 73,486 - 4,578 9,555 78,064 2,633 1972 8/3/98 40
Crowne Plaza Phoenix, AZ - 1,852 15,957 - 3,448 1,852 19,405 654 1981 8/3/98 40
Hilton Airport Hotel Grand
Rapids, MI (1) 2,049 16,657 - 539 2,049 17,196 594 1979 8/3/98 40
Marriott West Loop Houston, TX (1) 2,943 23,934 - 2,603 2,943 26,537 861 1976 8/3/98 40
Courtyard by Marriott
Durham, NC - 1,406 11,001 - 47 1,406 11,048 391 1996 8/3/98 40
Courtyard by Marriott,
Marina Del Rey, CA (1) 3,450 24,534 - 346 3,450 24,880 872 1976 8/3/98 40
Courtyard by Marriott,
Century City, CA - 2,165 16,465 - 20 2,165 16,485 584 1986 8/3/98 40
Courtyard by Marriott,
Lake Buena Vista, FL - - 41,267 - 700 - 41,967 1,464 1972 8/3/98 40
Crowne Plaza, San Jose, CA (1) 2,130 23,404 - 1,500 2,130 24,904 869 1975 8/3/98 40
Doubletree Hotel
Westshore, Tampa, FL - 2,904 23,476 - 87 2,904 23,563 834 1972 8/3/98 40
Howard Johnson Resort Key
Largo, FL - 1,784 12,419 - 477 1,784 12,896 444 1971 8/3/98 40
Radisson Annapolis, MD - 1,711 13,671 - 104 1,711 13,775 486 1975 8/3/98 40
Holiday Inn Fort
Lauderdale, FL - 2,381 19,419 - 75 2,381 19,494 690 1969 8/3/98 40
Holiday Inn Express
Hanover, MD - 821 6,687 - 11 821 6,698 640 1988 8/3/98 -
Holiday Inn Madeira Beach, FL - 1,781 13,349 - 22 1,781 13,371 474 1972 8/3/98 40
Holiday Inn Chicago
O'Hare, IL 20,054 4,290 72,631 - 187 4,290 72,818 2,582 1975 8/3/98 40
Holiday Inn & Suites
Alexandria, VA - 1,769 14,064 - 52 1,769 14,116 499 1985 8/3/98 40
Hilton Clearwater, FL - - 69,285 - 559 - 69,844 2,457 1980 8/3/98 40
Radisson Rochester, NY - - 6,499 - 40 - 6,539 229 1971 8/3/98 40
Radisson Old Towne
Alexandria, VA - 2,241 17,796 - 39 2,241 17,835 632 1975 8/3/98 40
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Initial cost to Costs subsequent to
Company acquisition Gross amount at end of year
----------------------------------------------------------------
Building Building and Building and Accum-
and Improve- Improve- ulated Year of
Encum- Improve- ments ments Deprecia- Construc- Date
Description brances Land ments Land Land tion tion Acquired Life
-------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ramada Inn Clearwater, FL - 1,270 13,453 - 89 1,270 13,542 1,602 1969 8/3/98 -
Richmond Hotel and
Conference Center - 245 3,380 - 20 245 3,400 712 1975 8/3/98 -
Crowne Plaza Las Vegas, NV - 3,006 24,011 - 15 3,006 24,026 855 1989 8/3/98 40
Crowne Plaza Portland, OR 5,064 2,950 23,254 - 55 2,950 23,309 828 1988 8/3/98 40
Four Points Hotel, Mt.
Arlington, NJ 4,724 6,553 6,058 - 39 6,553 6,097 215 1984 8/3/98 40
Ramada Inn Mahwah, NJ - 1,117 8,994 - 120 1,117 9,114 321 1972 8/3/98 40
Ramada Plaza Meriden, CT - 1,247 10,057 - 12 1,247 10,069 357 1985 8/3/98 40
Ramada Plaza Shelton, CT 4,703 2,040 16,235 - 20 2,040 16,255 575 1989 8/3/98 40
Sheraton Crossroads
Mahwah, NJ - 3,258 26,185 - 160 3,258 26,345 932 1986 8/3/98 40
St. Tropez Suites, Las
Vegas, NV - 3,027 24,429 - 10 3,027 24,439 869 1986 8/3/98 40
Doral Forrestal,
Princeton, NJ - 9,578 57,555 - 7,044 9,578 64,599 2,088 1981 8/11/98 40
South Seas Plantation,
Captiva, FL - 3,084 83,573 - 5,024 3,084 88,597 2,607 1975 10/1/98 40
Radisson Suites Beach
Resort, Marco Island, FL - 7,120 35,300 - 1,378 7,120 36,678 1,098 1983 10/1/98 40
Best Western Sanibel
Island, FL - 3,868 3,984 - (25) 3,868 3,959 124 1967 10/1/98 40
The Dunes Golf & Tennis
Club, Sanibel Island, FL - 7,705 3,043 - 81 7,705 3,124 94 1964 10/1/98 40
Sanibel Inn, Sanibel
Island, FL - 8,482 12,045 - (59) 8,482 11,986 373 1964 10/1/98 40
Seaside Inn, Sanibel
Island, FL - 1,702 6,416 - 16 1,702 6,432 200 1964 10/1/98 40
Song of the Sea, Sanibel
Island, FL - 339 3,223 - 62 339 3,285 101 1964 10/1/98 40
Sundial Beach Resort,
Sanibel Island, FL - 320 12,009 - 699 320 12,708 375 1975 10/1/98 40
Holiday Inn, Madison, WI - 4,143 6,692 49 4,143 6,741 168 1965 1/11/99 40
------------------------------------------------------------------
$318,467 $2,202,982 $(107) $175,336 $318,360 $2,378,318 $115,234
==================================================================
</TABLE>
(1) These properties secure the New Secured Facility which, as of December 31,
1999, had an outstanding balance of $328,954.
The components of hotel property and equipment are as follows:
<TABLE>
<CAPTION>
Property and Accumulated
Equipment Depreciation
------------- ------------
<S> <C> <C>
Land $ 318,360 $ -
Building and Improvements 2,378,318 115,234
Furniture and equipment 320,787 67,196
Construction in progress 101,258 -
------------- ------------
Total property and equipment $ 3,118,723 $ 182,430
============= ============
</TABLE>
A reconciliation of the Company's investment in hotel property
and equipment and related accumulated depreciation is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Hotel property and equipment
Balance, beginning of period $ 2,957,543 $ 947,597 $ 342,366
Acquisitions during period 12,081 1,865,142 550,913
Improvements and construction
-in-progress 160,294 144,804 54,318
Cost of real estate sold (11,195) - -
------------- ------------ -----------
Balance, end of period 3,118,723 2,957,543 947,597
------------- ------------ -----------
Accumulated depreciation
Balance, beginning of period 83,797 26,858 8,432
Additions-depreciation expense 99,297 56,939 18,426
Cost of real estate sold (664) - -
------------- ------------ -----------
Balance, end of period 182,430 83,797 26,858
------------- ------------ -----------
Net hotel property and equipment, end of period $ 2,936,293 $ 2,873,746 $ 920,739
============= ============ ===========
</TABLE>
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 405 of Regulation S-K with respect to
Directors and Executive Officers of the Company is incorporated herein by
reference to the sections entitled "Management" and "Principal Stockholders" in
the Company's definitive proxy for its 2000 Annual Meeting of Stockholders (the
"2000 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
to the sections entitled "Executive Compensation," "Compensation of Directors"
and "Stock Option Grants" in the 2000 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
to the section entitled "Principal Stockholders" in the 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the section entitled "Certain Relationships and Related Transactions" in the
2000 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. Index to Financial Statements and Financial Statement Schedules
1. Financial Statements
The Financial Statements included in the Annual Report on Form 10-K are
listed in Item 8.
2. Financial Statement Schedules
The Financial Statement Schedules included in the Annual Report on Form 10-
K are listed in Item 8.
51
<PAGE>
3. Exhibits
All Exhibits listed below are filed with this Annual Report on Form 10-K
unless specifically stated to be incorporated by reference to other documents
previously filed with the Commission.
Exhibit
- -------
No. Description of Document
- -- -----------------------
3.1* Amended and Restated Articles of Incorporation of the Registrant
(Articles of Merger between American General Hospitality Corporation
and CapStar Hotel Company).
3.2* Amended and Restated By-laws of the Registrant.
4.1** Form of Share Certificate.
4.2 Specimen Subordinated Note.
4.3 Specimen Convertible Note (included in Exhibit 4.7).
4.4 Indenture, dated as of August 19, 1997, between CapStar Hotel Company
and IBJ Schroder Bank & Trust Company, as Trustee.
4.5 Second Supplemental Indenture, dated as of August 3, 1998, between
MeriStar Hospitality Corporation and IBJ Schroder Bank & Trust
Company, as Trustee.
4.6 Indenture, dated as of October 16, 1997, between CapStar Hotel Company
and First Trust, National Association, as Trustee, (the "Convertible
Notes Indenture").
4.7 Certificate dated October 16, 1997, pursuant to Section 3.1 of
Convertible Notes Indenture.
4.8 First Supplemental Indenture, dated as of August 3, 1998, between
MeriStar Hospitality Corporation and U.S. Bank Trust, National
Association, as Trustee.
4.9**** Indenture, dated as of March 18, 1999, between MeriStar Hospitality
Corporation and IBJ Whitehall Bank & Trust Company, as Trustee.
4.10**** Specimen Certificate of Outstanding Note (included in Exhibit 4.9 as
Exhibit A).
4.11**** Specimen Certificate of Exchange Note.
10.1*** Second Amended and Restated Agreement of Limited Partnership of
MeriStar Hospitality Operating Partnership, L.P. dated as of August 3,
1998.
10.2*** Second Amended and Restated Senior Secured Credit Agreement dated as
of August 3, 1998.
10.3*** Loan Agreement made as of August 3, 1998 between MeriStar Hospitality
Corporation and its affiliates and Secore Financial Corporation.
10.4* Form of MeriStar Incentive Plan.
10.5* Form of MeriStar Non-Employee Directors' Incentive Plan.
10.6* Form of Employment Agreement between MeriStar Hospitality Corporation
and Paul W. Whetsell.
10.7* Form of Employment Agreement between MeriStar Hospitality Corporation
and Steven D. Jorns.
10.8*** Form of Employment Agreement between MeriStar Hospitality Corporation
and Bruce G. Wiles.
10.9*** Form of Employment Agreement between MeriStar Hospitality Corporation
and John Emery.
10.10* Form of Exchange Rights Agreement, by and among MeriStar Hospitality
Corporation, MeriStar Hospitality Operating Partnership, L.P., and the
Persons set forth therein.
10.11* Operating Partnership, L.P., CMC Operating Company and CMC Operating
Partnership, L.P.
10.12* Form of Operating Lease
10.13 Loan Agreement, dated as of August 12, 1999, between MeriStar
Hospitality Operating Partnership, L.P. and Lehman Brothers Holdings
Inc. D/B/A Lehman Capital, a division of Lehman Brothers Holdings Inc.
12 Schedule Regarding the Computation of Ratios
21 Subsidiaries of the Company
23 Consent of KPMG LLP
24 Power of Attorney (see signature page)
27 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on Form
S-4 (File No. 333-49611), filed with the Securities and Exchange Commission
on April 7, as amended.
** Incorporated by reference to the Company's Registration Statement on Form
S-3 (File No. 333-66229), filed with the Securities and Exchange Commission
on October 28, as amended.
*** Incorporated by reference to the Company's Annual Report on Form 10-K (File
No. 001-11903), filed with the Securities and Exchange Commission on
March 2, 1999.
**** Incorporated by reference to the Company's Registration Statement on Form
S-4 (File No. 333-78163) filed with the Securities and Exchange Commission
on May 10, 1999.
B. Reports on Form 8-K
None.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, MeriStar Hospitality Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
MERISTAR HOSPITALITY CORPORATION
By: /s/ Paul W. Whetsell
--------------------------------------
Paul W. Whetsell
Chief Executive Officer and
Chairman of the Board
Dated: March 13, 2000
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul W. Whetsell, Bruce G. Wiles and John Emery,
such person's true and lawful attorneys-in-fact and agents, with full power of
substitution and revocation, for such person and in such person's name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this report filed pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, and to file the same
with all exhibits thereto, and the other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and things requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report and the foregoing Power of Attorney have been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Chief Executive Officer and Chairman of the Board March 13, 2000
/s/ Paul W. Whetsell of Directors (Principal Executive Officer)
_____________________________
Paul W. Whetsell
/s/ Steven D. Jorns Vice Chairman of the Board of Directors March 13, 2000
_____________________________
Steven D. Jorns
/s/ Bruce G. Wiles President and Director March 13, 2000
_____________________________
Bruce G. Wiles
Chief Financial Officer (Principal Financial and March 13, 2000
/s/ John Emery Accounting Officer)
_____________________________
John Emery
</TABLE>
53
<PAGE>
/s/ James F. Dannhauser
_____________________________ Director March 13, 2000
James F. Dannhauser
/s/ Daniel L. Doctoroff
_____________________________ Director March 13, 2000
Daniel L. Doctoroff
/s/ William S. Janes
_____________________________ Director March 13, 2000
William S. Janes
/s/ Mahmood Khimji
_____________________________ Director March 13, 2000
Mahmood Khimji
/s/ H. Cabot Lodge III
_____________________________ Director March 13, 2000
H. Cabot Lodge III
/s/ James R. Worms
_____________________________ Director March 13, 2000
James R. Worms
54
<PAGE>
Exhibit 4.2
(Face of Note)
____% [Series A] [Series B] Senior Subordinated Note due ____
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE UNITED STATES INTERNAL
REVENUE CODE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS % OF
ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS , [19 ][20 ], [AND] THE
YIELD TO MATURITY IS % [THE METHOD USED TO DETERMINE THE YIELD IS AND
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF
, [19 ][20 ] TO [19 ][20 ], IS % OF THE PRINCIPAL AMOUNT OF THIS
SECURITY].
No. $___________
CAPSTAR HOTEL COMPANY
promises to pay to _____________, or registered assigns, the
principal sum of __________________ Dollars on __________, ____.
Interest Payment Dates: ________ __ and ______ __
Record Dates: ________ __ and ______ __
Dated:
CAPSTAR HOTEL COMPANY
By: ____________________________
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the [Global] Notes
referred to in the within-
mentioned Indenture:
IBJ Schroder Bank & Trust Company,
as Trustee
By _____________________________
Authorized Signatory
1
<PAGE>
(Back of Note)
_____% [Series A] [Series B] Senior Subordinated Note due ____
of
CapStar Hotel Company
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY OR ANY
NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
2
<PAGE>
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. CapStar Hotel Company, a Delaware corporation (the
"COMPANY"), promises to pay interest on the principal amount of this _____%
[Series A] [Series B] Senior Subordinated Note due ____ (the "NOTE") at the rate
and in the manner specified below.
The Company shall pay interest on the principal amount of this Note in
cash at the rate per annum shown above and shall pay the Liquidated Damages, if
any, payable pursuant to Section 5 of the Registration Rights Agreement referred
to below. The Company shall pay interest and Liquidated Damages, if any,
semi-annually on each ________ __ and ______ __ commencing ________ __, 199_, or
if any such day is not a Business Day (as defined in the Indenture referred to
below), on the next succeeding Business Day (each an "INTEREST PAYMENT DATE").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months for the actual number of days elapsed. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of this Note. To
the extent lawful, the Company shall pay interest on overdue principal and
premium at the rate of 1% per annum in excess of the then applicable interest
rate on this Note; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the _________ and
_________ next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, if any, and
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders; provided that payment by wire transfer of immediately
available funds will be required with respect to principal and premium, if any,
and interest and Liquidated Damages, if any, on all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank & Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company, any Guarantor or any other of its Subsidiaries may
act in any such capacity.
3
<PAGE>
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of August 19, 1997 (the "INDENTURE") between the Company, as issuer, and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The terms of the Indenture shall govern any inconsistencies between
the Indenture and the Notes.
5. OPTIONAL REDEMPTION. On or after ______ __, ____, the Company may
redeem all or any portion of the Notes, at any time upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on ______ __ of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2002............................................................... _______%
2003............................................................... _______%
2004............................................................... _______%
2005 and thereafter................................................ _______%
Notwithstanding the foregoing, prior to ______ __, 2000, the Company
may redeem, on any one or more occasions, with the net cash proceeds of one or
more public offerings of its common equity (a "PUBLIC EQUITY OFFERING") (within
60 days of the consummation of any such Public Equity Offering), up to 35% of
the aggregate principal amount of the Notes originally issued at a redemption
price equal to _______% of the principal amount of such Notes plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
PROVIDED, HOWEVER, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
[In addition, the Company, at its option, at any time prior to ______
____, may redeem the Notes, in whole or in part (if in part, by lot or such
other method as the Trustee shall deem fair or appropriate) at the Make-Whole
Price, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase.]
6. OFFERS TO PURCHASE. Subject to the Company's obligation to make an
offer to purchase Notes in connection with Asset Sales and a Change of Control
(as described in the Indenture), the Company has no mandatory redemption or
sinking fund obligations with respect to the Notes. Notice of any such offer to
purchase will be given as provided in the Indenture. Holders of Notes that are
the subject of an offer to purchase may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below and taking certain other actions, all as set forth in the Indenture.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
4
<PAGE>
8. SUBORDINATION. The Notes and the Subsidiary Guarantees, if any,
are subordinated to Senior Debt, as defined in the Indenture. To the extent
provided in the Indenture, Senior Debt must be paid before the Notes and the
Subsidiary Guarantees may be paid. The Company agrees, and each Holder by
accepting a Note and any Subsidiary Guarantee agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give them
effect and appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of $1,000
of principal amount. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Company shall not be required to exchange or register the
Notes during a period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section 3.2 of the Indenture
and ending at the close of business on the day of selection, or to exchange or
register any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part, or to exchange or
register a Note between a record date and the next succeeding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing Default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding. The Change of
Control and Asset Sale purchase features of the Notes may not be amended or
waived without the consent of at least 66 2/3% in principal amount of the Notes
then outstanding. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to comply with Section 5.1, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of the Notes under the Indenture or any
Guarantor's Obligations under its Subsidiary Guarantee in the case of a merger,
consolidation or sale of assets involving the Company or such Guarantor, as
applicable, pursuant to Article 5 or Article 11 of the Indenture, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes (including providing for Subsidiary Guarantees and any supplemental
indenture required pursuant to Section 4.15 of the Indenture) or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA and to release a Guarantor in
accordance with the Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Liquidated Damages, if any, on
the Notes (whether or not such payment shall be prohibited by the subordination
provisions of the Indenture); (ii) default in payment when due of the principal
of or premium, if any, on the Notes at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant to
a Change of Control Offer or an Assets Sale Offer) (whether or not such payment
shall be prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company or any Restricted Subsidiary to comply with Section 5.01
of the Indenture; (iv) failure by the Company or any Guarantor for 60 days in
the performance of any other covenant, warranty or agreement in the Indenture or
the Notes after
5
<PAGE>
written notice shall have been given to the Company by the Trustee or to the
Company and the Trustee from Holders of at least 25% in principal amount of the
Notes then outstanding; (v) the failure to pay at final stated maturity (giving
effect to any applicable grace periods and any extensions thereof) the principal
amount of Non-Recourse Indebtedness of the Company or any of its Restricted
Subsidiaries with an aggregate principal amount in excess of the lesser of (A)
10% of the total assets of the Company and its Restricted Subsidiaries measured
as of the end of the Company's most recent fiscal quarter for which internal
financial statements are available immediately prior to the date on which such
default occurred, determined on a pro forma basis and (B) $50 million, and such
failure continues for a period of 10 days or more, or the acceleration of the
final stated maturity of any such Non-Recourse Indebtedness (which acceleration
is not rescinded, annulled or otherwise cured within 10 days of receipt by the
Company or such Restricted Subsidiary of notice of such acceleration); (vi) the
failure to pay at final stated maturity (giving effect to any applicable grace
periods and any extensions thereof) the principal amount of any Indebtedness
(other than Non-Recourse Indebtedness) of the Company or any Restricted
Subsidiary of the Company and such failure continues for a period of 10 days or
more, or the acceleration of the final stated maturity of any such Indebtedness
(which acceleration is not rescinded, annulled or otherwise cured within 10 days
of receipt by the Company or such Restricted Subsidiary of notice of any such
acceleration) if the aggregate principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness, in default for failure
to pay principal at final maturity or which has been accelerated, in each case
with respect to which the 10-day period described above has passed, aggregates
$10.0 million or more at any time; (vii) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments rendered against them (other than
judgment liens without recourse to any assets or property of the Company or any
of its Restricted Subsidiaries other than assets or property securing
Non-Recourse Indebtedness) aggregating in excess of $10.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days (other than
any judgments as to which a reputable insurance company has accepted full
liability); (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in a judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or any Guarantor
(or its successors or assigns), or any Person acting on behalf of such Guarantor
(or its successors or assigns), shall deny or disaffirm its obligations or shall
fail to comply with any obligations under its Subsidiary Guarantee; and (ix)
certain events of bankruptcy or insolvency with respect to the Company, any
Guarantor or any of the Company's Subsidiaries that would constitute a
Significant Subsidiary or any group of the Company's Subsidiaries that, taken
together, would constitute a Significant Subsidiary. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company, any of its Subsidiary that would constitute a
Significant Subsidiary or any group of its Subsidiaries that, taken together,
would constitute a Significant Subsidiary or any Guarantor, all outstanding
Notes will become due and payable without further action or notice. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any acceleration with respect to the Notes and its
consequences. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power.
13. GUARANTEES OF NOTES. Payment of principal, premium, if any, and
interest and Liquidated Damages, if any, (including interest on overdue
principal and overdue interest, if lawful) on the Notes will be unconditionally
guaranteed by the Guarantors, if any, pursuant to, and subject to the terms of,
Article 11 of the Indenture.
6
<PAGE>
14. SECURITY. The Notes will be unsecured obligations of the Company,
ranking subordinate in right of payment to all Senior Debt of the Company.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder shall have any liability for any obligations of the
Company or any Guarantor under the Notes, any Subsidiary Guarantee or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver and release may not be
effective to waive or release liabilities under the federal securities laws.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
19. [SERIES A NOTES] REGISTRATION RIGHTS. Pursuant to the
Registration Rights Agreement (as defined in the Indenture), and subject to
certain terms and conditions stated therein, the Company will be obligated to
consummate an Exchange Offer pursuant to which the Holders of the Notes shall
have the right to exchange this Note for Exchange Notes, which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respect to the Note. In certain circumstances, and
subject to certain terms and conditions, Holders of the Notes shall have the
right to receive liquidated damages if the Company shall have failed to fulfill
its obligations under the Registration Rights Agreement.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, D.C. 20007
Attention: John Emery,
Chief Financial Officer
Telecopier No.: (202) 965-4445
7
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or
(we) assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's Social Security or tax I.D. No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: _____________________________
Your Signature: ___________________________
(Sign exactly as your name appears on the face of this
Note)
Signature Guarantee:* ______________________
- --------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No:____________
Signature Guarantee:*/____________
- ------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
9
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount
decrease in increase in of this Global Signature of
Principal Principal Note following authorized officer
Amount of this Amount of this such decrease of Trustee
Date of Exchange Global Note Global Note (or increase) or Custodian
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
10
<PAGE>
EXHIBIT 4.4
CAPSTAR HOTEL COMPANY
$200,000,000
SERIES A AND SERIES B
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
Dated as of August 19, 1997
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1
SECTION 1.1 DEFINITIONS 1
SECTION 1.2 OTHER DEFINITIONS 14
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT 14
SECTION 1.4 RULES OF CONSTRUCTION 15
ARTICLE 2 THE NOTES 15
SECTION 2.1 FORM AND DATING 15
SECTION 2.2 EXECUTION AND AUTHENTICATION 16
SECTION 2.3 REGISTRAR AND PAYING AGENT 16
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST 17
SECTION 2.5 HOLDERS LISTS 17
SECTION 2.6 TRANSFER AND EXCHANGE 17
SECTION 2.7 REPLACEMENT NOTES 18
SECTION 2.8 OUTSTANDING NOTES 18
SECTION 2.9 TREASURY NOTES 19
SECTION 2.10 TEMPORARY NOTES 19
SECTION 2.11 CANCELLATION 19
SECTION 2.12 DEFAULTED INTEREST 19
SECTION 2.13 RECORD DATE 20
SECTION 2.14 CUSIP NUMBER 20
SECTION 2.15 RESTRICTIVE LEGENDS 20
SECTION 2.16 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY 21
SECTION 2.17 SPECIAL TRANSFER PROVISIONS 22
ARTICLE 3 REDEMPTIONS AND OFFERS TO PURCHASE 24
SECTION 3.1 NOTICES TO TRUSTEE 24
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED OR PURCHASED 24
SECTION 3.3 NOTICE OF REDEMPTION 25
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION 25
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE 26
SECTION 3.6 NOTES REDEEMED IN PART 26
SECTION 3.7 OPTIONAL REDEMPTION 26
SECTION 3.8 MANDATORY REDEMPTION 27
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS 27
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE 4 COVENANTS 29
SECTION 4.1 PAYMENT OF NOTES 29
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY 29
SECTION 4.3 SEC REPORTS 30
SECTION 4.4 COMPLIANCE CERTIFICATE 30
SECTION 4.5 TAXES 31
SECTION 4.6 STAY, EXTENSION AND USURY LAWS 31
SECTION 4.7 LIMITATION ON RESTRICTED PAYMENTS 31
SECTION 4.8 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES 34
SECTION 4.9 LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
CERTAIN CAPITAL STOCK 34
SECTION 4.10 LIMITATION ON SALE OF ASSETS 36
SECTION 4.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES 37
SECTION 4.12 LIMITATION ON LIENS 38
SECTION 4.13 CORPORATE EXISTENCE 38
SECTION 4.14 CHANGE OF CONTROL 38
SECTION 4.15 SUBSIDIARY GUARANTEES 39
SECTION 4.16 LINE OF BUSINESS 40
SECTION 4.17 PAYMENTS FOR CONSENT 40
SECTION 4.18 NO SENIOR SUBORDINATED DEBT 40
ARTICLE 5 SUCCESSORS 40
SECTION 5.1 WHEN THE COMPANY MAY MERGE, ETC 40
SECTION 5.2 SUCCESSOR SUBSTITUTED 41
ARTICLE 6 DEFAULTS AND REMEDIES 41
SECTION 6.1 EVENTS OF DEFAULT 41
SECTION 6.2 ACCELERATION 43
SECTION 6.3 OTHER REMEDIES 44
SECTION 6.4 WAIVER OF PAST DEFAULTS 44
SECTION 6.5 CONTROL BY MAJORITY 44
SECTION 6.6 LIMITATION ON SUITS 44
SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT 45
SECTION 6.8 COLLECTION SUIT BY TRUSTEE 45
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM 45
SECTION 6.10 PRIORITIES 46
SECTION 6.11 UNDERTAKING FOR COSTS 46
ARTICLE 7 TRUSTEE 46
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 7.1 DUTIES OF TRUSTEE 46
SECTION 7.2 RIGHTS OF TRUSTEE 47
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE 48
SECTION 7.4 TRUSTEE'S DISCLAIMER 48
SECTION 7.5 NOTICE OF DEFAULTS 48
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS 49
SECTION 7.7 COMPENSATION AND INDEMNITY 49
SECTION 7.8 REPLACEMENT OF TRUSTEE 50
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC 51
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION 51
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY 51
ARTICLE 8 DISCHARGE OF INDENTURE 51
SECTION 8.1 DEFEASANCE AND DISCHARGE OF THIS INDENTURE AND THE NOTES 51
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE 52
SECTION 8.3 COVENANT DEFEASANCE 53
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE 53
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS 55
SECTION 8.6 REPAYMENT TO THE COMPANY 55
SECTION 8.7 REINSTATEMENT 56
ARTICLE 9 AMENDMENTS 56
SECTION 9.1 WITHOUT CONSENT OF HOLDERS 56
SECTION 9.2 WITH CONSENT OF HOLDERS 57
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT 58
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS 58
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES 58
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC 58
ARTICLE 10 SUBORDINATION 59
SECTION 10.1 AGREEMENT TO SUBORDINATE 59
SECTION 10.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY 59
SECTION 10.3 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES 60
SECTION 10.4 [THIS SECTION INTENTIONALLY OMITTED] 60
SECTION 10.5 ACCELERATION OF NOTES 61
SECTION 10.6 WHEN DISTRIBUTION MUST BE PAID OVER 61
SECTION 10.7 NOTICE BY THE COMPANY 61
SECTION 10.8 SUBROGATION 61
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
SECTION 10.9 RELATIVE RIGHTS 61
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY 62
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE 62
SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT 62
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION 63
SECTION 10.14 AMENDMENTS 63
ARTICLE 11 SUBSIDIARY GUARANTEES 63
SECTION 11.1 SUBSIDIARY GUARANTEES 63
SECTION 11.2 WHEN A GUARANTOR MAY MERGE, ETC 64
SECTION 11.3 LIMITATION OF GUARANTOR'S LIABILITY 65
SECTION 11.4 RELEASE OF A GUARANTOR 65
ARTICLE 12 MISCELLANEOUS 66
SECTION 12.1 TRUST INDENTURE ACT CONTROLS 66
SECTION 12.2 NOTICES 66
SECTION 12.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS 67
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT 67
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION 67
SECTION 12.6 RULES BY TRUSTEE AND AGENTS 68
SECTION 12.7 LEGAL HOLIDAYS 68
SECTION 12.8 RECOURSE AGAINST OTHERS 68
SECTION 12.9 DUPLICATE ORIGINALS 68
SECTION 12.10 GOVERNING LAW 68
SECTION 12.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS 69
SECTION 12.12 SUCCESSORS 69
SECTION 12.13 SEVERABILITY 69
SECTION 12.14 COUNTERPART ORIGINALS 69
SECTION 12.15 TABLE OF CONTENTS, HEADINGS, ETC 69
</TABLE>
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Supplemental Indenture
Exhibit C Form of Certificate to be Delivered in Connection with
Transfers to Non- QIB accredited Investors
Exhibit D From of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S
-iv-
<PAGE>
1
INDENTURE dated as of August 19, 1997 between CapStar Hotel Company, a
Delaware corporation (the "Company"), and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee").
Each of the Company and the Trustee agrees as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 8 3/4%
Series A Senior Subordinated Notes due 2007 of the Company (the "Series A
Notes") and the 8 3/4% Series B Senior Subordinated Notes due 2007 of the
Company (the "Series B Notes," and, together with the Series A Notes, the
"Notes").
I. ARTICLE
DEFINITIONS AND INCORPORATION
BY REFERENCE
A. SECTION DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-Registrar or agent for
service of notices and demands.
"Asset Sale" means (i) the sale, lease (other than operating leases in
respect of facilities which are ancillary to the operation of the Company's or a
Restricted Subsidiary's Hospitality Related Business properties or assets),
conveyance or other disposition of any property or assets of the Company or any
Restricted Subsidiary (including by way of a sale and leaseback transaction),
(ii) the issuance or sale of Equity Interests of any of the Company's Restricted
Subsidiaries or (iii) any Event of Loss, other than, with respect to clauses
(i), (ii) and (iii) above, the following: (1) the sale or disposition of
personal property held for sale in the ordinary course of business, (2) the sale
or disposal of damaged, worn out or other obsolete property in the ordinary
course of business as long as such property is no longer necessary for the
proper conduct of the business of the Company or such Restricted Subsidiary, as
applicable, (3) the transfer of assets by the Company to a Restricted Subsidiary
of the Company or by a Restricted Subsidiary of the Company to the Company or to
another Restricted Subsidiary of the Company, (4) (A) the exchange of one or
more lodging facilities and related assets held by the Company or a Restricted
Subsidiary of the Company for one or more lodging facilities and related assets
of any person or entity, provided, that if any other assets are received by the
Company or such Restricted Subsidiary in such exchange, such other consideration
is in cash or Cash Equivalents; provided, further, that such cash or Cash
Equivalent consideration shall be deemed to be cash proceeds of an Asset Sale
for the purposes of calculating "Net Proceeds" and applying Net Proceeds, if
any, as described in Section 4.10 hereof, or (B) the issuance of OP
<PAGE>
2
Units or Preferred OP Units as full or partial consideration for the acquisition
of lodging facilities and related assets, provided, that the Board of Directors
of the Company has determined that the terms of any exchange or acquisition are
fair and reasonable and that the fair market value of the assets received by the
Company, as set forth in an opinion of a Qualified Appraiser, are equal to or
greater than the fair market value of the assets exchanged, sold or issued by
the Company or a Restricted Subsidiary of the Company, (5) any Restricted
Payment, permitted under Section 4.7 hereof, (6) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
compliance with the provisions of Section 4.14 and Article V hereof, (7) the
conversion of or foreclosure or any mortgage or note, provided that the Company
or a Restricted Subsidiary receives the real property underlying any such
mortgage or note or (8) any transaction or series of related transactions that
would otherwise be an Asset Sale where the fair market value of the assets,
sold, leased, conveyed or otherwise disposed of was less than $5.0 million or an
Event of Loss or related series of Events of Loss pursuant to which the
aggregate value of property or assets involved in such Event of Loss or Events
of Loss is less than $5.0 million.
"Assumed Indebtedness" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person and (ii)
Indebtedness encumbering any asset acquired by such specified Person, in each
case excluding Indebtedness incurred in connection with, or in contemplation of
such other Person merging with or into or becoming a Subsidiary of such
specified Person.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York or the city in which the
Corporate Trust Office is located are authorized or obliged by law or executive
order to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participation, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers
acceptances with maturities not exceeding six months from the date of
acquisition and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper or commercial paper master notes having a rating of at
least P-2 or the equivalent thereof by Moody's Investors Service, Inc. or at
least A-2 or the equivalent thereof by Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition, (v) money market
mutual funds that provide daily purchase and redemption features, and (vi)
corporate debt
<PAGE>
3
with maturities of not greater than six months and with a rating of at least A
or the equivalent thereof by Standard & Poor's Corporation and a rating of at
least A2 or the equivalent thereof by Moody's Investors Service, Inc.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the Company's assets to any person or group (as such term
is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the acquisition
by any person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) of a direct or indirect interest in more than 50% of the ownership of the
Company or the voting power of the voting stock of the Company by way of
purchase, merger or consolidation or otherwise (other than a creation of a
holding company that does not involve a change in the beneficial ownership of
the Company as a result of such transaction), (iv) the merger or consolidation
of the Company with or into another corporation or the merger of another
corporation into the Company with the effect that immediately after such
transaction the stockholders of the Company immediately prior to such
transaction hold less than 50% of the total voting power of all securities
generally entitled to vote in the election of directors, managers, or trustees
of the Person surviving such merger or consolidation or (v) the first day on
which a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Company" means CapStar Hotel Company, a Delaware corporation, until a
successor replaces it in accordance with the applicable provisions of this
Indenture, and thereafter, means such successor.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus: (a) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale, to the extent such losses were deducted in computing Consolidated
Net Income, plus (b) provisions for taxes based on income or profits of such
Person for such period, to the extent such provision for taxes was included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense of
such Person for such period to the extent such expense was deducted in computing
Consolidated Net Income, plus (d) Consolidated Depreciation and Amortization
Expense of such Person for such period, to the extent deducted in computing
Consolidated Net Income less (e) noncash items increasing such Consolidated Net
Income for such period in each case, on a consolidated basis for such Person and
its Restricted Subsidiaries and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, the depreciation and amortization of and the interest expense of, a
Restricted Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to such Person by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders. Any
calculation of the Consolidated Cash Flow of an individual hotel property shall
be calculated in a manner consistent with the foregoing.
"Consolidated Current Liabilities" as of the date of determination means
the aggregate amount of liabilities of the Company and its consolidated
Subsidiaries which may properly be classified as current liabilities (including
taxes payable as accrued), on a consolidated basis, after eliminating (i) all
intercompany items between the Company and any
<PAGE>
4
Subsidiary and (ii) all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP consistently applied.
"Consolidated Depreciation and Amortization Expense" means, with respect to
any Person for any period, the total amount of depreciation and amortization
expense (including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and the
total amount of non-cash charges (other than non-cash charges that represent an
accrual or reserve for cash charges in future periods or which involved a cash
expenditure in a prior period) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis as determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (a) interest expense, whether paid or
accrued, to the extent such expense was deducted in computing Consolidated Net
Income (including amortization of original issue discount, non-cash interest
payments, the interest component of Capital Lease Obligations, and net payments
(if any) pursuant to Hedging Obligations, but excluding amortization of deferred
financing fees), (b) commissions, discounts and other fees and charges paid or
accrued with respect to letters of credit and bankers acceptance financing and
(c) interest for which such Person or its Restricted Subsidiaries is liable,
whether or not actually paid, pursuant to Indebtedness or under a Guarantee of
Indebtedness of any other Person, in each case, calculated for such Person and
its Restricted Subsidiaries for such period on a consolidated basis as
determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
provided, that the following shall be excluded: (i) the Net Income of any Person
that is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be excluded, whether or not distributed to the
Company or one of its Restricted Subsidiaries, (ii) the Net Income of any Person
that is a Restricted Subsidiary and that is restricted from declaring or paying
dividends or other distributions, directly or indirectly, by operation of the
terms of its charter, any applicable agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation or otherwise shall be included
only to the extent of the amount of dividends or distributions paid to the
referent Person or a Restricted Subsidiary, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded and (iv) the cumulative effect of changes
in accounting principles shall be excluded.
"Consolidated Net Tangible Assets" as of any date of determination, means
the total amount of assets (less accumulated depreciation and amortization,
allowances for doubtful receivables, other applicable reserves and other similar
items properly deducted in determining net assets) which would appear on a
consolidated balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of: (i) minority
interests in consolidated Subsidiaries held by Persons other than the Company or
a Subsidiary; (ii) excess of cost over fair value of assets of businesses
acquired, as determined in good faith by the Board of Directors; (iii) any
revaluation or other write-up in book value of assets subsequent to the Issuance
Date as a result of a change in the method of valuation in accordance with GAAP
consistently applied; (iv) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental expenses and
other intangible items; (v) treasury stock; and (vi) cash set apart and held in
a sinking or other analogous fund established for the purpose of
<PAGE>
5
redemption or other retirement of Capital Stock to the extent such obligation is
not reflected in Consolidated Current Liabilities.
"Consolidated Net Worth" means, with respect to any Person, as of any date
of determination, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such date
plus (ii) the respective amount reported on such Person's balance sheet as of
such date with respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such Preferred Stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issuance Date in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all Investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments) and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issuance Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of at least a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office" shall be at the address of the Trustee specified
in Section 12.2 or such other address as the Trustee may give notice to the
Company.
"Credit Agreement" means the senior credit facility dated June 30, 1997,
entered into between and among the Company and the lenders party thereto,
providing for borrowings and letters of credit, including any related notes,
security documentation, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, modified,
supplemented, restructured, renewed, restated, refunded, replaced or refinanced
or extended, in each case on a senior basis, from time to time on one or more
occasions.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event if Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Stock" means any Capital Stock (other than OP Units and
Preferred OP Units) which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the first anniversary of the date on which the
Notes mature.
<PAGE>
6
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for Capital Stock).
"Event of Loss" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (A) any loss, destruction
or damage of such property or asset or (B) any actual condemnation, seizure or
taking by the power of eminent domain or otherwise of such property or asset, or
confiscation of such property or asset or the requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Issuance Date (after giving effect
to the use of proceeds of the Notes issued hereunder), excluding, for this
purpose, amounts outstanding under the Credit Agreement as in effect on the
Issuance Date.
"Existing Preferred OP Units" means Preferred OP Units issued and
outstanding on the date of this Indenture.
"Final Memorandum" means the Company's Offering Memorandum dated August 14,
1997 pertaining to the offer and sale of $150,000,000 in aggregate principal
amount of Notes, pursuant to applicable exemptions from registration under the
Securities Act.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings that provide
working capital in the ordinary course of business) or issues or redeems
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with GAAP)
that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers, consolidations and dispositions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be calculated on a pro forma basis assuming that all such
acquisitions, dispositions, discontinued operations, mergers, consolidations
(and the reduction of any associated fixed charge obligations resulting
therefrom) had occurred on the first day of the four-quarter reference period.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (a) Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income and (b) the product of
(i) all cash dividend or distribution payments on any series of Preferred Stock
of such Person or its Restricted Subsidiaries (other than Preferred Stock owned
by such Person or its Restricted Subsidiaries), times (ii) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis
<PAGE>
7
and in accordance with GAAP; provided, however, that if the cash dividend on
such Preferred Stock is deductible for federal tax purposes, then the fraction
shall be equal to one.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States of America is
pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) or otherwise
incurring, assuming or becoming liable for the payment of any principal, premium
or interest, direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness or other obligation (including agreements to keep-
well and to purchase assets, goods, securities or services).
"Guarantor" means a Restricted Subsidiary that become a guarantor of the
Notes pursuant to the terms of this Indenture, and its successor, if any.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Hospitality-Related Business" means the lodging business and other
businesses necessary for, incident to, in support of, connected with,
complementary to or arising out of the lodging business, including, without
limitation, (i) developing, managing, operating, improving or acquiring lodging
facilities, restaurants and other food-service facilities and convention or
meeting facilities, and marketing services related thereto, (ii) acquiring,
developing, operating, managing or improving any real estate taken in
foreclosure (or similar settlement) by the Company or any of its Restricted
Subsidiaries, or any real estate ancillary or connected to any lodging owned,
managed or operated by the Company or any of its Restricted Subsidiaries, (iii)
owning and managing mortgages in, or other Indebtedness secured by Liens on
lodging and real estate related or ancillary to lodging or (iv) other related
activities thereto.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and also includes, to the extent not otherwise included,
the Guarantee of any Indebtedness of such Person or any other Person.
<PAGE>
8
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"Issuance Date" means the date of this Indenture.
"Lien" means, with respect to any asset, or income or profits
therefrom, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liquidated Damages" has the meaning assigned to such term in the
Registration Rights Agreements.
"Make-Whole Amount" with respect to a Note means an amount equal to
the excess, if any, of (i) the present value of the remaining interest, premium
and principal payments due on such Note as if such Note were redeemed on August
15, 2002, computed using a discount rate equal to the Treasury Rate plus 62.5
basis points, over (ii) the outstanding principal amount of such Note. "Treasury
Rate" is defined as the yield to maturity at the time of the computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15(519),
which has become publicly available at least two business days prior to the date
of the redemption notice or, if such Statistical Release is no longer published,
any publicly available source of similar market date) most nearly equal to the
then remaining maturity of the Notes assuming redemption of the Notes on August
15, 2002; provided, however, that if the Make-Whole Average Life of such Note is
not equal to the constant maturity of a United States Treasury security for
which such yields are given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Make-Whole Average Life of such Notes is less than one
year, the weekly average yield on actually traded United State Treasury
securities adjusted to a constant maturity of one year shall be used. "Make-
Whole Average Life" means the number of years (calculated to the nearest one-
twelfth) between the date of redemption and August 15, 2002.
"Make-Whole Price" with respect to a Note means the greater of (1) the
sum of the outstanding principal amount and the Make-Whole Amount of such Note,
and (ii) the redemption price of such Note on August 15, 2002, determined
pursuant to the first paragraph of Section 3.7 hereof (104.375% of the principal
amount).
<PAGE>
9
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale, and excluding any
extraordinary gain (but not loss), together with any related provision for taxes
on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"Non-Recourse Indebtedness" means Indebtedness (a) as to which neither the
Company nor any of its Restricted Subsidiaries (i) provides credit support
(other than in the form of a Lien on an asset serving as security for Non-
Recourse Indebtedness) pursuant to any undertaking, agreement or instrument that
would constitute Indebtedness, (ii) is directly or indirectly liable (other than
in the form of a Lien on an asset serving as security for Non-Recourse
Indebtedness) or (iii) constitutes the lender and (b) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Notes" means the Notes issued under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers" means the Chairman of the Board, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, Controller, Secretary, any Assistant Secretary or any Vice President
of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors, the President, the Chief Operating Officer, or a Vice
President and by the Chief Financial officer, the Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of the
Company, as applicable, except with respect to certificates required to be
furnished by the Company to the Trustee pursuant to Section 4.4 hereof, in which
event "Officers' Certificate" means a certificate signed by the principal
executive officer or principal financial officer.
"OP Units" means limited partnership interests in CapStar Management
Company, L.P., CapStar Management Company II, L.P. or any successor operating
partnership that require the issuer thereof to pay dividends or distributions
which are tied to dividends paid on the Company's common stock and which by
their terms may be converted into, or exercised or redeemed for, cash or the
Company's common stock.
<PAGE>
10
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of this
Indenture.
"Permitted Investments" means any (a) Investments in the Company, (b)
Investments in any Restricted Subsidiary, (c) Investments in Cash Equivalents,
(d) Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company, (e) Investments in Unrestricted Subsidiaries or Permitted Joint
Ventures, provided that such Investments are in entities solely or principally
engaged in Hospitality-Related Businesses and that the aggregate of such
Investments does not exceed the greater of (i) $25.0 million or (ii) 5% of
Consolidated Net Tangible Assets and (f) Investments in Unrestricted
Subsidiaries formed to acquire the Radisson Plaza, Lexington, Kentucky, the
Embassy Suites Center City, Philadelphia and the Doubletree Hotel, Austin, in an
aggregate amount not to exceed $50.0 million.
"Permitted Joint Venture" means any corporation, partnership, limited
liability company or partnership or other similar entity formed to hold lodging
properties for which the Company holds a management contract related thereto in
which the Company owns less than a 50.1% interest.
"Permitted Junior Securities" means Equity Interest in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to
Article 10 of this Indenture.
"Permitted Refinancing" means Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, to the extent (a) the principal amount
of Refinancing Indebtedness or the liquidation preference amount of Refinancing
Disqualified Stock, as the case may be, does not exceed the principal amount of
Indebtedness or the liquidation preference amount of Disqualified Stock, as the
case may be, so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums and reasonable expenses incurred in connection
therewith); (b) such Refinancing Indebtedness or Refinancing Disqualified Stock,
as the case may be, is scheduled to mature or is redeemable at the option of the
holder, as the case may be, no earlier than the Indebtedness or Disqualified
Stock, as the case may be, being refinanced; (c) in the case of Refinancing
Indebtedness, the Refinancing Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (d) in the case of Refinancing Disqualified Stock, the Disqualified
Stock has a Weighted Average Life to Mandatory Redemption equal to or greater
than the Weighted Average Life to Mandatory Redemption of the Disqualified Stock
being extended, refinanced, renewed, replaced, defeased or refunded; (e) if the
Indebtedness or the Disqualified Stock, as the case may be, being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated or junior in
right of payment to the Notes, the Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, is subordinated or junior in right of
payment to the Notes on terms at least as favorable to the holders of Notes as
those contained in the documentation governing the Indebtedness or the
Disqualified Stock, as the case may be, being extended, refinanced, renewed,
replaced, defeased or refunded and (f) such Refinancing Indebtedness or
Refinancing Disqualified Stock is incurred or issued either by the Company or by
a Restricted Subsidiary who is the obligor on the Indebtedness or Disqualified
Stock being extended, refinanced, renewed, replaced, defeased or refunded.
<PAGE>
11
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred OP Units" means limited partnership interests in CapStar
Management Company, L.P., CapStar Management Company II, L.P. or any successor
operating partnership that require the issuer thereof to pay regularly scheduled
fixed distributions thereon, which are not related to dividends on the Company's
common stock, and which by their terms may be converted into, or exercised or
redeemed for, cash or the Company's common stock.
"Preferred Stock" means (i) any Equity Interest with preferential right in
the payment of dividends or distributions or upon liquidation, and (ii) any
Disqualified Stock.
"Refinancing Disqualified Stock" means Disqualified Stock issued in
exchange for, or the proceeds of which are used, to extend, refinance, renew,
replace, defease or refund Disqualified Stock or Indebtedness permitted to be
issued pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.9 hereof or Indebtedness referred to in clauses (iii),
(v), (vii), (ix) and (x) of the second paragraph of Section 4.9 hereof.
"Refinancing Indebtedness" means Indebtedness issued in exchange for, or
the proceeds of which are used to extend, refinance renew, replace, defease or
refund Indebtedness permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.9 hereof or
Indebtedness referred to in clauses (iii), (v), (vii), (ix) and (x) of the
second paragraph of Section 4.9 hereof.
"Registration Rights Agreements" means those certain Registration Rights
Agreements dated as of the Issuance Date between the Company and Lehman Brothers
Inc. and between the Company and OHST setting forth certain registration rights
with respect to the Notes.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of Designated Senior Debt, provided, that if, and for
so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Investments" means an Investment other than a Permitted
Investment.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means, in the case of the Company or any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of the
<PAGE>
12
Company, whether outstanding on the Issuance Date or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes. Without limiting the generality of the foregoing,
"Senior Debt" shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, (x) all Obligations of every nature of
the Company under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, whether outstanding on the
Issuance Date or thereafter incurred, and (y) all Hedging Obligations (including
Guarantees thereof), whether outstanding on the Issuance Date or thereafter
incurred. Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company or any Guarantor to a Subsidiary of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Subsidiary of the Company or any Subsidiary of
the Company or any Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) any liability
for federal, state, local or other taxes owed or owing by the Company or any
Guarantor, (v) that portion of Indebtedness incurred in violation of this
Indenture provisions set forth under Section 4.9 hereof; provided, however, that
in the case of this clause (v), (A) any Indebtedness issued to any person who
had no actual knowledge that the incurrence of such Indebtedness was not
permitted under this Indenture and who received in connection with the issuance
thereof a certificate from the Chief Financial Officer of the Company to the
effect that the issuance of such Indebtedness would not violate this Indenture
shall constitute Senior Debt and (B) any Indebtedness arising from the honoring
by a bank or other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business shall constitute Senior
Debt provided that such Indebtedness is extinguished within three business days
of occurrence, and (vi) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company or any
Guarantor.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Trust Officer" means any officer in the Corporate Trust Office of the
Trustee.
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13
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Indebtedness; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the same time from
Persons who are not affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results (other than pursuant
to agreements relating to the management of hotels entered into between
Restricted Subsidiaries and Unrestricted Subsidiaries in the ordinary course of
such Subsidiaries' business, consistent with past practice); and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the board resolution giving effect
to such designation and an officer's certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.7 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.9 hereof, the Company
shall be in default of such covenant). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary, and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.9 hereof and
(ii) no Default or Event of Default would be in existence following such
designation.
"Weighted Average Life to Mandatory Redemption" means, when applied to any
Disqualified Stock at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (x) 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 (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
liquidation preference amount of such Disqualified Stock.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) 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 (y) the
number of years (calculated to the nearest one twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
A. SECTION OTHER DEFINITIONS.
Defined in
Term Section
-----------------------------------------------------
"Accredited Investor" 2.1
"Affiliate Transaction" 4.11
"Agent Members" 2.16
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14
"Asset Sale Offer" 3.9
"Asset Sale Offer Price" 4.10
"Bankruptcy Law" 6.1
"Blockage Period" 10.3
"Change of Control Offer" 4.14
"Change of Control Payment" 4.14
"Change of Control Payment Date" 4.14
"Computation Period" 4.7
"Covenant Defeasance" 8.3
"Custodian" 6.1
"defeasance trust" 8.4
"Default Notice" 10.3
"Depositary" 2.1
"Event of Default" 7.1
"Excess Proceeds" 4.10
"Global Note" 2.1
"Legal Defeasance" 8.2
"Legal Holiday" 12.7
"Offshore Physical Securities" 2.1
"Paying Agent" 2.4
"Payment Blockage Notice" 10.3
"Private Placement Legend" 2.15
"Public Equity Offering" 3.7
"Redemption Percentages" 3.7
"Registrar" 2.3
"Restricted Payments" 4.7
"Rule 144A" 2.1
"Subsidiary Guarantee" 11.1
"US Physical Securities" 2.1
A. SECTION INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, any Guarantor and any
successor obligor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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15
A. SECTION RULES OF CONSTRUCTION.
Unless the context otherwise requires:
1. a term has the meaning assigned to it;
1. an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
1. "or" is not exclusive;
1. words in the singular include the plural, and in the plural include
the singular;
1. provisions apply to successive events and transactions.
I. ARTICLE
THE NOTES
A. SECTION FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. Subject to Section 2.7
hereof, the Notes shall be issued at any time, or from time to time, in an
aggregate principal amount not to exceed $200,000,000. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
agreements to which the Company or any Guarantor is subject or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issued
initially in denominations of $1,000 and integral multiples thereof.
Notes offered and sold in reliance on Rule 144A under the Securities
Act ("Rule 144A") and to institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("Accredited
Investors") shall be issued initially in the form of one or more permanent
global notes in registered form, in substantially the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for The
Depository Trust Company (the "Depositary"), duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Securities"). Additionally, Notes offered and sold in reliance on any
other exemption from registration under the Securities Act, including pursuant
to Rule 144A, other than as described in the preceding paragraph may be issued,
in the form of permanent certificated Notes in registered form, in substantially
the form set forth in Exhibit A (the "U.S. Physical Securities"). The Offshore
Physical Securities and the U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
A. SECTION EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Notes for the Company by
manual or facsimile signature.
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16
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount stated in Section 2.1 hereof. The aggregate
principal amount of Notes outstanding at any time may not exceed the amount set
forth herein, except as provided in Section 2.7.
The Trustee may appoint an authenticating agent to authenticate Notes.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
A. SECTION REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any co-
registrar, the "Registrar") and (ii) an office or agency where Notes may be
presented for payment (the "Paying Agent"). The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar. The Company shall enter into an
appropriate agency agreement with any Agent not a party to this Indenture, which
shall incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails to maintain a Registrar or Paying Agent, or fails to give the foregoing
notice, the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 7.7 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
A. SECTION PAYING AGENT TO HOLD MONEY IN TRUST .
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, or interest or Liquidated Damages (as defined in
the Registration Rights Agreement), if any, on the Notes, and will notify the
Trustee of any default by the Company or Guarantor, if any, in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company) shall have no
further liability for the money delivered to the Trustee. If
<PAGE>
17
the Company or any of its Subsidiaries acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
A. SECTION HOLDERS LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven (7)
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, including
the aggregate principal amount thereof, and the Company and the Guarantors shall
otherwise comply with TIA Section 312(a).
A. SECTION TRANSFER AND EXCHANGE.
1. Where Notes are presented to the Registrar with a request to
register the transfer thereof or exchange them for an equal principal amount of
Notes of other denominations, the Registrar shall register the transfer or make
the exchange if its requirements for such transactions are met; provided,
however, that any Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar and the Trustee duly executed by
the Holder thereof or by his attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Company shall issue and the Trustee
shall authenticate Notes at the Registrar's request, subject to such rules as
the Trustee may reasonably require.
1. The Company and the Registrar shall not be required (i) to
issue, to register the transfer of, or to exchange Notes during a period
beginning at the opening of business on a Business Day fifteen (15) days before
the day of any selection of Notes for redemption or purchase under Section 3.2
and ending at the close of business on the day of selection, (ii) to register
the transfer of or exchange any Note so selected for redemption or purchase in
whole or in part, except the unredeemed or unpurchased portion of any Note being
redeemed or purchased in part or (iii) to register the transfer or exchange of a
Note between the Record Date and the next succeeding Interest Payment Date.
1. No service charge shall be made for any registration of a
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment by the Holder of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Section 2.10, 3.6 or 9.5).
1. Prior to due presentment for registration of transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of, premium, if any, and interest on
such Note and for all other purposes whatsoever, whether or not such Note is
overdue, and neither the Trustee, any Agent, nor the Company shall be affected
by notice to the contrary.
1. Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Note
may be effected only through a book entry system maintained by the Holder of
such Global Note (or its agent), and that ownership of a beneficial interest in
the Global Note shall be required to be reflected in a book entry.
<PAGE>
18
A. SECTION REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or either of the
Company or the Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, the Company shall issue and the Trustee, upon the
written order of the Company signed by two Officers of the Company, shall
authenticate a replacement Note if an indemnity bond is supplied by the Holder
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, each Agent and each authenticating agent from any loss
which any of them may suffer if a Note is replaced. The Company and the Trustee
may charge for its expenses in replacing a Note.
Every replacement Note is an additional Obligation of the Company.
A. SECTION OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in interest in a Global Note effected by the
Trustee in accordance with the provision hereof, and those described in this
Section as not outstanding.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note.
A. SECTION TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, a Guarantor, if any, or any Affiliate of the Company or a Guarantor, if
any, shall be considered as though not outstanding, except that for purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer knows to be so
owned shall be so considered. The Company agrees to notify the Trustee of the
existence of any Notes owned by the Company, by any Guarantor or by any
Affiliate of the Company or a Guarantor.
A. SECTION TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee, upon receipt of
the written order of the Company signed by two Officers of the Company, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
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19
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
A. SECTION CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act) unless the Company directs them to be returned to them. The Company may not
issue new Notes to replace Notes that have been redeemed or paid or that have
been delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company unless by a written order, signed by an Officer of the Company, the
Company shall direct that cancelled Notes be returned to them.
A. SECTION DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five (5) Business Days prior to the
payment date, in each case at the rate provided in the Notes and in Section 4.1
hereof. The Company shall, with the consent of the Trustee, fix or cause to be
fixed each such special record date and payment date. At least fifteen (15)
days before the special record date, the Company (or the Trustee, in the name of
and at the expense of the Company) shall mail to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
A. SECTION RECORD DATE.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
A. SECTION CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided, that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee in writing of any change in the CUSIP number.
A. SECTION RESTRICTIVE LEGENDS.
Each Global Note and Physical Security that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") unless
otherwise agreed by the Company and the Holder thereof:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES
<PAGE>
20
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A
SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
<PAGE>
21
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A. SECTION BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY-.
1. The Global Note initially shall (i) be registered in the name of
the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
1. Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interest of beneficial owners in the Global Note may be transferred or
exchanged for Physical Securities in accordance with the rules and procedures of
the Depositary and the provisions of Section 2.17. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in the Global Note if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Note and a successor depositary is not appointed by the Company within 90 days
of such notice or (ii) an Event of Default has occurred and is continuing and
the Registrar has received a written request from the Depositary to issue
Physical Securities.
1. In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
1. In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b) above, the Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Securities of
authorized denominations.
1. Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
above shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.15.
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22
1. The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
A. SECTION SPECIAL TRANSFER PROVISIONS.
1. Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
a) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is after August 19, 1999, or (y)
(1) in the case of a transfer to an Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C hereto or (2)
in the case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of Exhibit D
hereto; and
a) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of (x) the
certificate, if any, required by paragraph (i) above and (y) instructions given
in accordance with the Depositary's and the Registrar's procedures, (a) the
Registrar shall reflect on its books and records the date and (if the transfer
does not involve a transfer of outstanding Physical Securities) a decrease in
the principal amount of the Global Note in an amount equal to the principal
amount of the beneficial interest in the Global Note to be transferred, and (b)
the Company shall execute and the Trustee shall authenticate and deliver one or
more Physical Securities of like tenor and amount.
1. Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
a) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been effected in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that it is purchasing the Notes for its own
account or an account with respect to which it exercises sole investment
discretion and that any such account is a QIB within the meaning of Rule 144A,
and it is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and
a) if the proposed transferee is an Agent Member and the
Notes to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Note in an amount equal to
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23
principal amount of the Physical Securities to be transferred, and the Trustee
shall cancel the Physical Securities so transferred.
1. Private Placement Legend. Upon the registration of the
transfer, exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the registration of the transfer, exchange or replacement of Notes
bearing the Private Placement Legend, the Registrar shall deliver only Notes
that bear the Private Placement legend unless (i) the circumstance contemplated
by paragraph (a)(i)(x) of this Section 2.17 exists or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act.
1. General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for at least two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 hereof or this Section 2.17. The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
I. ARTICLE
REDEMPTIONS AND OFFERS TO PURCHASE
A. SECTION NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 45 days but not more than 90 days before a redemption date (unless a
shorter notice period shall be satisfactory to the Trustee), an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur, (ii) the redemption date, (iii) the principal amount
of Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Notes pursuant
to the provisions of Sections 4.10 or 4.14, it shall furnish to the Trustee, an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the offer to purchase shall occur, (ii) the offer's terms, (iii) the
purchase price, (iv) the principal amount of the Notes to be purchased and (v) a
statement to the effect that (a) the Company or one of its Restricted
Subsidiaries has made an Asset Sale and that the conditions set forth in
Sections 3.9 and 4.10 have been satisfied or (b) a Change of Control has
occurred and the conditions set forth in Section 4.14 have been satisfied, as
applicable.
A. SECTION SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.
In the event that less than all of the Notes are to be purchased in an
Asset Sale Offer or redeemed at any time, the Trustee shall select the Notes to
be redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate (and in
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24
such manner as complies with applicable legal requirements). The Company shall
give written notice to the Trustee of such requirements of any securities
exchange not less than forty-five (45) nor more than ninety (90) days prior to
the date on which notice of such redemption or purchase is to be given. In the
event a partial redemption is made with the proceeds of a public offering by the
Company of common equity securities, selection of the Notes or portions thereof
for redemption shall be made by the Trustee only on a pro rata basis or on as
nearly a pro rata basis as practicable (subject to procedures of the
Depositary), unless such method is otherwise prohibited. In the event of
partial redemption, other than pro rata, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption. In the event that less than all of
the Notes properly tendered in an Asset Sale Offer are to be purchased, the
particular Notes to be purchased shall be selected promptly upon the expiration
of such Asset Sale Offer.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption or purchase and, in the case of any Note selected for
partial redemption or purchase, the principal amount thereof to be redeemed or
purchased. Notes and portions of them selected shall be in principal amounts of
$1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder
are to be redeemed or purchased, the entire outstanding principal amount of
Notes held by such Holder shall be redeemed or purchased. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Notes called
for redemption also apply to portions of Notes called for redemption.
In the event the Company is required to make an Asset Sale Offer
pursuant to Section 3.9 and Section 4.10 hereof, and the amount of Excess
Proceeds to be applied to such purchase would result in the purchase of a
principal amount of Notes which is not evenly divisible by $1,000, the Trustee
shall promptly refund to the Company the portion of such Excess Proceeds that is
not necessary to purchase the immediately lesser principal amount of Notes that
is so divisible.
A. SECTION NOTICE OF REDEMPTION.
At least thirty (30) days but not more than sixty (60) days before a
redemption date, the Company shall mail, or cause to be mailed, by first class
mail, a notice of redemption to each Holder whose Notes are to be redeemed at
its registered address.
The notice shall identify the CUSIP number of the Notes, if any, and
the Notes to be redeemed and shall state:
1. the redemption date;
1. the redemption price;
1. if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note of the same series in principal amount
equal to the unredeemed portion will be issued;
1. the name and address of the Paying Agent;
1. that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
<PAGE>
25
1. that, unless the Company defaults in making such redemption
payment, interest and Liquidated Damages, if any, on Notes called for redemption
ceases to accrue on and after the redemption date;
1. the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
1. that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
A. SECTION EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become due and payable on the redemption
date at the redemption price. On and after the redemption date, unless the
Company defaults in the payment of the redemption price, interest and Liquidated
Damages, if any, will cease to accrue on the Notes or portions of them called
for redemption and all rights of Holders of such Notes will terminate except for
the right to receive the redemption price. Upon surrender to the Paying Agent,
the Holders of such Notes shall be paid the redemption price plus accrued
interest and Liquidated Damages, if any, to the redemption date, but interest
installments and unpaid Liquidated Damages, if any, whose maturity is on or
prior to the redemption date will be payable to the Holder of record at the
close of business on the relevant record dates referred to in the Notes. A
notice of redemption may not be conditional.
A. SECTION DEPOSIT OF REDEMPTION PRICE.
At least one Business Day before the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money in immediately
available funds sufficient to pay the redemption price of and, if applicable,
accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on
that date. The Trustee or the Paying Agent shall promptly, and in any event
within two Business Days after the redemption date, return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of and, if applicable, accrued
interest and Liquidated Damages, if any, on all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, interest and Liquidated Damages, if any, on the Notes or the portions
of Notes to be redeemed will cease to accrue on the applicable redemption date,
whether or not such Notes are presented for payment. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, from the redemption date until such unpaid interest is paid, in each
case at the rate provided in the Notes and in Section 4.1 hereof.
A. SECTION NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in
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26
principal amount to the unredeemed portion of the Note surrendered; provided,
however, that no Note of $1,000 or less in principal amount shall be purchased
or redeemed in part.
A. SECTION OPTIONAL REDEMPTION.
At any time on or after August 15, 2002, the Notes will be subject to
redemption at the option of the Company, in whole or in part, up on not less
than 30 nor more than 60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 15 of the
years indicated below:
Year Percentage
- ---- ----------
2002 104.375%
2003 102.917%
2004 101.458%
2005 and thereafter 100.000%
Notwithstanding the foregoing, prior to August 15, 2000, the Company
may redeem, on any one or more occasions, with the net cash proceeds of one or
more public offerings of its common equity (a "Public Equity Offering") (within
60 days of the consummation of any such Public Equity Offering), up to 35% of
the aggregate principal amount of the Notes issued at a redemption price equal
to 108.750% of the principal amount of such Notes plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date;
provided, however, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after each such redemption.
In addition, the Company, at its option, at any time prior to August
15, 2002, may redeem the Notes, in whole or in part (if in part, by lot or by
such other method as the Trustee shall deem fair or appropriate) at the Make-
Whole Price, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date.
A. SECTION MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to purchase Notes
pursuant to Section 4.10 and Section 4.14, the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.
A. SECTION OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
Within 30 days after the date that Excess Proceeds exceed $10.0
million and an Asset Sale Offer is required under Section 4.10 hereof, the
Company shall mail or cause the Trustee to mail (in the Company's name and at
its expense and pursuant to an Officers' Certificate) an offer to purchase to
each Holder of Notes pursuant to the terms of this Section 3.9 and to holders of
other Indebtedness that ranks by its terms pari passu in right of payment with
the Notes and the terms of which contain substantially similar requirements with
respect to the application of net proceeds from asset sales as are contained
herein.
The Asset Sale Offer (as defined in Section 4.10) with respect to the
Notes shall be mailed by the Company (or the Trustee) to Holders of Notes at
their last registered address with a copy to the Trustee and the Paying Agent
and shall set forth (a) notice that an Asset Sale
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27
has occurred, that the Company is making an Asset Sale Offer, pursuant to this
Section 3.9, and that each Holder of Notes then outstanding has the right to
require the Company to repurchase, for cash, such Holder's Notes at the Asset
Sale Offer Price, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the payment date; (b) the purchase price per $1,000 of
principal amount and the payment date of the Asset Sale Offer, (c) the maximum
amount of Excess Proceeds, required to be applied to such Asset Sale Offer with
respect to the Notes; (d) that any Notes properly tendered pursuant to the Asset
Sale Offer will be accepted for payment (subject to reduction as provided in
this Section 3.9) on the payment date of the Asset Sale Offer and any Notes not
properly tendered will remain outstanding and continue to accrue interest and
Liquidated Damages, if applicable; (e) that unless the Company defaults in the
payment of the Asset Sale Offer Price, all Notes accepted for payment pursuant
to the Asset Sale Offer shall cease to accrue interest and Liquidated Damages
after the payment date of the Asset Sale Offer; (f) that Holders electing to
have any Notes purchased pursuant to an Asset Sale Offer will be required to
surrender the Notes, with the form entitled Option of Holder to Elect Purchase
on the reverse of the Notes completed, or transfer by book-entry transfer, to
the Company, the Depository or the Paying Agent specified in the notice at the
address specified in the notice prior to the close of business on the third
Business Day preceding the payment date of the Asset Sale Offer; (g) that
Holders will be entitled to withdraw their tendered Notes and their election to
require the Company to purchase the Notes provided that the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the payment date of the Asset Sale Offer, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes tendered for purchase, and a statement that such Holder is
withdrawing such Holder's tendered Notes and such Holder's election to have such
Notes purchased; (h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the amount of the Asset Sale Offer, the Company
shall select the Notes to be purchased by lot on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased or
otherwise in accordance with this Indenture); and (i) that Holders whose Notes
are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer). If the payment date of the Asset Sale Offer is on or after
an interest payment record date and on or before the related interest payment
date, any accrued interest and Liquidated Damages will be paid to the Person in
whose name a Note is registered at the close of business on such record date,
and no additional interest will be payable to Holders who tender a Note pursuant
to the Asset Sale Offer.
The Company shall fix the payment date of the Asset Sale Offer for
such purchase no earlier than 30 but no more than 60 days after the Asset Sale
Offer is mailed as set forth above, except as may otherwise be required by
applicable law.
The Company shall comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to this Section 3.9. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section 3.9,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Indenture by
virtue thereof.
On the payment date of the Asset Sale Offer, the Company shall, to the
extent permitted by law, (x) accept for payment Notes or portions thereof
properly tendered pursuant to the Asset Sale Offer, (y) deposit with the Paying
Agent the amount of money, in immediately available funds, equal to the maximum
Excess Proceeds required under Section 4.10 to be applied to such Asset Sale
Offer with respect to such Notes and (z) deliver or cause to be delivered to the
Trustee, Notes so accepted together with an Officers' Certificate stating the
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28
Notes or portions thereof tendered to the Company. If the aggregate purchase
price of all Notes properly tendered exceeds the maximum amount of Excess
Proceeds, required to be applied to such Asset Sale Offer with respect to such
Notes, as applicable, the Notes or portions thereof to be purchased shall be
selected pursuant to Section 3.2 hereof. The Paying Agent shall promptly mail
to each Holder of Notes so accepted for payment a check in an amount equal to
the aggregate purchase price of the Notes purchased by the Company from such
Holder and the Trustee shall promptly authenticate and mail to each Holder a new
Note of the same series equal in principal amount to any unpurchased portion of
any Note surrendered, if any, or return any unpurchased Note to such Holder;
provided, however, that each such new Note shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce in a
newspaper of national circulation or in a press release provided to a nationally
recognized financial wire service the results of the Asset Sale Offer on the
payment date.
Other than as specifically provided in this Section 3.9, each purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1, 3.2, 3.5 and 3.6 hereof.
I. ARTICLE
COVENANTS
A. SECTION PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes on the dates
and in the manner provided in this Indenture and the Notes. Principal, premium,
if any, and interest and Liquidated Damages, if any, shall be considered paid on
the due date if the Paying Agent, if other than the Company or a Subsidiary of
the Company, holds as of 9:00 a.m. Eastern Time on the due date money deposited
by the Company in immediately available funds and designated for and sufficient
to pay all principal, premium, if any, and interest and Liquidated Damages, if
any, then due. Such Paying Agent shall return to the Company promptly, and in
any event, no later than five days following the date of payment, any money
(including accrued interest) that exceeds such amount of principal, premium, if
any, and interest paid on the Notes. The Company shall pay all Liquidated
Damages, if any, in the same manner and on the same dates as set forth above and
in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the interest rate then applicable to the Notes to
the extent lawful. In addition, it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages, if any, (without regard to any applicable grace
period) at the same rate to the extent lawful.
A. SECTION MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee or Registrar) where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
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29
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3.
A. SECTION SEC REPORTS.
1. The Company shall, whether or not required by the rules and
regulations of the SEC, submit to the SEC for public availability and provide to
the Trustee and the Holders copies of all quarterly and annual reports and other
information, documents and reports specified in Sections 13 and 15(d) of the
Exchange Act for so long as the Notes are outstanding.
1. If the Company or a Guarantor, if any, is required to furnish
annual or quarterly reports to its stockholders pursuant to the Exchange Act,
the Company shall cause such annual report or quarterly or other financial
report furnished to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar.
1. The Company and the Guarantors, if any, shall deliver all
reports and other documents and information to the Holders under this Section
4.3. The Trustee shall, if requested to by the Company, deliver such reports,
other documents and information to the Holders, but at the sole expense of the
Company.
1. The Company, for so long as the Notes are outstanding, will
continue to provide to Holders and to prospective purchasers of Notes the
information required by Rule 144A(d)(4).
1. Notwithstanding anything contrary herein, the Trustee shall
have no duty to review such documents for purposes of determining compliance
with any provision of this Indenture.
A. SECTION COMPLIANCE CERTIFICATE.
1. The Company shall deliver to the Trustee, within sixty (60)
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether each of the Company and its
Subsidiaries has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each of the Company and
its Subsidiaries has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action each of
the Company and its Subsidiaries is taking or propose to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or
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30
interest or Liquidated Damages, if any, on the Notes are prohibited (or if such
event has occurred, a description of the event and what action each is taking or
proposes to take with respect thereto).
1. The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default or (ii) any event of default under any other
mortgage, indenture or instrument which with the passage of time or giving of
notice would be a Default or an Event of Default under Section 6.1 hereof, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
A. SECTION TAXES.
The Company shall, and shall cause each of its Subsidiaries to pay
prior to delinquency, all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
A. SECTION STAY, EXTENSION AND USURY LAWS.
The Company covenants, and the Company shall cause any Guarantor to
covenant (to the extent they may lawfully do so), that it will not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or at any
time hereafter in force, which may affect the covenants or the performance of
this Indenture. The Company (to the extent it may lawfully do so) hereby
expressly waives, and the Company will cause any Guarantor (to the extent it may
lawfully do so) expressly to waive, all benefit or advantage of any such law,
and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
A. SECTION LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (other than: (1) dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company; (2)
dividends or distributions by a Restricted Subsidiary of the Company, provided
that to the extent that a portion of such dividend or distribution is paid to a
holder of Equity Interests of a Restricted Subsidiary other than the Company or
a Restricted Subsidiary, such portion of such dividend or distribution is not
greater than such holder's pro rata aggregate common equity interest in such
Restricted Subsidiary; and (3) dividends or distributions payable on Existing
Preferred OP Units and Preferred OP Units issued in compliance with Section 4.09
hereof); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary or other Affiliate
of the Company (other than (A) any Equity Interests owned by the Company or any
Restricted Subsidiary of the Company, (B) any Existing Preferred OP Units and
(C) any Preferred OP Units issued in compliance with Section 4.9 hereof); (iii)
purchase, redeem or otherwise acquire or retire for value any Indebtedness of
the Company or any Restricted Subsidiary that is subordinated or junior in right
of payment, by its terms, to the Notes or any Guarantee thereof prior to the
scheduled final maturity or sinking fund payment dates for payment of principal
and interest in accordance with the original documentation for such subordinated
or junior Indebtedness; or (iv) make any Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of such Restricted Payment:
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31
1. no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
1. the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.9 hereof; and
1. such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issuance Date (excluding Restricted Payments permitted by clauses
(ii), (iii), (iv), (v) and (vi) (X) of the next succeeding paragraph), is less
than the sum, without duplication, of (i) 50% of the Consolidated Net Income of
the Company for the period (taken as one accounting period) from June 30, 1997
to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net proceeds (including
the fair market value of non-cash proceeds as determined in good faith by the
Board of Directors) received by the Company from the issue or sale, in either
case, since the Issuance Date of either (A) Equity Interests of the Company or
of (B) debt securities of the Company that have been converted or exchanged into
such Equity Interests (other than Equity Interests (or convertible or
exchangeable debt securities) sold to a Restricted Subsidiary of the Company and
other than Disqualified Stock or debt securities that have been converted or
exchanged into Disqualified Stock), plus (iii) in case any Unrestricted
Subsidiary has been redesignated a Restricted Subsidiary pursuant to the terms
of this Indenture or has been merged, consolidated or amalgamated with or into,
or transfers or conveys assets to, or is liquidated into, the Company or a
Restricted Subsidiary and provided that no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof, the
lesser of (A) the book value (determined in accordance with GAAP) at the date of
such redesignation, combination or transfer of the aggregate Investments made by
the Company and its Restricted Subsidiaries in such Unrestricted Subsidiary (or
of the assets transferred or conveyed, as applicable) and (B) the fair market
value of such Investments in such Unrestricted Subsidiary at the time of such
redesignation, combination or transfer (or of the assets transferred or
conveyed, as applicable), in each case as determined in good faith by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a resolution of such Board and, in each case, after deducting any
Indebtedness associated with the Unrestricted Subsidiary so designated or
combined or with the assets so transferred or conveyed, plus (iv) 100% of any
dividends or interest actually received in cash by the Company or a Restricted
Subsidiary after the Issuance Date from (A) a Restricted Subsidiary the Net
Income of which has been excluded from the computation of Consolidated Net
Income, (B) an Unrestricted Subsidiary, (C) a Person that is not a Subsidiary or
(D) a Person that is accounted for on the equity method plus (v) $15.0 million.
Notwithstanding the foregoing, the provisions of this Section 4.7 will
not prohibit:
a) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture; (ii) (X) the redemption,
purchase, retirement or other acquisition of any OP Unit in exchange for Equity
Interests of the Company (other than Disqualified Stock) and (Y) the redemption,
purchase, retirement or other acquisition of any Equity Interests of the Company
or a Restricted Subsidiary (other than OP Units or Preferred OP Units) in
exchange
<PAGE>
32
for, or out of the proceeds of, the substantially concurrent sale (other than to
a Restricted Subsidiary of the Company) of other Equity Interests of the Company
(other than any Disqualified Stock); provided that in the case of (X) and (Y)
the amount of any proceeds that is utilized for such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (iii) the defeasance, redemption, repayment or purchase of
Indebtedness of the Company or any Restricted Subsidiary that is subordinated or
junior in right of payment, by its terms, to the Notes or any Guarantee thereof
in a Permitted Refinancing; (iv) the defeasance, redemption, repayment or
purchase of Indebtedness of the Company or any Restricted Subsidiary; that is
subordinated or junior in right of payment, by its terms, to the Notes or any
Guarantee thereof with the proceeds of a substantially concurrent sale (other
than to a Subsidiary of the Company) of Equity Interests (other than
Disqualified Stock) of the Company; provided that the amount of any proceeds
that is utilized for such defeasance, redemption, repayment or purchase shall be
excluded from clause (c) (ii) of the preceding paragraph; (v) the purchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company pursuant to any management equity subscription agreement or stock
option agreement; provided, however, that the aggregate price paid for all such
purchased, redeemed, acquired or retired Equity Interests shall not exceed
$1,000,000 in any 12 month period; and (vi)(X) the making of any Permitted
Investment described in clauses (a), (b), (c), (d) or (f) of the definition
thereof and (Y) the making of any Permitted Investment described in clause (e)
thereof, provided that, in the case of clauses (ii)(Y), (iii), (iv), (v) and
(vi)(Y), no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof.
In determining whether any Restricted Payment is permitted by this
Section 4.7, the Company may allocate or reallocate all or any portion of such
Restricted Payment among the clauses (i) through (vi) of the preceding paragraph
or among such clauses and the first paragraph of this Section 4.7 including
clauses (a), (b) and (c), provided that at the time of such allocation or
reallocation, all such Restricted Payments, or allocated portions thereof, would
be permitted under the various provisions of this Section 4.7.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than (i) the end of any calendar quarter in which
any Restricted Payment is made or (ii) the making of a Restricted Payment which,
when added to the sum of all previous Restricted Payments made in a calendar
quarter, would cause the aggregate of all Restricted Payments made in such
quarter to exceed $5.0 million, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section 4.7
were computed, which calculations may be based upon the Company's latest
available financial statements.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default or
Event of Default. For purposes of making the determination as to whether such
designation would cause a Default or Event of Default, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this Section 4.7. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the time
of such designation, (y) the fair market value of such Investments at the time
of such designation and (z) the original fair market value of such
<PAGE>
33
Investments at the time they were made. Such designation will only be permitted
if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Any such designation by the Board of Directors shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
A. SECTION LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) (i) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances or capital contributions to
the Company or any of its Restricted Subsidiaries, or (c) sell, lease or
transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reasons of (i) Existing Indebtedness as in effect on the Issuance Date, (ii) the
Credit Agreement, provided that the encumbrances or restrictions contained in
such agreement as amended, modified, supplemented, restructured, renewed,
restated, refunded, replaced or refinanced or extended from time to time on one
or more occasions are no more restrictive than those contained in the Credit
Agreement as in effect on the Issuance Date, (iii) this Indenture and the Notes,
(iv) applicable law, (v) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries or of
any Person that becomes a Restricted Subsidiary as in effect at the time of such
acquisition or such Person becoming a Restricted Subsidiary (except to the
extent such Indebtedness was incurred in connection with or in contemplation of
such acquisition or such Person becoming a Restricted Subsidiary), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that the Consolidated Cash Flow of such Person is
not taken into account (to the extent of such restriction) in determining
whether such acquisition was permitted by the terms of this Indenture, (vi)
restrictions of the nature described in clause (c) above by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (vii) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in this clause (c) above on the property so
acquired, (viii) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancings
are no more restrictive than those contained in the agreements governing the
Indebtedness or Disqualified Stock being refinanced, or (ix) customary
restrictions in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements and mortgages.
A. SECTION LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
CERTAIN CAPITAL STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur" and correlatively, an "incurrence" of) any Indebtedness (including
Acquired Debt), the Company shall not issue, and shall not permit any
<PAGE>
34
of its Restricted Subsidiaries to issue, any shares of Disqualified Stock and
the Company shall not permit any of its Restricted Subsidiaries to issue any
Preferred Stock; provided, however, that the Company or any Guarantor may incur
Indebtedness or issue shares of Disqualified Stock and the Restricted
Subsidiaries may incur Indebtedness under the Credit Agreement if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions shall not apply to:
1. the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Indebtedness of an Unrestricted Subsidiary, such event
shall be deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
1. the incurrence by the Company or its Restricted Subsidiaries
of Indebtedness pursuant to the Credit Agreement in an aggregate principal
amount not to exceed $300.0 million at any one time outstanding, minus any Net
Proceeds that have been applied to permanently reduce the outstanding amount of
such Indebtedness pursuant to clause (a) of the second paragraph of Section 4.10
hereof;
1. the incurrence by the Company and its Restricted Subsidiaries
of Existing Indebtedness;
1. the incurrence by the Company or its Restricted Subsidiaries
of Indebtedness under Hedging Obligations that do not increase the Indebtedness
of the Company or the Restricted Subsidiary, as the case may be, other than as a
result of fluctuations in interest or foreign currency exchange rates provided
that such Hedging Obligations are incurred for the purpose of providing interest
rate protection with respect to Indebtedness permitted under the Indenture or to
provide currency exchange protection in connection with revenues generated in
currencies other than U.S. dollars;
1. the incurrence or the issuance by the Company of Refinancing
Indebtedness or Refinancing Disqualified Stock or the incurrence or issuance by
a Restricted Subsidiary of Refinancing Indebtedness or Refinancing Disqualified
Stock; provided, however, that such Refinancing Indebtedness or Refinancing
Disqualified Stock is a Permitted Refinancing;
1. the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; provided, however, that (a) any subsequent
issuance or transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than a Restricted Subsidiary and (b) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be;
1. the incurrence of Indebtedness represented by the Notes and
any Guarantee thereof;
<PAGE>
35
1. the incurrence by the Company or any of its Restricted
Subsidiaries, in the ordinary course of business and consistent with past
practice, of surety, performance or appeal bonds;
1. the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $50.0 million;
1. the incurrence by the Company or any of its Restricted
Subsidiaries of Assumed Indebtedness--provided that, after giving effect to the
incurrence thereof, the Company could incur at lease $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in the
preceding paragraph; and
1. the issuance of Preferred OP Units by the Company or any of
its Restricted Subsidiaries as full or partial consideration for the acquisition
of lodging facilities and related assets, provided that, after giving effect to
the issuance thereof, the Company could incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in the
preceding paragraph.
A. SECTION LIMITATION ON SALE OF ASSETS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, conduct an Asset Sale, unless (x) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) and (y) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; provided, however, that
the principal amount of the following shall be deemed to be cash for purposes of
this provision: (A) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto), of
the Company or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes or any Guarantee thereof) that are assumed
by the transferee of any such assets and (B) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are converted by the Company or such Restricted Subsidiary into cash within
90 days of the closing of such Asset Sale (to the extent of the cash received).
Notwithstanding the foregoing, the restriction in clause (y) above will not
apply with respect to mortgages, other notes receivable or other securities
received by the Company or any Restricted Subsidiary from a transferee of any
assets to the extent such mortgages, other notes receivable or other securities
are Investments permitted to be made by the Company or such Restricted
Subsidiary under Section 4.7 hereof.
Within 365 days of any Asset Sale, the Company or such Restricted
Subsidiary may (a) apply the Net Proceeds from such Asset Sale to repay any
Indebtedness that ranks by its terms senior to the Notes (or any Guarantee
thereof) and, in the case of any Indebtedness under the Credit Agreement, to
effect a permanent reduction in the amount of Indebtedness that may be incurred
pursuant to clause (ii) of the second paragraph of Section 4.9 hereof, or (b)
invest the Net Proceeds from such Asset Sale in property or assets used in a
Hospitality-Related Business, provided that the Company or such Restricted
Subsidiary will have complied with this clause (b) if, within 365 days of such
Asset Sale, the Company or such Restricted Subsidiary shall have commenced and
not completed or abandoned an investment in compliance with this clause (b) and
shall have segregated such Net Proceeds from the general funds of the Company
and its Subsidiaries for that purpose and such Investment is substantially
completed within 180 days after the first anniversary of such Asset Sale. Any
Net Proceeds from an Asset Sale that are not
<PAGE>
36
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds". When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company shall make an offer, to all Holders
of Notes and to holders of other Indebtedness that ranks by its terms pari passu
in right of payment with the Notes and the terms of which contain substantially
similar requirements with respect to the application of net proceeds from asset
sales as are contained in this Indenture (an "Asset Sale Offer") to purchase on
a pro rata basis the maximum principal amount of Notes, that is an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in this Indenture.
To the extent that the aggregate amount of Notes and other such Indebtedness
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds available for purchase thereof, the Trustee shall
select the Notes to be purchased in the manner described under Section 3.3
hereof. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero. Pending the final application of any Net Proceeds from
an Asset Sale pursuant to this paragraph, the Company or any Restricted
Subsidiary may temporarily reduce Indebtedness of the Company or a Restricted
Subsidiary that ranks by its terms senior to the Notes or otherwise invest such
Net Proceeds in Cash Equivalents.
Any offer to purchase the Notes pursuant to this Section 4.10 shall be
made pursuant to the provisions of Section 3.9 hereof. Simultaneously with the
notification of such offer to the Trustee, the Company shall provide the Trustee
with an Officer's is Certificate setting forth the calculations used in
determining the amount of Excess Proceeds to be applied to the purchase of the
Notes. The Company will comply, to the extent applicable, with the requirements
of Rule 14e-1 under the Exchange Act and other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with any offer to purchase and the purchase of Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
Section 3.9 and this Section 4.10, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of Section 3.9 and this Section 4.10 to make an
Asset Sale Offer.
A. SECTION LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or Guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary on an arm's length basis with an unrelated Person, (b) the
Company delivers to the Trustee (i) with respect to any Affiliate Transaction
involving aggregate payments in excess of $5.0 million, an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
such Affiliate Transaction is approved by a majority of the disinterested
members of the Board of Directors and (ii) with respect to any Affiliate
Transaction involving aggregate payments in excess of $10.0 million (other than
an Affiliate Transaction involving the acquisition or disposition of a lodging
facility by the Company or a Restricted Subsidiary of the Company), an opinion
as to the fairness to the Company or such Restricted Subsidiary from a financial
point of view issued, at the option of the Company, by an investment banking
firm of national standing or
<PAGE>
37
a Qualified Appraiser and (c) the Company delivers to the Trustee in the case of
an Affiliate Transaction involving the acquisition or disposition of a lodging
facility by the Company or a Restricted Subsidiary of the Company and (x)
involving aggregate payments of more than $5.0 million and less than $25.0
million, an appraisal by a Qualified Appraiser to the effect that the
transaction is being undertaken at fair market value or (y) involving aggregate
payments of $25.0 million or more, an opinion as to the fairness of the
transaction to the Company or such Restricted Subsidiary from a financial point
of view issued by an investment banking firm of national standing; provided,
however, that the following shall not be deemed Affiliate Transactions: (A) any
employment, deferred compensation, stock option, noncompetition, consulting or
similar agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (B) transactions between
or among the Company and/or its Restricted Subsidiaries, (C) the incurrence of
fees in connection with the provision of hotel management services, provided
that such fees are paid in the ordinary course of business and are consistent
with past practice and (D) Restricted Payments permitted by Section 4.7 hereof.
A. SECTION LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien that secures obligations under any Indebtedness which is pari
passu with or subordinated to the Notes, unless the Notes are equally and
ratably secured with the obligations so secured or until such time as such
obligations are no longer secured by a Lien.
A. SECTION CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
Subsidiaries, in accordance with its respective organizational documents (as the
same may be amended from time to time) and (ii) its (and its Subsidiaries')
rights (charter and statutory), licenses and franchises; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate existence of any of its Subsidiaries, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
A. SECTION CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase (the "Change of Control Payment").
Prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control, the Company shall (i) repay in
full and terminate all commitments under Indebtedness under the Credit Agreement
and all other Senior Debt the terms of which require repayment upon a Change of
Control or offer to repay in full and terminate all commitments under all
Indebtedness under the Credit Agreement and all other such Senior Debt and to
repay the Indebtedness owed to each lender or holder of Senior Debt which has
accepted such offer or (ii) obtain the requisite consents under the Credit
Agreement and all other Senior Debt to permit the repurchase of the Notes as
provided below. The Company shall
<PAGE>
38
first comply with the covenant in the immediately preceding sentence before it
shall be required to repurchase Notes pursuant to the provisions described
below, and the Company's failure to comply with the covenant described in the
immediately preceding sentence shall constitute an Event of Default described in
clause (3) and not in clause (2) under Section 6.1 hereof.
Within 10 days following the date upon which the Change of Control
occurs, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Trustee or Paying Agent, if any, at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.14 to make a Change of Control Offer.
On the Change of Control Payment Date, the Company will, to the extent
permitted by law, (x) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (y) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (z) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of Notes so accepted the Change of Control Payment
for such Notes, and the Trustee shall promptly authenticate and mail to each
Holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided, however, that each such new Note shall be
in principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce in a newspaper of national circulation or in a press release
provided to a nationally recognized financial wire service the results of the
Change of Control Offer on the Change of Control Payment Date.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control made by the Company
and purchased all Notes validly tendered and not withdrawn under such Change of
Control Offer.
A. SECTION SUBSIDIARY GUARANTEES.
Prior to guaranteeing any other Indebtedness of the Company (other
than the Credit Agreement), a Restricted Subsidiary that is also a Significant
Subsidiary must execute and deliver to the Trustee a supplemental indenture in
the form of Exhibit B hereto pursuant to which such Restricted Subsidiary shall
Guarantee, on an unsecured senior subordinated basis, all of the Obligations of
the Company with respect to the Notes together with an opinion of counsel (which
counsel may be an employee of the Company) to the effect that the supplemental
<PAGE>
39
indenture has been duly executed and delivered by such Restricted Subsidiary and
is in compliance in all material respects with the terms of this Indenture.
The Indebtedness represented by any such Subsidiary Guarantee (i.e.,
the payment of Obligations on the Notes) will be subordinated on the same basis
to Senior Debt of the Guarantor as the Notes are subordinated to Senior Debt of
the Company.
A. SECTION LINE OF BUSINESS.
For so long as any Notes are outstanding, the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, engage in any business
or activity other than a Hospitality-Related Business.
A. SECTION PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
A. SECTION NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is senior in right of payment to the
Notes and subordinate or junior in right of payment to any other Indebtedness of
the Company, and no Guarantor shall incur, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is senior in right of payment to the
Guarantee by such Guarantor of the Notes and subordinate or junior in right of
payment to any other Indebtedness of the Guarantor.
I. ARTICLE
SUCCESSORS
A. SECTION WHEN THE COMPANY MAY MERGE, ETC.
The Company shall not consolidate or merge with or into or wind up
into (whether or not the Company is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, Person or entity unless:
a) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia;
a) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person or to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made assumes all
the obligations of the Company under the Notes and this Indenture pursuant to a
supplemental indenture;
a) at the time of such transaction and immediately after such transaction
after giving pro forma effect thereto, no Default or Event of Default exists or
would exist;
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a) the Company or any Person formed by or surviving such consolidation
or merger, or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) shall have Consolidated Net Worth
(immediately after the transaction) equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) shall, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.9 hereof; and
a) the Company shall have delivered to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate and an Opinion
of Counsel to the combined effect that such sale, assignment, transfer, lease,
conveyance or other disposition, and, if applicable, any supplemental indenture
executed in connection therewith, comply with this Indenture. The Trustee shall
be entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
A. SECTION SUCCESSOR SUBSTITUTED.
Upon any consolidation, merger, lease, conveyance or transfer of all
or substantially all of the assets of the Company, as the case may be, in
accordance with Section 5.1 hereof, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale, lease,
conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Notes with the same effect as if such successor had been named as the Company
herein or therein and thereafter the predecessor corporation shall be relieved
of all further obligations and covenants under this Indenture and the Notes.
I. ARTICLE
DEFAULTS AND REMEDIES
A. SECTION EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default under this
Indenture:
(1) default for 30 days in the payment when due of interest or Liquidated
Damages, if any, on the Notes (whether or not such payment shall be prohibited
by the subordination provisions of this Indenture);
(1) default in payment when due of principal of or premium, if any, on the
Notes at maturity, upon redemption or otherwise (including the failure to make a
payment to purchase Notes tendered pursuant to a Change of Control Offer or an
Assets Sale Offer) (whether or not such payment shall be prohibited by the
subordination provisions of this Indenture);
(1) failure by the Company or any Restricted Subsidiary to comply with
Section 5.1;
(1) failure by the Company or any Guarantor for 30 days in the performance
of any other covenant, warranty or agreement in this Indenture or the Notes
after written notice shall have been given to the Company by the Trustee or to
the Company and the Trustee from Holders of at least 25% in principal amount of
the Notes then outstanding;
(1) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of
Non-Recourse Indebtedness of the
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41
Company or any of its Restricted Subsidiaries with an aggregate principal amount
in excess of the lesser of (A) 10% of the total assets of the Company and its
Restricted Subsidiaries measured as of the end of the Company's most recent
fiscal quarter for which internal financial statements are available immediately
preceding the date on which such default occurred, determined on a pro forma
basis and (B) $50 million, and such failure continues for a period of 10 days or
more, or the acceleration of the final stated maturity of any such Non-Recourse
Indebtedness (which acceleration is not rescinded, annulled or otherwise cured
within 10 days of receipt by the Company or such Restricted Subsidiary of notice
of any such acceleration);
(1) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of any
Indebtedness (other than Non-Recourse Indebtedness) of the Company or any
Restricted Subsidiary of the Company and such failure continues for a period of
10 days or more, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise cured
within 10 days of receipt by the Company or such Restricted Subsidiary of notice
of any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
in default for failure to pay principal at final maturity or which has been
accelerated, in each case with respect to which the 10-day period described
above has passed, aggregates $10.0 million or more at any time;
(1) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments rendered against them (other than judgment liens without recourse to
any assets or property of the Company or any of its Restricted Subsidiaries
other than assets or property securing Non-Recourse Indebtedness) aggregating in
excess of $10.0 million, which judgments are not paid, discharged or stayed for
a period of 60 days (other than any judgments as to which a reputable insurance
company has accepted full liability);
(1) except as permitted by this Indenture, any Subsidiary Guarantee shall be
held in a judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any Guarantor (or its successors or
assigns), or any Person acting on behalf of such Guarantor (or its successors or
assigns), shall deny or disaffirm its obligations or shall fail to comply with
any obligations under its Subsidiary Guarantee;
(1) the Company, any Guarantor or any of the Company's Subsidiaries that would
constitute a Significant Subsidiary or any group of the Company's Subsidiaries
that, taken together, would constitute a Significant Subsidiary pursuant to or
within the meaning of the Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it
in an involuntary case,
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors,
(e) admits in writing its inability to pay its debts as
they become due; and
(1) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
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42
(a) is for relief in an involuntary case against the Company,
any Guarantor or any Subsidiary that is a Significant Subsidiary of
the Company or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary of the Company,
(b) appoints a Custodian of the Company, any Guarantor or any
Subsidiary that is a Significant Subsidiary of the Company or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary of the Company, or for all or substantially all
of the property of the Company, any Guarantor or any Subsidiary that
is a Significant Subsidiary of the Company, or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary of the Company, or
(c) orders the liquidation of the Company, any Guarantor or any
Subsidiary that is a Significant Subsidiary of the Company or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary of the Company,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
The term "Bankruptcy Law" means, title 11, U.S. Code or any similar
federal or state law for the relief of debtors, each as amended from time to
time. The term Custodian means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
A. SECTION ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clauses (9) and (10) of Section 6.1 hereof) occurs and is continuing, the
Trustee by written notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes by written notice to
the Company and the Trustee, may declare all Notes to be due and payable
immediately. Upon the effectiveness of such declaration, all amounts due and
payable on the Notes, as determined in the succeeding paragraphs, shall be due
and payable effective immediately. If an Event of Default specified in clause
(9) or (10) of Section 6.1 hereof occurs, all outstanding Notes shall ipso facto
become and be immediately due and payable immediately without further action or
notice on the part of or by the Trustee or any Holder.
In the event that the maturity of the Notes is accelerated pursuant to
this Section 6.2, 100% of the principal amount thereof shall become due and
payable plus premium, if any, and accrued and unpaid interest, if any, to the
date of payment.
A. SECTION OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, premium, if
any, or interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
A. SECTION WAIVER OF PAST DEFAULTS.
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43
Subject to Section 9.2 hereof, Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest or Liquidated Damages, if any, on any Note held by
a non-consenting Holder. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
A. SECTION CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, or that the Trustee determines may be
unduly prejudicial to the rights of other Holders or that may involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction.
A. SECTION LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(1) the Holder gives to the Trustee written notice of a continuing Event of
Default or the Trustee receives such notice from the Company;
(1) the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(1) such Holder or Holders offer and, if requested, provide to the Trustee
indemnity satisfactory to the Trustee against any loss, liability or expense;
(1) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer and, if requested, the provision of indemnity; and
(1) during such 60-day period the Holders of a majority in aggregate principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
A. SECTION RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest and Liquidated Damages, if any, on the Note, on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
A. SECTION COLLECTION SUIT BY TRUSTEE.
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44
If an Event of Default specified in Section 6.1(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company or any Guarantor for the
whole amount of principal, premium, if any, and interest and Liquidated Damages,
if any, remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
A. SECTION TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and any other
amounts due the Trustee under Section 7.7 hereof) and the Holders allowed in any
judicial proceedings relative to the Company or any Guarantor (or any other
obligor upon the Notes), their creditors or their property and shall be entitled
and empowered to collect, receive and distribute any money or securities or
other property payable or deliverable on any such claims and to distribute the
same, and any custodian in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof out of the estate in any such proceeding shall be denied for
any reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties that the Holders of the Notes may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
A. SECTION PRIORITIES.
If the Trustee collects or receives any money or securities or other
property pursuant to this Article, it shall pay out the money or securities or
other property in the following order:
First: to the Trustee, its agents and counsel for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest and Liquidated Damages, if any,
ratably, without preference or priority of any kind (including defaulted
interest), according to the amounts due and payable on the Notes for principal,
premium, if any, and interest and Liquidated Damages, if any, respectively;
Third: without duplication, to Holders for any other obligations
owing to the Holders under the Notes or this Indenture; and
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45
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any such
payment to Holders.
A. SECTION UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
aggregate principal amount of the then outstanding Notes.
I. ARTICLE
TRUSTEE
A. SECTION DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(1) Except during the continuance of an Event of Default:
(a) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(a) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(1) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) this paragraph does not limit the effect of paragraph (2) of
this Section 7.1;
(a) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(a) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.5.
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(1) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(1) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(1) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
A. SECTION RIGHTS OF TRUSTEE.
Subject to TIA Section 315:
(1) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(1) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(1) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed and
monitored with due care.
(1) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(1) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(1) Without limiting the provisions of Section 7.1(5), the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of the Holders of a
majority in aggregate principal amount of the then outstanding Notes pursuant to
this Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(1) The Trustee shall not be required to give any bond or surety
in respect of the performance of its powers and duties hereunder.
(1) Except with respect to Section 4.1, the Trustee shall have
no duty to inquire as to the performance of the Company's covenants in Article
4. In addition, the Trustee
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47
shall not be deemed to have knowledge of any Default or Event of Default except
(i) any Event of Default occurring pursuant to Sections 6.1(1), 6.1(2) or 4.1 or
(ii) any Default or Event of Default of which the Trustee shall have received
written notification or obtained actual knowledge.
A. SECTION INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company or any Affiliate of the foregoing with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof.
A. SECTION TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
A. SECTION NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known by a Trust Officer of the Trustee, the Trustee shall mail to Holders a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal or
interest on any Note, the Trustee may withhold the notice if and so long as a
Trust Officer in good faith determines that withholding the notice is in the
interests of Holders. The Trustee shall comply with TIA Section 315(b).
A. SECTION REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15, 1998
following the date hereof, the Trustee shall mail to Holders a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to Holders shall be
submitted to the SEC and each stock exchange, if any, on which the Notes are
listed. The Company shall promptly notify the Trustee when the Notes are listed
on or delisted by any stock exchange.
A. SECTION COMPENSATION AND INDEMNITY.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company agrees to reimburse the Trustee
promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by it in addition to the compensation for
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48
its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company agrees to indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture, except
as set forth in the next paragraph. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee
to so notify the Company shall not relieve the Company of its obligations
hereunder except to the extent the Company has been prejudiced thereby. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and, if the Company or the Trustee shall
have been advised by its respective counsel that representation of the Trustee
and the Company by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed), the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld. The
provisions of this paragraph shall survive the satisfaction and discharge of
this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own gross negligence or
willful misconduct.
The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien on all money or property held or collected by the
Trustee, except that held in trust to pay principal and interest on particular
Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(9) or (10) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
A. SECTION REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company. The
Company may remove the Trustee at its discretion or if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief
is entered with respect to the Trustee under any Bankruptcy Law;
(1) a Custodian or public officer takes charge of the Trustee or its property;
or
(1) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
Subject to the provision of TIA Section 315(e), if the Trustee after
written request by any Holder who has been a bona fide holder of a Note or Notes
for at least six months fails to comply with Section 7.10, such Holder, on
behalf of himself and others similarly situated, may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.7. Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 hereof shall continue
for the benefit of the retiring Trustee.
A. SECTION SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
A. SECTION ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee powers, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a). The Trustee is subject to TIA Section
310(b). The provisions of TIA Section 310 shall apply to the Company as the
obligor of the Notes.
A. SECTION PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to
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TIA Section 311(a) to the extent indicated therein. The provisions of TIA
Section 311 shall apply to the Company as the obligor of the Notes.
I. ARTICLE
DISCHARGE OF INDENTURE
A. SECTION DEFEASANCE AND DISCHARGE OF THIS INDENTURE AND THE
NOTES.
1. The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
with respect to the Notes, elect to have either Section 8.2 or 8.3 hereof be
applied to all outstanding Notes upon compliance with the conditions set forth
below in this Article 8.
1. The Company may terminate its obligations (and the obligations of
any Guarantor in respect of Subsidiary Guarantees) under the Notes and this
Indenture (except those obligations referred to in the penultimate paragraph of
this Section 8.1(b)) if all such Notes thereto authenticated and delivered
(except lost, stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment cash in United States dollars has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company, as provided in Section 8.6, or discharged from such
trust) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder, or if (i) either (x) pursuant to Article
3, the Company shall have given notice to the Trustee and mailed a notice of
redemption to each Holder of the redemption of all of the Notes under
arrangements satisfactory to the Trustee for the giving of such notice or (y)
all Notes have otherwise become due and payable hereunder, (ii) the Company
shall have irrevocably deposited or caused to be deposited with the Trustee or a
trustee satisfactory to the Trustee, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds in
trust solely for the benefit of the Holders for that purpose, cash in United
States dollars in such amount as is sufficient without consideration of
reinvestment of such interest, to pay principal of, premium, if any, interest
and Liquidated Damages, if any, on the outstanding Notes to maturity or
redemption; provided that the Trustee shall have been irrevocably instructed to
apply such deposit to the payment of said principal, premium, if any, interest
and Liquidated Damages, if any, with respect to the Notes; and, provided,
further, that from and after the time of deposit, the money deposited shall not
be subject to the rights of holders of Senior Debt pursuant to the provisions of
Article 10; (iii) no Default or Event of Default with respect to this Indenture
or the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company or any Guarantor is a party or by which it is bound; (iv) the
Company shall have paid all other sums payable by it hereunder; and (v) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent relating to the
satisfaction and discharge of this Indenture have been complied with. Such
Opinion of Counsel shall also state that such satisfaction and discharge does
not result in a default under the Credit Agreement (if then in effect) or any
other agreement or instrument then known to such counsel that binds or affects
the Company or any Guarantor.
Notwithstanding the foregoing paragraph, the Company's (and any
Guarantor's) obligations in Sections 2.5, 2.6, 2.7, 2.8, 4.1, 4.2, 7.7, 8.6 and
8.7 shall survive until the Notes are no longer outstanding pursuant to the last
paragraph of Section 2.8. After the Notes are not longer outstanding, the
Company's obligations in Sections 7.7, 8.6 and 8.7 shall survive.
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51
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations (and the
obligations of any Guarantors in respect of Subsidiary Guarantees) under the
Notes and this Indenture except for those surviving obligations specified above.
A. SECTION LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1(a) hereof of the option
applicable to this Section 8.2, the Company and the Guarantors, if any, shall be
deemed to have been discharged from their obligations with respect to all
outstanding Notes and Subsidiary Guarantees, if any, on the date the conditions
set forth below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be outstanding only for the purposes
of Section 8.5 hereof and the other Sections of this Indenture referred to in
clauses (i) and (ii) of this Section 8.2, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due, solely from amounts deposited with the Trustee, as provided in
Section 8.4 hereof, (ii) the Company's and the Guarantors' obligations with
respect to the Notes under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.10 and 4.2
hereof, (iii) the rights, powers, trusts, duties, indemnities and immunities of
the Trustee and the Company's obligations in connection therewith and (iv) this
Article 8.
A. SECTION COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1(a) hereof of the option
applicable to this Section 8.3, the Company and the Guarantors, if any, shall be
released from their obligations under the covenants contained in Sections 4.7,
4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.18, 5.1 and 11.2 with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not outstanding for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed outstanding for
all other purposes hereunder (it being understood that such Notes shall not be
deemed outstanding for accounting purposes). For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Notes, the Company and
the Guarantors may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1(e) hereof but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.1 hereof of the option applicable to this Section 8.3, any event described in
Sections 6.1(c) through 6.1(i) hereof shall not constitute Events of Default.
A. SECTION CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
8.2 or Section 8.3 hereof to the outstanding Notes:
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52
1. the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 hereof who shall agree to comply with the provisions of this
Article 8 applicable to it), in trust (the "defeasance trust"), for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) cash in
United States dollars in an amount, or (b) non-callable Government Securities
which through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than one day before the
due date of any payment, cash in United States dollars in an amount, or (c) a
combination thereof, in such amounts as will be sufficient in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge and
which shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge the principal of, premium, if any, and interest (including defaulted
interest) and Liquidated Damages, if any, on the outstanding Notes and any other
obligations owing to the Holders of the Notes, under the Notes or this Indenture
on the stated maturity or on the applicable redemption date, as the case may be,
of such principal or installment of principal of, premium, if any, interest and
Liquidated Damages, if any, on the outstanding Notes, provided that the Trustee
shall have been irrevocably instructed to apply such money or the proceeds of
such non-callable Government Securities to said payments with respect to the
Notes;
1. in the case of an election under Section 8.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States (which counsel may be an employee of the Company or any Subsidiary of the
Company) reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the Issuance Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same time, as
would have been the case if such Legal Defeasance had not occurred;
1. in the case of an election under Section 8.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States (which counsel may be an employee of the Company or any Subsidiary of the
Company) reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
1. no Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds applied to
such deposit) or, insofar as Section 6.1(h) or 6.1(i) hereof is concerned, at
any time in the period ending on the 123rd day after the date of such deposit
(or greater period of time in which any such deposit of trust funds may remain
subject to bankruptcy or insolvency laws insofar as those apply to the deposit
by the Company) (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
2. such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
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53
1. in the case of an election under either Section 8.2 or 8.3
hereof, the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that, as of the date of such opinion, (A) the trust funds will not be
subject to any rights of holders of Indebtedness other than the Notes and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 123rd day following the deposit and assuming no Holder of the Notes is
an insider of the Company, after the 123rd day following the deposit, as of the
date of such opinion, the trust funds will not be subject to avoidance under
Section 547 of the United States Bankruptcy Code (or any successor provision
thereto) and related judicial decisions or any other applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
under any United States or state law;
1. in the case of an election under either Section 8.2 or 8.3
hereof, the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election under
Section 8.2 or 8.3 hereof was not made by the Company with the intent of
preferring the Holders of Notes over other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding creditors of the Company
or others; and
1. the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which counsel may be
an employee of the Company or any Subsidiary of the Company), each stating that
all conditions precedent provided for relating to either the Legal Defeasance
under Section 8.2 hereof or the Covenant Defeasance under Section 8.3 hereof (as
the case may be) have been complied with as contemplated by this Section 8.4.
A. SECTION DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.1(b) or Section 8.4 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company and the Guarantors, if any, shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
cash or non-callable Government Securities deposited pursuant to Section 8.1(b)
or Section 8.4 hereof or the principal, premium, if any, and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any money or non-callable Government Securities held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof which would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
A. SECTION REPAYMENT TO THE COMPANY.
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54
The Trustee shall promptly pay to the Company after request therefor
any excess money held at such time in excess of amounts required to pay any of
the Company's Obligations then owing with respect to the Notes.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for one year after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
A. SECTION REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash or non-
callable Government Securities in accordance with Section 8.1(b), Section 8.2 or
Section 8.3 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the obligations of the Company and the
Guarantors, if any, under this Indenture, the Notes and the Subsidiary
Guarantees, if any, shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.1(b), Section 8.2 or Section 8.3 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.1(b), Section 8.2 or Section 8.3 hereof, as the case
may be; provided, however, that, if the Company or any Guarantor makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company or such Guarantor shall be
subrogated to the rights of the Holders of such Note to receive such payment
from the money held by the Trustee or Paying Agent.
I. ARTICLE
AMENDMENTS
A. SECTION WITHOUT CONSENT OF HOLDERS.
The Company, any Guarantor and the Trustee, as applicable, may amend
or supplement this Indenture, the Notes, and any Subsidiary Guarantee without
the consent of any Holder:
1. to cure any ambiguity, defect or inconsistency;
2. to provide for uncertificated Notes in addition to or in place of
certificated Notes;
1. to provide for the assumption of the Company's obligations to
Holders of the Notes under this Indenture or any Guarantor's obligations under
its Subsidiary Guarantee in the case of a merger, consolidation or sale of
assets involving the Company or such Guarantor, as applicable, pursuant to
Article 5 or Article 11 hereof;
<PAGE>
55
1. to make any change that would provide any additional rights or
benefits to the Holders of the Notes (including providing for Subsidiary
Guarantees and any supplemental indenture required pursuant to Section 4.15
hereof) or that does not adversely affect the legal rights under this Indenture
of any such Holder;
1. to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; and
1. to release a Guarantor in accordance with Section 11.4 hereof.
Upon the request of the Company and any Restricted Subsidiary, in its
capacity as a Guarantor, accompanied by a resolution of the Board of Directors
of the Company or such Restricted Subsidiary, as applicable, authorizing the
execution of any such amended or supplemental indenture and upon receipt by the
Trustee of the documents described in Section 9.6 hereof, the Trustee shall join
with the Company and any such Restricted Subsidiary in the execution of any
amended or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations which
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture which adversely affects its own rights,
duties or immunities under this Indenture, or otherwise.
A. SECTION WITH CONSENT OF HOLDERS.
Except as provided below in this Section 9.2, the Company, any
Guarantor and the Trustee together may amend this Indenture, the Notes and any
Subsidiary Guarantee with the written consent of the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes (including
consents obtained in connection with a purchase of or a tender offer or exchange
offer for Notes).
Upon the request of the Company, accompanied by a resolution of the
Board of Directors of the Company, authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon
receipt by the Trustee of the documents described in Section 9.6 hereof, the
Trustee shall join with the Company and any Guarantor, as the case may be, in
the execution of such supplemental indenture unless such supplemental indenture
adversely affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section 9.2 becomes effective,
the Company shall mail to the Holders of each Note affected thereby a notice
briefly describing the amendment or waiver. Any failure of the Company to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture or waiver. Subject to
Sections 6.4 and 6.7 hereof, the Holders of a majority in aggregate principal
amount of the Notes then outstanding (including consents obtained in connection
with a purchase of or a tender offer or exchange offer for Notes) may waive any
existing default or compliance in a particular instance by the Company or any
Guarantor with any provision of this Indenture or the Notes. However, without
the consent of each Holder affected, an amendment or waiver under this Section
may not (with respect to any Notes held by a non-consenting Holder):
<PAGE>
56
1. reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
1. reduce the principal of or change the fixed maturity of any
Note or waive any of the provisions with respect to the redemption of the Notes;
1. reduce the rate of or change the time for payment of interest
on any Note;
1. waive a Default or an Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
1. make any Note payable in money other than that stated in the
Note;
1. make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest or Liquidated Damages
on the Notes;
1. waive a redemption payment with respect to any Note;
1. modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes in a
manner which adversely affects the Holders in any material respect;
1. except pursuant to Article 8 or pursuant to Section 11.4,
release any Guarantor from its obligations under a Subsidiary Guarantee, or
change any such Subsidiary Guarantee in any manner that would adversely affect
the Holders in any material respect; or
1. make any change in the foregoing amendment and waiver
provisions.
A. SECTION COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in
an amendment or supplemental indenture that complies with the TIA as then in
effect.
A. SECTION REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as
to his or her Note if the Trustee receives written notice of revocation before
the date the waiver or amendment becomes effective. An amendment or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to Section 2.5, or
(ii) such other date as the Company shall designate.
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57
A. SECTION NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
A. SECTION TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment or supplemental
indenture, the Trustee shall be entitled to receive, and, subject to Section 7.1
hereof, shall be fully protected in relying upon, an Officers' Certificate and
an Opinion of Counsel as conclusive evidence that such amendment or supplemental
indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors of the Company or any
Restricted Subsidiary in its capacity as a Guarantor, as applicable, approves
it.
I. ARTICLE
SUBORDINATION
A. SECTION AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full in cash or Cash Equivalents of all Obligations on Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
A. SECTION LIQUIDATION; DISSOLUTION; BANKRUPTCY.
1. Upon any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors or marshalling of assets of the Company or in a
bankruptcy, reorganization, insolvency, receivership or other similar proceeding
relating to the Company or its property, whether voluntary or involuntary, all
Obligations due upon all Senior Debt shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Notes, or for the
acquisition by the Company or any of its Subsidiaries of any of the Notes for
cash or property or otherwise, and until all Obligations with respect to Senior
Debt are paid in full in cash or Cash Equivalents, any distribution to which the
Holders would be entitled shall be made to the Holders of Senior Debt (except
that Holders of the Notes may receive Permitted Junior Securities and payments
made pursuant to Section 8.4 or Section 8.1(b)).
1. In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or
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58
securities, shall be received by any Holder when such payment or distribution is
prohibited by Section 10.2(a), such payment or distribution shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt (pro rata to such holders on the basis of the respective amount of
Senior Debt held by such holders) or their respective Representatives, or to the
trustee under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Senior Debt then due remaining unpaid until all such Senior Debt has
been paid in full in cash or Cash Equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
1. The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article 5 hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article 5 hereof.
A. SECTION NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
If any default occurs and is continuing in the payment when due
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its behalf with respect to any Obligations on the Notes,
or to acquire any of the Notes for cash or property or otherwise (except that
Holders of Notes may receive Permitted Junior Securities and payments made from
the trust pursuant to Section 8.1(b) or Section 8.4). In addition, if any other
event of default occurs and is continuing with respect to any Designated Senior
Debt, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 179 days after the delivery of such Default Notice
(the Blockage Period), neither the Company nor any of its Subsidiaries shall (x)
make any payment of any kind or character with respect to any Obligations on the
Notes (except that Holders of Notes may receive Permitted Junior Securities and
payments made from the trust pursuant to Section 8.4 or 8.1(b)) or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 179
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 365 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for the commencement of a second Blockage Period by the Representative of
such Designated Senior Debt whether or not within a period of 365 consecutive
days, unless such event of default shall have been cured or waived for a period
of not less than 180 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after
the date of commencement of such Blockage Period that, in either case, would
give rise to an event of default pursuant to any provisions under which an event
of default previously existed or was continuing shall constitute a new event of
default for this purpose).
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59
The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Debt, if any, received from the holders of
Senior Debt (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.2 or to pursue any rights or remedies hereunder.
A. SECTION [THIS SECTION INTENTIONALLY OMITTED.]
A. SECTION ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
A. SECTION WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.3 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt (pro rata to such holders
on the basis of the respective amounts of Senior Debt held by such Holders) or
their Representatives under the indenture or other agreement (if any) pursuant
to which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
A. SECTION NOTICE BY THE COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article.
A. SECTION SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the
<PAGE>
60
extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Debt. A distribution made under this Article to holders of
Senior Debt that otherwise would have been made to Holders is not, as between
the Company and Holders, a payment by the Company on the Notes.
A. SECTION RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
1. impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and interest
on the Notes in accordance with their terms;
1. affect the relative rights of Holders and creditors of the Company
other than their rights in relation to holders of Senior Debt; or
1. prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
and owners of Senior Debt to receive distributions and payments otherwise
payable to Holders.
If the Company fails because of this Article to pay principal of or
interest or Liquidated Damages, if any, on Notes on the due date, the failure is
still a Default or Event of Default.
A. SECTION SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
A. SECTION DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
A. SECTION RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
<PAGE>
61
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
A. SECTION AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.9 hereof at least 30 days before the expiration of the time to file such
claim, any Representative of Designated Senior Debt is hereby authorized to file
an appropriate claim for and on behalf of the Holders of the Notes.
A. SECTION AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
I. ARTICLE
SUBSIDIARY GUARANTEES
A. SECTION SUBSIDIARY GUARANTEES.
The Company's Obligations under the Notes and this Indenture will be
jointly and severally guaranteed by any Restricted Subsidiary (a "Guarantor")
which is required to execute and deliver a supplemental indenture pursuant to
Section 4.15 hereof (the "Subsidiary Guarantees"). Subject to the provisions of
this Article 11, any such Guarantor will, jointly and severally, unconditionally
guarantee, on an unsecured senior subordinated basis, to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the Obligations of the Company under this Indenture or the Notes,
that: (i) the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes will be paid in full when due, whether at the
maturity or interest payment or mandatory redemption date, by acceleration, call
for redemption, offer to purchase or otherwise, and interest on the overdue
principal of, premium, and interest and Liquidated Damages, if any, on the Notes
and all other Obligations of the Company to the Holders or the Trustee under
this Indenture or the Notes will be promptly paid in full or performed, all in
accordance with the terms of this Indenture and the Notes; (ii) in case of any
extension of time of payment or renewal of any Notes or any of such other
Obligations, they will be paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at maturity, by acceleration or
otherwise; and (iii) any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights
under any Subsidiary Guarantee will be paid. Failing payment when due of any
amount so guaranteed for whatever reason, any Guarantor will be obligated
(subject to any grace periods allowed pursuant to Section 6.1 hereof) to pay the
same whether or not such failure to pay has become an Event of Default which
could cause acceleration pursuant to Section 6.2 hereof. An Event of Default
under this Indenture or the Notes shall constitute an
<PAGE>
62
event of default under any Subsidiary Guarantee, and shall entitle the Holders
of Notes to accelerate the Obligations of any Guarantor hereunder in the same
manner and to the same extent as the Obligations of the Company. Any Guarantor
will agree that its Obligations hereunder shall be unconditional, irrespective
of the validity, regularity or enforceability of the Notes or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of any Guarantor. Any Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of either or both of the Company, protest, notice and
all demands whatsoever and covenants that its Subsidiary Guarantee will not be
discharged except by complete performance of its Obligations under the Notes and
this Indenture. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the Company or
any Guarantor any amount paid by any such entity to the Trustee or such Holder,
any Subsidiary Guarantee to the Notes, to the extent theretofore discharged,
shall be reinstated in full force and effect. Any Guarantor agrees that it shall
not be entitled to any right of subrogation in relation to the Holder in respect
of any Obligations guaranteed hereby until payment in full of all Obligations
guaranteed hereby. Any Guarantor will agree that, as between it, on the one
hand, and the Holders of Notes and the Trustee, on the other hand, (x) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article 6 hereof for the purposes hereof, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any acceleration of such Obligations
as provided in Article 6 hereof, such Obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purpose of such Subsidiary Guarantee. A Guarantor shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holder under its Subsidiary Guarantee.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
of such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purpose of the foregoing sentence, the
Trustee and the Holders of Notes shall have the right to receive and/or retain
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article 10 hereof. In the event that the Trustee or any Holder shall have
received any Guarantor payment that is prohibited by the foregoing sentence,
such Guarantor payment shall be paid over and delivered forthwith to the holders
of the Senior Debt remaining unpaid, to the extent necessary to pay in full all
Senior Debt.
Each Holder of a Note by its acceptance thereof (a) agrees to and
shall be bound by the provisions of this Section 11.1, (b) authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee its attorney-in-fact for any and all such purposes.
A. SECTION WHEN A GUARANTOR MAY MERGE, ETC.
No Guarantor shall consolidate or merge with or into (whether or not
such Guarantor is the surviving person), another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
<PAGE>
63
1. the person formed by or surviving any such consolidation or merger (if
other than such Guarantor) assumes all the Obligations of such Guarantor
pursuant to a supplemental indenture in the form of Exhibit B hereto and under
the Notes and this Indenture;
1. immediately after giving effect to such transaction, no Default or
Event of Default exists; and
1. such Guarantor or any person formed by or surviving any such
consolidation or merger, (A) will have Consolidated Net Worth (immediately after
giving effect to such transaction) equal to or greater than the Consolidated Net
Worth of such Guarantor immediately preceding the transaction and (B) would be
permitted by virtue of the Company's Fixed Charge Coverage Ratio set forth in
the first paragraph of Section 4.9 hereof to incur, immediately after giving
effect to such transaction, at least $1.00 of additional Indebtedness.
The Guarantor shall deliver to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel, covering clauses (i) and (ii) (in the case of clause
(ii), to such counsel's knowledge), stating that the proposed transaction and
such supplemental indenture comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
Notwithstanding the foregoing, (A) a Guarantor may consolidate with or
merge with or into the Company; provided, however, that the surviving
corporation (if other than the Company) shall expressly assume by supplemental
indenture complying with the requirements of this Indenture, the due and
punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on all of the Notes, and the due and punctual
performance and observance of all the covenants and conditions of this Indenture
to be performed by the Company and (B) a Guarantor may consolidate with or merge
with or into any other Guarantor.
A. SECTION LIMITATION OF GUARANTOR'S LIABILITY.
For purposes of this Article 11 and any Subsidiary Guarantee, each
Guarantor's liability will be that amount from time to time equal to the
aggregate liability of such Guarantor hereunder and thereunder, but shall be
limited to the least of (i) the aggregate amount of the obligations of the
Company under the Notes and this Indenture or (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the federal Bankruptcy Code and in the Debtor and Creditor Law of the State
of New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee was entered into, after giving effect to the incurrence of
existing Indebtedness immediately prior to such time; provided that, it shall be
a presumption in any lawsuit or other proceeding in which a Guarantor is a party
that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount
set forth in clause (i) above unless any creditor, or representative of
creditors of such guarantor, or debtor in possession or trustee in bankruptcy of
the Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of the Guarantor is limited to the amount set forth in clause (ii). In making
any determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
A. SECTION RELEASE OF A GUARANTOR.
Concurrently with the payment in full of all of the Company's
Obligations under the Notes and this Indenture (other than with respect to any
indemnification obligations), each Guarantor shall be released from and relieved
of its Obligations under this Article 11. In the
<PAGE>
64
event of a sale or other disposition of all of the assets of any Guarantor,
which sale or other disposition is otherwise in compliance with the terms of
this Indenture, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) will be automatically and
unconditionally released and relieved of any obligations under its Subsidiary
Guarantee. The Trustee shall deliver an appropriate instrument evidencing any
such release under this Section 11.4 upon receipt of a request by the Company
accompanied by an Officers' Certificate and an Opinion of Counsel certifying as
to the compliance with this Section 11.4. The provisions of Section 11.2 shall
not apply to any merger or consolidation pursuant to which a Guarantor is
released from its Obligations under this 11.4.
I. ARTICLE
MISCELLANEOUS
A. SECTION TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of TIA Section 318(c), the imposed duties shall
control.
A. SECTION NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first-class
mail (registered or certified, return receipt requested), or sent by telex,
telecopier or overnight air courier guaranteeing next Business Day delivery, to
the other's address:
If to the Company:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, D.C. 20007
Attention: John Emery, Chief Financial Officer
Telecopier No.: (202) 965-4445
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Richard S. Borisoff, Esq.
Telecopier No.: (212) 373-2523
If to the Trustee:
IBJ Schroder Bank and Trust Company
1 State Street
New York, NY 10004
Attention: Corporate Trust Department
<PAGE>
65
Telecopier No.: (212) 858-2952
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next Business Day
delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail to his address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed or given in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
A. SECTION COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
A. SECTION CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
1. an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.5)
stating that, in the opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
1. an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 12.5)
stating that, in the opinion of such counsel, all such conditions precedent and
covenants have been complied with.
A. SECTION STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to Section 4.4 and TIA Section 314(a)(4)) shall include:
<PAGE>
66
1. a statement that the Person making such certificate or opinion has
read such covenant or condition;
1. a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
1. a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
1. a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificate of public officials.
A. SECTION RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
A. SECTION LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banking
institutions in The City of New York are authorized or obligated by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on such
payment for the intervening period.
A. SECTION RECOURSE AGAINST OTHERS.
No director, officer, partner, employee, agent, manager, stockholder,
incorporator or other Affiliate, as such of the Company or of a Guarantor, if
any, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, or this Indenture or a Subsidiary Guarantee, if any,
or for any claim based upon, in respect of or by reason of such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. This waiver and release are part of the consideration for issuance
of the Notes. Such waiver and release may not be effective to waive or release
liabilities under the federal securities laws.
A. SECTION DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
A. SECTION GOVERNING LAW.
The internal law of the State of New York shall govern and be used,
without reference to its choice of law principles (other than Sec. 5-1401 of the
General Obligation Law), to construe this Indenture, the Notes and Subsidiary
Guarantee.
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67
A. SECTION NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
A. SECTION SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
A. SECTION SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
A. SECTION COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
A. SECTION TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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68
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective duly authorized officers as of the date first
written above.
SIGNATURES
CAPSTAR HOTEL COMPANY,
By: ____________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as
Trustee
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
(Face of Note)
____% [Series A] [Series B] Senior Subordinated Note due ____
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE UNITED STATES INTERNAL
REVENUE CODE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS % OF
ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS , [19 ][20 ], [AND] THE YIELD TO
MATURITY IS % [THE METHOD USED TO DETERMINE THE YIELD IS AND THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT APPLICABLE TO THE SHORT ACCRUAL PERIOD OF , [19 ]
[20 ] TO [19 ][20 ], IS % OF THE PRINCIPAL AMOUNT OF THIS SECURITY].
No. $___________
CAPSTAR HOTEL COMPANY
promises to pay to _____________, or registered assigns, the
principal sum of __________________ Dollars on __________, ____.
Interest Payment Dates: ________ __ and ______ __
Record Dates: ________ __ and ______ __
Dated:
CAPSTAR HOTEL COMPANY
By: ____________________________
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the [Global] Notes
referred to in the within-
mentioned Indenture:
IBJ Schroder Bank & Trust Company,
as Trustee
By _____________________________
Authorized Signatory
A-2
<PAGE>
(Back of Note)
_____% [Series A] [Series B] Senior Subordinated Note due ____
of
CapStar Hotel Company
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM, EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY OR ANY
NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED
A-3
<PAGE>
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
I. INTEREST. CapStar Hotel Company, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this _____%
[Series A] [Series B] Senior Subordinated Note due ____ (the "Note") at the rate
and in the manner specified below.
The Company shall pay interest on the principal amount of this Note in
cash at the rate per annum shown above and shall pay the Liquidated Damages, if
any, payable pursuant to Section 5 of the Registration Rights Agreement referred
to below. The Company shall pay interest and Liquidated Damages, if any, semi-
annually on each ________ __ and ______ __ commencing ________ __, 199_, or if
any such day is not a Business Day (as defined in the Indenture referred to
below), on the next succeeding Business Day (each an "Interest Payment Date").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months for the actual number of days elapsed. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of this Note. To
the extent lawful, the Company shall pay interest on overdue principal and
premium at the rate of 1% per annum in excess of the then applicable interest
rate on this Note; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful.
I. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the _________ and
_________ next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, if any, and
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders; provided that payment by wire transfer of immediately
available funds will be required with respect to principal and premium, if any,
and interest and Liquidated Damages, if any, on all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
I. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank &
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company, any Guarantor or any other of its Subsidiaries may
act in any such capacity.
I. INDENTURE. The Company issued the Notes under an Indenture
dated as of August 19, 1997 (the "Indenture") between the Company, as issuer,
and the Trustee.
A-4
<PAGE>
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The terms of the Indenture shall govern any inconsistencies between the
Indenture and the Notes.
I. OPTIONAL REDEMPTION. On or after ______ __, ____, the Company
may redeem all or any portion of the Notes, at any time upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on ______ __ of the years indicated below:
Year Percentage
- ---------------
2002 _______%
2003 _______%
2004 _______%
2005 and thereafter _______%
Notwithstanding the foregoing, prior to ______ __, 2000, the Company
may redeem, on any one or more occasions, with the net cash proceeds of one or
more public offerings of its common equity (a "Public Equity Offering") (within
60 days of the consummation of any such Public Equity Offering), up to 35% of
the aggregate principal amount of the Notes originally issued at a redemption
price equal to _______% of the principal amount of such Notes plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
provided, however, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
[In addition, the Company, at its option, at any time prior to ______
____, may redeem the Notes, in whole or in part (if in part, by lot or such
other method as the Trustee shall deem fair or appropriate) at the Make-Whole
Price, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase.]
I. OFFERS TO PURCHASE. Subject to the Company's obligation to
make an offer to purchase Notes in connection with Asset Sales and a Change of
Control (as described in the Indenture), the Company has no mandatory redemption
or sinking fund obligations with respect to the Notes. Notice of any such offer
to purchase will be given as provided in the Indenture. Holders of Notes that
are the subject of an offer to purchase may elect to have such Notes purchased
by completing the form entitled "Option of Holder to Elect Purchase" appearing
below and taking certain other actions, all as set forth in the Indenture.
I. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
I. SUBORDINATION. The Notes and the Subsidiary Guarantees, if
any, are subordinated to Senior Debt, as defined in the Indenture. To the
extent provided in the Indenture, Senior Debt must be paid before the Notes and
the Subsidiary Guarantees may be paid. The Company agrees, and each Holder by
accepting a Note and any Subsidiary Guarantee
A-5
<PAGE>
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give them effect and appoints the Trustee as attorney-
in-fact for such purpose.
I. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000 of principal amount. The transfer of Notes may be
registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Company shall not be
required to exchange or register the Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.2 of the Indenture and ending at the close of
business on the day of selection, or to exchange or register any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part, or to exchange or register a Note between a
record date and the next succeeding Interest Payment Date.
I. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
I. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing Default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding. The Change of
Control and Asset Sale purchase features of the Notes may not be amended or
waived without the consent of at least 66 2/3% in principal amount of the Notes
then outstanding. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to comply with Section 5.1, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of the Notes under the Indenture or any
Guarantor's Obligations under its Subsidiary Guarantee in the case of a merger,
consolidation or sale of assets involving the Company or such Guarantor, as
applicable, pursuant to Article 5 or Article 11 of the Indenture, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes (including providing for Subsidiary Guarantees and any supplemental
indenture required pursuant to Section 4.15 of the Indenture) or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA and to release a Guarantor in
accordance with the Indenture.
I. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages, if any,
on the Notes (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes at maturity, upon redemption
or otherwise (including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or an Assets Sale Offer) (whether or not
such payment shall be prohibited by the subordination provisions of the
Indenture); (iii) failure by the Company or any Restricted Subsidiary to comply
with Section 5.01 of the Indenture; (iv) failure by the Company or any Guarantor
for 60 days in the performance of any other covenant, warranty or agreement in
the Indenture or the Notes after written notice shall have been given to the
Company by the Trustee or to the Company and the Trustee from Holders of at
least 25% in principal amount of the Notes then outstanding; (v) the failure to
pay at final stated maturity (giving effect to any applicable grace periods and
any extensions thereof) the principal amount of Non-Recourse Indebtedness of the
Company or any of its Restricted Subsidiaries with an
A-6
<PAGE>
aggregate principal amount in excess of the lesser of (A) 10% of the total
assets of the Company and its Restricted Subsidiaries measured as of the end of
the Company's most recent fiscal quarter for which internal financial statements
are available immediately prior to the date on which such default occurred,
determined on a pro forma basis and (B) $50 million, and such failure continues
for a period of 10 days or more, or the acceleration of the final stated
maturity of any such Non-Recourse Indebtedness (which acceleration is not
rescinded, annulled or otherwise cured within 10 days of receipt by the Company
or such Restricted Subsidiary of notice of such acceleration); (vi) the failure
to pay at final stated maturity (giving effect to any applicable grace periods
and any extensions thereof) the principal amount of any Indebtedness (other than
Non-Recourse Indebtedness) of the Company or any Restricted Subsidiary of the
Company and such failure continues for a period of 10 days or more, or the
acceleration of the final stated maturity of any such Indebtedness (which
acceleration is not rescinded, annulled or otherwise cured within 10 days of
receipt by the Company or such Restricted Subsidiary of notice of any such
acceleration) if the aggregate principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness, in default for failure
to pay principal at final maturity or which has been accelerated, in each case
with respect to which the 10-day period described above has passed, aggregates
$10.0 million or more at any time; (vii) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments rendered against them (other than
judgment liens without recourse to any assets or property of the Company or any
of its Restricted Subsidiaries other than assets or property securing Non-
Recourse Indebtedness) aggregating in excess of $10.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days (other than any
judgments as to which a reputable insurance company has accepted full
liability); (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in a judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or any Guarantor
(or its successors or assigns), or any Person acting on behalf of such Guarantor
(or its successors or assigns), shall deny or disaffirm its obligations or shall
fail to comply with any obligations under its Subsidiary Guarantee; and (ix)
certain events of bankruptcy or insolvency with respect to the Company, any
Guarantor or any of the Company's Subsidiaries that would constitute a
Significant Subsidiary or any group of the Company's Subsidiaries that, taken
together, would constitute a Significant Subsidiary. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company, any of its Subsidiary that would constitute a
Significant Subsidiary or any group of its Subsidiaries that, taken together,
would constitute a Significant Subsidiary or any Guarantor, all outstanding
Notes will become due and payable without further action or notice. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any acceleration with respect to the Notes and its
consequences. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power.
I. GUARANTEES OF NOTES. Payment of principal, premium, if any,
and interest and Liquidated Damages, if any, (including interest on overdue
principal and overdue interest, if lawful) on the Notes will be unconditionally
guaranteed by the Guarantors, if any, pursuant to, and subject to the terms of,
Article 11 of the Indenture.
I. SECURITY. The Notes will be unsecured obligations of the
Company, ranking subordinate in right of payment to all Senior Debt of the
Company.
I. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder shall have any liability for any obligations of the
Company or any
A-7
<PAGE>
Guarantor under the Notes, any Subsidiary Guarantee or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver and release may not be effective to waive or
release liabilities under the federal securities laws.
I. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
I. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
I. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
I. [SERIES A NOTES] REGISTRATION RIGHTS. Pursuant to the
Registration Rights Agreement (as defined in the Indenture), and subject to
certain terms and conditions stated therein, the Company will be obligated to
consummate an Exchange Offer pursuant to which the Holders of the Notes shall
have the right to exchange this Note for Exchange Notes, which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respect to the Note. In certain circumstances, and
subject to certain terms and conditions, Holders of the Notes shall have the
right to receive liquidated damages if the Company shall have failed to fulfill
its obligations under the Registration Rights Agreement.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Suite 650
Washington, D.C. 20007
Attention: John Emery,
Chief Financial Officer
Telecopier No.: (202) 965-4445
A-8
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or
(we) assign and transfer this Note to
(Insert assignee's Social Security or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Date: _____________________________
Your Signature:
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee:*
______________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on the
Note)
Tax Identification No:____________
Signature Guarantee:*/____________
_______________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-10
<PAGE>
Transfer and Exchange
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) March 26, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
Check One
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that
has furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) __ outside the United States to a "foreign person" in
compliance with Rule 904 of Regulation S under the Securities
Act; or
(5) __ pursuant to the exemption from registration provided by Rule
144 under the Securities Act; or
(6) __ pursuant to an effective registration statement under the
Securities Act; or
(7) __ pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any Person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: ___________ Signed:_________________________________
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee:________________________________________
A-11
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ___________________ Signed:_________________________
NOTICE: To be executed
by an executive officer
A-12
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease Amount of increase Principal Amount Signature of
----------------
in in Principal of this Global Note authorized officer
Principal Amount of this following such of Trustee or Note
Amount of Global Note decrease Custodian
----------- ---------
this Global Note (or increase)
---------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE
This "Supplemental Indenture", dated as of ________, between
_________________ (the "Guarantor"), a subsidiary of CapStar Hotel Company, a
Delaware corporation (the Company), and IBJ Schroder Bank & Trust Company, as
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company, a Delaware corporation, has heretofore executed
and delivered to the Trustee an indenture (the "Indenture"), dated as of August
19, 1997, providing for the issuance of up to an aggregate principal amount of
$200,000,000 of _____% Senior Subordinated Notes due ____ (the "Notes");
WHEREAS, Section 4.15 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's Obligations under the Notes
pursuant to a Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.1 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
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
I. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
I. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees, jointly
and severally with all other Guarantors, to guarantee the Company's obligations
under the Notes on the terms and subject to the conditions set forth in Article
11 of the Indenture and to be bound by all other applicable provisions of the
Indenture and to be bound by all other applicable provisions of the Indenture.
The obligations of the Guarantor hereunder shall be junior and subordinated to
the Senior Debt of such Guarantor in the manner and to the extent set forth in
Article 11 of the Indenture.
I. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, shareholder or agent of the
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor 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 of the Notes by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver or release may not be
effective to waive or release liabilities under the federal securities laws.
B-1
<PAGE>
I. NEW YORK LAW TO GOVERN. The internal law of the State of New
York shall govern and be used to construe this Supplemental Indenture.
I. 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.
I. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:____________, ____
[Guarantor]
By: ____________________________
Name:
Title:
IBJ Schroder Bank & Trust Company,
as Trustee
By: _____________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
IBJ Schroder Bank & Trust Company
1 State Street
New York, NY 10004
Attention: Corporate Trust Department
Re: CapStar Hotel Company
_____% Senior Subordinated Notes due ____
Ladies and Gentlemen:
In connection with our proposed purchase of _____% Senior Subordinated
Notes due ____ (the "Notes") of CapStar Hotel Company (the "Company"), we
confirm that:
I. We have received a copy of the Final Memorandum (the "Final
Memorandum"), dated ______ __, 1997 relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages A-1 and
A-2 of the Final Memorandum and in the section entitled "Notice to Investors" of
the Final Memorandum including the restrictions on duplication and circulation
of the Final Memorandum.
I. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (as described in the Final Memorandum) and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
I. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes prior to the date
which is three years after the original issuance of the Notes, we will do so
only (i) to the Company or any of its subsidiaries, (ii) inside the United
States in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act), (iii)
inside the United States to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to the Trustee (as defined in the Indenture relating
to the Notes), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, (iv) outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
I. We are not acquiring the Notes for or on behalf of, and will
not transfer the Notes to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement
C-1
<PAGE>
Income Security Act of 1974), except as permitted in the section entitled
"Notice to Investors" of the Final Memorandum.
I. We understand that, on any proposed resale of any Notes, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
I. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or their investment, as the case may be.
I. We are acquiring the Notes purchased by us for our account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereto to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:___________________________
Name:
C-2
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
IBJ Schroder Bank & Trust Company
1 State Street
New York, New York
Attention: Corporate Trust Department
Re: CapStar Hotel Company
(the Company) _____% Senior Subordinated
Notes due ____ (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
----------------------------------------
I. the offer of the Notes was not made to a Person in the United
- ----------------------------------------------------------------------------
States;
- -------
I. either (a) at the time the buy offer was originated, the
- -----------------------------------------------------------------------
transferee was outside the United States or we and any person acting on our
- ---------------------------------------------------------------------------
behalf reasonably believed that the transferee was outside the United States, or
- --------------------------------------------------------------------------------
(b) the transaction was executed in, on or through the facilities of a
- ----------------------------------------------------------------------
designated off-shore securities market and neither we nor any person acting on
- ------------------------------------------------------------------------------
our behalf knows that the transaction has been pre-arranged with a buyer in the
- -------------------------------------------------------------------------------
United States;
- --------------
I. no directed selling efforts have been made in the United States
- ------------------------------------------------------------------------------
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
- --------------------------------------------------------------------------------
S, as applicable;
- -----------------
I. the transaction is not part of a plan or scheme to evade the
- ---------------------------------------------------------------------------
registration requirements of the Securities Act; and
- ----------------------------------------------------
I. we have advised the transferee of the transfer restrictions
- --------------------------------------------------------------------------
applicable to the Notes.
- ------------------------
D-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
-----------------------------------------------------------------
irrevocably authorized to produce this letter or a copy hereof to any interested
- --------------------------------------------------------------------------------
party in any administrative or legal proceedings or official inquiry with
- -------------------------------------------------------------------------
respect to the matters covered hereby. Terms used in this certificate have the
- -------------------------------------------------------------------------------
meanings set forth in Regulation S.
- -----------------------------------
Very truly yours,
-----------------
By:______________________
Authorized Signature
--------------------
D-2
<PAGE>
Exhibit 4.5
MERISTAR HOSPITALITY CORPORATION
TO
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
SECOND SUPPLEMENTAL
INDENTURE
Dated as of August 3, 1998
<PAGE>
1
SECOND SUPPLEMENTAL INDENTURE, dated as of August 3, 1998 between MeriStar
Hospitality Corporation, a Maryland corporation, having its principal office at
1010 Wisconsin Avenue, N.W., Suite 650, Washington, D.C. 20007 and IBJ Schroder
Bank & Trust Company, a banking corporation duly organized and existing under
the laws of the State of New York, as Trustee under the Indenture referred to
below (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, CapStar Hotel Company, a Delaware corporation ("CapStar") has
heretofore executed and delivered to the Trustee a certain indenture, dated as
of August 19, 1997 (the "Original Indenture"), as supplemented and amended by
the First Supplemental Indenture, dated as of March 20, 1998 (the "First
Supplement" and, together with the Original Indenture, the "Indenture"),
pursuant to which one series of senior subordinated notes of CapStar (herein
called the "Securities") were issued. All terms used in this Second
Supplemental Indenture which are defined in the Indenture shall have the
meanings assigned to them in the Indenture;
WHEREAS, CapStar and American General Hospitality Corporation, a Maryland
corporation ("AGH") have entered into an Agreement and Plan of Merger, dated as
of March 15, 1998 (the "Merger Agreement"), whereby CapStar will merge with and
into AGH (the "Merger"), with the result that AGH will be the surviving
corporation operating under the name MeriStar Hospitality Corporation (herein
called the "Company");
WHEREAS, Section 5.1 of the Indenture provides that CapStar shall not enter
the Merger unless the Company assumes all the obligations of CapStar under the
Securities and the Indenture pursuant to a supplemental indenture;
WHEREAS, Section 9.1 of the Indenture provides that without the written
consent of any Holder, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee may enter into an indenture supplemental to the
Indenture to provide for the assumption of the Company's obligations to Holders
of the Securities under the Indenture in the case of a merger involving the
Company pursuant to Article 5 of the Indenture;
WHEREAS, the Company pursuant to the foregoing authority, proposes in and
by this Second Supplemental Indenture to amend the Indenture upon the Merger
<PAGE>
2
to reflect the assumption by the Company of all the obligations of CapStar under
the Securities and the Indenture; and
WHEREAS, all things necessary to make this Second Supplemental Indenture a
valid agreement of the Company and the Trustee and a valid amendment of and
supplement to the Indenture have been done.
<PAGE>
3
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities as follows:
ARTICLE ONE
PROVISIONS OF
GENERAL APPLICATION
SECTION 1.1 Assumption of Obligations. The Company assumes all the
-------------------------
obligations of CapStar under the Securities and the Indenture.
ARTICLE TWO
MISCELLANEOUS
SECTION 2.1 Incorporation of Indenture. All the provisions of this
--------------------------
Second Supplemental Indenture shall be deemed to be incorporated in, and made a
part of, the Indenture; and the Indenture, as supplemented and amended by this
Second Supplemental Indenture, shall be read, taken and construed as one and the
same instrument.
SECTION 2.2 Application of Second Supplemental Indenture. The provisions
--------------------------------------------
and benefit of this Second Supplemental Indenture shall be effective with
respect to Securities outstanding prior to and after the execution hereof.
SECTION 2.3 Headings. The headings of the Articles and Sections of the
--------
Second Supplemental Indenture are inserted for convenience of reference and
shall not be deemed to be a part thereof.
SECTION 2.4 Counterparts. This Second Supplemental Indenture may be
------------
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 2.5 Conflict with Trust Indenture Act. If any provision hereof
---------------------------------
limits, qualifies or conflicts with another provision hereof which is required
to be included in this Second Supplemental Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
<PAGE>
4
SECTION 2.6 Successors and Assigns. All covenants and agreements in
----------------------
this Second Supplemental Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
A. SECTION 2.7 Separability Clause. In case any provision in
-------------------
this Second Supplemental Indenture shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
A. SECTION 2.8 Governing Law. The internal law of the State of
-------------
New York shall govern and be used to construe this Second Supplemental
Indenture.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
<PAGE>
6
STATE OF )
) ss.:
COUNTY OF )
On the day of , 1998, before me
personally came, to me known, who, being by me duly sworn, did depose and say
that he is of MERISTAR HOSPITALITY CORPORATION, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
_______________________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
On the day of , 1998, before me
personally came, to me known, who, being by me duly sworn, did depose and say
that he is of IBJ SCHRODER BANK & TRUST COMPANY, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
_______________________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
<PAGE>
Exhibit 4.6
CAPSTAR HOTEL COMPANY
AND
FIRST TRUST OF NEW YORK, N.A.
Indenture
Dated as of October 16, 1997
Subordinated Debt Securities
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY 1
ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1
Section 1.1 Definitions. 1
Section 1.2 Compliance Certificates and Opinions. 10
Section 1.3 Form of Documents Delivered to Trustee 11
Section 1.4 Acts of Holders 12
Section 1.5 Notices, etc., to Trustee and Company 14
Section 1.6 Notice to Holders; Waiver 14
Section 1.7 Effect of Headings and Table of Contents 15
Section 1.8 Successors and Assigns 15
Section 1.9 Separability Clause 15
Section 1.10 Benefits of Indenture 15
Section 1.11 Governing Law 16
Section 1.12 Legal Holidays 16
Section 1.13 Personal Immunity from Liability for Incorporators, Stockholders, Etc. 16
ARTICLE 2 SECURITIES FORMS 16
Section 2.1 Forms of Securities 16
Section 2.2 Form of Trustee's Certificate of Authentication 17
Section 2.3 Securities Issuable in Global Form 17
ARTICLE 3 THE SECURITIES 18
Section 3.1 Amount Unlimited; Issuable in Series 18
Section 3.2 Denominations 22
Section 3.3 Execution, Authentication, Delivery and Dating 23
Section 3.4 Temporary Securities 25
Section 3.5 Registration, Registration of Transfer and Exchange 28
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities 31
Section 3.7 Payment of Interest; Interest Rights Preserved 33
Section 3.8 Persons Deemed Owners of 35
Section 3.9 Cancellation 36
Section 3.10 Computation of Interest 36
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 4 SATISFACTION AND DISCHARGE 36
Section 4.1 Satisfaction and Discharge of Indenture 36
Section 4.2 Application of Trust Funds 38
ARTICLE 5 REMEDIES 38
Section 5.1 Events of Default 38
Section 5.2 Acceleration of Maturity; Rescission and Annulment 40
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee 41
Section 5.4 Trustee May File Proofs of Claim 42
Section 5.5 Trustee May Enforce Claims Without Possession of Securities or Coupons 43
Section 5.6 Application of Money Collected 43
Section 5.7 Limitation on Suits 43
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium, if any,
Interest and Additional Amounts 44
Section 5.9 Restoration of Rights and Remedies 44
Section 5.10 Rights and Remedies Cumulative 44
Section 5.11 Delay or Omission Not Waiver 45
Section 5.12 Control by Holders of Securities 45
Section 5.13 Waiver of Past Defaults 45
Section 5.14 Waiver of Usury, Stay or Extension Laws 46
Section 5.15 Undertaking for Costs 46
ARTICLE 6 THE TRUSTEE 46
Section 6.1 Notice of Defaults 46
Section 6.2 Certain Rights of Trustee 47
Section 6.3 Not Responsible for Recitals or Issuance of Securities 48
Section 6.4 May Hold Securities 48
Section 6.5 Money Held in Trust 49
Section 6.6 Compensation and Reimbursement 49
Section 6.7 Corporate Trustee Required; Eligibility; Conflicting Interests 49
Section 6.8 Resignation and Removal; Appointment of Successor 50
Section 6.9 Acceptance of Appointment by Successor 51
Section 6.10 Merger, Conversion, Consolidation or Succession to Business 53
Section 6.11 Appointment of Authenticating Agent 53
ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY 55
Section 7.1 Disclosure of Names and Addresses of Holders 55
Section 7.2 Reports by Trustee 55
Section 7.3 Reports by Company 55
Section 7.4 Company to Furnish Trustee Names and Addresses of Holders 56
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8 CONSOLIDATION, MERGER, SALE,LEASE OR CONVEYANCE 57
Section 8.1 Consolidations and Mergers of Company and Sales, Leases and Conveyances
Permitted Subject to Certain Conditions 57
Section 8.2 Rights and Duties of Successor Corporation 57
Section 8.3 Officers' Certificate and Opinion of Counsel 58
ARTICLE 9 SUPPLEMENTAL INDENTURES 58
Section 9.1 Supplemental Indentures without Consent of Holders 58
Section 9.2 Supplemental Indentures with Consent of Holders 60
Section 9.3 Execution of Supplemental Indentures 61
Section 9.4 Effect of Supplemental Indentures 61
Section 9.5 Conformity with Trust Indenture Act 61
Section 9.6 Reference in Securities to Supplemental Indentures 61
ARTICLE 10 COVENANTS 62
Section 10.1 Payment of Principal, Premium, if any, Interest and Additional Amounts 62
Section 10.2 Maintenance of Office or Agency 62
Section 10.3 Money for Securities Payments to Be Held in Trust 64
Section 10.4 Existence 65
Section 10.5 Maintenance of Properties 66
Section 10.6 Payment of Taxes and Other Claims 66
Section 10.7 Statement as to Compliance 66
Section 10.8 Additional Amounts 66
Section 10.9 Waiver of Certain Covenants 67
ARTICLE 11 REDEMPTION OF SECURITIES 68
Section 11.1 Applicability of Article 68
Section 11.2 Election to Redeem; Notice to Trustee 68
Section 11.3 Selection by Trustee of Securities to Be Redeemed 68
Section 11.4 Notice of Redemption 68
Section 11.5 Deposit of Redemption Price 70
Section 11.6 Securities Payable on Redemption Date 70
Section 11.7 Securities Redeemed in Part 71
ARTICLE 12 SINKING FUNDS 72
Section 12.1 Applicability of Article 72
Section 12.2 Satisfaction of Sinking Fund Payments with Securities 72
Section 12.3 Redemption of Securities for Sinking Fund 72
ARTICLE 13 REPAYMENT AT THE OPTION OF HOLDERS 73
Section 13.1 Applicability of Article 73
Section 13.2 Repayment of Securities 73
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 13.3 Exercise of Option 73
Section 13.4 When Securities Presented for Repayment Became Due and Payable 74
Section 13.5 Securities Repaid in Part 75
ARTICLE 14 DEFEASANCE AND COVENANT DEFEASANCE 75
Section 14.1 Applicability of Article; Company's Option to Effect Defeasance or Covenant
Defeasance 75
Section 14.2 Defeasance and Discharge 76
Section 14.3 Covenant Defeasance 76
Section 14.4 Conditions to Defeasance or Covenant Defeasance 77
Section 14.5 Deposited Money and Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions 79
ARTICLE 15 SUBORDINATION 81
Section 15.1 Agreement to Subordinate 81
Section 15.2 Liquidation; Dissolution; Bankruptcy 81
Section 15.3 Default on Senior Debt 81
Section 15.4 Acceleration of Securities 82
Section 15.5 When Distribution Must Be Paid Over 82
Section 15.6 Notice by Company 82
Section 15.7 Subrogation 82
Section 15.8 Relative Rights 82
Section 15.9 Subordination May Not Be Impaired by Trust 83
Section 15.10 Distribution or Notice to Representative 83
Section 15.11 Rights of Trustee and Paying Agent 83
EXHIBIT A FORMS OF CERTIFICATION 86
EXHIBIT A-1 FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED TO RECEIVE BEARER SECURITY
OR TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE 86
EXHIBIT A-2 FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND CEDEL S.A. IN CONNECTION WITH
THE EXCHANGE OF A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO OBTAIN INTEREST PAYABLE
PRIOR TO THE EXCHANGE DATE 88
</TABLE>
<PAGE>
CAPSTAR HOTEL COMPANY
Reconciliation and tie between Trust Indenture Act of 1939 (the "1939
Act") and Indenture, dated as of October 16, 1997.
Trust Indenture Act Section Indenture Section
Sec. 310(a)(1)....................... 6.7
(a)(2)......................... 6.7
(b)............................ 6.7, 6.8
Sec. 312(c).......................... 7.1
Sec. 313(a).......................... 7.2
(c)............................ 7.2
Sec. 314(a).......................... 7.3
(a)(4)......................... 10.11
(c)(1)......................... 1.2
(c)(2)......................... 1.2
(e)............................ 1.2
Sec. 315(b).......................... 6.1
Sec. 316(a) (last sentence).......... 1.1 ("Outstanding")
(a)(1)(A)...................... 5.2, 5.12
(a)(1)(B)...................... 5.13
(b)............................ 5.8
Sec. 317(a)(1)....................... 5.3
(a)(2)......................... 5.4
Sec. 318(a).......................... 1.11
(c)............................ 1.11
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
Attention should also be directed to Section 318(c) of the 1939 Act, which
provides that the provisions of Sections 310 to and including 317 of the 1939
Act are a part of and govern every qualified indenture, whether or not
physically contained therein.
<PAGE>
INDENTURE, dated as of October 16, 1997, between CAPSTAR HOTEL COMPANY, a
Delaware corporation (hereinafter called the "Company"), having its principal
office at 1010 Wisconsin Avenue, N.W., Suite 650, Washington, DC 20007 and First
Trust of New York, N.A., a corporation organized under the laws of New York, as
Trustee hereunder (hereinafter called the "Trustee"), having its Corporate Trust
Office at 100 Wall Street, New York, New York 10005.
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for its lawful
purposes subordinated debt securities (hereinafter called the "Securities")
evidencing its unsecured and unsubordinated indebtedness, and has duly
authorized the execution and delivery of this Indenture to provide for the
issuance from time to time of the Securities, unlimited as to principal amount,
to bear interest at the rates or formulas, to mature at such times and to have
such other provisions as shall be fixed as hereinafter provided.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended, that are deemed to be incorporated into this Indenture and
shall, to the extent applicable, be governed by such provisions.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
I.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
A. Definitions. For all purposes of this Indenture, except as
-----------
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the TIA, either
directly or by reference therein, have the meanings assigned to them
therein, and the terms "cash transaction" and "self-liquidating paper," as
used in TIA
<PAGE>
2
Section 311, shall have the meanings assigned to them in the rules of the
Commission adopted under the TIA;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Additional Amounts" means any additional amounts which are required
by a Security or by or pursuant to a Board Resolution, under circumstances
specified therein, to be paid by the Company in respect of certain taxes imposed
on certain Holders and which are owing to such Holders.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 6.11.
"Authorized Newspaper" means a newspaper, printed in the English
language or in an official language of the country of publication, customarily
published on each Business Day, whether or not published on Saturdays, Sundays
or holidays, and of general circulation in each place in connection with which
the term is used or in the financial community of each such place. Whenever
successive publications are required to be made in Authorized Newspapers, the
successive publications may be made in the same or in different Authorized
Newspapers in the same city meeting the foregoing requirements and in each case
on any Business Day.
"Bankruptcy Law" has the meaning specified in Section 5.1.
"Bearer Security" means any Security established pursuant to Section
2.1 which is payable to bearer.
<PAGE>
3
"Board of Directors" means the board of directors of the Company, the
executive committee or any committee of that board duly authorized to act
hereunder.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day," when used with respect to any Place of Payment or any other
particular location referred to in this Indenture or in the Securities, means,
unless otherwise specified with respect to any Securities pursuant to Section
3.1, any day, other than a Saturday or Sunday, that is neither a legal holiday
nor a day on which banking institutions in that Place of Payment or particular
location are authorized or required by law, regulation or executive order to
close.
"CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or its
successor.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
"Common Stock" means, with respect to any Person, capital stock issued by
such Person other than Preferred Stock.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" and "Company Order" mean, respectively, a written request
or order signed in the name of the Company by its Chairman of the Board, the
President or a Vice President, and by its Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee.
"Conversion Event" means the cessation of use of (i) a Foreign Currency
both by the government of the country which issued such currency and for the
settlement of transactions by a central bank or other public institutions of or
within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit
(or composite currency) other than the ECU for the purposes for which it was
established.
<PAGE>
4
"Corporate Trust Office" means the office of the Trustee at which, at any
particular time, its corporate trust business shall be principally administered,
which office at the date hereof is located at .
"corporation" includes corporations, associations, companies and business
trusts.
"coupon" means any interest coupon appertaining to a Bearer Security.
"Custodian" has the meaning specified in Section 5.1.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
"ECU" means the European Currency Unit as defined and revised from time to
time by the Council of the European Communities.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"European Communities" means the European Economic Community, the European
Coal and Steel Community and the European Atomic Energy Community.
"European Monetary System" means the European Monetary System established
by the Resolution of December 5, 1978 of the Council of the European
Communities.
"Event of Default" has the meaning specified in Article Five.
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the ECU issued by the government of one or more
countries other than the United States of America or by any recognized
confederation or association of such governments.
"GAAP" means generally accepted accounting principles, as in effect from
time to time, as used in the United States applied on a consistent basis.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
<PAGE>
5
Currency in which the Securities of a particular series are payable, for the
payment of which its full faith and credit is pledged or (ii) obligations of a
Person controlled or supervised by and acting as an agency or instrumentality of
the United States of America or such government which issued the foreign
currency in which the Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
"Holder" means, in the case of a Registered Security, the Person in whose
name a Security is registered in the Security Register and in the case of a
Bearer Security, the bearer thereof and, when used with respect to any coupon,
shall mean the bearer thereof.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, and shall
include the terms of particular series of Securities established as contemplated
by Section 3.1; provided, however, that, if at any time more than one Person is
-------- -------
acting as Trustee under this instrument, "Indenture" shall mean, with respect to
any one or more series of Securities for which such Person is Trustee, this
instrument as originally executed or as it may from time to time be supplemented
or amended by one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof and shall include the terms of the
particular series of Securities for which such Person is Trustee established as
contemplated by Section 3.1, exclusive, however, of any provisions or terms
which relate solely to other series of Securities for which such Person is
Trustee, regardless of when such terms or provisions were adopted, and exclusive
of any provisions or terms adopted by means of one or more indentures
supplemental hereto executed and delivered after such Person had become such
Trustee but to which such Person, as such Trustee, was not a party.
"Indexed Security" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity may be more or less than the
principal face amount thereof at original issuance.
<PAGE>
6
"interest," when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, shall mean interest
payable after Maturity, and, when used with respect to a Security which provides
for the payment of Additional Amounts pursuant to Section 10.8, includes such
Additional Amounts.
"Interest Payment Date," when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Maturity," when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption, notice of option to elect
repayment or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors, the President or a Vice President and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company or who may be an employee of or other counsel for the Company
and who shall be satisfactory to the Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 5.2.
"Outstanding," when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
or repayment at the option of the Holder money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other than
the Company) in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the Holders of such
Securities and any coupons appertaining thereto, provided that, if such
Securities are be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
<PAGE>
7
(iii) Securities, except to the extent provided in Sections 14.2
and 14.3, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Fourteen;
(iv) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; and
(v) Securities converted into Common Stock or Preferred Stock
pursuant to or in accordance with this Indenture if the terms of such
Securities provide for convertibility pursuant to Section 3.1;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 3.13, (i) the principal amount of an
Original Issue Discount Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the amount of principal thereof that would be (or
shall have been declared to be) due and payable, at the time of such
determination, upon a declaration of acceleration of the maturity thereof
pursuant to Section 5.2, (ii) the principal amount of any Security denominated
in a Foreign Currency that may be counted in making such determination or
calculation and that shall be deemed Outstanding for such purpose shall be equal
to the Dollar equivalent, determined pursuant to Section 3.1 as of the date such
Security is originally issued by the Company, of the principal amount (or, in
the case of an Original Issue Discount Security, the Dollar equivalent as of
such date of original issuance of the amount determined as provided in clause
(i) above) of such Security, (iii) the principal amount of any Indexed Security
that may be counted in making such determination or calculation and that shall
be deemed outstanding for such purpose shall be equal to the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
with respect to such Security pursuant to Section 3.1, and (iv) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee
<PAGE>
8
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities or coupons on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of or within
any series, means the place or places where the principal of (and premium, if
any) and interest on such Securities are payable as specified as contemplated by
Sections 3.1 and 10.2.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains.
"Preferred Stock" means, with respect to any Person, capital shares issued
by such Person that are entitled to a preference or priority over any other
capital shares issued by such Person upon any distribution of such Person's
assets, whether by dividend or upon liquidation.
"Redemption Date," when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price," when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registered Security" shall mean any Security which is registered in the
Security Register.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Registered Securities of or within any series means the date specified
for that purpose as contemplated by Section 3.1, whether or not a Business Day.
<PAGE>
9
"Repayment Date" means, when used with respect to any Security to be repaid
at the option of the Holder, the date fixed for such repayment by or pursuant to
this Indenture.
"Repayment Price" means, when used with respect to any Security to be
repaid at the option of the Holder, the price at which it is to be repaid by or
pursuant to this Indenture.
"Representative" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means the
chairman or vice-chairman of the Board of Directors, the chairman or vice-
chairman of the executive committee of the Board of Directors, the president,
any vice president (whether or not designated by a number or a word or words
added before or after the title "vice president"), the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge and familiarity with the particular
subject.
"Security" has the meaning stated in the first recital of this Indenture
and, more particularly, means any Security or Securities authenticated and
delivered under this Indenture; provided, however, that, if at any time there is
-------- -------
more than one Person acting as Trustee under this Indenture, "Securities" with
respect to the Indenture as to which such Person is Trustee shall have the
meaning stated in the first recital of this Indenture and shall more
particularly mean Securities authenticated and delivered under this Indenture,
exclusive, however, of Securities of any series as to which such Person is not
Trustee.
"Security Register" and Security Registrar" have the respective meanings
specified in Section 3.5.
"Senior Debt" means any obligation of the Company to its creditors whether
now outstanding or subsequently incurred other than (i) any obligation as to
which, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such obligation is not Senior Debt,
and (ii) obligations evidenced by the Securities.
<PAGE>
10
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" (as defined in Article I, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act of 1933) of the Company.
"Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of or within any series means a date fixed by the Trustee
pursuant to Section 3.7.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"Subsidiary" means a corporation a majority of the outstanding voting stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company. For the purposes of this definition, "voting
stock" means stock having voting power for the election of directors, whether at
all times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and as in force at the date as of which this Indenture was executed,
except as provided in Section 9.5.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this Indenture until a Successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder; provided, however, that if
-------- -------
at any time there is more than one such Person, "Trustee" as used with respect
to the Securities of any series shall mean only the Trustee with respect to
Securities of that series.
"United States" means, unless otherwise specified with respect to any
Securities pursuant to Section 3.1, the United States of America (including the
states and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"United States person" means, unless otherwise specified with respect to
any Securities pursuant to Section 3.1, an individual who is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source.
<PAGE>
11
"Yield to Maturity" means the yield to maturity, computed at the time of
issuance of a Security (or, if applicable, at the most recent redetermination of
interest on such Security) and as set forth in such Security in accordance with
generally accepted United States bond yield computation principles.
A. Compliance Certificates and Opinions. Upon any application
------------------------------------
or request by the Company to the Trustee to take any action under any provision
of this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including certificates
delivered pursuant to Section 10.8) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such condition or covenant
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
A. Form of Documents Delivered to Trustee. In any case where
--------------------------------------
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion as to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
<PAGE>
12
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate or representations by counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the opinion, certificate or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel or certificate or
representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information as to such factual matters is in the
possession of the Company, unless such counsel knows that the certificate or
opinion or representations as to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
1. Acts of Holders. Any request, demand, authorization, direction,
---------------
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders of the Outstanding Securities of all series or one or more
series, as the case may be, may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agents duly appointed in writing. If Securities of a series are issuable as
Bearer Securities, any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders of Securities of such series may, alternatively, be embodied in and
evidenced by the record of Holders of Securities of such series voting in favor
thereof, either in person or by proxies duly appointed in writing, at any
meeting of Holders of Securities of such series duly called and held in
accordance with the provisions of the supplemental indenture with respect to
such series, or a combination of such instruments and any such record. Except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments or record or both are delivered to the Trustee
and, where it is hereby expressly required, to the Company. Such instrument or
instruments and any such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments or so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any such agent, or
of the holding by any Person of a Security, shall be sufficient for any purpose
of this Indenture and conclusive in favor of the Trustee and the Company and any
agent of the Trustee or the Company, if made in the manner provided in this
Section.
1. The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or
<PAGE>
13
writing acknowledged to him the execution thereof. Where such execution is by a
signer acting in a capacity other than his individual capacity, such certificate
or affidavit shall also constitute sufficient proof of his authority. The fact
and date of the execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
1. The ownership of Registered Securities shall be proved by the Security
Register.
1. The ownership of Bearer Securities may be proved by the production of
such Bearer Securities or by a certificate executed, as depositary, by any trust
company, bank, banker or other depositary, wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing that at
the date therein mentioned such Person had on deposit with such depositary, or
exhibited to it, the Bearer Securities therein described; or such facts may be
proved by the certificate or affidavit of the Person holding such Bearer
Securities, if such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such ownership of any
Bearer Security continues until (1) another certificate or affidavit bearing a
later date issued in respect of the same Bearer Security is produced, or (2)
such Bearer Security is produced to the Trustee by some other Person, or (3)
such Bearer Security is surrendered in exchange for a Registered Security, or
(4) such Bearer Security is no longer Outstanding. The ownership of Bearer
Securities may also be proved in any other manner which the Trustee deems
sufficient.
1. If the Company shall solicit from the Holders of Registered Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, in or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
--------
the Holders on such
<PAGE>
14
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after the
record date.
In the absence of any such record date fixed by the Company,
regardless as to whether a solicitation of the Holders is occurring on behalf of
the Company or any Holder, the Trustee may, at its option, fix in advance a
record date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Trustee shall have no obligation to do so. Any such record date shall be a date
not more than 30 days prior to the first solicitation of Holders generally in
connection therewith no later than the date of such solicitation.
1. Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent, any Authenticating Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
A. Notices, etc., to Trustee and Company. Any request, demand,
-------------------------------------
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at
or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture or at any other address previously
furnished in writing to the Trustee by the Company.
A. Notice to Holders; Waiver. Where this Indenture provides
-------------------------
for notice of any event to Holders of Registered Securities by the Company or
the Trustee, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each such Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date,
<PAGE>
15
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders of Registered Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders of Registered Securities or the sufficiency of any
notice to Holders of Bearer Securities given as provided herein. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice.
If by reason of the suspension of or irregularities in regular mail service
or by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification to Holders of Registered Securities as shall be
made with the approval of the Trustee shall constitute a sufficient notification
to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified with
respect to any Securities pursuant to Section 3.1, where this Indenture provides
for notice to Holders of Bearer Securities of any event, such notice shall be
sufficiently given if published in an Authorized Newspaper in The City of New
York and in such other city or cities as may be specified in such Securities on
a Business Day, such publication to be not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. Any
such notice shall be deemed to have been given on the date of such publication
or, if published more than once, on the date of the first such publication.
If by reason of the suspension of publication of any Authorized Newspaper
or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither the failure to give notice by
publication to any particular Holder of Bearer Securities as provided above, nor
any defect in any notice so published, shall affect the sufficiency of such
notice with respect to other Holders of Bearer Securities or the sufficiency of
any notice to Holders of Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by
<PAGE>
16
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
A. Effect of Headings and Table of Contents. The Article and Section
----------------------------------------
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
A. Successors and Assigns. All covenants and agreements in this
----------------------
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
B. Separability Clause. In case any provision in this Indenture or in
-------------------
any Security or coupon shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
A. Benefits of Indenture. Nothing in this Indenture or in the Securities
---------------------
or coupons, express or implied, shall give to any Person, other than the parties
hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and
their successors hereunder and the Holders any benefit or any legal or equitable
right, remedy or claim under this Indenture.
A. Governing Law. This Indenture and the Securities and coupons shall
be governed by and construed in accordance with the law of the State of New
York. This Indenture is subject to the provisions of the TIA that are required
to be part of this Indenture and shall, to the extent applicable, be governed by
such provisions.
A. Legal Holidays. In any case where any Interest Payment Date,
--------------
Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or any Security or
coupon other than a provision in the Securities of any series which specifically
states that such provision shall apply in lieu hereof), payment of interest or
any Additional Amounts or principal (and premium, if any) need not be made at
such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund
payment date, or at the Stated Maturity or Maturity, provided that no interest
shall accrue on the amount so payable for the period from and after such
Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment
date, Stated Maturity or Maturity, as the case may be.
A. Personal Immunity from Liability for Incorporators, Stockholders, Etc.
----------------------------------------------------------------------
No recourse shall be had for the payment of the principal of or premium, if any,
or interest, if any, on any Security, or for any claim based thereon, or
<PAGE>
17
otherwise in respect of any Security, or based on or in respect of this
Indenture or any indenture supplemental hereto, against any incorporator, or
against any past, present or future stockholder, director of officers, as such,
of the Company or of any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being expressly waived and released as
a condition of, and as consideration for, the execution of this Indenture and
the issue of Securities.
I.
SECURITIES FORMS
A. Forms of Securities. The Registered Securities, if any, of each
-------------------
series and the Bearer Securities, if any, of each series and related coupons
shall be in substantially the forms as shall be established in one or more
indentures supplemental hereto or approved from time to time by or pursuant to a
Board Resolution in accordance with Section 3.1, shall have such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture or any indenture supplemental hereto, and may have
such letters, numbers or other marks of identification or designation and such
legends or endorsements placed thereon as the Company may deem appropriate and
as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Securities may be listed, or to conform to usage.
Unless otherwise specified as contemplated by Section 3.1, Bearer
Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or coupons, as evidenced by
their execution of such Securities or coupons.
A. Form of Trustee's Certificate of Authentication. Subject to Section
-----------------------------------------------
6.11, the Trustee's certificate of authentication shall be in substantially the
following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
<PAGE>
18
First Trust of New York, N.A.,
as Trustee
By: ,
Authorized Signatory
A. Securities Issuable in Global Form. If Securities of or within a
----------------------------------
series are issuable in global form, as specified as contemplated by Section 3.1,
then, notwithstanding clause (8) of Section 3.1 and the provisions of Section
3.2, any such Security shall represent such of the Outstanding Securities of
such series as shall be specified therein and may provide that it shall
represent the aggregate amount of Outstanding Securities of such series from
time to time endorsed thereon and that the aggregate amount of Outstanding
Securities of such series represented thereby may from time to time be increased
or decreased to reflect exchanges. Any endorsement of a Security in global form
to reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby shall be made by the Trustee in such manner and
upon instructions given by such Person or Persons as shall be specified therein
or in the Company Order to be delivered to the Trustee pursuant to Section 3.3
or 3.4. Subject to the provisions of Section 3.3 and, if applicable, Section
3.4, the Trustee shall deliver and redeliver any Security in permanent global
form in the manner and upon instructions given by the Person or Persons
specified therein or in the applicable Company Order. If a Company Order
pursuant to Section 3.3 or 3.4 has been, or simultaneously is, delivered, any
instructions by the Company with respect to endorsement or delivery or
redelivery of a Security in global form shall be in writing but need not comply
with Section 1.2 and need not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 3.3 shall apply to any
Security represented by a Security in global form if such Security was never
issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 1.2 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 3.3.
Notwithstanding the provisions of Section 3.7, unless otherwise specified
as contemplated by Section 3.1, payment of principal of and any premium and
interest on any Security in permanent global form shall be made to the Person or
Persons specified therein.
Notwithstanding the provisions of Section 3.8 and except as provided in the
preceding paragraph, the Company, the Trustee and any agent of the Company and
<PAGE>
19
the Trustee shall treat as the Holder of such principal amount of Outstanding
Securities represented by a permanent global Security (i) in the case of a
permanent global Security in registered form, the Holder of such permanent
global Security in registered form, or (ii) in the case of a permanent global
Security in bearer form, Euroclear or CEDEL.
I.
THE SECURITIES
A. Amount Unlimited; Issuable in Series. The aggregate
------------------------------------
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in one or more Board Resolutions or pursuant to authority granted by
one or more Board Resolutions and, subject to Section 3.3, set forth, or
determined in the manner provided, in an Officers' Certificate, or established
in one or more indentures supplemental hereto, prior to the issuance of
Securities of any series, any or all of the following, as applicable (each of
which (except for the matters set forth in clauses (1), (2) and (15) below), if
so provided, may be determined from time to time by the Company with respect to
unissued Securities of the series when issued from time to time):
(1) the title of the Securities of the series (which shall
distinguish the Securities of such series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6, 11.7 or 13.5);
(3) the date or dates, or the method by which such date or dates will
be determined, on which the principal of the Securities of the series shall
be payable;
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, or the method by which such rate or rates shall be
determined, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the Interest
Payment Dates on which such interest will be payable and the Regular Record
Date, if any, for the
<PAGE>
20
interest payable on any Registered Security on any Interest Payment Date,
or the method by which such date shall be determined, and the basis upon
which interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(5) the place or places, if any, other than or in addition to the
Borough of Manhattan, The City of New York, where the principal of (and
premium, if any), interest, if any, on, and Additional Amounts, if any,
payable in respect of, Securities of the series shall be payable, any
Registered Securities of the series may be surrendered for registration of
transfer, exchange or conversion and notices or demands to or upon the
Company in respect of the Securities of the series and this Indenture may
be served;
(6) the period or periods within which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and other terms and conditions upon which Securities
of the series may be redeemed, in whole or in part, at the option of the
Company, if the Company is to have the option;
(7) the obligation, if any, of the Company to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which or the date or dates on which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and other terms and conditions upon which Securities
of the series shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Registered Securities of the series
shall be issuable and, if other than the denomination of $5,000, the
denomination or denominations in which any Bearer Securities of the series
shall be issuable;
(9) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent;
(10) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series that shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 5.2
or, if applicable, the portion of the principal amount of Securities of the
series that is convertible in accordance with the provisions of this
Indenture, or the method by which such portion shall be determined;
<PAGE>
21
(11) if other than Dollars, the Foreign Currency or Currencies in
which payment of the principal of (and premium, if any) or interest or
Additional Amounts, if any, on the Securities of the series shall be
payable or in which the Securities of the series shall be denominated;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on the Securities of the series may be determined
with reference to an index, formula or other method (which index, formula
or method may be based, without limitation, on one or more currencies,
currency units, composite currencies, commodities, equity indices or other
indices), and the manner in which such amounts shall be determined;
(13) whether the principal of (and premium, if any) or interest or
Additional Amounts, if any, on the Securities of the series are to be
payable, at the election of the Company or a Holder thereof, in a currency
or currencies, currency unit or units or composite currency or currencies
other than that in which such Securities are denominated or stated to be
payable, the period or periods within which, and the terms and conditions
upon which, such election may be made, and the time and manner of, and
identity of the exchange rate agent with responsibility for, determining
the exchange rate between the currency or currencies, currency unit or
units or composite currency or currencies in which such Securities are
denominated or stated to be payable and the currency or currencies,
currency unit or units or composite currency or currencies in which such
Securities are to be so payable;
(14) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to Securities of the
series, whether or not such Events of Default or covenants are consistent
with the Events of Default or covenants set forth herein;
(16) whether Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or both,
any restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may be
exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Securities of
the series are to be issuable initially in temporary global form and
whether any Securities of the series are to be issuable in permanent global
form with or without coupons and, if so, whether beneficial owners of
interests in any such permanent global Security may exchange such interests
for Securities of such series and of like tenor of any authorized form
<PAGE>
22
and denomination and the circumstances under which any such exchanges may
occur, if other than in the manner provided in Section 3.5, and, if
Registered Securities of the series are to be issuable as a global
Security, the identity of the depositary for such series;
(17) the date as of which any Bearer Securities of the series and any
temporary global Security representing Outstanding Securities of the series
shall be dated if other than the date of original issuance of the first
Security of the series to be issued;
(18) the Person to whom any Interest on any Registered Security of
the series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Security of the
series shall be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on a
temporary global Security on an Interest Payment Date will be paid if other
than in the manner provided in Section 3.4;
(19) the applicability, if any, of Sections 14.2 and/or 14.3 to the
Securities of the series and any provisions in modification of, in addition
to or in lieu of any of the provisions of Article Fourteen;
(20) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, then
the form and/or terms of such certificates, documents or conditions;
(21) if the Securities of the series are to be issued upon the
exercise of warrants, the time, manner and place for such Securities to be
authenticated and delivered;
(22) whether and under what circumstances the Company will pay
Additional Amounts on the Securities of the series to any Holder who is not
a United States person (including any modification to the definition of
such term) in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such Securities
rather than pay such Additional Amounts (and the terms of any such option);
(23) the obligation, if any, of the Company to permit the conversion
of the Securities of such series into the Company's Common Stock or
Preferred
<PAGE>
23
Stock, as the case may be, and the terms and conditions upon which such
conversion shall be effected (including, without limitation, the initial
conversion price or rate, the conversion period, any adjustment of the
applicable conversion price and any requirements relative to the
reservation of such shares for purposes of conversion); and
(24) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to any
Bearer Securities of such series shall be substantially identical except, in the
case of Registered Securities, as to denomination and except as may otherwise be
provided in or pursuant to such Board Resolution (subject to Section 3.3) and
set forth in such Officers' Certificate or in any such indenture supplemental
hereto. All Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the Holders, for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established by
action taken pursuant to one or more Board Resolutions, a copy of an appropriate
record of such action(s) shall be certified by the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers' Certificate setting forth the terms of the Securities
of such series.
A. Denominations. The Securities of each series shall be
-------------
issuable in such denominations as shall be specified as contemplated by Section
3.1. With respect to Securities of any series denominated in Dollars, in the
absence of any such provisions with respect to the Securities of any series, the
Registered Securities of such series, other than Registered Securities issued in
global form (which may be of any denomination), shall be issuable in
denominations of $1,000 and any integral multiple thereof and the Bearer
Securities of such series, other than Bearer Securities issued in global form
(which may be of any denomination), shall be issuable in a denomination of
$5,000.
A. Execution, Authentication, Delivery and Dating. The
----------------------------------------------
Securities and any coupons appertaining thereto shall be executed on behalf of
the Company by its Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon, and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities and coupons may be manual or facsimile signatures of
the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
<PAGE>
24
Securities or coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities or coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series, together with any
coupon appertaining thereto, executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; provided, however, that,
-------- -------
in connection with its original issuance, no Bearer Security shall be mailed or
otherwise delivered to any location in the United States; and provided further
-------- -------
that, unless otherwise specified with respect to any series of Securities
pursuant to Section 3.1, a Bearer Security may be delivered in connection with
its original issuance only if the Person entitled to receive such Bearer
Security shall have furnished a certificate to Euroclear or CEDEL, as the case
may be, in the form set forth in Exhibit A-1 to this Indenture or such other
certificate as may be specified with respect to any series of Securities
pursuant to Section 3.1, dated no earlier than 15 days prior to the earlier of
the date on which such Bearer Security is delivered and the date on which any
temporary Security first becomes exchangeable for such Bearer Security in
accordance with the terms of such temporary Security and this Indenture. If any
Security shall be represented by a permanent global Bearer Security, then, for
purposes of this Section and Section 3.4, the notation of a beneficial owner's
interest therein upon original issuance of such Security or upon exchange of a
portion of a temporary global Security shall be deemed to be delivery in
connection with its original issuance of such beneficial owner's interest in
such permanent global Security. Except as permitted by Section 3.6, the Trustee
shall not authenticate and deliver any Bearer Security unless all appurtenant
coupons for interest then matured have been detached and canceled.
If all the Securities of any series are not to be issued at one time and if
the Board Resolution or supplemental indenture establishing such series shall so
permit, such Company Order may set forth procedures acceptable to the Trustee
for the issuance of such Securities and determining the terms of particular
Securities of such series, such as interest rate or formula, maturity date, date
of issuance and date from which interest shall accrue. In authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to TIA Section 315(a) through 315(d)) shall be fully protected in
relying upon,
(i) an Opinion of Counsel stating that
<PAGE>
25
(a) the form or forms of such Securities and any coupons have
been established in conformity with the provisions of this Indenture;
(b) the terms of such Securities and any coupons have been
established in conformity with the provisions of this Indenture; and
(c) such Securities, together with any coupons appertaining the
completed by appropriate insertions and executed and delivered by the
Company to the Trustee for authentication in accordance with this
Indenture, authenticated and delivered by the Trustee in accordance
with this Indenture and issued by the Company in the manner and
subject to any conditions specified in such Opinion of Counsel, will
constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting the enforcement of
creditors' rights generally and to general equitable principles; and
(ii) an Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the issuance of the Securities
have been complied with and that, to the best of the knowledge of the
signers of such certificate, no Event of Default with respect to any of
the Securities shall have occurred and be continuing.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all the Securities of any series are not to be issued at one time,
it shall not be necessary to deliver an Officers' Certificate otherwise required
pursuant to Section 3.1 or a Company Order, or an Opinion of Counsel or an
Officers' Certificate otherwise required pursuant to the preceding paragraph at
the time of issuance of each Security of such series, but such order, opinion
and certificates, with appropriate modifications to cover such future issuances,
shall be delivered at or before the time of issuance of the first Security of
such series.
Each Registered Security shall be dated the date of its authentication
and each Bearer Security shall be dated as of the date specified as contemplated
by Section 3.1.
<PAGE>
26
No Security or coupon shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Security
or Security to which such coupon appertains a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee by
manual signature of an authorized signatory, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture. Notwithstanding the foregoing, if any Security
shall have been authenticated and delivered hereunder but never issued and sold
by the Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9 together with a written statement (which
need not comply with Section 1.2 and need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
1. Temporary Securities. Pending the preparation of definitive
--------------------
Securities of any series, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued, in registered form, or, if authorized, in bearer form
with one or more coupons or without coupons, and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities. In the case of Securities of any series, such
temporary Securities may be in global form.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with Section 3.4(b) or as otherwise provided in or
pursuant to a Board Resolution), if temporary Securities of any series are
issued, the Company will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series
(accompanied by any non-matured coupons appertaining thereto), the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall be
-------- -------
delivered in exchange for a temporary Registered Security; and provided further
-------- -------
that a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 3.3.
Until so exchanged, the temporary Securities of any series shall in
<PAGE>
27
all respects be entitled to the same benefits under this Indenture as definitive
Securities of such series.
1. Unless otherwise provided in or pursuant to a Board Resolution, this
Section 3.4(b) shall govern the exchange of temporary Securities issued in
global form other than through the facilities of The Depository Trust Company.
If any such temporary Security is issued in global form, then such temporary
global Security shall, unless otherwise provided therein, be delivered to the
London office of a depositary or common depositary (the "Common Depositary"),
for the benefit of Euroclear and CEDEL, for credit to the respective accounts of
the beneficial owners of such Securities (or to such other accounts as they may
direct).
Without unnecessary delay but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary global
Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Company. On or after
the Exchange Date, such temporary global Security shall be surrendered by the
Common Depositary to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary global Security to be
exchanged. The definitive Securities to be delivered in exchange for any such
temporary global Security shall be in bearer form, registered form, permanent
global bearer form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 3.1, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof; provided,
--------
however, that, unless otherwise specified in such temporary global Security,
- -------
upon such presentation by the Common Depositary, such temporary global Security
is accompanied by a certificate dated the Exchange Date or a subsequent date and
signed by Euroclear as to the portion of such temporary global Security held for
its account then to be exchanged and a certificate dated the Exchange Date or a
subsequent date and signed by CEDEL as to the portion of such temporary global
Security held for its account then to be exchanged, each in the form set forth
in Exhibit A-2 to this Indenture or in such other form as may be established
pursuant to Section 3.1; and provided further that definitive Bearer Securities
-------- -------
shall be delivered in exchange for a portion of a temporary global Security only
in compliance with the requirements of Section 3.3.
Unless otherwise specified in such temporary global Security, the interest
of a beneficial owner of Securities of a series in a temporary global Security
shall be exchanged for definitive Securities of the same series and of like
tenor following the Exchange Date when the account holder instructs Euroclear or
CEDEL,
<PAGE>
28
as the case may be, to request such exchange on his behalf and delivers to
Euroclear or CEDEL, as the case may be, a certificate in the form set forth in
Exhibit A-1 to this Indenture (or in such other form as may be established
pursuant to Section 3.1), dated no earlier than 15 days prior to the Exchange
Date, copies of which certificate shall be available from the offices of
Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such
series of Securities and each Paying Agent. Unless otherwise specified in such
temporary global Security, any such exchange shall be made free of charge to the
beneficial owners of such temporary global Security, except that a Person
receiving definitive Securities must bear the cost of insurance, postage,
transportation and the like unless such Person takes delivery of such definitive
Securities in person at the offices of Euroclear or CEDEL. Definitive Securities
in bearer form to be delivered in exchange for any portion of a temporary global
Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 3.1, interest payable on a temporary global Security
on an Interest Payment Date for Securities of such series occurring prior to the
applicable Exchange Date shall be payable to Euroclear and CEDEL on such
Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee of a
certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other forms as may be established pursuant to Section
3.1), for credit without further interest on or after such Interest Payment Date
to the respective accounts of Persons who are the beneficial owners of such
temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated no
earlier than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such
other forms as may be established pursuant to Section 3.1). Notwithstanding
anything to the contrary herein contained, the certifications made pursuant to
this paragraph shall satisfy the certification requirements of the preceding two
paragraphs of this Section 3.4(b) and of the third paragraph of Section 3.3 of
this Indenture and the interests of the Persons who are the beneficial owners of
the temporary global Security with respect to which such certification was made
will be exchanged for definitive Securities of the same series and of like tenor
on the Exchange Date or the date of certification if such date occurs after the
Exchange Date, without further act or deed by such beneficial owners. Except as
otherwise provided in this paragraph, no payments of principal or interest owing
with respect to a beneficial interest in a temporary global Security will be
made unless and until such interest in such temporary global Security shall have
been exchanged for an interest in a definitive Security. Any interest so
received by Euroclear and CEDEL and not paid as herein provided shall be
returned to the Trustee prior to the expiration of two years after such Interest
Payment Date in order to be repaid to the Company.
<PAGE>
29
A. Registration, Registration of Transfer and Exchange. The Company
---------------------------------------------------
shall cause to be kept at the Corporate Trust Office of the Trustee or in any
office or agency of the Company in a Place of Payment a register for each series
of Securities (the registers maintained in such office or in any such office or
agency of the Company in a Place of Payment being herein sometimes referred to
collectively as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Registered Securities and of transfers of Registered Securities. The
Security Register shall be in written form or any other form capable of being
converted into written form within a reasonable time. The Trustee, at its
Corporate Trust Office, is hereby initially appointed "Security Registrar" for
the purpose of registering Registered Securities and transfers of Registered
Securities on such Security Register as herein provided. In the event that the
Trustee shall cease to be Security Registrar, it shall have the right to examine
the Security Register at all reasonable times.
Subject to the provisions of this Section 3.5, upon surrender for
registration of transfer of any Registered Security of any series at any office
or agency of the Company in a Place of Payment for that series, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Registered Securities
of the same series, of any authorized denominations and of a like aggregate
principal amount, bearing a number not contemporaneously outstanding, and
containing identical terms and provisions.
Subject to the provisions of this Section 3.5, at the option of the Holder,
Registered Securities of any series may be exchanged for other Registered
Securities of the same series, of any authorized denomination or denominations
and of a like aggregate principal amount, containing identical terms and
provisions, upon surrender of the Registered Securities to be exchanged at any
such office or agency. Whenever any such Registered Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive. Unless otherwise specified with respect to any
series of Securities as contemplated by Section 3.1, Bearer Securities may not
be issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution and (subject
to Section 3.3) set forth in the applicable Officers' Certificate, or in any
indenture supplemental hereto, delivered as contemplated by Section 3.1, at the
option of the Holder, Bearer Securities of any series may be exchanged for
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Bearer
Securities to be exchanged at any such office or agency, with all unmatured
coupons and all matured coupons in default thereto appertaining. If the Holder
of a Bearer Security is unable to produce any such
<PAGE>
30
unmatured coupon or coupons or matured coupon or coupons in default, any such
permitted exchange may be effected if the Bearer Securities are accompanied by
payment in funds acceptable to the Company in an amount equal to the face amount
of such missing coupon or coupons, or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee if there is furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall surrender
to any Paying Agent any such missing coupon in respect of which such a payment
shall have been made, such Holder shall be entitled to receive the amount of
such payment; provided, however, that, except as otherwise provided in Section
-------- -------
10.2, interest represented by coupons shall be payable only upon presentation
and surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be, and
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon then due in accordance
with the provisions of this Indenture. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 3.1, any permanent global Security shall be exchangeable
only as provided in this paragraph. If the depositary for any permanent global
Security is The Depository Trust Company ("DTC"), then, unless the terms of such
global Security expressly permit such global Security to be exchanged in whole
or in part for definitive Securities, a global Security may be transferred, in
whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC,
or to a successor to DTC for such global Security selected or approved by the
Company or to a nominee of such successor to DTC. If at any time DTC notifies
the Company that it is unwilling or unable to continue as depositary for the
applicable global Security or Securities or if at any time DTC ceases to be a
clearing agency registered under the Securities Exchange Act of 1934 if so
required by applicable law or regulation, the Company shall appoint a successor
depositary with respect to such global Security or Securities. If (x) a
successor depositary for such global Security or Securities is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of
<PAGE>
31
such unwillingness, inability or ineligibility, (y) an Event of Default has
occurred and is continuing and the beneficial owners representing a majority in
principal amount of the applicable series of Securities represented by such
global Security or Securities advise DTC to cease acting as depositary for such
global Security or Securities or (z) the Company, in its sole discretion,
determines at any time that all Outstanding Securities (but not less than all)
of any series issued or issuable in the form of one or more global Securities
shall no longer be represented by such global Security or Securities, then the
Company shall execute, and the Trustee shall authenticate and deliver definitive
Securities of like series, rank, tenor and terms in definitive form in an
aggregate principal amount equal to the principal amount of such global Security
or Securities. If any beneficial owner of an interest in a permanent global
Security is otherwise entitled to exchange such interest for Securities of such
series and of like tenor and principal amount of another authorized form and
denomination, as specified as contemplated by Section 3.1 and provided that any
applicable notice provided in the permanent global Security shall have been
given, then without unnecessary delay but in any event not later than the
earliest date on which such interest may be so exchanged, the Company shall
execute, and the Trustee shall authenticate and deliver definitive Securities in
aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security. On or after the earliest
date on which such interests may be so exchanged, such permanent global Security
shall be surrendered for exchange by DTC or such other depositary as shall be
specified in the Company Order with respect thereto to the Trustee, as the
Company's agent for such purpose; provided, however, that no such exchanges may
-------- -------
occur during a period beginning at the opening of business 15 days before any
selection of Securities to be redeemed and ending on the relevant Redemption
Date if the Security for which exchange is requested may be among those selected
for redemption; and provided further that no Bearer Security delivered in
-------- -------
exchange for a portion of a permanent global Security shall be mailed or
otherwise delivered to any location in the United States. If a Registered
Security is issued in exchange for any portion of a permanent global Security
after the close of business at the office or agency where such exchange occurs
on (i) any Regular Record Date and before the opening of business at such office
or agency on the relevant Interest Payment Date, or (ii) any Special Record Date
and the opening of business at such office or agency on the related proposed
date for payment of Defaulted Interest, interest or Defaulted Interest, as the
case may be, will not be payable on such Interest Payment Date or proposed date
for payment, as the case may be, in respect of such Registered Security, but
will be payable on such Interest Payment Date or proposed date for payment, as
the case may be, only to the Person to whom interest in respect of such portion
of such permanent global Security is payable in accordance with the provisions
of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and
<PAGE>
32
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6, 11.7 or 13.5 not involving any transfer.
The Company or the Trustee, as applicable, shall not be required (i) to
issue, register the transfer of or exchange any Security if such Security may be
among those selected for redemption during a period beginning at the opening of
business 15 days before selection of the Securities to be redeemed under Section
11.3 and ending at the close of business on (A) if such Securities are issuable
only as Registered Securities, the day of the mailing of the relevant notice of
redemption and (B) if such Securities are issuable as Bearer Securities, the day
of the first publication of the relevant notice of redemption or, if such
Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Registered Security so selected for
redemption in whole or in part, except, in the case of any Registered Security
to be redeemed in part, the portion thereof not to be redeemed, or (iii) to
exchange any Bearer Security so selected for redemption except that such a
Bearer Security may be exchanged for a Registered Security of that series and
like tenor, provided that such Registered Security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Security which has been surrendered for repayment at the option of
the Holder, except the portion, if any, of such Security not to be so repaid.
A. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated
------------------------------------------------
Security or a Security with a mutilated coupon appertaining to it is surrendered
to the Trustee or the Company, together with, in proper cases, such security or
indemnity as may be required by the Company or the Trustee to save each of them
or any agent of either of them harmless, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a new Security of
the same series and principal amount, containing identical terms and provisions
and bearing a number not contemporaneously outstanding, with coupons
corresponding to the coupons, if any, appertaining to the surrendered Security.
<PAGE>
33
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security or
coupon, and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security or coupon has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs in case any
such mutilated, destroyed, lost or stolen Security or coupon has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, with coupons corresponding to the coupons, if any,
appertaining to such destroyed, lost or stolen Security or to the Security to
which such destroyed, lost or stolen coupon appertains, pay such Security or
coupon; provided, however, that payment of principal of (and premium, if any),
-------- -------
any interest on and any Additional Amounts with respect to, Bearer Securities
shall, except as otherwise provided in Section 10.2, be payable only at an
office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 3.1, any interest on Bearer Securities
shall be payable only upon presentation and surrender of the coupons
appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen coupon appertains,
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security and its coupons, if any,
or the destroyed, lost or stolen coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and their
coupons, if any, duly issued hereunder.
<PAGE>
34
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities or coupons.
A. Payment of Interest; Interest Rights Preserved. Except as otherwise
----------------------------------------------
specified with respect to a series of Securities in accordance with the
provisions of Section 3.1, interest on any Registered Security that is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest at the office or agency of the Company maintained for such
purpose pursuant to Section 10.2; provided, however, that each installment of
-------- -------
interest on any Registered Security may at the Company's option be paid by (i)
mailing a check for such interest, payable to or upon the written order of the
Person entitled thereto pursuant to Section 3.8, to the address of such Person
as it appears on the Security Register or (ii) transfer to an account maintained
by the payee located inside the United States.
Unless otherwise provided as contemplated by Section 3.1 with respect to
the Securities of any series, payment of interest may be made, in the case of a
Bearer Security, by transfer to an account maintained by the payee with a bank
located outside the United States.
Unless otherwise provided as contemplated by Section 3.1, every permanent
global Security will provide that interest, if any, payable on any Interest
Payment Date will be paid to DTC, Euroclear and/or CEDEL, as the case may be,
with respect to that portion of such permanent global Security held for its
account by Cede & Co. or the Common Depositary, as the case may be, for the
purpose of permitting such party to credit the interest received by it in
respect of such permanent global Security to the accounts of the beneficial
owners thereof.
In case a Bearer Security of any series is surrendered in exchange for a
Registered Security of such series after the close of business (at an office or
agency in a Place of Payment for such series) on any Regular Record Date and
before the opening of business (at such office or agency) on the next succeeding
Interest Payment Date, such Bearer Security shall be surrendered without the
coupon relating to such Interest Payment Date and interest will not be payable
on such Interest Payment Date in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the provisions of this Indenture.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 3.1, any interest on any Registered
Security of any series that is payable, but is not punctually paid or duly
provided for, on any
<PAGE>
35
Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the registered Holder thereof on the relevant Regular Record
Date by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Registered Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Registered Security of such series and the date of the
proposed payment (which shall not be less than 20 days after such notice is
received by the Trustee), and at the same time the Company shall deposit
with the Trustee an amount of money in the currency or currencies, currency
unit or units or composite currency or currencies in which the Securities
of such series are payable (except as otherwise specified pursuant to
Section 3.1 for the Securities of such series) equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit on or prior
to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more that 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Registered Securities of
such series at his address as it appears in the Security Register not less
than 10 days prior to such Special Record Date. The Trustee may, in its
discretion, in the name and at the expense of the Company, cause a similar
notice to be published at least once in an Authorized Newspaper in each
place of payment, but such publications shall not be a condition precedent
to the establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid to
the Persons in whose names the Registered Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2). In case a Bearer Security of any
series is surrendered at the office or agency in a Place of Payment for
such series in exchange for a Registered Security of such series after the
close of business at such office or agency on any Special Record Date
<PAGE>
36
and before the opening of business at such office or agency on the related
proposed date for payment of Defaulted Interest, such Bearer Security shall
be surrendered without the coupon relating to such proposed date of payment
and Defaulted Interest will not be payable on such proposed date of payment
in respect of the Registered Security issued in exchange for such Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the provisions of this Indenture.
(2) The Company may make payment of any Defaulted Interest on the
Registered Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 3.5,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
A. Persons Deemed Owners. Prior to due presentment of a Registered
---------------------
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Registered
Security is registered as the owner of such Security for the purpose of
receiving payment or principal of (and premium, if any), and (subject to
Sections 3.5 and 3.7) interest on, such Registered Security and for all other
purposes whatsoever, whether or not such Registered Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto
shall pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the Holder of any Bearer Security and the Holder of any
coupon as the absolute owner of such Security or coupon for the purpose of
receiving payment thereof or on account thereof and for all other purposes
whatsoever, whether or not such Security or coupon be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
<PAGE>
37
Notwithstanding the foregoing, with respect to any global Security, nothing
herein shall prevent the Company, the Trustee, or any agent of the Company or
the Trustee, from giving effect to any written certification, proxy or other
authorization furnished by any depositary, as a Holder, with respect to such
global Security or impair, as between such depositary and owners of beneficial
interests in such global Security, the operation of customary practices
governing the exercise of the rights of such depositary (or its nominee) as
Holder of such global Security.
A. Cancellation. All Securities and coupons surrendered for payment,
------------
redemption, repayment at the option of the Holder, registration of transfer or
exchange or for credit against any sinking fund payment shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee, and any such
Securities and coupons and Securities and coupons surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold, and all
Securities so delivered shall be promptly canceled by the Trustee. If the
Company shall so acquire any of the Securities however, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Securities unless and until the same are surrendered to the Trustee for
cancellation. No Securities shall be authenticated in lieu of or in exchange
for any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. Canceled Securities and coupons held by the
Trustee shall be destroyed by the Trustee and the Trustee shall deliver a
certificate of such destruction to the Company, unless by a Company Order the
Company directs their return to it.
A. Computation of Interest. Except as otherwise specified as
-----------------------
contemplated by Section 3.1 with respect to Securities of any series, interest
on the Securities of each series shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
I.
SATISFACTION AND DISCHARGE
A. Satisfaction and Discharge of Indenture. This Indenture shall upon
---------------------------------------
Company Request cease to be of further effect with respect to any series of
Securities specified in such Company Request (except as to any surviving rights
of registration of transfer or exchange of Securities of such series herein
expressly provided for and any right to receive Additional Amounts, and the
Trustee, upon
<PAGE>
38
receipt of a Company Order, and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture as
to such series when
(1) either
(A) all Securities of such series theretofore authenticated and
delivered and all coupons, if any, appertaining thereto (other than
(i) coupons appertaining to Bearer Securities surrendered for exchange
for Registered Securities and maturing after such exchange, whose
surrender is not required or has been waived as provided in Section
3.5, (ii) Securities and coupons of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 3.6, (iii) coupons appertaining to Securities
called for redemption and maturing after the relevant Redemption Date,
whose surrender has been waived as provided in Section 11.6, and (iv)
Securities and coupons of such series for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the
Trustee for cancellation; or
(B) all Securities of such series and, in the case of (i) or
(ii) below, any coupons appertaining thereto not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) if redeemable at the option of the Company,
are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose (A) an amount of money in the
currency or currencies, currency unit or units or composite currency
or currencies in which the Securities of such series are payable, (B)
Government Obligations that through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will
provide, not later
<PAGE>
39
than on day before the due date of any payment, money in an amount, or
(C) a combination thereof, sufficient to pay and discharge the entire
indebtedness on such Securities and such coupons not theretofore
delivered to the Trustee for cancellation, for principal (and premium,
if any) and interest, and any Additional Amounts with respect thereto,
to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date,
as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee and any predecessor Trustee under
Section 6.6, the obligations of the Company to any Authenticating Agent under
Section 6.11 and, if money shall have been deposited with and held by the
Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations
of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall
survive.
A. Application of Trust Funds. Subject to the provisions of
--------------------------
the last paragraph of Section 10.3, all money deposited with the Trustee
pursuant to Section 4.1 shall be held in trust and applied by it, in accordance
with the provisions of the Securities, the coupons and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any), and any interest and
Additional Amounts for whose payment such money has been deposited with or
received by the Trustee, but such money need not be segregated from other funds
except to the extent required by law.
<PAGE>
I.
REMEDIES
A. Events of Default. "Event of Default," wherever used herein with respect
-----------------
to any particular series of Securities, means any one of the following events
(whatever the reason for such Event of Default and whether or not it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon or any Additional
Amounts payable in respect of any Security of that series or of any coupon
appertaining thereto, when such interest, Additional Amounts or coupon
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series when it becomes due and payable at its
Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of any Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture with respect to any Security of
that series (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to the Company
by the trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
or
(5) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it
in an involuntary case,
<PAGE>
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of either of its property,
or
(C) orders the liquidation of the Company or any Significant
Subsidiary,
and the order or decree remains unstayed and in effect for 90 days; or
(7) any other Event of Default provided with respect to Securities of
that series.
As used in this Section 5.1, the term "Bankruptcy Law" means title 11, U.S. Code
or any similar Federal or State law for the relief of debtors and the term
Custodian means any receiver, trustee, assignee, liquidator or other similar
official under any Bankruptcy Law.
A. Acceleration of Maturity; Rescission and Annulment. If an Event of
--------------------------------------------------
Default with respect to Securities of any series at the time Outstanding occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities of that series
may declare the principal (or, if any Securities are Original Issue Discount
Securities or Indexed Securities, such portion of the principal as may be
specified in the terms thereof) of all the Securities of that series to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the Holders), and upon any such declaration such principal
or specified portion thereof shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided,
<PAGE>
the Holders of a majority in principal amount of the Outstanding Securities of
that series, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay in the currency, currency unit or composite currency in
which the Securities of such series are payable (except as otherwise
specified pursuant to Section 3.1 for the Securities of such series):
(A) all overdue installments of interest on and any
Additional Amounts payable in respect of all Outstanding Securities of
that series and any related coupons,
(B) the principal of (and premium, if any, on) any
Outstanding Securities of that series which have become due otherwise
than by such declaration of acceleration and interest thereon at the
rate or rates borne by or provided for in such Securities,
(C) to the extent that payment of such interest as lawful,
interest upon overdue installments of interest and any Additional
Amounts at the rate or rates borne by or provided for in such
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the nonpayment of the principal of (or premium, if any) or
interest on Securities of that series which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
A. Collection of Indebtedness and Suits for Enforcement by Trustee. The
---------------------------------------------------------------
Company covenants that if:
(1) default is made in the payment of any installment of interest or
Additional Amounts, if any, on any Security of any series and any related
coupon when such interest or Additional Amount becomes due and payable and
such default continues for a period of 30 days, or
<PAGE>
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security of any series at its Maturity,
then the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities of such series and coupons, the whole
amount then due and payable on such Securities and coupons for principal (and
premium, if any) and interest and Additional Amount, with interest upon any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installments of interest
or Additional Amounts, if any, at the rate or rates borne by or provided for in
such Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities of such series and
collect the moneys adjudged decreed to be payable in the manner provided by law
out of the property if the Company or any other obligor upon such Securities of
such series, wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
related coupons by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
A. Trustee 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 the Company or
any other obligor upon the Securities or the property of the Company or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Securities of any series shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal, premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Securities of such series, of
<PAGE>
principal (and premium, if any) and interest and Additional Amounts, if
any, owing and unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series and coupons to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or coupon any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or coupons or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder of a
Security or coupon in any such proceeding.
A. Trustee May Enforce Claims Without Possession of Securities or Coupons.
----------------------------------------------------------------------
All rights of action and claims under this Indenture or any of the
Securities or coupons may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities and
coupons in respect of which such judgment has been recovered.
A. Application of Money Collected. Any money collected by the Trustee
------------------------------
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest and any Additional
Amounts, upon
<PAGE>
presentation of the Securities or coupons, or both, as the case may be, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.6;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium, if any) and interest and
any Additional Amounts payable, in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the aggregate amounts due and payable on
such Securities and coupons for principal (and premium, if any), interest
and Additional Amounts, respectively; and
THIRD: To the payment of the remainder, if any, to the Company.
A. Limitation on Suits. No Holder of any Security of any series or any
-------------------
related coupon shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to
<PAGE>
obtain or to seek to obtain priority or preference over any other of such
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all such Holders.
A. Unconditional Right of Holders to Receive Principal, Premium, if any,
---------------------------------------------------------------------
Interest and Additional Amounts. Notwithstanding any other provision in this
- -------------------------------
Indenture, the Holder of any Security or coupon shall have the right which is
absolute and unconditional to receive payment of the principal of (and premium,
if any) and (subject to Sections 3.5 and 3.7) interest on, and any Additional
Amounts in respect of, such Security or payment of such coupon on the respective
due dates expressed in such Security or coupon (or, in the case of redemption,
on the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
A. Restoration of Rights and Remedies. If the Trustee or any Holder of a
----------------------------------
Security or coupon has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case, the Company, the Trustee and the Holders of
Securities and coupons shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
A. Rights and Remedies Cumulative. Except as otherwise provided with
------------------------------
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities or coupons in the last paragraph of Section 3.6, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders of Securities
or coupons is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
A. Delay or Omission Not Waiver. No delay or omission of the Trustee or
----------------------------
of any Holder of any Security or coupon to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders of Securities or coupons, as the case may be.
<PAGE>
A. Control by Holders of Securities. The Holders of not less than a majority
--------------------------------
in principal amount of the Outstanding Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders of Securities of
such series not joining therein.
A. Waiver of Past Defaults. The Holders of not less than a majority in
-----------------------
principal amount of the Outstanding Securities of any series may on behalf of
the Holders of all the Securities of such series and any related coupons waive
any past default hereunder with respect to such series and its consequences,
except a default
(1) in the payment of the principal of (or premium, if any) or
interest on or Additional Amounts payable in respect of any Security of
such series or any related coupons, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
A. Waiver of Usury, Stay or Extension Laws. The Company covenants (to the
---------------------------------------
extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any usury, stay or extension law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
<PAGE>
A. Undertaking for Costs. All parties to this Indenture agree, and each
---------------------
Holder of any Security by his acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Indenture, or in any suit against the Trustee for
any action taken or omitted by it as Trustee, the filing by any party litigant
in such suit of any undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party in such suit having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest on any Security on or after
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
I.
THE TRUSTEE
A. Notice of Defaults. Within 90 days after the occurrence of any default
------------------
hereunder with respect to the Securities of any series, the Trustee shall
transmit in the manner and to the extent provided in TIA Section 313(c), notice
of such default hereunder known to the Trustee, unless such default shall have
been cured or waived; provided, however, that, except in the case of a default
-------- -------
in the payment of the principal of (or premium, if any) or interest on or any
Additional Amounts with respect to any Security of such series, or in the
payment of any sinking fund installment with respect to the Securities of such
series, the Trustee shall be protected in withholding such notice if and so long
as Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders of the Securities
and coupons of such series; and provided further that in the case of any default
-------- -------
or breach of the character specified in Section 5.1(4) with respect to the
Securities and coupons of such series, no such notice to Holders shall be given
until at least 90 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default with respect to the Securities
of such series.
A. Certain Rights of Trustee. Subject to the provisions of TIA Section 315(a)
-------------------------
through 315(d):
<PAGE>
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security, together with any coupons appertaining thereto,
to the Trustee for authentication and delivery pursuant to Section 3.3
which shall be sufficiently evidenced as provided therein) and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities of any series or any related coupons
pursuant to this Indenture, unless such Holders shall have offered to the
Trustee security or indemnity reasonably satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
<PAGE>
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and reasonably believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Except during the continuance of an Event of Default, the Trustee
undertakes to perform only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
A. Not Responsible for Recitals or Issuance of Securities. The recitals
------------------------------------------------------
contained herein and in the Securities, except the Trustee's certificate of
authentication, and in any coupons shall be taken as the statements of the
Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee make no representations as to
the validity or sufficiency of this Indenture or of the Securities or coupons,
except that the Trustee represents that it is duly authorized to execute and
deliver this Indenture, authenticate the Securities and perform its obligations
hereunder. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
A. May Hold Securities. The Trustee, any Paying Agent, Security
-------------------
Registrar, Authenticating Agent or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and coupons and, subject to TIA Sections 310(b) and 311, may otherwise deal with
the Company with the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar, Authenticating Agent or such other agent.
A. Money Held in Trust. Money held by the Trustee in trust hereunder need
-------------------
not be segregated from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Company.
A. Compensation and Reimbursement. The Company agrees:
------------------------------
<PAGE>
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse each
of the Trustee and any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its own part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(5) or Section 5.1(6), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of (or premium, if any) or interest
on particular Securities or any coupons.
The provisions of this Section shall survive the termination of this
Indenture.
A. Corporate Trustee Required; Eligibility; Conflicting Interests. There
--------------------------------------------------------------
shall at all times be a Trustee hereunder which shall be eligible to act as
Trustee under TIA Section 310(a)(1) and shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or the requirements of Federal,
State, Territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
<PAGE>
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. If the Trustee has or shall acquire a
conflicting interest within the meaning of the TIA, the Trustee shall either
eliminate such interest or resign to the extent and in the manner provided by
and subject to the provisions of the TIA and this Indenture.
A. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
1. No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 6.9.
1. The Trustee may resign at any time with respect to the Securities of one or
more series by giving written notice thereof to the Company. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
1. The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Trustee and to the
Company.
1. If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 3.10(b) after written request therefor by the Company or by any
Holder of a Security who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under Section 6.7 and
shall fail to resign after written request therefor by the Company or by
any Holder of a Security who has been a bona fide Holder of a Security for
at least six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
<PAGE>
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.
1. If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause with respect to
the Securities of one or more series, the Company, by or pursuant to a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series). If, within one year after
such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee with respect to the Securities
of such series and to that extent supersede the successor Trustee appointed by
the Company. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the Holders of Securities
and accepted appointment in the manner hereinafter provided, any Holder of a
Security who has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to Securities of such series.
1. The Company shall give notice of each resignation and each removal of the
Trustee with respect to the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any series in the manner
provided for notices to the Holders of Securities in Section 1.6. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
1. Acceptance of Appointment by Successor. In case of the appointment
--------------------------------------
hereunder of a successor Trustee with respect to all Securities, every such
successor Trustee shall execute, acknowledge and deliver to the Company and to
the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company
<PAGE>
or the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder.
1. In case of the appointment hereunder of a successor Trustee with respect to
the Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto, pursuant to
Article Nine hereof, wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
1. Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
1. No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
<PAGE>
A. Merger, Conversion, Consolidation or Succession to Business. Any
-----------------------------------------------------------
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities or coupons shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities or coupons so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities or coupons. In case any Securities or coupons shall not have been
authenticated by such predecessor Trustee, any such successor Trustee may
authenticate and deliver such Securities or coupons, in either its own name or
that of its predecessor Trustee, with the full force and effect which this
Indenture provides for the certificate of authentication of the Trustee.
A. Appointment of Authenticating Agent. At any time when any of the
-----------------------------------
Securities remain Outstanding, the Trustee may appoint an Authenticating Agent
or Agents with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series issued upon exchange, registration of transfer or partial redemption or
repayment thereof, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Any such appointment shall be
evidenced by an instrument in writing signed by a Responsible Officer of the
Trustee, a copy of which instrument shall be promptly furnished to the Company.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a bank or trust company or corporation organized and doing business and in
good standing under the laws of the United States of America or of any State or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authorities. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at any
time an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this
<PAGE>
56
Section, such Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time resign
by giving written notice of resignation to the Trustee for such series and to
the Company. The Trustee for any series of Securities may at any time terminate
the agency of an Authenticating Agent by giving written notice of termination to
such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 1.6. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation including reimbursement of its reasonable expenses for
its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
<PAGE>
57
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
First Trust of New York, N.A.,
as Trustee
By: ,
as Authenticating Agent
By: ,
Authorized Signatory
I.
HOLDERS' LISTS AND REPORTS
BY TRUSTEE AND COMPANY
A. Disclosure of Names and Addresses of Holders. Every Holder of
--------------------------------------------
Securities or coupons, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any
Authenticating Agent nor any Paying Agent nor any Security Registrar shall be
held accountable by reason of the disclosure of any information as to the names
and addresses of the Holders of Securities in accordance with TIA Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under TIA Section 312(b).
A. Reports by Trustee. Within 60 days after May 15 of each year commencing
------------------
with the first May 15 after the first issuance of Securities pursuant to this
Indenture, the Trustee shall transmit by mail to all Holders of Securities as
provided in TIA Section 313(c) a brief report dated as of such May 15 if
required by TIA Section 3l3(a). A copy of each such report shall at the time of
such transmission to Holders be filed by the Trustee with each stock exchange
upon which any Securities are listed, with the Commission and the Company. The
Company will notify the Trustee when any securities are listed on any stock
exchange.
A. Reports by Company. The Company will:
------------------
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the
<PAGE>
58
information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of such Sections, then
it will file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to the Holders of Securities, within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in TIA Section 3l3(c), such summaries of any information,
documents and reports required to be filed by the Company pursuant to
paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
A. Company to Furnish Trustee Names and Addresses of Holders. The Company
---------------------------------------------------------
will furnish or cause to be furnished to the Trustee:
1. semi-annually, not later than 15 days after the Regular Record Date
for interest for each series of Securities, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Registered
Securities of such series as of such Regular Record Date, or if there is no
Regular Record Date for interest for such series of Securities, semi-annually,
upon such dates as are set forth in the Board Resolution or indenture
supplemental hereto authorizing such series, and
1. at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Security
-------- -------
Registrar, no such list shall be required to be furnished.
<PAGE>
59
I.
CONSOLIDATION, MERGER, SALE,
LEASE OR CONVEYANCE
A. Consolidations and Mergers of Company and Sales, Leases and Conveyances
-----------------------------------------------------------------------
Permitted Subject to Certain Conditions. The Company may consolidate with, or
- ---------------------------------------
sell, lease or convey all or substantially all of its assets to, or merge with
or into any other corporation, provided that in any such case, (i) either the
Company shall be the continuing corporation, or the successor corporation shall
be a corporation organized and existing under the laws of the United States or a
State thereof and such successor corporation shall expressly assume the due and
punctual payment of the principal of (and premium, if any) and any interest
(including all Additional Amounts, if any, payable pursuant to this Indenture)
on all of the Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company by supplemental indenture, complying
with Article Nine hereof, satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation and (ii) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or the lapse of time, or both, would become an
Event of Default, shall have occurred and be continuing.
A. Rights and Duties of Successor Corporation. In case of any such
------------------------------------------
consolidation, merger, sale, lease or conveyance and upon any such assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as the party of the first part, and the predecessor corporation, except in the
event of a lease, shall be relieved of any further obligation under this
Indenture and the Securities. Such successor corporation thereupon may cause to
be signed, and may issue either in its own name or in the name of the Company,
any or all of the Securities issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation, instead of the Company, and subject to all the
terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver any Securities which previously shall have
been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
securities so issued shall in all respects have the same legal rank and benefit
under this
<PAGE>
60
Indenture as the Securities theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such securities had been issued at
the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance, such
changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
A. Officers' Certificate and Opinion of Counsel. Any consolidation,
--------------------------------------------
merger, sale, lease or conveyance permitted under Section 8.1 is also subject to
the condition that the Trustee receive an Officers' Certificate and an Opinion
of Counsel to the effect that any such consolidation, merger, sale, lease or
conveyance, and the assumption by any successor corporation, complies with the
provisions of this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
I.
SUPPLEMENTAL INDENTURES
A. Supplemental Indentures without Consent of Holders. Without the consent of
--------------------------------------------------
any Holders of Securities or coupons, the Company, when authorized by or
pursuant to a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities contained; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such Events of Default
are to be for the benefit of less than all series of Securities stating
that such Events of Default are expressly being included solely for the
benefit of such series); provided, however, that in respect of any such
-------- -------
additional Events of Default such supplemental Indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other
<PAGE>
61
defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default or may
limit the right of the Holders of a majority in aggregate principal amount
of that or those series of Securities to which such additional Events of
Default apply or waive such default; or
(4) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal or any
premium or interest on Bearer Securities, to permit Bearer Securities to be
issued in exchange for Registered Securities, to permit Bearer Securities
to be issued in exchange for Bearer Securities of other authorized
denominations or to permit or facilitate the issuance of Securities in
uncertificated form, provided that any such action shall not adversely
affect the interests of the Holders of Securities of any series or any
related coupons in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series and
any related coupons as permitted by Sections 2.1 and 3.1, including the
provisions and procedures relating to Securities convertible into Common
Stock or Preferred Stock, as the case may be; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with
the provisions of this Indenture, provided such provisions shall not
adversely affect the interests of the Holders of Securities of any series
or any related coupons in any material respect; or
(10) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any
<PAGE>
62
series of Securities pursuant to Sections 4.1, 14.2 and 14.3; provided that
--------
any such action shall not adversely affect the interests of the Holders of
Securities of such series and any related coupons or any other series of
Securities in any material respect.
A. Supplemental Indentures with Consent of Holders. With the consent of
-----------------------------------------------
the Holders of not less than a majority in principal amount of all Outstanding
Securities affected by such supplemental indenture, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by or
pursuant to a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of Securities and any
related coupons under this Indenture; provided, however, that no such
-------- -------
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or premium, if
any, on) or any installment of principal of or interest on, any Security;
or reduce the principal amount thereof or the rate or amount of interest
thereon or any Additional Amounts payable in respect thereof, or any
premium payable upon the redemption thereof, or change any obligation of
the Company to pay Additional Amounts pursuant to Section 10.8 (except as
contemplated by Section 8.1(1) and permitted by Section 9.1(1)), or reduce
the amount of the principal of an Original Issue Discount Security) that
would be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 5.2 or the amount thereof provable in
bankruptcy pursuant to Section 5.4, or adversely affect any right of
repayment at the option of the Holder of any Security, or change any Place
of Payment where, or the currency or currencies, currency unit or units or
composite currency or currencies in which, any Security or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption or repayment at the option of the Holder, on
or after the Redemption Date or the Repayment Date, as the case may be), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver with respect to such series (or compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the requirements of
Section 15.4 for quorum or voting, or
<PAGE>
63
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.8, except to increase the required percentage to effect such
action or to provide that certain other provisions of this Indenture cannot
be modified or waived without the consent of the Holder of each Outstanding
Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
A. Execution of Supplemental Indentures. In executing, or accepting the
------------------------------------
additional trusts created by, any supplemental indenture permitted by this
Article or the modification thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
A. Effect of Supplemental Indentures. Upon the execution of any supplemental
---------------------------------
indenture under this Article, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of this Indenture
for all purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder and of any coupon appertaining thereto
shall be bound thereby.
A. Conformity with Trust Indenture Act. Every supplemental indenture
-----------------------------------
executed pursuant to this Article shall conform to the requirements of the Trust
Indenture Act as then in effect.
A. Reference in Securities to Supplemental Indentures. Securities of any
--------------------------------------------------
series authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall, if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Trustee and the
Company, to
<PAGE>
64
any such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such series.
I.
COVENANTS
A. Payment of Principal, Premium, if any, Interest and Additional Amounts.
----------------------------------------------------------------------
The Company covenants and agrees for the benefit of the Holders of each series
of Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest on and any Additional Amounts payable in respect
of the Securities of that series in accordance with the terms of such series of
Securities, any coupons appertaining thereto and this Indenture. Unless
otherwise specified as contemplated by Section 3.1 with respect to any series of
Securities, any interest due on and any Additional Amounts payable in respect of
Bearer Securities on or before Maturity, other than Additional Amounts, if any,
payable as provided in Section 10.8 in respect of principal of (or premium, if
any, on) such a Security, shall be payable only upon presentation and surrender
of the several coupons for such interest installments as are evidenced thereby
as they severally mature. Unless otherwise specified with respect to Securities
of any series pursuant to Section 3.1, at the option of the Company, all
payments of principal may be paid by check to the registered Holder of the
Registered Security or other person entitled thereto against surrender of such
Security.
A. Maintenance of Office or Agency. If Securities of a series are issuable
-------------------------------
only as Registered Securities, the Company shall maintain in each Place
of Payment for any series of Securities an office or agency where Securities of
that series may be presented or surrendered for payment or conversion, where
Securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. If Securities of a
series are issuable as Bearer Securities, the Company will maintain: (A) in the
Borough of Manhattan, The City of New York, an office or agency where any
Registered Securities of that series may be presented or surrendered for payment
or conversion, where any Registered Securities of that series may be surrendered
for registration of transfer, where Securities of that series may be surrendered
for exchange, where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served and where Bearer
Securities of that series and related coupons may be presented or surrendered
for payment or conversion in the circumstances described in the following
paragraph (and not otherwise); (B) subject to any laws or regulations applicable
thereto, in a Place of Payment for that series which is located outside the
United States, an office or agency where Securities of that series and related
coupons may be presented and surrendered
<PAGE>
65
for payment (including payment of any Additional Amounts payable on Securities
of that series pursuant to Section 10.8) or conversion; provided, however, that
-------- -------
if the Securities of that series are listed on the Luxembourg Stock Exchange or
any other stock exchange located outside the United States and such stock
exchange shall so require, the Company will maintain a Paying Agent for the
Securities of that series in Luxembourg or any other required city located
outside the United States, as the case may be, so long as the Securities of that
series are listed on such exchange; and (C) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series located outside the
United States an office or agency where any Registered Securities of that series
may be surrendered for registration of transfer, where Securities of that series
may be surrendered for exchange and where notices and demand to or upon the
Company in respect of the Securities of that series and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of each such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, except that Bearer Securities of that
series and the related coupons may be presented and surrendered for payment
(including payment of any Additional Amounts payable on Bearer Securities of
that series pursuant to Section 10.8) or conversion at the offices specified in
the Security, in London, England, and the Company hereby appoints the same as
its agent to receive such presentations, surrenders, notices and demands, and
the Company hereby appoints the Trustee its agent to receive all such
presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 3.1, no payment of principal, premium or interest on or Additional
Amounts in respect of Bearer Securities shall be made at any office or agency of
the Company in the United States or by check mailed to any address in the United
States or by transfer to an account maintained with a bank located in the United
States; provided, however, that, if the Securities of a series are payable in
-------- -------
Dollars, payment of principal of and any premium and interest on any Bearer
Security (including any Additional Amounts payable on Securities of such series
pursuant to Section 10.8) shall be made at the office of the Company's Paying
Agent in the Borough of Manhattan, The City of New York, if (but only if)
payment in Dollars of the full amount of such principal, premium, interest or
Additional Amounts, as the case may be, at all offices or agencies outside the
United States maintained for the purpose by the Company in accordance with this
Indenture, is illegal or effectively precluded by exchange controls or other
similar restrictions.
The Company may from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all of such purposes, and may from time to time rescind
such designations;
<PAGE>
66
provided, however, that no such designation or rescission shall in any manner
- -------- -------
relieve the Company of its obligation to maintain an office or agency in
accordance with the requirements set forth above for Securities of any series
for such purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency. Unless otherwise specified with respect to any
Securities pursuant to Section 3.1 with respect to a series of Securities, the
Company hereby designates as a Place of Payment for each series of Securities
the office or agency of the Company in the Borough of Manhattan, The City of New
York, and initially appoints the Trustee at its Corporate Trust Office as Paying
Agent in such city and as its agent to receive all such presentations,
surrenders, notice and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 3.1, if and so long as the Securities of any series (i) are denominated
in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long
as it is required under any other provision of the Indenture, then the Company
will maintain with respect to each such series of Securities, or as so required,
at least one exchange rate agent.
A. Money for Securities Payments to Be Held in Trust. If the Company shall
-------------------------------------------------
at any time act as its own Paying Agent with respect to any series of any
Securities and any related coupons, it will, on or before each due date of the
principal of (and premium, if any), or interest on or Additional Amounts in
respect of, any of the Securities of that series, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum in the currency or
currencies, currency unit or units or composite currency or currencies in which
the Securities of such series are payable (except as otherwise specified
pursuant to Section 3.1 for the Securities of such series) sufficient to pay the
principal (and premium, if any) or interest or Additional Amounts so becoming
due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities and any related coupons, it will, on or before each due date of the
principal of (and premium, if any), or interest on or Additional Amounts in
respect of, any Securities of that series, deposit with a Paying Agent a sum (in
the currency or currencies, currency unit or units or composite currency or
currencies described in the preceding paragraph) sufficient to pay the principal
(and premium, if any) or interest or Additional Amounts, so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest or Additional Amounts and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its action
or failure so to act.
<PAGE>
67
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Securities or Additional Amounts in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any such payment of
principal (and premium, if any) or interest or Additional Amounts; and
(3) at any time during the continuance of any Event of Default upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Except as otherwise provided in the Securities of any series, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of (and premium, if any) or interest on,
or any Additional Amounts in respect of, any Security of any series and
remaining unclaimed for two years after such principal (and premium, if any),
interest or Additional Amounts has become due and payable shall be paid to the
Company upon Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment of such
principal of (and premium, if any) or interest on, or any Additional Amounts in
respect of, any Security, without interest thereon, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
-------- -------
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in an
Authorized Newspaper, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such
<PAGE>
68
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
A. Existence. Subject to Article Eight, the Company will do or cause to
---------
be done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises, except to
the extent the failure to do so would not have a material adverse effect on the
business, assets, financial condition or results of operations of the Company (a
"Material Adverse Effect"); provided, however, that the Company shall not be
-------- -------
required to preserve any right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company.
A. Maintenance of Properties. The Company will cause all of it properties
-------------------------
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
except to the extent the failure to do so would not have a Material Adverse
Effect on the Company; provided, however, that the Company shall not be required
-------- -------
to continue the operation or maintenance of any such property or be prevented
from disposing of such property if the Board of Directors shall determine that
such discontinuance or disposal is desirable in the conduct of the business of
the Company.
A. Payment of Taxes and Other Claims. The Company will pay or discharge
---------------------------------
or cause to be paid or discharged, before the same shall become delinquent, (1)
all taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary and have a Material Adverse Effect; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
A. Statement as to Compliance. The Company will deliver to the Trustee,
--------------------------
within 120 days after the end of each fiscal year, a brief certificate from the
principal executive officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance with all
conditions and covenants under this Indenture and, in the event of any
noncompliance, specifying such noncompliance and the nature and status thereof.
For purposes of this Section 10.7,
<PAGE>
69
such compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
A. Additional Amounts. If any Securities of a series provide for the
------------------
payment of Additional Amounts, the Company will pay to the Holder of any
Security of such series or any coupon appertaining thereto Additional Amounts as
may be specified as contemplated by Section 3.1. Whenever in this Indenture
there is mentioned, in any context except in the case of Section 5.2(1), the
payment of the principal of or any premium or interest on, or in respect of, any
Security of any series or payment of any related coupon or the net proceeds
received on the sale or exchange of any Security of any series, such mention
shall be deemed to include mention of the payment of Additional Amounts provided
by the terms of such series established pursuant to Section 3.1 to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof pursuant to such terms and express mention of the payment of
Additional Amounts (if applicable) in any provisions hereof shall not be
construed as excluding Additional Amounts in those provisions hereof where such
express mention is not made.
Except as otherwise specified as contemplated by Section 3.1, if the
Securities of a series provide for the payment of Additional Amounts, at least
10 days prior to the first Interest Payment Date with respect to that series of
Securities or if the Securities of that series will not bear interest prior to
Maturity, the first day on which a payment of principal and any premium is made,
and at least 10 days prior to each date of payment of principal and any premium
or interest if there has been any change with respect to the matters set forth
in the below-mentioned Officers' Certificate, the Company will furnish the
Trustee and the Company's principal Paying Agent or Paying Agents, if other than
the Trustee, with an Officers' Certificate instructing the Trustee and such
Paying Agent or Paying Agents whether such payment of principal of and any
premium or interest on the Securities of that series shall be made to Holders of
Securities of that series or any related coupons who are not United States
persons without withholding for or on account of any tax, assessment or other
governmental charge described in the Securities of the series. If any such
withholding shall be required, then such Officers' Certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
Holders of Securities of that series or related coupons and the Company will pay
to the Trustee or such Paying Agent the Additional Amounts required by the terms
of such Securities. In the event that the Trustee or any Paying Agent, as the
case may be, shall not so receive the above-mentioned certificate, then the
Trustee or such Paying Agent shall be entitled (i) to assume that no such
withholding or deduction is required with respect to any payment of principal or
interest with respect to any Securities of a series or related coupons until it
shall have received a certificate advising otherwise and (ii) to make all
payments of principal and interest with respect to the Securities of a series or
related coupons without withholding or deductions until otherwise advised. The
Company
<PAGE>
70
covenants to indemnify the Trustee and any Paying Agent for, and to hold them
harmless against, any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them or in reliance on any Officers'
Certificate furnished pursuant to this Section or in reliance on the Company's
not furnishing such an Officers' Certificate.
A. Waiver of Certain Covenants. The Company may omit in any particular
---------------------------
instance to comply with any term, provision or condition set forth in Sections
10.4 to 10.6, inclusive, if before or after the time for such compliance the
Holders of at least a majority in principal amount of all outstanding Securities
of such series, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such covenant or condition, but no
such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
I.
REDEMPTION OF SECURITIES
A. Applicability of Article. Securities of any series which are redeemable
------------------------
before their Stated Maturity shall be redeemable in accordance with their terms
and (except as otherwise specified as contemplated by Section 3.1 for Securities
of any series) in accordance with this Article.
A. Election to Redeem; Notice to Trustee. The election of the Company to
-------------------------------------
redeem any Securities shall be evidenced by or pursuant to a Board Resolution.
In case of any redemption at the election of the Company of less than all of the
Securities of any series, the Company shall, at least 45 days prior to the
giving of the notice of redemption in Section 11.4 (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities of such series to be redeemed.
In the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
A. Selection by Trustee of Securities to Be Redeemed. If less than all
-------------------------------------------------
the Securities of any series issued on the same day with the same terms are to
be redeemed, the particular Securities to be redeemed shall be selected not more
than 60 days prior to time Redemption Date by the Trustee, from the Outstanding
Securities of such series issued on such date with the same terms not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which
<PAGE>
71
may provide for the selection for redemption of portions (equal the minimum
authorized denomination for Securities of that series or any integral multiple
thereof) of the principal amount of Securities of such series of a denomination
larger than the minimum authorization denomination for Securities of that
series.
The Trustee shall promptly notify the Company and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption and,
in the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
A. Notice of Redemption. Notice of redemption shall be given in the
--------------------
manner provided in Section 1.6, not less than 30 days nor more than 60 days
prior to the Redemption Date, unless a shorter period is specified by the terms
of such series established pursuant to Section 3.1, to each Holder of Securities
to be redeemed, but failure to give such notice in the manner herein provided to
the Holder of any Security designated for redemption as a whole or in part, or
any defect in the notice to any such Holder, shall not affect the validity of
the proceedings for the redemption of any other such Security or portion
thereof.
Any notice that is mailed to the Holders of Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Holder receives the notice.
All notices of redemption shall state
(1) the Redemption Date,
(2) the Redemption Price, accrued interest to the Redemption Date payable
as provided in Section 11.6, if any, and Additional Amounts, if any,
(3) if less than all Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amount) of the particular Security or Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice which
relates to such Security shall state that on and after the Redemption Date, upon
surrender of such Security, the holder will receive, without a charge, a new
Security or
<PAGE>
72
Securities of authorized denominations for the principal amounts thereof
remaining unredeemed,
(5) that on the Redemption Date the Redemption Price and accrued interest
to the Redemption Date payable as provided in Section 11.6, if any, will become
due and payable upon each such Security, or the portion thereof, to be redeemed
and, if applicable, that interest thereon shall cease to accrue on and after
said date,
(6) the Place or Places of Payment where such Securities, together in the
case of Bearer Securities with all coupons appertaining thereto, if any,
maturing after the Redemption Date, are to be surrendered for payment of the
Redemption Price and accrued interest, if any, or for conversion,
(7) that the redemption is for a sinking fund, if such is the case,
(8) that, unless otherwise specified in such notice, Bearer Securities of
any series, if any, surrendered for redemption must be accompanied by all
coupons maturing subsequent to the date fixed for redemption or the amount of
any such missing coupon or coupons will be deducted from the Redemption Price,
unless security or indemnity satisfactory to the Company, the Trustee for such
series and any Paying Agent is furnished,
(9) if Bearer Securities of any series are to be redeemed and any
Registered Securities of such series are not to be redeemed, and if such Bearer
Securities may be exchanged for Registered Securities not subject to redemption
on this Redemption Date pursuant to Section 3.5 or otherwise, the Last date, as
determined by the Company, on which such exchanges may be made,
(10) the CUSIP number of such Security, if any, and
(11) if applicable, that a Holder of Securities who desires to convert
Securities for redemption must satisfy the requirements for conversion contained
in such Securities, the then existing conversion price or rate, and the date and
time when the option to convert shall expire.
Notice of redemption of Securities to be redeemed shall be given by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.
A. Deposit of Redemption Price. At least one Business Day prior to any
---------------------------
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, which it may not do
in
<PAGE>
73
the case of a sinking fund payment under Article Twelve, segregate and hold
in trust as provided in Section 10.3) an amount of money in the currency or
currencies, currency unit or units or composite currency or currencies in which
the Securities of such series are payable (except as otherwise specified
pursuant to Section 3.1 for the Securities of such series) sufficient to pay on
the Redemption Date the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities or
portions thereof which are to be redeemed on that date.
A. Securities Payable on Redemption Date. Notice of redemption having been
-------------------------------------
given as aforesaid, the Securities so to be redeemed shall, on the Redemption
Date, become due and payable at the Redemption Price therein specified in the
currency or currencies, currency unit or units or composite currency or
currencies in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 3.1 for the Securities of such series)
(together with accrued interest, if any, to the Redemption Date), and from and
after such date (unless the Company shall default in the payment of the
Redemption Price and accrued interest) such Securities shall, if the same were
interest-bearing, cease to bear interest and the coupons for such interest
appertaining to any Bearer Securities so to be redeemed, except to the extent
provided below, shall be void. Upon surrender of any such Security for
redemption in accordance with said notice, together with all coupons, if any,
appertaining thereto maturing after the Redemption Date, such Security shall be
paid by the Company at the Redemption Price, together with accrued interest, if
any, to the Redemption Date; provided, however, that installments of interest on
-------- -------
Bearer Securities whose Stated Maturity is on or prior to the Redemption Date
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 10.2) and, unless otherwise specified
as contemplated by Section 3.1, only upon presentation and surrender of coupons
for such interest; and provided further that, except as otherwise provided with
-------- -------
respect to Securities convertible into Common Stock or Preferred Stock,
installments of interest on Registered Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Holders of such Securities,
or one or more Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 3.7.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price an amount equal to the face
amount of all such missing coupons, or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee if there be furnish to them
such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall
surrender to the Trustee or any Paying Agent any such missing coupon in respect
of which a deduction shall have been made from the Redemption Price, such Holder
shall be entitled to receive the
<PAGE>
74
amount so deducted; provided, however, that interest represented by coupons
-------- -------
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 10.2) and unless otherwise specified as
contemplated by Section 3.1, only upon presentation and surrender of those
coupons.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Security.
A. Securities Redeemed in Part. Any Registered Security which is to be
---------------------------
redeemed only in part (pursuant to the provisions of this Article or of Article
Twelve) shall be surrendered at a Place of Payment therefor (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duty executed
by, the Holder thereof or his attorney duly authorized in writing) and the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge a new Security or Securities of
the same series, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
I.
SINKING FUNDS
A. Applicability of Article. The provisions of this Article shall be
------------------------
applicable to any sinking fund for the retirement of Securities of a series
except as otherwise specified as contemplated by Section 3.1 for Securities of
such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of such Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of any Securities of any
series, the cash amount of any mandatory sinking fund payment may be subject to
reduction as provided in Section 12.2. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
A. Satisfaction of Sinking Fund Payments with Securities. The Company
-----------------------------------------------------
may, in satisfaction of all or any part of any mandatory sinking fund payment
with respect to the Securities of a series, (1) deliver Outstanding Securities
of such series (other than any previously called for redemption) together in the
case of any Bearer Securities of such series with all unmatured coupons
appertaining thereto and (2)
<PAGE>
75
apply as a credit Securities of such series which have been redeemed either at
the election of the Company pursuant to the terms of such Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities, as provided for by the terms of such Securities, or
which have otherwise been acquired by the Company; provided that such Securities
--------
so delivered or applied as a credit have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee at the
applicable Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such mandatory sinking fund
payment shall be reduced accordingly.
A. Redemption of Securities for Sinking Fund. Not less than 60 days prior
-----------------------------------------
to each sinking fund payment date for Securities of any series, the Company will
deliver to the Trustee an Officers' Certificate specifying the amount of the
next ensuing mandatory sinking fund payment for that series pursuant to the
terms of that series, the portion thereof, if any, which is to be satisfied by
payment of cash in the currency or currencies, currency unit or units or
composite currency or currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 3.1 for the
Securities of such series) and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 12.2, and the optional amount, if any, to be added in cash to the next
ensuing mandatory sinking fund payment, and will also deliver to the Trustee any
Securities to be so delivered and credited. If such Officers' Certificate shall
specify an optional amount to be added in cash to the next ensuing mandatory
sinking fund payment, the Company shall thereupon be obligated to pay the amount
therein specified. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 11.3 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 11.4. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 11.6 and 11.7.
I.
REPAYMENT AT THE OPTION OF HOLDERS
A. Applicability of Article. Repayment of Securities of any series before
------------------------
their Stated Maturity at the option of Holders thereof shall be made in
accordance with the terms of such Securities, if any, and (except as otherwise
specified by the terms of such series established pursuant to Section 3.1) in
accordance with this Article.
<PAGE>
76
A. Repayment of Securities. Securities of any series subject to repayment
-----------------------
in whole or in part at the option of the Holders thereof will, unless otherwise
provided in the terms of such Securities, be repaid at a price equal to the
principal amount thereof, together with interest, if any, thereon accrued to the
Repayment Date specified in or pursuant to the terms of such Securities. The
Company covenants that at least one Business Day prior to the Repayment Date it
will deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 10.3) an amount of money in the currency or currencies, currency unit or
units or composite currency or currencies in which the Securities of such series
are payable (except as otherwise specified pursuant to Section 3.1 for the
Securities of such series) sufficient to pay the principal (or, if so provided
by the terms of the Securities of any series, a percentage of the principal) of,
and (except if the Repayment Date shall be an Interest Payment Date) accrued
interest on, all the Securities or portions thereof, as the case may be, to be
repaid on such date.
A. Exercise of Option. Securities of any series subject to repayment at
------------------
the option of the Holders thereof will contain an "Option to Elect Repayment"
form on the reverse of such Securities. In order for any Security to be repaid
at the option of the Holder, the Trustee must receive at the Place of Payment
therefor specified in the terms of such Security (or at such other place or
places of which the Company shall from time to time notify the Holders of such
Securities) not earlier than 60 days nor later than 30 days prior to the
Repayment Date (1) the Security so providing for such repayment together with
the "Option to Elect Repayment" form on the reverse thereof duly completed by
the Holder (or by the Holder's attorney duly authorized in writing) or (2) a
telegram, telex, facsimile transmission or a Letter from a member of a national
securities exchange, or the National Association of Securities Dealers, Inc.
("NASD"), or a commercial bank or trust company in the United States setting
forth the name of the Holder of the Security, the principal amount of the
Security, the principal amount of the Security to be repaid, the CUSIP number,
if any, or a description of the tenor and terms of the Security, a statement
that the option to elect repayment is being exercised thereby and a guarantee
that the Security to be repaid, together with the duly completed form entitled
"Option to Elect Repayment" on the reverse of the Security, will be received by
the Trustee not later than the fifth Business Day after the date of such
telegram, telex, facsimile transmission or Letter; provided, however, that such
-------- -------
telegram, telex, facsimile transmission or letter shall only be effective if
such Security and form duly completed are received by the Trustee by such fifth
Business Day. If less than the entire principal amount of such Security is to
be repaid in accordance with the terms of such Security, the principal amount of
such Security to be repaid, in increments of the minimum denomination for
Securities of such series, and the denomination or denominations of the Security
or Securities to be issued to the Holder for the portion for the principal
amount of such Security surrendered that is not to be repaid, must be specified.
The principal amount of any Security providing for repayment at the option of
the Holder thereof may not be repaid
<PAGE>
77
in part if, following such repayment, the unpaid principal amount of such
Security would be less than the minimum authorized denomination of Securities of
the series of which such Security to be repaid is a part. Except as otherwise
may be provided by the terms of any Security providing for repayment at the
option of the Holder thereof, exercise of the repayment option by the Holder
shall be irrevocable unless waived by the Company.
A. When Securities Presented for Repayment Became Due and Payable. If
--------------------------------------------------------------
Securities of any series providing for repayment at the option of the Holders
thereof shall have been surrendered as provided in this Article and as provided
by or pursuant to the terms of such Securities, such Securities or the portions
thereof, as the case may be, to be repaid shall become due and payable and shall
be paid by the Company on the Repayment Date therein specified, and on and after
such Repayment Date (unless the Company shall default in the payment of such
Securities on such Repayment Date) such Securities shall, if the same were
interest-bearing, cease to bear interest and the coupons for such interest
appertaining to any Bearer Securities so to be repaid, except to the extent
provided below, shall be void. Upon surrender of any such Security for
repayment in accordance with such provisions, together with all coupons, if any,
appertaining thereto maturing after the Repayment Date, the principal amount of
such Security so to be repaid shall be paid by the Company, together with
accrued interest, if any, to the Repayment Date; provided, however, that coupons
-------- -------
whose Stated Maturity is on or prior to the Repayment Date shall be payable only
at an office or agency located outside the United States (except as otherwise
provided in Section 10.2) and, unless otherwise specified pursuant to Section
3.1, only upon presentation and surrender of such coupons; and provided further
that, in the case of Registered Securities, installments of interest, if any,
whose Stated Maturity is on or prior to the Repayment Date shall be payable (but
without interest thereon, unless the Company shall default in the payment
thereof) to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.
If any Bearer Security surrendered for repayment shall not be accompanied
by all appurtenant coupons maturing after the Repayment Date, such Security may
be paid after deducting from the amount payable therefor as provided in Section
13.2 an amount equal to the face amount of all such missing coupons, or the
surrender of such missing coupon or coupons may be waived by the Company and the
Trustee if there be furnished to them such security or indemnity as they may
require to save each of them and any Paying Agent harmless. If thereafter the
Holder of such Security shall surrender to the Trustee or any Paying Agent any
such missing coupon in respect of which a deduction shall have been made as
provided in the preceding sentence, such Holder shall be entitled to receive the
amount so deducted; provided, however, that interest represented by coupons
-------- -------
shall be payable only at an office or agency located outside the United States
(except as otherwise provided in Section 10.2)
<PAGE>
78
and, unless otherwise specified as contemplated by Section 3.1, only upon
presentation and surrender of those coupons.
If the principal amount of any Security surrendered for repayment shall not
be so repaid upon surrender thereof, such principal amount (together with
interest, if any, thereon accrued to such Repayment Date) shall, until paid,
bear interest from the Repayment Date at the rate of interest or Yield to
Maturity (in the case of Original Issue Discount Securities) set forth in such
Security.
A. Securities Repaid in Part. Upon surrender of any Registered Security
-------------------------
which is to be repaid in part only, the company shall execute and the Trustee
shall authenticate and deliver to the Holder of such Security, without service
charge and at the expense of the Company a new Registered Security or Securities
of the same series, of any authorized denomination specified by the Holder, in
an aggregate principal amount equal to and in exchange for the portion of the
principal of such Security so surrendered which is not to be repaid.
I.
DEFEASANCE AND COVENANT DEFEASANCE
A. Applicability of Article; Company's Option to Effect Defeasance or
------------------------------------------------------------------
Covenant Defeasance. If, pursuant to Section 3.1, provision is made for either
- -------------------
or both of (a) defeasance of the Securities of or within a series under Section
14.2 or (b) covenant defeasance of the Securities of or within a series under
Section 14.3, then the provisions of such Section or Sections, as the case may
be, together with the other provisions of this Article (with such modifications
thereto as may be specified pursuant to Section 3.1 with respect to any
Securities), shall be applicable to such Securities and any coupons appertaining
thereto, and the Company may at its option by Board Resolution, at any time,
with respect to such Securities and any coupons appertaining thereto, elect to
have Section 14.2 (if applicable) or Section 14.3 (if applicable) be applied to
such Outstanding Securities and any coupons appertaining thereto upon compliance
with the conditions set forth below in this Article.
A. Defeasance and Discharge. Upon the Company's exercise of the above
------------------------
option applicable to this Section with respect to any Securities of or within a
series, the Company shall be deemed to have been discharged from its obligations
with respect to such Outstanding Securities and any coupons appertaining thereto
on the date the conditions set forth in Section 14.4 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Outstanding Securities and any coupons appertaining thereto, which shall
thereafter be deemed to be "Outstanding"
<PAGE>
79
only for the purposes of Section 14.5 and the other Sections of this Indenture
referred to in clauses (A) and (B) below, and to have satisfied all of its other
obligations under such Securities and any coupons appertaining thereto and this
Indenture insofar as such Securities and any coupons appertaining thereto are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Outstanding Securities and any coupons appertaining thereto to
receive, solely from the trust fund described in Section 14.4 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest, if any, on such Securities and any coupons appertaining
thereto when such payments are due, (B) the Company's obligations with respect
to such Securities under Sections 3.5, 3.6, 10.2 and 10.3 and with respect to
the payment of Additional Amounts, if any, on such Securities as contemplated by
Section 10.8, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article. Subject to compliance with this Article
Fourteen, the Company may exercise its option under this Section notwithstanding
the prior exercise of its option under Section 14.3 with respect to such
Securities and any coupons appertaining thereto.
A. Covenant Defeasance. Upon the Company's exercise of the
-------------------
above option applicable to this Section with respect to any Securities of or
within a series, the Company shall be released from its obligations under
Sections 10.4 to 10.6, inclusive, and, if specified pursuant to Section 3.1, its
obligations under any other covenant, with respect to such Outstanding
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 14.4 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with Sections 10.4 to 10.6, inclusive, or such other
covenant, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to such Outstanding Securities and any coupons appertaining thereto, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or such other covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or such other covenant or by reason of reference in any such
Section or such other covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a default or an Event
of Default under Section 5.1(4) or 5.1(8) or otherwise, as the case may be, but,
except as specified above, the remainder of this Indenture and such Securities
and any coupons appertaining thereto shall be unaffected thereby.
<PAGE>
80
A. Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of Section 14.2 or Section 14.3
to any Outstanding Securities of or within a series and any coupons appertaining
thereto:
1. The Company shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of Section 6.7
who shall agree to comply with the provisions of this Article Fourteen
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities and any coupons appertaining
thereto, (1) an amount in such currency, currencies or currency unit in which
such Securities and any coupons appertaining thereto are then specified as
payable at Stated Maturity, or (2) Government Obligations applicable to such
Securities and coupons appertaining thereto (determined on the basis of the
currency, currencies or currency unit in which such Securities and coupons
appertaining thereto are then specified as payable at Stated Maturity) which
through the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the due
date of any payment of principal of (and premium, if any) and interest, if any,
on such Securities and any coupons appertaining thereto, money in an amount, or
(3) a combination thereof, in any case, in an amount, sufficient, without
consideration of any reinvestment of such principal and interest, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, (i) the principal of (and premium, if any) and interest, if any,
on such Outstanding Securities and any coupons appertaining thereto on the
Stated Maturity of such principal or installment of principal or interest and
(ii) any mandatory sinking fund payments or analogous payments applicable to
such Outstanding Securities and any coupons appertaining thereto on the day on
which such payments are due and payable in accordance with the terms of this
Indenture and of such Securities and any coupons appertaining thereto.
1. Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company is a party or by which it
is bound.
1. No Event of Default or event which with notice or lapse of time or
both would become an Event of Default with respect to such Securities and any
coupons appertaining thereto shall have occurred and be continuing on the date
of such deposit or, insofar as Sections 5.1(6) and 5.1(7) are concerned, at any
time during the period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until the
expiration of such period).
<PAGE>
81
1. In the case of an election under Section 14.2, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of execution of this Indenture, there has been a
change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Outstanding Securities and any coupons appertaining thereto will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal Income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
had not occurred.
1. In the case of an election under Section 14.3, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
such Outstanding Securities and any coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a result of
such covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
1. The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 14.2 or the covenant defeasance under
Section 14.3 (as the case may be) have been complied with and an Opinion of
Counsel to the effect that either (i) as a result of a deposit pursuant to
subsection (a) above and the related exercise of the Company's option under
Section 14.2 or Section 14.3 (as the case may be), registration is not required
under the Investment Company Act of 1940, as amended, by the Company, with
respect to the trust funds representing such deposit or by the Trustee for such
trust funds or (ii) all necessary registrations under said Act have been
effected.
1. Notwithstanding any other provisions of this Section, such defeasance
or covenant defeasance shall be effected in compliance with any additional or
substitute terms, conditions or limitations which may be imposed on the Company
in connection therewith pursuant to Section 3.1.
A. Deposited Money and Government Obligations to Be Held in
--------------------------------------------------------
Trust; Other Miscellaneous Provisions. Subject to the provisions of the last
- -------------------------------------
paragraph of Section 10.3, all money and Government Obligations (or other
property as may be provided pursuant to Section 3.1) (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 14.5, the "Trustee") pursuant to Section 14.4 in
respect of any Outstanding Securities of any series and any coupons appertaining
thereto shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and any coupons
<PAGE>
82
appertaining thereto and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Holders of such Securities and any coupons
appertaining thereto of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest and Additional Amounts, if any, but
such money need not be segregated from other funds except to the extent required
by law.
Unless otherwise specified with respect to any Security pursuant to
Section 3.1, if, after a deposit referred to in Section 14.4(a) has been made,
(a) the Holder of a Security in respect of which such deposit was made is
entitled to, and does, elect pursuant to Section 3.1 or the terms of such
Security to receive payment in a currency or currency unit other than that in
which the deposit pursuant to Section 14.4(a) has been made in respect of such
Security, or (b) a Conversion Event occurs in respect of the currency or
currency unit in which the deposit pursuant to Section 14.4(a) has been made,
the indebtedness represented by such Security and any coupons appertaining
thereto shall be deemed to have been, and will be, fully discharged and
satisfied through the payment of the principal of (and premium, if any), and
interest, if any, on such Security as the same becomes due out of the proceeds
yielded by converting (from time to time as specified below in the case of any
such election) the amount or other property deposited in respect of such
Security into the currency or currency unit in which such Security becomes
payable as a result of such election or Conversion Event based on the applicable
market exchange rate for such currency or currency unit in effect on the second
Business Day prior to each payment date, except, with respect to a Conversion
Event, for such currency or currency unit in effect (as nearly as feasible) at
the time of the Conversion Event.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 14.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of such Outstanding Securities and any coupons
appertaining thereto.
Anything in this Article to the contrary notwithstanding, subject to
Section 6.6, the Trustee shall deliver or pay to the Company from time to time
upon Company Request any money or Government Obligations (or other property and
any proceeds therefrom) held by it as provided in Section 14.4 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect a defeasance or covenant defeasance, as applicable, in accordance with
this Article.
<PAGE>
83
I.
SUBORDINATION
A. Agreement to Subordinate. The Company agrees, and each
------------------------
Holder of Securities by accepting a Security agrees, that the indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article, to the prior payment in full of all
Senior Debt and that the subordination is for the benefit of the holders of
Senior Debt.
A. Liquidation; Dissolution; Bankruptcy. Upon any distribution
------------------------------------
to creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive payment in
full in cash of the principal of and interest (including interest accruing
after the commencement of any such proceeding) to the date of payment on
the Senior Debt before Holders of Securities shall be entitled to receive
any payment of principal of or interest on Securities; and
(2) until the Senior Debt is paid in full in cash, any distribution
to which Holders of Securities would be entitled but for this Article shall
be made to holders of Senior Debt as their interests may appear, except
that Holders of Securities may receive securities that are subordinated to
Senior Debt to at least the same extent as the Securities.
A. Default on Senior Debt. The Company may not pay principal
----------------------
of or interest on the Securities and may not acquire any Securities for cash or
property other than capital stock of the Company if:
(1) a default on Senior Debt occurs and is continuing that permits
holders of such Senior Debt to accelerate its maturity, and
(2) the default is the subject of judicial proceedings or the Company
receives a notice of the default from a person who may give it pursuant to
Section 15.11. If the Company receives any such notice, a similar notice
received within nine months thereafter relating to the same default on the
same issue of Senior Debt shall not be effective for purposes of this
Section.
The Company may resume payments on the Securities and may acquire them
when:
<PAGE>
84
1. the default is cured or waived, or
2. 120 days pass after the notice is given if the default is not the
subject of judicial proceedings, if this Article otherwise permits the payment
or acquisition at that time.
A. Acceleration of Securities. If payment of the Securities is
--------------------------
accelerated because of an Event of Default, the Company shall promptly notify
holders of Senior Debt of the acceleration. The Company may pay the Securities
when 120 days pass after the acceleration occurs if this Article permits the
payment at that time.
A. When Distribution Must Be Paid Over. If a distribution is
-----------------------------------
made to Holders of Securities that because of this Article should not have been
made to them, the Holders of Securities who receive the distribution shall hold
it in trust for holders of Senior Debt and pay it over to them as their
interests may appear.
A. Notice by Company. The Company shall promptly notify the
-----------------
Trustee and any Paying Agent of any facts known to the Company that would cause
a payment of principal of or interest on Securities to violate this Article.
A. Subrogation. After all Senior Debt is paid in full and until
-----------
the Securities are paid in full, Holders of Securities shall be subrogated to
the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt to the extent that distributions otherwise payable to the Holders of
Securities have been applied to the payment of Senior Debt. A distribution made
under this Article to holders of Senior Debt which otherwise would have been
made to Holders of Securities is not, as between the Company and Holders of
Securities, a payment by the Company on Senior Debt.
A. Relative Rights. This Article defines the relative rights of
---------------
Holders of Securities and holders of Senior Debt. Nothing in this Indenture
shall:
(1) impair, as between the Company and Holders of Securities, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
(2) affect the relative rights of Holders of Securities and creditors
of the Company other than holders of Senior Debt; or
(3) prevent the Trustee or any Holders of Securities from exercising
its available remedies upon an Event of Default, subject to the rights of
holders of Senior Debt to receive distributions otherwise payable to
Holders of Securities.
<PAGE>
85
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still an Event of Default
as provided elsewhere herein.
A. Subordination May Not Be Impaired by Trust. No right of any
------------------------------------------
holder of Senior Debt to enforce the subordination of the indebtedness evidenced
by the Securities shall be impaired by any act or failure to act by the Company
or by its failure to comply with this Indenture.
A. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representative.
A. Rights of Trustee and Paying Agent. The Trustee or any
----------------------------------
Paying Agent may continue to make payments on the Securities until it receives
notice of facts that would cause a payment of principal of or interest on the
Securities to violate this Article. Only the Company, a Representative or a
holder of an issue of Senior Debt that has no Representative may give the
notice.
* * * * *
<PAGE>
86
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
CAPSTAR HOTEL COMPANY
By:
Title:
Attest:
Title:
FIRST TRUST OF NEW YORK, N.A.,
as Trustee
By:
Title:
Attest:
Title:
<PAGE>
87
)
) ss:
)
On the day of , 199 , before me personally came, to me
known, who, being by me duly sworn, did depose and say that he/she resides at,
that he/she is of CAPSTAR HOTEL COMPANY, one of the parties
described in and which executed the foregoing instrument, and that he/she signed
his/her name thereto by authority of the Board of Trustees.
Notarial Seal
Notary Public
COMMISSION EXPIRES
)
) ss:
)
On the day of , 199 , before me personally came,
to me known, who, being by me duly sworn, did depose and say that he/she
resides at , that he/she is
of , one of the parties described
in and which executed the foregoing instrument, and that he/she signed his/her
name thereto by authority of the Board of Trustees.
Notarial Seal
Notary Public
COMMISSION EXPIRES
<PAGE>
EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON
ENTITLED TO RECEIVE BEARER SECURITY OR
TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
Insert title or sufficient description of Securities to be delivered
This is to certify that, as of the date hereof, and except as set
forth below, the above-captioned Securities held by you for our account (i) are
owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States federal income taxation regardless of its
source ("United States person(s)"), (ii) are owned by United States person(s)
that are (a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section 2.165-
12(c)(1)(v) are herein referred to as "financial institutions") purchasing for
their own account or for resale, or (b) United States person(s) who acquired the
Securities through foreign branches of United States financial institutions and
who hold the Securities through such United States financial institutions on the
date hereof (and in either case (a) or (b), each such United States financial
institution hereby agrees, on its own behalf or through its agent, that you may
advise CapStar Hotel Company or its agent that such financial institution will
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United
States Internal Revenue Code of 1986, as amended, and the regulations
thereunder), or (iii) are owned by United States or foreign financial
institution(s) for purposes of resale during the restricted period (as defined
in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and, in
addition, if the owner is a United States or foreign financial institution
described in clause (iii) above (whether or not also described in clause (i) or
(ii)), this is to further certify that such financial institution has not
acquired the Securities for purposes of resale directly or indirectly to a
United States person or to a person within the United States or its possessions.
<PAGE>
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the above-
captioned Securities held by you for our account in accordance with your
Operating Procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certificate excepts and does not relate to U.S.$ of such
interest in the above-captioned Securities in respect of which we are not able
to certify and as to which we understand an exchange for an interest in a
Permanent Global Security or an exchange for and delivery of definitive
Securities (or, if relevant, collection of any interest) cannot be made until we
do certify.
We understand that this certificate may be required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: , 19
To be dated no earlier than the 15th day prior
to (i) the Exchange Date or (ii) the relevant
Interest Payment Date occurring prior to the
Exchange Date, as applicable
Name of Person Making
Certification
(Authorized Signatory)
Name:
Title:
<PAGE>
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR
AND CEDEL S.A. IN CONNECTION WITH THE EXCHANGE
OF A PORTION OF A TEMPORARY GLOBAL SECURITY OR
TO OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE
Insert title or sufficient description of Securities to be delivered
This is to certify that, based solely on written certifications that
we have received in writing, by tested telex or by electronic transmission from
each of the persons appearing in our records as persons entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
in the form attached hereto, as of the date hereof, U.S.$ principal
amount of the above-captioned Securities (i) is owned by person(s) that are not
citizens or residents of the United States, domestic partnerships, domestic
corporations or any estate or trust the income of which is subject to United
States Federal income taxation regardless of its source ("United States
person(s)"), (ii) is owned by United States person(s) that are (a) foreign
branches of United States financial institutions (financial institutions, as
defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) are herein
referred to as "financial institutions") purchasing for their own account or for
resale, or (b) United States person(s) who acquired the Securities through
foreign branches of United States financial institutions and who hold the
Securities through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such financial institution has agreed, on
its own behalf or through its agent, that we may advise CapStar Hotel Company or
its agent that such financial institution will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined In United States Treasury Regulations Section 1.163-
5(c)(2)(i)(D)(7)), and, to the further effect, that financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Securities for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
<PAGE>
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We further certify that (i) we are not making available herewith for
exchange (or, if relevant, collection of any interest) any portion of the
temporary global Security representation the above-captioned Securities excepted
in the above-referenced certificates of Member Organizations and (ii) as of the
date hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: 19
To be dated no earlier than the Exchange Date
or the relevant Interest Payment Date occurring
prior to the Exchange Date, as applicable
By:
<PAGE>
Exhibit 4.7
OFFICERS' CERTIFICATE
We, Paul W. Whetsell, President, Chief Executive Officer and Chairman of
the Board, and John Emery, Chief Financial Officer, of CapStar Hotel Company
(the "Company"), pursuant to authority granted to the undersigned by the Board
of Directors of the Company, hereby establish the terms of the Company's 4.75%
Convertible Subordinated Notes due 2004 (the "Notes"), and pursuant to Section
3.1 of the Indenture dated as of October 16, 1997 between the Company and First
Trust of New York, National Association, as Trustee (the "Indenture"), hereby
certify as follows with respect to the Notes (unless otherwise defined herein,
capitalized terms shall have the meanings set forth in the Indenture):
1. The title of the Notes shall be "4.75% Convertible Subordinated Notes
due 2004." The Notes constitute a series of Securities as defined in
the Indenture. The Notes shall be issuable in fully registered form
only in denominations of $1,000 or any integral multiple thereof.
2. The maximum aggregate principal amount of Notes that may be
authenticated and delivered under the Indenture shall be $150,000,000
(or $172,500,000 if the over-allotment option (the "Over-Allotment
Option") set forth in the Underwriting Agreement dated October 9, 1997
by and between the Company and Lehman Brothers, Inc., BT Alex. Brown
Incorporated, Goldman, Sachs & Co., Merrill Lynch & Co., NationsBanc
Montgomery Securities, Inc., and Smith Barney Inc. (the
"Representatives") is exercised)(except for Notes authenticated and
delivered upon registration of transfer of, or in exchange for, other
Notes pursuant to Section 3.4, 3.5 or 3.6 of the Indenture).
3. The principal amount of the Notes shall be payable on October 15,
2004, subject to the provisions of the Indenture.
4. Interest on the Notes will accrue from October 16, 1997. The Notes
will bear interest at a rate of 4.75% per annum, payable semi-annually
on April 15 and October 15, commencing on April 15, 1998, to holders
of record at the close of business on the preceding April 1 and
October 1, respectively, except (i) that the interest payment upon
redemption (unless the date of redemption is an interest payment date)
will be payable to the Person to whom principal is payable and (ii) as
set forth in the next succeeding sentence. In the case of any Note (or
portion thereof) which is converted into Common Stock during the
period from (but excluding) a record date to (but excluding) the next
succeeding interest payment date either (i) if such Note (or portion
thereof) has been called for redemption on a date of redemption which
occurs during such period, or is to be redeemed in connection with a
Change in Control on a Change in Control Purchase Date (as defined in
the Form of Note) which occurs during such period, the Company shall
not be required to pay interest on such interest payment date in
respect of any such Note (or portion thereof) or (ii) if otherwise,
any Note (or portion thereof) submitted for conversion during such
period shall be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the aggregate principal
amount so converted. Interest may, at the Company's option, be paid in
U.S. Dollars either (i) by check mailed to the address of the Person
entitled thereto as it appears in the Note register or (ii) by
transfer to an account maintained by such Person located in the United
States; provided, however, that payments to The Depository Trust
Company, New York, New York ("DTC") will be made by wire transfer of
immediately available funds to the
<PAGE>
account of DTC or its nominee. Interest will be computed on the basis
of a 360-day year composed of twelve 30-day months.
5. The Notes are subject to a right of conversion, as set forth herein:
Section 5.1. Right to Convert. Subject to and upon compliance with the
provisions of the Indenture, the holder of any Note shall have the right,
at his or her option, at any time after ninety (90) days following the date
of original issuance of the Notes (without taking into account any exercise
of the Over-Allotment Option), and prior to the close of business on
October 15, 2004 (except that, with respect to any Note or portion of a
Note which shall be called for redemption, such right shall terminate,
except as provided in Section 5.2, at the close of business on the Business
Day next preceding the date fixed for redemption of such Note or portion of
a Note unless the Company shall default in payment due upon redemption
thereof) to convert the principal amount at maturity of any such Note, or
any portion of such principal amount at maturity which is $1,000 or an
integral multiple thereof, into that number of fully paid and non-
assessable shares of Common Stock (as such shares shall then be
constituted) obtained by dividing the principal amount at maturity of the
Note or portion thereof surrendered for conversion by $1,000 and
multiplying the result so obtained by the Conversion Rate in effect at such
time, by surrender of the Note so to be converted in whole or in part in
the manner provided, together with any required funds, in Section 5.2. A
holder of Notes is not entitled to any rights of a holder of Common Stock
until such holder has converted his Notes to Common Stock, and only to the
extent such Notes are deemed to have been converted to Common Stock under
this Section 5.
Section 5.2. Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends. In order to exercise
the conversion privilege with respect to any Note in certificated form, the
holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to the Indenture, accompanied by the funds, if any, required by
the penultimate paragraph of this Section 5.2, and shall give written
notice of conversion in the form provided on the Notes (or such other
notice which is acceptable to the Company) to the office or agency through
which the holder elects to convert such Note or the portion thereof
specified in said notice. Such notice shall also state the name or names
(with address or addresses) in which the certificate or certificates for
shares of Common Stock which shall be issuable on such conversion shall be
issued, and shall be accompanied by transfer taxes, if required pursuant to
Section 5.7. Each such Note surrendered for conversion shall, unless the
shares issuable on conversion are to be issued in the same name as the
registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed
by, the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Note in global form, the beneficial holder must complete the
appropriate instruction form for conversion pursuant to the Depository's
book-entry conversion program, deliver by book-entry delivery an interest
in such Note in global form, furnish appropriate endorsements and transfer
documents if required by the Company or the Trustee or conversion agent,
and pay the funds, if any, required by this Section 5.2 and any transfer
taxes if required pursuant to Section 5.7.
2
<PAGE>
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other
than that of the Noteholder (as if such transfer were a transfer of the Note
or Notes (or portion thereof) so converted), the Company shall issue and
shall deliver to such holder at the office or agency maintained by the
Company for such purpose pursuant to the Indenture, a certificate or
certificates for the number of full shares of Common Stock issuable upon
such conversion of such Note or portion thereof in accordance with the
provisions of this Section 5 and a check or cash in respect of any
fractional interest in respect of a share of Common Stock arising upon such
conversion, as provided in Section 5.3. In case any Note of a denomination
greater than $1,000 shall be surrendered for partial conversion, and subject
to Section 1, the Company shall execute and the Trustee shall authenticate
and deliver to the holder of the Note so surrendered, without charge to him,
a new Note or Notes in authorized denominations in an aggregate principal
amount equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above
in this Section 5.2 have been satisfied as to such Note (or portion
thereof), and the person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder of record of the shares
represented thereby; provided, however, that any such surrender on any date
when the stock transfer books of the Company shall be closed shall
constitute the person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Rate in effect on the date upon which such Note shall be
surrendered.
Except as described in this Section 5.2, holders of the Notes will not be
entitled to any payment or adjustment on account of accrued and unpaid
interest upon conversion of the Notes. The Company's delivery of the fixed
number of shares of Common Stock into which the Notes are convertible will
be deemed to satisfy the Company's obligation to pay the principal amount at
maturity of the Notes and all accrued interest that has not previously been
(or is not simultaneously being) paid. The Common Stock is treated as issued
first in payment of accrued interest and then in payment of principal.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date
to the close of business on the Business Day next preceding the following
interest payment date shall (unless such Note or portion thereof being
converted shall have been called for redemption during the period from the
close of business on such record date to the close of business on the
Business Day next preceding the following interest payment date) be
accompanied by payment, in New York Clearing House funds or other funds
acceptable to the Company, of an amount equal to the interest otherwise
payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment need be made if there
shall exist at the time of conversion a default in the payment of interest
on the Notes. Except as provided above in this Section 5.2, no payment or
other adjustment shall be made for interest accrued on any Note converted or
for dividends on any shares issued upon the conversion of such Note as
provided in this Section 5.
3
<PAGE>
Upon the conversion of an interest in a Note in global form, the Trustee, or
the Custodian at the direction of the Trustee, shall make a notation on such
Note in global form as to the reduction in the principal amount at maturity
represented thereby.
Section 5.3. Cash Payments in lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be
issued upon conversion of Notes. If more than one Note shall be surrendered
for conversion at one time by the same holder, the number of full shares
which shall be issuable upon conversion shall be computed on the basis of
the aggregate principal amount at maturity of the Notes (or specified
portions thereof to the extent permitted hereby) so surrendered. If any
fractional share of stock would be issuable upon the conversion of any Note
or Notes, the Company shall make an adjustment and payment therefor in cash
at the current market value thereof to the holder of Notes. The current
market value of a share of Common Stock shall be the Closing Price on the
first Business Day immediately preceding the day on which the Notes (or
specified portions thereof) are deemed to have been converted.
Section 5.4. Conversion Rate. The conversion rate shall be as specified in
the form of Note (herein called the "Conversion Rate") attached hereto,
subject to adjustment as provided in this Section 5.
Section 5.5. Adjustment of Conversion Rate. The Conversion Rate shall be
adjusted from time to time by the Company as follows:
(a) In case the Company shall pay a dividend or make a distribution, in
shares of its Common Stock, on its Common Stock, the Conversion Rate in
effect at the opening of business on the date following the date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Conversion Rate by a
fraction of which the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination and the numerator shall be the sum of such number of shares
and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the
opening of business on the day following the date fixed for such
determination. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
If any dividend or distribution of the type described in this Section 5.5(a)
is declared but is not so paid or made and not required to be so paid or
made, the Conversion Rate shall again be adjusted to the Conversion Rate
which would then be in effect if such dividend or distribution had not been
declared.
(b) In case the Company shall issue rights or warrants to all holders of
its Common Stock entitling them (for a period expiring within 45 days after
the date fixed for determination of stockholders entitled to receive such
rights or warrants) to subscribe for or purchase Common Stock at a price per
share less than the Current Market Price per share of Common Stock (as
defined in Section 5.5(g) below) at the record date for the determination of
stockholders
4
<PAGE>
entitled to receive such rights or warrants, the Conversion Rate in effect
immediately prior thereto shall be adjusted so that the same shall equal the
rate determined by multiplying the Conversion Rate in effect immediately
prior to the date fixed for determination of stockholders entitled to
receive such rights or warrants by a fraction the denominator of which shall
be the number of shares of Common Stock outstanding at the close of business
on the date fixed for determination of stockholders entitled to receive such
rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such
Current Market Price and the numerator of which shall be the number of
shares of Common Stock outstanding on the date fixed for determination of
stockholders entitled to receive such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made successively whenever any such rights or warrants
are issued, and shall become effective immediately after the opening of
business on the day following the record date for the determination of the
stockholders entitled to receive such rights or warrants. In determining
whether any rights or warrants entitle the holders to subscribe for or
purchase shares of Common Stock at less than such Current Market Price, and
in determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by the Company
for such rights or warrants, the value of such consideration, if other than
cash, to be determined by the Board of Directors. To the extent that shares
of Common Stock are not delivered or required to be delivered after the
expiration of such rights or warrants, the Conversion Rate shall be
readjusted to the Conversion Rate which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. If such rights or warrants are not so issued and not required to
be so issued, the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect if such record date for the
determination of stockholders entitled to receive such rights or warrants
had not been fixed.
(c) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately reduced, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall distribute to all holders of its Common
Stock shares of any class of capital stock of the Company (other than Common
Stock) or evidences of its indebtedness or assets (excluding cash dividends
or other distributions to the extent paid from retained earnings of the
Company) or rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in Section 5.5(b) above) (any of the
foregoing hereinafter in this Section 5.5(d) called the "Distributed
Securities"), then in each such case the Conversion Rate shall be adjusted
so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect on the record date with respect to such
distribution by a fraction of which the denominator shall be the Current
Market Price per share of the Common
5
<PAGE>
Stock on such record date less the fair market value on such record date (as
determined by the Board of Directors of the Company, whose determination
shall be conclusive, and described in a certificate filed with the Trustee)
of the Distributed Securities applicable to one share of Common Stock and
the numerator of which shall be the Current Market Price per share of the
Common Stock on the record date for the determination of shareholders
entitled to receive such distribution; such adjustment shall become
effective immediately prior to the opening of business on the day following
such record date. Notwithstanding the foregoing, in the event the then fair
market value (as so determined) of the portion of the Distributed Securities
applicable to one share of Common Stock is equal to or greater than the
Current Market Price of the Common Stock on the relevant record date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion the amount
of Distributed Securities such holder would have received had such holder
converted each Note on such record date. In the event that such distribution
is not so paid or made, the Conversion Rate shall again be adjusted to the
Conversion Rate which would then be in effect if such distribution had not
been declared. If the Board of Directors determines the fair market value of
any distribution for purposes of this subsection (d) by reference to the
actual or when issued trading market for any securities, it must in doing so
consider the prices in such market over the same period used in computing
the Current Market Price of the Common Stock.
Notwithstanding the foregoing provisions of this subsection (d), no
adjustment shall be made thereunder for any distribution of Distributed
Securities if the Company makes proper provision so that each holder of a
Note who converts such Note (or any portion thereof) after the record date
for such distribution shall be entitled to receive upon such conversion, in
addition to the shares of Common Stock issuable upon such conversion, the
amount and kind of Distributed Securities that such holder would have been
entitled to receive if such holder had, immediately prior to such record
date, converted such Note into Common Stock, provided that, with respect to
any Distributed Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the extent (and so
long as) the Distributed Securities receivable upon conversion of such Note
would be convertible, exchangeable or exercisable, as applicable, without
any loss of rights or privileges for a period of at least 60 days following
conversion of such Note.
(e) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding (x) any quarterly cash
dividend on the Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed the greater of
(A) the amount per share of Common Stock of the next preceding quarterly
cash dividend on the Common Stock to the extent such preceding quarterly
dividend did not require any adjustment of the Conversion Rate pursuant to
this Section 5.5(e) (as adjusted to reflect subdivisions or combinations of
the Common Stock), and (B) 10% of the average of the last reported sales
price of the Common Stock (determined as provided in Section 5.5(g)) during
the ten Trading Days (as defined in Section 5.5(g)) next preceding the date
of declaration of such dividend and (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary), then, in such case, unless the Company
elects to reserve such cash for distribution to the holders of the Notes
upon the conversion of the Notes so that any such holder converting Notes
will receive upon such conversion, in addition to the shares of Common Stock
to which such holder is entitled, the amount of cash which such holder would
have received if such holder had, immediately prior to the record date for
such distribution of cash, converted its Notes into Common Stock, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to
the close of business on such record date by a fraction of which the
denominator shall be
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<PAGE>
such Current Market Price of the Common Stock on the record date less the
amount of cash so distributed (and not excluded as provided above)
applicable to one share of Common Stock and the numerator of which shall be
the Current Market Price of the Common Stock on such record date; such
adjustment to be effective immediately prior to the opening of business on
the day following the record date; provided, however, that in the event the
portion of the cash so distributed applicable to one share of Common Stock
is equal to or greater than the Current Market Price of the Common Stock on
the record date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Noteholder shall have the right to receive upon
conversion the amount of cash such holder would have received had such
holder converted each Note on the record date. If such dividend or
distribution is not so paid or made, the Conversion Rate shall again be
adjusted to be the Conversion Rate which would then be in effect if such
dividend or distribution had not been declared.
If any adjustment is required to be made as set forth in this subsection (e)
as a result of a distribution that is a quarterly dividend, such adjustment
shall be based upon the amount by which such distribution exceeds the amount
of the quarterly cash dividend permitted to be excluded pursuant hereto. If
an adjustment is required to be made as set forth in this subsection (e)
above as a result of a distribution that is not a quarterly dividend, such
adjustment shall be based upon the full amount of the distribution.
(f) In case a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer shall involve the payment by the
Company or such subsidiary of consideration per share of Common Stock having
a fair market value (as determined by the Board of Directors or, to the
extent permitted by applicable law, a duly authorized committee thereof,
whose determination shall be conclusive, and described in a resolution of
the Board of Directors or such duly authorized committee thereof, as the
case may be, at the last time (the "Expiration Time") tenders or exchanges
may be made pursuant to such tender or exchange offer (as it shall have been
amended), that exceeds the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, the Conversion Rate shall
be adjusted so that the same shall equal the rate determined by multiplying
the Conversion Rate in effect immediately prior to the Expiration Time by a
fraction of which the denominator shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) on the
Expiration Time multiplied by the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time and the numerator of
which shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on
the acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the shares deemed so accepted up to any
such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time; such
adjustment to become effective immediately prior to the opening of business
on the day following the Expiration Time. If the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the
Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion
7
<PAGE>
Rate shall again be adjusted to be the Conversion Rate which would then be
in effect if such tender or exchange offer had not been made.
(g) For purposes of this Section 5.5, the following terms shall have the
meaning indicated:
(i) "Current Market Price" per share of Common Stock at any date
shall be deemed to be the average of the last reported sale prices for
the ten (10) consecutive Trading Days (as defined below) preceding the
day before the record date with respect to any distribution, issuance or
other event requiring such computation.
(ii) "Closing Price" with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and
asked prices, regular way, in each case on the Nasdaq National Market or
New York Stock Exchange, or, if such security is not listed or admitted
to trading on such quotation system or exchange, on the principal
national security exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security
on the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose, or a price determined in good faith
by the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution.
(iii) "fair market value" shall mean the amount which a willing buyer
under no compulsion to buy would pay a willing seller under no compulsion
to sell in an arm's length transaction.
(iv) "record date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive such
cash, securities or other property (whether such date is fixed by the
Board of Directors or by statute, contract or otherwise).
(v) "Trading Day" shall mean (x) if the applicable security is quoted
on the Nasdaq National Market, a day on which trades may be made on
thereon or (y) if the applicable security is listed or admitted for
trading on the New York Stock Exchange or another national security
exchange, a day on which the New York Stock Exchange or another national
security exchange is open for business or (z) if the applicable security
is not so listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which
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<PAGE>
banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
(h) Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock,
(ii) are not exercisable, and
(iii) are also issued in respect of future issuances of Common Stock,
shall not be deemed distributed for purposes of this Section 5.5 until
the occurrence of the earliest Trigger Event. In addition, in the event
of any distribution of rights or warrants, or any Trigger Event with
respect thereto, that shall have resulted in an adjustment to the
Conversion Rate under this Section 5.5, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased
without exercise by any holders thereof, the Conversion Rate shall be
readjusted upon such final redemption or repurchase to give effect to
such distribution or Trigger Event, as the case may be, as though it were
a cash distribution, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of any such rights or warrants all of
which shall have expired without exercise by any holder thereof, the
Conversion Rate shall be readjusted as if such issuance had not occurred.
(i) No adjustment to the Conversion Rate shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
rate; provided, however, that any adjustments which by reason of this
subsection (i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made by the Company and shall be made to the nearest cent
or to the nearest one hundredth of a share, as the case may be. Anything in
this Section 5.5 to the contrary notwithstanding, the Company shall be
entitled to make such increases in the Conversion Rate, in addition to those
required by this Section 5.5, as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or any distribution
of securities convertible into or exchangeable for stock hereafter made by
the Company to its stockholders shall not be taxable. To the extent
permitted by applicable law, the Company from time to time may increase the
Conversion Rate by any amount for any period of time if the period is at
least 20 days, the increase is irrevocable during the period and the Board
of Directors shall have made a determination that such increase would be in
the best interests of the Company, which determination shall be conclusive.
Whenever the Conversion Rate is so increased, the Company shall mail to
Noteholders and file with the Trustee and the conversion agent a notice of
the increase. The Company shall mail the notice at least 5 days before the
date the increased Conversion Rate takes effect. The notice shall state the
increased Conversion Rate and the period it will be in effect.
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<PAGE>
(j) Whenever the Conversion Rate is adjusted, as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion Rate
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion Rate
setting forth the adjusted Conversion Rate and the date on which such
adjustment becomes effective and shall mail such notice of such adjustment
of the Conversion Rate to each Noteholder at its last address appearing on
the Note register provided for in the Indenture, within twenty (20) days
after execution thereof. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(k) In any case in which this Section 5.5 provides that an adjustment
shall become effective immediately after a record date for an event, the
Company may defer until the occurrence of such event (i) issuing to the
holder of any Note converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving effect to
such adjustment and (ii) paying to such holder any amount in cash or
additional shares in lieu of any fractional share pursuant to Section 5.3.
(l) In case of a tender or exchange offer made by a Person other than
the Company or any subsidiary for an amount which increases the offeror's
ownership of Common Stock to more than 25% of the Common Stock outstanding
and shall involve the payment by such Person of consideration per share of
Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) at the Expiration Time that exceeds
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, and in which, as of the Expiration Time, the
Board of Directors is not recommending rejection of the offer, the
Conversion Rate shall be increased so that the same shall equal the price
determined by multiplying the Conversion Rate in effect immediately prior to
the Expiration Time by a fraction of which the denominator shall be the
number of shares of Common Stock outstanding (including any tendered or
exchange shares) at the Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration
Time and the numerator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all Purchased Shares and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
increase to become effective immediately prior to the opening of business on
the day following the Expiration Time. In the event that such Person is
obligated to purchase shares pursuant to any such tender or exchange offer,
but such Person is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Rate
shall again be adjusted to be the Conversion Rate which would then be in
effect if such tender or exchange offer had not been made. Notwithstanding
the foregoing, the adjustment described in this Section 5.5(l) shall not be
made if, as of the Expiration Time, the offering documents with
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<PAGE>
respect to such offer disclose a plan or intention to cause the Company to
engage in any transaction described in Article 8 of the Indenture.
Section 5.6. Effect of Reclassification, Consolidation, Merger or Sale. If
any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 5.5(c) applies), (ii) any consolidation, merger
or combination of the Company with another corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, or (iii) any sale or conveyance of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation as a result of which holders of Common Stock shall be entitled
to receive stock, securities or other property or assets (including cash)
with respect to or in exchange for such Common Stock, then the Company or
the successor or purchasing corporation, as the case may be, shall execute
with the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets
(including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Notes
(assuming, for such purposes, a sufficient number of authorized shares of
Common Stock available to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance assuming such holder of Common Stock did not exercise his rights
of election, if any, as to the kind or amount of securities, cash or other
property receivable upon such consolidation, merger, statutory exchange,
sale or conveyance (provided, that, if the kind or amount of securities,
cash or other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance is not the same for each share of Common Stock
in respect of which such rights of election shall not have been exercised
("nonelecting-share")), then for the purposes of this Section 5.6 the kind
and amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance for each non-
electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares. Such supplemental indenture
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on
the Note register provided for in the Indenture, within twenty (20) days
after execution thereof. Failure to deliver such notice shall not affect the
legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 5.6 applies to any event or occurrence, Section 5.5 shall
not apply.
Section 5.7. Taxes on Shares Issued. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting
Notholder for any tax in respect of the issue thereof. The Company shall
not, however, be required to pay any tax which may be payable in respect of
any transfer involved in the issue and delivery of stock in
11
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any name other than that of the holder of any Note converted, and the
Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issue thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
Section 5.8. Reservation of Shares; Shares to be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock. The Company shall
provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to
provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common
Stock issuable upon conversion of the Notes, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue shares of such Common
Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Notes will upon issue be fully paid and non-assessable by
the Company and free from all taxes, liens and charges with respect to the
issue thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration
or approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall be
listed on the Nasdaq National Market, the New York Stock Exchange or any
other national securities exchange or automated quotation system the Company
will, if permitted by the rules of such exchange or automated quotation
system, list and keep listed, so long as the Common Stock shall be so listed
on such exchange or automated quotation system, all Common Stock issuable
upon conversion of the Notes; provided, however, that if rules of such
exchange or automated quotation system permit the Company to defer the
listing of such Common Stock until the first conversion of the Notes into
Common Stock in accordance with the provisions of the Indenture, the Company
covenants to list such Common Stock issuable upon conversion of the Notes in
accordance with the requirements of such exchange or automated quotation
system at such time.
Section 5.9. Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility
to any holder of Notes to determine whether any facts exist which may
require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon
the conversion of any Note; and the Trustee and any other conversion agent
make no representations with respect thereto. Subject to
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<PAGE>
the provisions of the Indenture, neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to issue, transfer
or deliver any shares of Common Stock or stock certificates or other
securities or property or cash upon the surrender of any Note for the
purpose of conversion or to comply with any of the duties, responsibilities
or covenants of the Company contained in this Article. Without limiting the
generality of the foregoing, neither the Trustee nor any conversion agent
shall be under any responsibility to determine the correctness of any
provisions contained in any supplemental indenture entered into pursuant to
Section 5.6 relating either to the kind or amount of shares of stock or
securities or property (including cash) receivable by Noteholders upon the
conversion of their Notes after any event referred to in such Section 5.6 or
to any adjustment to be made with respect thereto, but, subject to the
provisions of Article 6 of the Indenture, may accept as conclusive evidence
of the correctness of any such provisions, and shall be protected in relying
upon, the Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such supplemental
indenture) with respect thereto.
Section 5.10. Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other distribution) on
its Common Stock that would require an adjustment in the Conversion Price
pursuant to Section 5.5; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any share of
any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from
no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the Company
is required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding-
up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to
each holder of Notes at his address appearing on the Note register provided
for in the Indenture, as promptly as possible but in any event at least
fifteen (15) days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights or warrants, or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution or rights are to be determined,
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become
effective or occur, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-
up. Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend,
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distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
6. The Notes are subject to redemption, as set forth in the form of the Note.
7. The Notes are not subject to a sinking fund or other analogous fund
requirement.
8. The Corporate Trust Office of First Trust of New York, National
Association is appointed as the principal paying agent, transfer agent,
and registrar for the Notes and for the purpose mentioned in Section 10.2
of the Indenture. The Notes may be presented for payment at maturity at
such Corporate Trust Office, or at any other agency as may be appointed by
the Issuer from time to time in The City of New York.
9. The Notes will be represented by one or more Global Notes as described
under the caption "Description of the Notes--Book Entry; Delivery and
Form" in the Issuer's Prospectus Supplement dated October __, 1997 with
respect to the offering of the Notes. There will be no bearer notes.
10. The Notes shall have such other terms and conditions (including
subordination) as are set forth in the form of the Note. The Notes shall
be subject to the provisions of the Indenture [, except that the terms of
Sections 14.2 and 14.3 of the Indenture shall not apply to the Notes].
11. The attached form of the Notes is in the form hereby approved by the
undersigned pursuant to authority granted by the Board of Directors of the
Company.
This Certificate is delivered pursuant to the provisions of Sections 2.1, 3.1
and 3.3 of the Indenture. The undersigned hereby certify as follows:
(a) we have read each of the Sections of the Indenture referred to above,
and the definitions of the Indenture relating thereto;
(b) we have examined the Indenture, the form of Notes and such other
documents, records and instruments as we have deemed necessary for purposes of
giving this Certificate;
(c) in our opinion, we have made such examination and investigation as is
necessary to enable us to express an informed opinion as to whether the
conditions precedent to the issuance of the Notes have been complied with; and
(d) in our opinion, the conditions precedent to the issuance of the Notes
have been complied with.
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Dated: October 16, 1997 ----------------------------------
Paul W. Whetsell, President, Chief
Executive Officer and Chairman of
the Board
Dated: October 16, 1997 ----------------------------------
John Emery,
Chief Financial Officer
15
<PAGE>
FORM OF NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
CAPSTAR HOTEL COMPANY
4.75% CONVERTIBLE SUBORDINATED NOTE DUE 2004 No. ______
CUSIP
CapStar Hotel Company, a corporation duly organized and validly existing under
the laws of the State of Delaware (herein called the "Company"), which term
includes any successor corporation under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of One Hundred Seventy Two Million Five
Hundred Thousand Dollars ($172,500,000) on October 15, 2004, at the office or
agency of the Company maintained for that purpose in the Borough of Manhattan,
The City of New York, or, at the option of the holder of this Note, at the
Corporate Trust Office, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, semi-annually on April 15 and October 15 of
each year, commencing April 15 , 1998, on said principal sum at said office or
agency, in like coin or currency, at the rate per annum of 4.75% from October
16, 1997 (or from the most recent interest payment date to which interest has
been paid or provided for), until payment of said principal sum has been made or
duly provided for. Notwithstanding the foregoing, if the date hereof is after
any April 1 or October 1, as the case may be, and before the following April 15
or October 15, this Note shall bear interest from such April 1 or October 1;
provided, however, that if the Company shall default in the payment of interest
due on such April 15 or October 15, then this Note shall bear interest from the
next preceding April 1 or October 1 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from October 16, 1997. The interest payable on the Note pursuant to the
Indenture on any April 15 or October 15, will be paid to the person entitled
thereto as it appears in the Note register at the close of business on the
record date, which shall be the April 1 or October 1 (whether or not a Business
Day) next preceding such April 15 or October 15, as provided in the Indenture;
provided, that any such interest not punctually paid or duly provided for shall
be payable as provided in the Indenture. Interest may, at the option of the
Company, be paid by check mailed to the registered address of such person.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions subordinating the
payment of principal amount at maturity, Issue Price, Redemption Price, Change
in Control Purchase Price and interest on the Notes to the prior payment in full
of all Senior Indebtedness, as defined in the Indenture, and provisions giving
the holder of this Note the right to convert this Note into Common Stock of the
Company on the terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Note shall be deemed to be a contract made under the laws of New York,
and for all purposes shall be construed in accordance with and governed by the
laws of New York, without regard to principles of conflicts of laws.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
CAPSTAR HOTEL COMPANY
By: _____________________________
Name:
Title:
Attest: ____________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the
within-named Indenture.
Dated: October 16, 1997
__________________________, as Trustee
By: ______________________________
Authorized Signatory
By: ______________________________
As Authenticating Agent (if
different from Trustee)
2
<PAGE>
[FORM OF REVERSE OF NOTE]
CAPSTAR HOTEL COMPANY
4.75% CONVERTIBLE SUBORDINATED NOTE DUE 2004
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 4.75% Convertible Subordinated Notes due 2004 (herein called
the "Notes"), limited to the aggregate principal amount at maturity of
$172,500,000 all issued or to be issued under and pursuant to an indenture dated
as of October 15, 1997 (herein called the "Indenture"), between the Company and
First Trust of New York, National Association, as trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the Issue Price, and accrued interest, if any,
through the date of declaration on all Notes may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount at maturity of the Notes at the time outstanding,
evidenced as in the Indenture provided, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in any
<PAGE>
manner the rights of the holders of the Notes; provided, however, that as
provided in the Indenture, no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount at maturity thereof, or reduce
any amount payable on redemption or repurchase thereof, or impair the right of
any Noteholder to institute suit for the payment thereof, or make the principal
amount at maturity thereof or Redemption Price, Change in Control Purchase Price
or interest thereon payable in any coin or currency other than that provided in
the Note, or modify the provisions of the Indenture with respect to the
subordination of the Notes in a manner adverse to the Noteholders in any
material respect, or change the obligation of the Company to make redemption of
any Note upon the happening of a Change in Control in a manner adverse to the
holder of the Notes, or impair the right to convert the Notes into Common Stock
subject to the terms set forth in the Indenture, as supplemented, without the
consent of the holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of principal
amount at maturity, Redemption Price, Change in Control Purchase Price or
interest in respect of any of the Notes or a failure by the Company to convert
any Notes into Common Stock of the Company. Any such consent or waiver by the
holder of this Note (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Note and any Notes which may be issued in exchange or substitute hereof,
irrespective of whether or not any notation thereof is made upon this Note or
such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, expressly subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness (as defined below) of
the Company, whether outstanding at the date of the Indenture or thereafter
incurred, and this Note is issued subject to the provisions of the Indenture
with respect to such subordination. Each holder of this Note, by accepting the
same, agrees to and shall be bound by such provisions and authorizes the Trustee
on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and appoints the Trustee his attorney-
in-fact for such purpose.
No payment shall be made with respect to the principal of, or premium, if
any, or interest on the Notes (including the Payment of any Redemption Price or
Change in Control Purchase Price (as defined below)), if (i) a default in the
payment of principal, premium, if any, interest, rent or other obligations in
respect of Senior Indebtedness occurs and is continuing (or, in the case of
Senior Indebtedness for which there is a period of grace, in the event of such a
default that continues beyond the period of grace, if any, specified in the
instrument or lease evidencing such Senior Indebtedness); or (ii) a default,
other than a payment default, on Designated Senior Indebtedness occurs and is
continuing that then permits holders of such Designated Senior Indebtedness to
accelerate its maturity and the Trustee receives a notice of the default (a
"Payment Blockage Notice") from a Representative or the Company. The Company may
and shall resume payments on and distributions in respect of the Notes upon the
earlier of: (1) the date upon which the default is cured or waived or ceases to
exist, or (2) in the case of a default referred to in clause (ii) above, 179
days after the Payment Blockage Notice is received. No subsequent period of
payment blockage may be commenced pursuant to a Payment Blockage Notice unless
and until (A) at least 365 days shall have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice, and (B) all
scheduled payments of principal amount at maturity, Redemption Price, Change in
Control Purchase Price and interest on the Notes that have come due have been
paid in full in cash. During any period of payment blockage, any payment that
otherwise would have been made during such period will accrue interest, to the
extent legally permissible, at the annual rate set forth herein from the date on
which such payment was required under the terms of the Indenture until the date
of payment. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
For purposes of the Notes, the term "Senior Indebtedness" means the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, Indebtedness
(as defined below) of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to, the foregoing),
unless in the case of any particular Indebtedness the instrument creating or
evidencing the same or the assumption or guarantee thereof expressly provides
that such Indebtedness shall not be senior in right of payment to the Notes or
expressly provides that such Indebtedness is "pari passu" with or "junior" to
the Notes. Notwithstanding the foregoing, the term Senior Indebtedness shall
not include any Indebtedness of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company. If any payment made to any holder of any Senior Indebtedness or its
Representative with respect to such Senior Indebtedness is rescinded or must
otherwise be returned by such holder or Representative upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, the
2
<PAGE>
reinstated Indebtedness of the Company arising as a result of such rescission or
return shall constitute Senior Indebtedness effective as of the date of such
rescission or return.
The term "Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof) (other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services), (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees or bankers' acceptances, (c) all obligations and
liabilities (contingent or otherwise) in respect of leases of such Person
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person and all obligations and other liabilities (contingent or otherwise) under
any lease or related document (including a purchase agreement) in connection
with the lease of real property which provides that such Person is contractually
obligated to purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the lessor
and the obligations of such Person under such lease or related document to
purchase or to cause a third party to purchase such leased property, (d) all
obligations of such Person (contingent or otherwise) with respect to an interest
rate or other swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar instrument or
agreement, (e) all direct or indirect guaranties or similar agreements by such
Person in respect of, and obligations or liabilities (contingent or otherwise)
of such Person to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or liabilities of another
Person of the kind described in clauses (a) through (d), (f) any indebtedness or
other obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness). If any payment made to any holder of any
Designated Senior Indebtedness or its Representative with respect to such
Designated Senior Indebtedness is rescinded or must otherwise be returned by
such holder or Representative upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, the reinstated Indebtedness of the Company arising
as a result of such rescission or return shall constitute Designated Senior
Indebtedness effective as of the date of such rescission or return.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal amount at maturity, Issue
Price, Redemption Price, Change in Control Purchase Price and
3
<PAGE>
interest on this Note at the place, at the respective times, at the rate and in
the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a year of a
360-day year or twelve 30-day months. In the case of any Note (or portion
thereof) which is converted into Common Stock of the Company during the period
from (but excluding) a recorded date to (but excluding) the next succeeding
interest payment date either (i) if such Note (or portion thereof) has been
called for redemption on a redemption date which occurs during such period, or
is to be redeemed in connection with a Change in Control Purchase Date which
occurs during such period, the Company shall not be required to pay interest on
such interest payment date in respect of any such Note (or portion thereof) or
(ii) if otherwise, any Note (or portion thereof) submitted for conversion during
such period shall be accompanied by funds equal to the interest payable on such
succeeding interest payment date on the aggregate principal amount at maturity
so converted.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount at maturity and any integral multiple
thereof. At the office or agency of the Company referred to on the face hereof,
and in the manner and subject to the limitations provided in the Indenture, but
without payment of any service charge (but with payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration or exchange of Notes), Notes may be exchanged for a like
aggregate principal amount at maturity of Notes of other authorized
denominations.
The Notes will not be redeemable at the option of the Company prior to
October 15, 2000. At any time on or after October 15, 2000, and prior to
maturity, the Notes may be redeemed at the option of the Company as a whole, or
from time to time in part, upon mailing a notice of such redemption not less
than 30 days and not more than 60 days before the date fixed for redemption to
the holders of Notes at their last registered addresses, all as provided in the
Indenture, at the following Redemption Prices per $1,000 principal amount at
maturity, together in each case with accrued interest to the date fixed for
redemption.
Redemption Date Redemption Price
- ---------------- ----------------
October 15, 2000 102.71%
October 15, 2001 102.04%
October 15, 2002 101.36%
October 15, 2003 100.68%
October 15, 2004 100.00%
Notwithstanding the foregoing, if the date fixed for redemption is an April 15
or October 15, then the interest payable on such date shall be paid to the
holder of record on the next preceding April 1 or October 1.
The Notes are not subject to redemption through the operation of any
sinking fund.
4
<PAGE>
In the event of a Change in Control, each holder will have the option, subject
to the terms and conditions of the Indenture (including, without limitation, the
redemption provisions thereof), to require the Company to repurchase all or any
part (provided that the principal amount must be $1,000 or an integral multiple
thereof) of the holder's Notes as of the date that is 30 Business Days after the
date of the Company's notice of the occurrence of such Change in Control (the
"Change in Control Purchase Date") for a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest up to but not
including the Change in Control Purchase Date (the "Change in Control Purchase
Price"); provided that any semi-annual payment of interest becoming due on the
Change in Control Purchase Date shall be payable to the holders of record on the
relevant record date of the Notes being repurchased. The payment of the Change
in Control Purchase Price shall be made on the fifth full business day following
the Change in Control Purchase Date.
Within ten Business Days after the occurrence of a Change in Control, the
company is required to mail to each holder and to the Trustee a written notice
of the occurrence of such Change in Control, setting forth, among other things,
the terms and conditions of, and the procedures required for exercise of, the
Holder's right to require the repurchase of such holder's Notes.
To exercise the repurchase right upon a Change in Control, a holder must
deliver written notice of such exercise to the Trustee at any time prior to the
close of business on the Change in Control Purchase Date, specifying the Notes
with respect to which the repurchase right is being exercised. Such notice of
exercise may be withdrawn by the holder by a written notice of withdrawal
delivered to the Trustee at any time prior to the close of business on the
Change in Control Purchase Date. A Change in Control shall be deemed to have
occurred if any of the following occurs after the original issuance of the
Notes:
(i) the acquisition by any Person (including any syndicate or group deemed to
be a "person" under Section 13(d)(3) or 14(d)(2) of the Exchange Act or a
successor provision) of beneficial ownership, directly or indirectly, through a
purchase, merger, or other acquisition transaction or series of transactions, of
shares of capital stock of the Company entitling such Person to exercise more
than 50% of the total voting power of all shares of capital stock of the Company
entitling the holders thereof to vote generally in elections of directors; or
(ii) any consolidation of the Company with, or merger of the Company into, any
other Person, any merger of another Person into the Company, or any sale, lease,
or exchange in one transaction or a series of related transactions, of all or
substantially all of the property and assets of the Company to another Person
(other than (a) any such transaction pursuant to which the holders of 50% or
more of the total voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors immediately prior to such
transaction have, directly or indirectly, at least 50% or more of the total
voting power of all shares of capital stock of the continuing or surviving
corporation entitled to vote generally in elections of directors of the
continuing or surviving corporation immediately after such transaction, and (b)
a merger which (1) does not result in any reclassification, conversion,
exchange, or cancellation of outstanding shares of capital stock of the Company
or (2) is effected primarily to change the jurisdiction of incorporation of the
Company and results in reclassification, conversion, or exchange of outstanding
shares of Common Stock solely into shares of Common Stock of the surviving
entity); provided, however, that a Change in Control shall not be deemed to have
occurred if the closing price per share of the Common Stock for any 10 trading
days within the period of 20 consecutive trading days ending immediately before
the occurrence of the event that would otherwise constitute a Change in Control
shall equal or exceed 105% of the Conversion Price of the Notes in effect on
each such trading day.
5
<PAGE>
A "beneficial owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after 90 days following the date of original
issuance of the Notes and prior to the close of business on October 15, 2004,
or, as to all or any portion hereof called for redemption, prior to the close of
business on the Business Day immediately preceding the date fixed for redemption
(unless the Company shall default in payment due upon redemption thereof), to
convert the principal hereof or any portion of such principal which is $1,000
principal amount at maturity or an integral multiple thereof, into that number
of fully paid and nonassessable shares of Company's Common Stock, as said shares
shall be constituted at the date of conversion, obtained by dividing the
principal amount at maturity of this Note or portion thereof to be converted by
$1,000 and multiplying the result so obtained by 23.2558 (the "Conversion Rate")
or such Conversion Rate as adjusted from time to time as provided in the
Indenture, upon surrender of this Note, together with a conversion notice as
provided in the Indenture, to the Company at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
or at the option of such holder, the Corporate Trust Office, and, unless the
shares issuable on conversion are to be issued in the same name as this Note,
duly endorsed by, or accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the holder or by his duly authorized attorney.
No adjustment in respect of accrued interest or dividends will be made upon any
conversion; provided, however, that if this Note shall be surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the close of business on the Business Day preceding
the interest payment date, this Note (unless it or the portion being converted
shall have been called for redemption during the period from the close of
business on any record date for the payment of interest to the close of business
on the Business Day preceding the interest payment date) must be accompanied by
an amount, in New York Clearing House funds or other funds acceptable to the
Company, equal to the interest payable on such interest payment date on the
principal amount at maturity being converted. No fractional shares will be
issued upon any conversion, but an adjustment in cash will be made, as provided
in the Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for conversion on or
before the close of business on the date fixed for redemption, may be deemed to
be purchased from the holder of such Notes at an amount equal to the applicable
Redemption Price, together with accrued interest to the date fixed for
redemption, by one or more investment bankers or other purchasers who may agree
with the Company to purchase such Notes from the holders thereof and convert
them into Common Stock of the Company and to make payment for such Notes as
aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust
Office, a new Note or Notes of authorized denominations for an equal aggregate
principal amount at maturity will be issued to the transferee in exchange
thereof, subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any
6
<PAGE>
other conversion agent nor any Note registrar shall be affected by any notice to
the contrary. All payments made to or upon the order of such registered holder
shall, to the extent of the sum or sums paid, satisfy and discharge liability
for monies payable on this Note.
No recourse for the payment of the principal amount at maturity, Issue
Price, Redemption Price, Change in Control Purchase Price or any interest on
this Note, or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws of New York,
and for all purposes shall be construed in accordance with the laws of New York,
without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
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<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM -- as tenants in UNIF GIFT MIN ACT --
common
TEN ENT -- as tenants by the _________________ Custodian
entireties (Cust)
JT TEN -- as joint tenants _____________________ under
with right of survivorship and (Minor)
not as tenants in common
Uniform Gifts to Minors Act
____________________(State)
Additional abbreviations may also be used
though not in the above list.
8
<PAGE>
CONVERSION NOTICE
To: CAPSTAR HOTEL COMPANY
The undersigned registered owner of this Note hereby irrevocably exercises
the option to convert this Note, or the portion hereof (which is $1,000
principal amount at maturity or an integral multiple thereof) below designated,
into shares of Common Stock of CapStar Hotel Company in accordance with the
terms of the Indenture referred to in this Note, and directs that the shares
issuable and deliverable upon such conversion, together with any check in
payment for fractional shares and any Notes representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. If shares or any portion of
this Note not converted are to be issued in the name of a person other than the
undersigned, the undersigned will check the appropriate box below and pay all
transfer taxes payable with respect thereto. Any amount required to be paid to
the undersigned on account of interest accompanies this Note.
Dated: * Sign exactly as name appears on the other side of the
Note:
---------------------------------------
Signature(s)
---------------------------------------
Signature Guarantee
Fill in for registration of shares of Common Stock if to be issued, and Notes if
to be delivered, other than to and in the name of the registered holder:
- ---------------------------------------
(Name)
- ---------------------------------------
(Street Address)
- ---------------------------------------
(City, State and Zip Code)
Please print name and address
Principal amount at maturity to be converted
(if less than all): $___________
-------------------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE>
ASSIGNMENT
For value received _____________________ hereby sell(s), assign(s) and
transfer(s) unto ______________________ (Please insert social security or other
Taxpayer Identification Number of assignee) the within Note, and hereby
irrevocably constitutes and appoints ____________________ attorney to transfer
the said Note on the books of the Company, with full power of substitution in
the premises.
OPTION TO ELECT REPAYMENT
UPON A CHANGE IN CONTROL
TO: CAPSTAR HOTEL COMPANY
The undersigned registered owner of this Note hereby acknowledges receipt
of a notice from CapStar Hotel Company (the "Company") as to the occurrence of a
Change in Control with respect to the Company and requests and instructs the
Company to repay the entire principal amount at maturity of this Note, or the
portion thereof (which is $1,000 principal amount at maturity or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the redemption price, together with
accrued interest to, but excluding, such date, to the registered holder hereof.
Dated:
--------------------------------------
--------------------------------------
Signature(s)
NOTICE: The above signatures of the holder(s)
hereof must correspond with the name as written
upon the face of the Note in every particular
without alteration or enlargement or any change
whatever.
Principal amount at maturity to be repaid (if less
than all):
$_______________
_________________________________
Social Security or Other Taxpayer
Identification Number
<PAGE>
EXHIBIT 4.8
MERISTAR HOSPITALITY CORPORATION
TO
U.S. BANK TRUST NATIONAL ASSOCIATION
Trustee
FIRST SUPPLEMENTAL
INDENTURE
Dated as of August 3, 1998
<PAGE>
1
FIRST SUPPLEMENTAL INDENTURE, dated as of August 3, 1998 between MeriStar
Hospitality Corporation, a Maryland corporation, having its principal office at
1010 Wisconsin Avenue, N.W., Suite 650, Washington, D.C. 20007 and U.S. Bank
Trust National Association (f/k/a First Trust of New York, N.A.), a national
banking association, duly organized under the laws of the United States of
America, as Trustee under the Indenture referred to below (herein called the
"Trustee").
RECITALS OF THE COMPANY
WHEREAS, CapStar Hotel Company, a Delaware corporation ("CapStar") has
heretofore executed and delivered to the Trustee a certain indenture, dated as
of October 16, 1997 (the "Indenture"), pursuant to which subordinated debt
securities of CapStar (herein called the "Securities") were issued. All terms
used in this First Supplemental Indenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture;
WHEREAS, CapStar and American General Hospitality Corporation, a Maryland
corporation ("AGH") have entered into an Agreement and Plan of Merger, dated as
of March 15, 1998 (the "Merger Agreement"), whereby CapStar will merge with and
into AGH (the "Merger"), with the result that AGH will be the surviving
corporation operating under the name MeriStar Hospitality Corporation (herein
called the "Company");
WHEREAS, Section 8.2 of the Indenture provides that CapStar shall not enter
the Merger unless the Company assumes all the obligations of CapStar under the
Securities and the Indenture pursuant to a supplemental indenture;
WHEREAS, Section 9.1(1) of the Indenture provides that without the written
consent of any Holder, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee may enter into an indenture supplemental to the
Indenture to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company in the
Indenture and in the Securities;
WHEREAS, the Company pursuant to the foregoing authority, proposes in and
by this First Supplemental Indenture to amend the Indenture upon the Merger to
reflect the assumption by the Company of all the obligations of CapStar under
the Securities and the Indenture; and
<PAGE>
2
WHEREAS, all things necessary to make this First Supplemental Indenture a
valid agreement of the Company and the Trustee and a valid amendment of and
supplement to the Indenture have been done.
<PAGE>
3
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities as follows:
ARTICLE ONE
PROVISIONS OF
GENERAL APPLICATION
SECTION 1.1 Assumption of Obligations. The Company assumes the due and
-------------------------
punctual payment of the principal of (and premium, if any) and any interest
(including all Additional Amounts, if any, payable pursuant to this Indenture)
on all of the Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by CapStar. The Company also represents and warrants
(i) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of CapStar or any Subsidiary as a
result thereof as having been incurred by CapStar or such Subsidiary at the time
of such transaction, no Event of Default, and no event which, after notice or
the lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing; and (ii) all conditions precedent in the Indenture
to the Company's assumption of CapStar's obligations have been complied with.
ARTICLE TWO
MISCELLANEOUS
SECTION 2.1 Incorporation of Indenture. All the provisions of this First
--------------------------
Supplemental Indenture shall be deemed to be incorporated in, and made a part
of, the Indenture; and the Indenture, as supplemented and amended by this First
Supplemental Indenture, shall be read, taken and construed as one and the same
instrument.
SECTION 2.2 Application of First Supplemental Indenture. The provisions
-------------------------------------------
and benefit of this First Supplemental Indenture shall be effective with respect
to Securities outstanding prior to and after the execution hereof.
SECTION 2.3 Headings. The headings of the Articles and Sections of the
--------
First Supplemental Indenture are inserted for convenience of reference and shall
not be deemed to be a part thereof.
<PAGE>
4
SECTION 2.4 Counterparts. This First Supplemental Indenture may be
------------
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 2.5 Conflict with Trust Indenture Act. If any provision hereof
---------------------------------
limits, qualifies or conflicts with another provision hereof which is required
to be included in this First Supplemental Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
SECTION 2.6 Successors and Assigns. All covenants and agreements in this
----------------------
First Supplemental Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
A. SECTION 2.7 Separability Clause. In case any provision in this First
-------------------
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
A. SECTION 2.8 Governing Law. The internal law of the State of New York
-------------
shall govern and be used to construe this First Supplemental Indenture.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
<PAGE>
6
STATE OF )
) ss.:
COUNTY OF )
On the day of , 1998, before me
personally came, to me known, who, being by me duly sworn, did depose and say
that he is of MERISTAR HOSPITALITY CORPORATION, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
___________________________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
On the day of , 1998, before me
personally came, to me known, who, being by me duly sworn, did depose and say
that he is of U.S. BANK TRUST NATIONAL ASSOCIATION, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
___________________________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
<PAGE>
Exhibit 10.13
THE BORROWERS NAMED
HEREIN
and
LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION
OF LEHMAN BROTHERS HOLDINGS INC.
__________________________
LOAN AGREEMENT
__________________________
Dated: As of August 12, 1999
<PAGE>
THIS LOAN AGREEMENT made as of the 12th day of August, 1999 between
the undersigned borrowers listed on the signature pages hereto, (hereinafter
referred to, individually and collectively, as the context may require, as a
"Borrower" or "Borrowers"), each of the foregoing having an office at 1010
-------- ---------
Wisconsin Avenue, N.W., Washington, D.C. 20007 and LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation, having an office at Three World Financial Center, New York, New
York 10285 (hereinafter referred to, together with its successors and/or
assigns, as "Lender");
------
W I T N E S S E T H :
WHEREAS, at the request of Borrower, Lender has agreed to fund to
Borrower a loan in the principal amount of $330,000,000 (the "Loan") pursuant to
----
the terms of this Agreement;
WHEREAS, the Loan is evidenced by that certain note of even date
herewith in the original principal amount of $301,250,000 ("Note One"), made by
certain of the Borrowers, as set forth on Schedule 1 attached hereto (the "Note
One Borrowers"), to Lender, and that certain note of even date herewith in the
original principal amount of $28,750,000 ("Note Two"), made by certain of the
Borrowers, as set forth on Schedule 2 attached hereto (the "Note Two
Borrowers"), to Lender (Note One and Note Two, collectively, together with all
extensions, renewals, substitutions, modifications, amendments and restatements
thereof, the "Note");
----
WHEREAS, Note Two is secured by, among other things, two (2)
mortgages, deeds of trust, deeds to secure debt and other real estate security
instruments, as the case may be, each of even date herewith, made by the Note
Two Borrowers to and for the benefit of Lender (the "Note Two Security
Instruments"), but not by the Note One Security Instruments (defined below); and
Note One is secured by, among other things, (i) the Note Two Security
Instruments and (ii) seventeen (17) mortgages, deeds of trust, deeds to secure
debt and other real estate security instruments, as the case may be, each of
even date herewith, made by the Note One Borrowers to and for the benefit of
Lender (the "Note One Security Instruments" and, together with the Note Two
-----------------------------
Security Instruments, collectively, the "Security Instruments");
--------------------
NOW, THEREFORE, in consideration of ten dollars ($10) and other good
and valuable consideration, the receipt of which is hereby acknowledged, Lender
and Borrower hereby covenant and agree as follows:
1. The Note and the Security Instruments. The indebtedness of Borrower shall
-------------------------------------
be: (i) evidenced by the Note, and (ii) secured by, among other things, (a)
the Security Instruments covering the fee interest of the applicable
Borrower in the property described therein (individually, a "Property" and
--------
collectively, the "Properties"), (b) assignments of leases and rents each
----------
given by Borrower to Lender dated the date hereof and covering the
Properties (the "Assignments of Rents"), (c) the Assignments of
--------------------
Agreements, Permits and Contracts given by Borrower to Lender dated the
date hereof and (d) the Conditional Assignment of Management Agreement and
Subordination of Management Fees dated the date hereof given by Borrower
and the Manager to Lender (as defined in the Security Instrument).
0
<PAGE>
2. Loan Documents. The term "Loan Documents" as used in this Agreement shall
-------------- --------------
collectively mean the Note, the Security Instruments, the Assignments of
Rents, the Assignments of Agreements, Permits and Contracts, the
Environmental Indemnity Agreement, and the Conditional Assignment of
Management Agreement and Subordination of Management Fees, the Guaranty of
Recourse Obligations, the Subordination, Non-Disturbance and Attornment
Agreements, each dated the date hereof, this Agreement and all other
documents and instruments of any nature whatsoever executed or delivered in
connection with the Loan.
3. Loan Repayment and Defeasance
-----------------------------
3.1 Prepayment and Repayment. Borrower shall repay any outstanding
------------------------
principal indebtedness of the Loan in full on the Maturity Date (as defined in
the Note) of the Loan, together with all accrued and unpaid interest thereon to
(but excluding) the date of repayment and all other amounts due to Lender in
connection with the Loan. Other than as required or permitted pursuant hereto
in connection with a casualty or condemnation, Borrower shall have no right to
prepay all or any portion of Loan.
3.2 Voluntary Defeasance of the Note.
--------------------------------
(a) On or after the Optional Defeasance Date (defined below) subject
to the terms and conditions set forth in this Section 3.2, Borrower may defease
all or any portion of the Loan evidenced by the Note (a "Defeasance") with
----------
Defeasance Collateral (defined below); provided that a partial defeasance of the
Note shall be permitted only in connection with the release of one or more
Properties in accordance with Section 4. Defeasance shall be subject, in each
case, to the satisfaction of the following conditions precedent:
(1) Borrower shall provide not less than thirty (30) days' prior
written notice to Lender specifying the date (the "Defeasance
----------
Date") on which the Defeasance Collateral is to be delivered and
----
on which the Defeasance is to occur, as well as the anticipated
outstanding principal balance of the Note as of the Defeasance
Date.
(2) Borrower shall pay to Lender all accrued and unpaid interest on
the principal balance of the Note to but not including the
Defeasance Date (and if the Defeasance Date is not a Payment
Date, the Defeasance Collateral shall take into account the
interest that would have accrued on the Note to but not including
the next Payment Date).
(3) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, then due and payable
under the Loan Documents.
(4) No Event of Default shall exist on the Defeasance Date, except in
the event of (A) a Defeasance of the entire outstanding principal
balance of the Note prior to the Maturity Date or (B) an for an
Event of Default relating solely to a Property that will be
released from the lien of the Security Instrument thereon
pursuant to Section 4 hereof in connection with such Defeasance.
1
<PAGE>
(5) Borrower shall deliver to Lender on the Defeasance Date the
required Defeasance Collateral for the Defeasance, which Lender
shall hold as security for the defeased portion of the Loan in
accordance with the terms of this Agreement.
(6) Borrower shall execute and deliver one or more security
agreements, in form and substance satisfactory to Lender (in its
reasonable judgment), creating a first priority lien on the
Defeasance Collateral in accordance with the provisions of this
Section 3.2 (the "Security Agreement").
------------------
(7) Borrower shall deliver to Lender an opinion of counsel for
Borrower in form and substance satisfactory to Lender (in its
reasonable discretion) stating, among other things, that Lender
has a perfected first priority security interest in the
Defeasance Collateral.
(8) If a Securitization has occurred, Borrower shall deliver to
Lender an opinion of counsel for Borrower in form and substance
satisfactory to Lender (in its reasonable discretion) and the
applicable Rating Agency (in their sole discretion) that the
transfer of the Defeasance Collateral in exchange for a release
of the Lien on the Property or Properties securing the Note does
not constitute a "significant modification" of the Loan under
Section 1001 of the Code or cause the REMIC Trust to fail to
qualify as a REMIC or otherwise cause a tax to be imposed on the
REMIC Trust and that such transfer will not adversely affect the
continued availability of any exemption relied upon in connection
with the securitization from the prohibited transaction rules of
ERISA and section 4975 of the Code.
(9) Borrower shall deliver or cause to be delivered a
nonconsolidation opinion with respect to the Successor Borrower
(defined below), if any, in form and substance reasonably
satisfactory to Lender and satisfactory to the applicable Rating
Agency in their sole discretion.
(10) Borrower shall deliver to Lender an Officer's Certificate
certifying that the requirements set forth in this Section 3.2
have been satisfied.
(11) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request in connection with
the satisfaction of the terms and conditions of this Section 3.2.
(12) Borrower shall pay all revenue, documentary stamp or intangible
taxes or any other tax or charge due in connection with the
transfer of the Note, the creation of one or more Defeased Notes
and Undefeased Notes, the transfer of one or more Defeased Notes
or Undefeased Notes, or otherwise required to accomplish the
Defeasance, together with all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any
costs and expenses associated with the release of one or more
Liens as provided in Section 4 hereof and reasonable attorneys'
fees and expenses.
2
<PAGE>
(13) Borrower shall deliver to Lender a confirmation, in form and
substance reasonably satisfactory to Lender, by a "Big Five"
independent certified public accounting firm selected by
Borrower, that the Defeasance Collateral shall generate monthly
amounts sufficient to pay all Scheduled Defeasance Payments
(defined below) and other amounts required to be paid by the
Borrower hereunder in connection with the proposed Defeasance.
(14) Borrower shall deliver to Lender a Rating Confirmation (defined
below) with respect to such Defeasance.
(15) In the event only a portion of the Loan evidenced by the Note is
the subject of the Defeasance in connection with the release of
any Lien of any Security Instrument on one or more Properties in
accordance with the terms of Section 4 below (including, without,
limitation, delivery of Defeasance Collateral sufficient to
defease such Property or Properties based on the Release Amount
of 125% of the Allocated Loan Amount for such Property or
Properties) Borrower shall execute and deliver all necessary
documents to amend and restate such Note and issue two substitute
notes for each Note: one note having a principal balance equal to
the defeased portion of the original Note (the "Defeased Note")
-------------
and one note having a principal balance equal to the undefeased
portion of the original Note (the "Undefeased Note"). The
---------------
Defeased Note and the Undefeased Note shall have identical terms
as the original of each Note (and the Defeased Note or Defeased
Notes and the Undefeased Note or Undefeased Notes shall be cross-
defaulted with each other), except for the principal balance. A
Defeased Note cannot be the subject of any further Defeasance.
An Undefeased Note may be the subject of a further Defeasance in
accordance with the terms of this clause (xv) (the term "Note",
as used above in this clause (xv) for these purposes, being
deemed to refer to the Undefeased Note that is the subject of
further defeasance) and the other provisions of this Section 3.2;
provided, however, that no such partial defeasance shall take
place unless the conditions outlined in Section 4 are satisfied.
(b) The Defeasance Collateral shall generate payments on or prior to,
but as close as possible to, all successive Payment Dates after the Defeasance
Date (including the Maturity Date) including the outstanding principal balance
of either the Loan or the Defeased Note or Defeased Notes on the Maturity Date,
and in amounts equal to the Debt Service due on such dates under the Note or
Notes or Defeased Note or Defeased Notes, as applicable (the "Scheduled
---------
Defeasance Payments"). Each of the obligations of the United States of America
- -------------------
that is part of the Defeasance Collateral shall be duly endorsed by the holder
thereof as directed by Lender or accompanied by a written instrument of transfer
in form and substance wholly satisfactory to Lender (including, without
limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to
effectuate book-entry transfers and pledges through the book-entry facilities of
such institution) in order to perfect upon the delivery of the Defeasance
Collateral a first priority security interest therein in favor of the Lender in
conformity with all applicable state and federal laws governing the granting of
such security interests. Borrower, pursuant to the Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the Defeasance Collateral shall be made
3
<PAGE>
directly to Lender and applied to satisfy the obligations of Borrower under the
Note or Notes or Defeased Note or Defeased Notes, as applicable.
(c) Upon compliance with the requirements of this Section 3.2, Lender
shall designate a successor entity (other than Lender or an affiliate of
Borrower) (the "Successor Borrower") to which Borrower shall transfer and assign
------------------
all obligations, rights and duties under and to the Note or Notes or, with
respect to the portion of the Note subject to such Defeasance, the Defeased
Note, with respect to the together with the pledged Defeasance Collateral (and
the obligation of the Lender named herein to designate a Successor Borrower
shall be retained by such Person notwithstanding the sale or transfer of the
Loan unless such obligation is specifically assumed by a transferee of the
Loan). The Successor Borrower shall assume the obligations under the Note or
Notes or, as applicable, the Defeased Note and the Security Agreement. The
Borrower shall pay $1,000 to any such Successor Borrower as consideration for
assuming the obligations under the Note or Notes or, as applicable, the Defeased
Note and the Security Agreement. Notwithstanding anything herein or in the Loan
Documents that may be construed to the contrary, no other assumption fee shall
be payable to the Successor Borrower upon or in consideration for its assumption
of the Note or Notes or, as applicable, the Defeased Note and the Security
Agreement in accordance with this a Defeasance hereunder, but Borrower shall pay
all reasonable out-of-pocket costs and expenses incurred by Lender, including
Lender's reasonable attorneys' fees and expenses, incurred in connection
therewith.
3.3 Default Prepayment. If all or any part of the principal amount of the
------------------
Loan is prepaid upon acceleration of the Loan following the occurrence of an
Event of Default at any time prior to the Maturity Date, Borrower shall be
required to make a payment (the "Yield Maintenance Payments") in an amount equal
--------------------------
to the greater of (a) three (3%) of such prepaid principal balance and (b) the
excess, if any, of (i) the sum of (A) the aggregate respective present values of
all scheduled interest payments in respect of the Loan (or the portion of all
such interest payments corresponding to the portion of the principal of the Loan
to be prepaid upon acceleration) for the period from the date of such prepayment
upon acceleration to (and including) the Maturity Date, discounted monthly at a
rate equal to the Treasury Constant Yield, such yield equivalent to a percentage
expressed on the basis of a 360 day year of twelve 30 day months and (B) the
aggregate respective present values of all scheduled principal payments in
respect of the Loan (or the then unpaid portion thereof to be prepaid upon
acceleration), assuming for these purposes that the entire outstanding scheduled
principal amount of the Loan as of the Maturity Date were to be paid in full on
such Payment Date, discounted monthly at a rate equal to the Treasury Constant
Yield, such yield equivalent to a percentage expressed on the basis of a 360 day
year of twelve 30 day months over (ii) the then current outstanding principal
amount of the Loan (or the then unpaid portion thereof to be prepaid upon
acceleration). If the Yield Maintenance Payments as calculated pursuant to this
clause (b) would not be a positive number, then the number yielded by such
calculation shall be zero. For purposes of this Section 3.3, the amount of the
Loan on the date of prepayment shall be determined after giving effect to any
payment of scheduled amortization made on such date. The determination of the
Yield Maintenance Payments by Lender shall be conclusive and binding on Borrower
in the absence of manifest error.
3.4 Involuntary Prepayment. Following a casualty or condemnation, in the
----------------------
event that Lender elects, pursuant to the terms of the Loan Documents, to apply
casualty proceeds or a condemnation award to the Debt, no prepayment premium
shall be due in connection therewith, provided that (i) no Event of Default
exists, (ii) no other sums (including interest) are due hereunder
4
<PAGE>
or under any of the other Loan Documents and (iii) no amount may be prepaid in
excess of the amount of casualty proceeds or condemnation award, as the case may
be. Any proceeds or awards applied pursuant to this Section 3.4 shall be applied
to the reduction of the then outstanding principal balance of the Note in the
inverse order in which principal payments are due thereunder.
4. Release of the Property.
-----------------------
4.1 No Release. Except as set forth in this Section 4, no repayment,
----------
prepayment or Defeasance of all or any portion of any Note shall cause, give
rise to a right to require, or otherwise result in, the release of the Lien of
any Security Instrument on any of the Properties.
4.2 Release of all Properties. (a) If Borrower has elected to defease
-------------------------
the Note in its entirety, and the requirements of Section 3 have been satisfied,
all of the Properties shall be released from the Liens of their respective
Security Instruments and the Defeasance Collateral, pledged pursuant to the
Security Agreement, shall be the sole source of collateral securing the Notes
and Borrower and the Guarantors shall be released from their obligations under
the Loan Documents (other than those arising under the Environmental Indemnity,
the Cooperation Agreement or which otherwise survive by their express terms).
(b) In connection with the release of the Liens contemplated in this
Section 4, Borrower shall submit to Lender, not less than fifteen (15) days
prior to the Defeasance Date, a release of Liens (and related Loan Documents)
for each Property (for execution by Lender) in a form appropriate in the
applicable state and otherwise satisfactory to Lender in its reasonable
discretion and all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release (collectively, "Release
Instruments"), together with an Officer's Certificate certifying that such
documentation is in compliance with all Legal Requirements. Lender shall execute
such Release Instruments on or prior to the Defeasance Date if all of the
conditions herein to such release of Liens have been satisfied, and promptly
upon such Defeasance, Lender shall transfer to Borrower any funds in the
Collateral Accounts with respect the Property or Properties which are the
subject of such Defeasance.
4.3 Partial Releases. In connection with a Defeasance of a portion but
----------------
less than all of the Note, and subject to the terms and conditions set forth
herein, Borrower shall have the right, from time to time, on any Payment Date
(as defined in the Note), or on any Business Day (as defined in the Note), to
obtain a release (a "Property Release") of a Property from the lien on the
----------------
related Security Instrument provided that (I) no default under this Agreement,
the Note, the Security Instruments or any other Loan Document has occurred and
is continuing (except for a default which relates solely and specifically to the
Property or Properties proposed to be released, and which release would cure
such default in respect of the Loan) and (II) subject to compliance with the
provisions set forth below in this Section 4.3, legal, record, economic and
beneficial ownership of the Property for which a Property Release is being
requested (the "Release Premises") is simultaneously with the granting of the
----------------
Property Release transferred (a "Release Premises Transfer") to and shall be
-------------------------
owned immediately after such Property Release by a person(s), party(ies) or
entity(ies) other than Borrower, or, except as provided below, any Affiliate of
Borrower ("Release Premises Transferee"). In the event that the Borrower seeks
---------------------------
to release a Property from the lien of the related Security Instrument, Lender
shall release such Property from the lien of the related Security Instrument and
the Loan Documents, but only compliance with the following conditions:
5
<PAGE>
(a) Borrower shall (on or after the Optional Defeasance Date),
defease the portion of the Note equal to the Release Amount (defined below) of
the Property being released (together with all accrued and unpaid interest on
the principal amount being so defeased), and such defeasance shall be undertaken
pursuant to the terms and conditions of Section 3, and all of such terms and
conditions shall be satisfied, including, without limitation, Section 3.2(a)
(xv) and Section 3.2(c).
(b) Borrower shall submit to Lender, not less than twenty (20) days
prior to the date of such release, all the Release Instruments together with an
Officer's Certificate certifying that such documentation (i) is in compliance
with all Legal Requirements and (ii) will not impair or otherwise adversely
affect the Liens, security interests and other rights of Lender under the Loan
Documents not being released (or as to the parties to the Loan Documents and
Properties subject to the Loan Documents not being released). In the event that
an Affiliate of Borrower is to be the Release Premises Transferee, such
Officer's Certificate shall also certify that the aggregate Allocated Loan
Amounts applicable to the total number of Release Premises which have been
transferred to Affiliates of Borrower (including the proposed transfer) shall
not exceed 30% of the original principal balance of the Note.
(c) With respect to any release of one or more Properties, after
giving effect to such release, the Debt Service Coverage Ratio for all of the
Properties then remaining subject to the Liens of the Security Instruments shall
be not less than the greater of (x) the Debt Service Coverage Ratio immediately
preceding the proposed release of a Property (for purposes of this calculation,
the income derived from the Defeasance Collateral delivered to Lender in
connection with a partial Defeasance occurring prior to the partial Defeasance
in question shall be included in the numerator of the Debt Service Coverage
Ratio to the extent that the amount of the income derived from such Defeasance
Collateral exceeds the debt service with respect to the applicable Defeased
Note) and (y) the Origination Debt Service Coverage Ratio; provided, however,
that in order to meet the test set forth in this clause (c), Borrower shall be
permitted to defease that portion of the Loan in addition to the applicable
Release Amount sufficient to increase the Debt Service Coverage Ratio to the
required level.
(d) If the Operating Lease (as defined in the Security Instruments)
for the Release Premises proposed to be released has been terminated pursuant to
Section 36.1 of the Operating Lease, and, after giving effect to such release,
the Borrower that owned the Release Premises prior thereto (the "Release
-------
Premises Transferor") is the owner of a Property that remains encumbered by the
- -------------------
lien of the Security Instruments, Borrower shall deliver an estoppel certificate
from the Operating Tenant (as defined in the Security Instrument) in form
satisfactory to Lender stating that the Operating Lease has been terminated and
that the Operating Tenant has released the Release Premises Transferor from all
liability and obligation to the Operating Tenant in connection with the
Operating Lease and that the Release Premises Transferor has no further
liability or obligation in connection with said Operating Lease or, if the
Operating Lease on the Release Premises has not been terminated, Borrower shall
deliver an estoppel certificate from the Operating Tenant in form satisfactory
to Lender that such Operating Lease, as it relates to the Release Premises, is
and will remain in full force and effect following the Release Premises Transfer
and that the Release Premises Transferor has no liability or obligation to the
Operating Tenant in connection with the Operating Lease.
6
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(e) The Property located in Philadelphia, Pennsylvania (the
"Philadelphia Property") may not be the subject of a Property Release unless
either (i) the Property located in Austin, Texas (the "Austin Property") is
released simultaneously pursuant to and in compliance with this Section 4.3,
including the requirement to deliver Defeasance Collateral, or (ii) the interest
in BA Parkway Associates II. L.P. held by CapStar AP Partners, L.P. is
simultaneously transferred to an entity other than one of the Borrowers. The
Property located in Madison, Wisconsin (the "Madison Property") may not be the
subject of a Property Release unless either (i) all of the Properties owned by
Meristar Secured Holdings LLC are released simultaneously pursuant to and in
compliance with this Section 4.3, including the requirement to deliver
Defeasance Collateral, or (ii) the interest in the Borrower which owns the
Madison Property held by Meristar Secured Holdings LLC is simultaneously
transferred to an entity other than one of the Borrowers.
4.4 Release of Lien. Lender shall, upon the written request and at the
---------------
expense of Borrower, upon payment in full of all of the Debt in accordance with
the terms of the Loan Documents, release the Liens of the Security Instruments
and other Loan Documents not theretofore released and transfer to Borrower all
sums then on deposit in the Collateral Accounts.
4.5 Disclosed Partial Releases. Notwithstanding anything to the contrary
--------------------------
contained in this Section 4 and provided that no default under this Agreement,
the Note, the Security Instruments or any other Loan Document has occurred and
is continuing, Borrower may request a release of a portion of the Mortgaged
Property upon which no improvements have been erected from the lien of the
Security Instrument for the Mortgaged Property (the "San Jose Security
Instrument") known as the Crowne Plaza, San Jose, California (the "San Jose
Crowne Plaza") upon the following terms and conditions:
(a) the term "Release Parcel" as used in this Subsection shall mean
that portion of unimproved land which Borrower may seek to release from the
lien of the San Jose Security Instrument pursuant to this Section as more
particularly described on Schedule 3 attached hereto;
(b) Borrower shall submit to Lender not less than 15 days prior to
the date of such release along with that notice attached hereto as Exhibit
A an Officer's Certificate certifying to Lender that (A) the balance of the
Property shall continue to be subject to the lien of the San Jose Security
Instrument and will not be divided or affected in any way which would have
a materially adverse effect on the operation, use or value of the San Jose
Crowne Plaza or on the Borrowers ability to timely pay the Debt or
adversely affect the security position of Lender under the San Jose
Security Instrument, (B) ingress and egress to and from the portion of the
San Jose Crowne Plaza remaining subject to the lien of the San Jose
Security Instrument will not be terminated or restricted as a result of any
such release, (C) such release shall not cause or result in a violation of
any of the other provisions of the San Jose Security Instrument or any
other Loan Documents, and (D) any parking spaces that are lost will
promptly be replaced if necessary to comply with the requirements of any
applicable laws or agreements pertaining to the San Jose Crowne Plaza;
(c) if requested by Lender, Borrower shall provide Lender with an
endorsement to Lender's title insurance policy insuring that the priority
of the lien of the San Jose Security Instrument is unaffected as to the San
Jose Crowne Plaza remaining encumbered by the lien
7
<PAGE>
of the San Jose Security Instrument by reason of the fact that the Release
Parcel has been released from the lien hereof, and Borrower shall pay for
the cost of such endorsement;
(d) all instruments of release shall contain such covenants,
conditions and restrictions and shall reserve such rights and easements
with respect to the Release Parcel as are necessary to protect and preserve
Lender's interests in the portion of the San Jose Crowne Plaza remaining
subject to the lien of such Security Instrument after any such release;
(e) Borrower shall provide Lender with such surveys, descriptions,
title insurance endorsements, computations of acreage and other information
as Lender may in its reasonable discretion require in connection with any
release made pursuant to this Subsection;
(f) Borrower shall obtain all subdivisions and zoning approvals with
respect to the Release Parcel and the portion of the San Jose Crowne Plaza
remaining subject to the lien of the San Jose Security Instrument as may
reasonably be required by Lender to insure that the Release Parcel and the
portion of the San Jose Crowne Plaza remaining subject to the lien of such
Security Instrument shall be independent of each other for all zoning,
subdivision and taxing purposes and to insure that the ability of Lender to
foreclose the San Jose Security Instrument shall not be hindered or
compromised in any manner whatsoever as a result of any such release;
(g) Borrower shall pay all of Lender's reasonable costs and expenses,
including reasonable counsel fees and disbursements incurred in connection
with the release of the Release Parcel from the lien of the San Jose
Security Instrument, the review and approval of the documents and
information required to be delivered in connection therewith and all
recording fees and title charges;
(h) Borrower shall certify to Lender that the release of the Release
Parcel shall have no adverse effect on either the then current Debt Service
Coverage Ratio or the then current NOI; and
(i) Borrower shall provide evidence reasonably satisfactory to Lender
that title to the Release Parcel has been transferred to a Release Premises
Transferee excluding an Affiliate of Borrower.
5. Substitution of Properties. Prior to the ninth anniversary of the date
--------------------------
hereof, provided that no Event of Default has occurred and is continuing,
Borrower shall have the right to obtain a release of one or more of the
Properties from the lien of the related Security Instrument and Loan
Documents (a "Substitution Release") upon (i) substitution (a
--------------------
"Substitution") of another fully licensed and operating hospitality
------------
property of comparable type and quality as the Property being released in
the place of the Release Premises (a "Substitute Property") owned in fee
-------------------
simple (or leasehold) by a Borrower and leased to the Operating Tenant
pursuant to an operating lease, substantially in the same form and content
as the Operating Lease, which Substitute Property is subjected to the lien
of a new mortgage, deed of trust, deed to secure debt or similar security
instruments, in the same form and substance as the Security Instruments
("Substitute Security Instrument") and to the lien of the Loan Documents,
------------------------------
as a first lien thereon and managed by Manager (or an affiliate of Manager
as provided for in the
8
<PAGE>
Management Agreement) pursuant to the terms of the Management Agreement or
a Replacement Management Agreement (as defined in the Security Instruments)
and, subject to a Franchise Agreement in compliance with the terms and
conditions of Section 3.13 of the Security Instruments and (ii) compliance
with and subject to the conditions set forth in this Section 5; provided,
however, that Borrower's rights to such release and substitution shall be
conditioned on receipt by Lender of the following:
(1) receipt of a copy of a deed conveying all of the applicable Borrower's
right, title and interest in and to the Substitute Property to a Release
Premises Transferee and a letter from such Borrower countersigned by a title
insurance company acknowledging receipt by such title insurance company of such
deed of assignment and assumption, as applicable, and agreeing to record such
deed or assignment and assumption, as applicable, in the real estate records for
the county in which the Substitute Property is located.
(2) evidence which would be satisfactory to a prudent institutional
mortgage lender that (i) the Substitute Property is fully operational and is of
similar or higher quality and value (including, without limitation, with respect
to physical condition and amenities) to the Release Premises and (ii) the
Properties, including the Substitute Property, will comply with both the
Geographic Diversity Threshold and the Franchise Diversity Threshold (each as
defined on Schedule 4 attached hereto).
(3) a current Appraisal of the Substitute Property prepared by an MAI
appraiser acceptable to Lender and to the Rating Agency within sixty (60) days
prior to the release and substitution (1) showing an appraised value equal to or
greater than the appraised value of the Release Premises as of the date hereof;
and (2) which supports an aggregate loan-to-value ratio with respect to the
Substitute Property and the Properties remaining subject to the lien of the
Security Instruments after the Substitution Release not greater than the ratio
equal to the lesser of (A) the aggregate loan-to-value ratio as of the date
hereof with respect to the Properties as set forth on Schedule A attached hereto
and (B) the aggregate loan-to-value ratio with respect to the Properties
remaining subject to the lien of the Security Instruments immediately prior to
the proposed Substitution Release.
(4) an opinion or opinions, as necessary, of the related Borrower's
counsel which would be satisfactory to a prudent institutional mortgage lender
that (i) the Substitute Security Instrument and the Loan Documents by which the
Substitute Property will be encumbered have been duly authorized, executed and
delivered by such Borrower and are valid and enforceable in accordance with
their terms, including, without limitation, with respect to the remedies
available to Lender by virtue of the cross-collateralization of the Loans,
subject to bankruptcy and equitable principles, (ii) the related Borrower and
Operating Tenant are qualified to do business and in good standing under the
laws of the jurisdiction where the Substitute Property is located, or that such
Borrower, are not required by any Legal Requirement to qualify to do business in
such jurisdiction, (iii) based on a certificate of the related Borrower the
encumbrance of the Substitute Property with the lien of the Substitute Security
Instrument and the Loan Documents shall not cause a breach of, or a default
under any agreement, document or instrument to which such Borrower is a party or
to which it or its properties are bound or affected, (iv) the Substitution
(including such Substitute Borrower and Substitute Property) does not affect the
opinions or assumptions set forth in the non-consolidation opinion delivered in
connection with the closing of the Loan; (v) if a Securitization has occurred,
the Substitution does not constitute a "significant modification" of the Loan
under Section 1001 of the Code or cause the REMIC Trust to fail to qualify as a
REMIC or otherwise cause a tax to be imposed on the REMIC Trust; and (vi) if a
Securitization has occurred, the Substitution will not
9
<PAGE>
adversely affect the continued availability of any exemption relied upon in
connection with the Securitization from the prohibited transaction rules of
ERISA and section 4975 of the Code.
(5) a certification by the related Borrower that (x) the certificates,
opinions and other instruments which have been or are therewith delivered to or
deposited with Lender in connection with such release and substitution conform
to the requirements of this Agreement and the Security Instruments, (y) all
conditions precedent herein have been complied with and (z) all conditions
precedent to the delivery of the Substitute Security Instrument and Loan
Documents contained in this Agreement have been fulfilled.
(6) original executed counterparts of the Substitute Security Instrument
and the Loan Documents encumbering the Substitute Property and the related
operating lease and related collateral, including without limitation, any
financing statements or other documents necessary to grant or perfect Lender's
first priority security interest in the Personal Property (defined in the
Security Instruments) located thereon and the Rents and Accounts Receivable
derived therefrom; the principal amount of such Substitute Security Instrument
shall equal the face amount of the Note, provided that in the event that the
jurisdiction in which the Substitute Property is located imposes a mortgage
recording intangibles or similar tax, and does not permit the allocation of
indebtedness for the purpose of determining the amount of such tax payable, the
principal amount of such Substitute Security Instrument shall equal 125% of the
Substitute Allocated Loan Amount (defined below).
(7) a title insurance policy issued by a title insurance company
satisfactory to the Rating Agency (or, if a Securitization has not occurred, to
Lender) insuring the lien of the Substitute Security Instrument on the
Substitute Property(ies), in form and substance which would be satisfactory to a
prudent institutional mortgage lender insuring that the Substitute Security
Instrument is a valid and enforceable first lien on the good and marketable fee
simple or leasehold estate, title of the related Borrower to the Substitute
Property in an amount equal to the amount of the Loan allocated to the
Substitute Property (the "Substitute Allocated Loan Amount"), subject only to
--------------------------------
standard and customary exceptions and such other exceptions that would be
approved by a prudent institutional mortgage lender, together with such
affirmative insurance and other endorsements customarily required by a prudent
institutional mortgage lender, including, without limitation, a "tie-in" and
first loss endorsement satisfactory to Lender, or, if such endorsement is not
available in the state in which the Substitute Property is located, insurance in
an amount equal to the greater of one hundred twenty five percent (125%) of the
Substitute Allocated Loan Amount or the amount on which mortgage or intangibles
tax was paid with respect to the Security Instrument for the Substitute
Property, together with a "last dollar endorsement". Such title insurance
policy shall not contain any exception for any state of facts that an accurate
survey might show or that a survey made after the date of the survey referred to
in Section 5(l) might show.
(8) If the Operating Lease for the Release Premises has been terminated
pursuant to Section 36.1 of the Operating Lease, and, after giving effect to
such Release, the Release Premises Transferor is the owner of a Property that
remains encumbered by the lien of the Security Instruments, an estoppel
certificate from the Operating Tenant in form satisfactory to Lender stating
that the Operating Lease has been terminated and that the Operating Tenant has
released the Release Premises Transferor from all liability for the payment of
any and all termination payments or any other payments due to the Operating
Tenant pursuant to the terms of the Operating Lease and that the Release
Premises Transferor has no further liability or obligation in connection with
said Operating Lease or, if the Operating Lease on the Release Premises has not
been terminated, an estoppel
10
<PAGE>
certificate from the Operating Tenant in form satisfactory to Lender that such
Operating Lease, as it relates to the Release Premises, is and will remain in
full force and effect following the Substitution Release and that the Release
Premises Transferor has no liability for the payment of any termination payments
or any other payments due to the Operating Tenant pursuant to the terms of the
Operating Lease and that the Release Premises Transferor has no further
liability or obligation in connection with said Operating Lease.
(9) evidence which would be satisfactory to a prudent institutional
mortgage lender that the Substitute Property and the use thereof are in
substantial compliance with the applicable zoning, subdivision, and all other
applicable federal, state or local laws and ordinances affecting the Substitute
Property, and that all material building and operating licenses and permits
necessary for the use and occupancy of the Substitute Property as a hospitality
property or hotel including, but not limited to, valid certificates of
occupancy, have been obtained and are in full force and effect.
(10) an environmental report dated within six (6) months prior to delivery
which states that the applicable Substitute Property (A) does not contain any
Hazardous Materials (1) in material violation of Environmental Laws, (2)
reasonably anticipated to give rise to Remedial Work (as defined in the
Environmental Indemnity Agreement) or (3) reasonably anticipated to cause
diminution in value of the Substitute Property, and (B) is not subject to any
risk of material contamination from any off-site Hazardous Material.
(11) evidence of payment of all costs and expenses incurred by Lender
including reasonable counsel fees and disbursements in connection with the
release of any Release Premises and the inclusion of the Substitute Property as
collateral, all recording charges, filing fees, taxes, or other expenses,
including but not limited to intangibles taxes and documentary stamp taxes in
connection with the recording of the Substitute Security Instruments and the
lien necessary to grant and perfect Lender a first priority lien on and security
interest in the Substitute Property, the Personal Property located therein and
the Rents derived therefrom.
(12) a recent survey of the Substitute Property(ies) prepared by a land
surveyor licensed in the state where the Substitute Property is located pursuant
to the then current American Land Title Association/American Congress of
Surveying and Mapping standards for title surveys and which would be otherwise
satisfactory to a prudent institutional mortgage lender, provided that no
structural additions to the improvements shown on such survey or new structures
have been made or built since the date of such survey and that there has been no
change in the legal description of the Substitute Property since the date of
such survey, whether due to sales, transfers, condemnation or otherwise.
(13) evidence indicating whether the Substitute Property is located within
a flood plain.
(14) a property inspection report dated within six (6) months of delivery
prepared by an independent licensed engineer approved by Lender, prepared in
accordance with standards employed by prudent institutional mortgage lenders
stating, among other things, that the Substitute Property is in good condition
and repair and free of material damage or waste and complies in all material
respects with the Americans with Disabilities Act, or which otherwise reveals a
state of fact that would be satisfactory to a prudent institutional mortgage
lender and provided that adequate reserves satisfactory to Lender and the Rating
Agency are established.
11
<PAGE>
(15) annual operating statements and occupancy statements for the
Substitute Property for the most recent fiscal year of the owner thereof,
together with a year to date operating statement, current occupancy statements,
and a budget for the current fiscal year, each certified by the related
Borrower, and a certificate of no adverse change since the date thereof executed
by the related Borrower, in each case in a form and substance which would be
satisfactory to a prudent institutional mortgage lender.
(16) original certificates and copies of policies of insurance required by
Lender under the terms of the Substitute Security Instrument for the Substitute
Property.
(17) evidence of the qualification and good standing of the related
Borrower and Operating Tenant (and the principals, if necessary) in the state
where the Substitute Property is located unless such qualification is not
required in such state by any Legal Requirement.
(18) certified copies of all Leases (as defined in the Substitute Security
Instrument) with respect to the Substitute Property and tenant estoppel
certificates from tenants under Material Leases, as required by Lender, all in a
form and substance which would be satisfactory to a prudent institutional
mortgage lender.
(19) certified copies of all material contracts and agreements relating to
the management, leasing and operation of the Substitute Property, including,
without limitation, the Franchise Agreement, each of which shall be in a form
and substance which would be satisfactory to a prudent institutional mortgage
lender in a transaction of similar type.
(20) certified copies of all material consents, licenses and approvals, if
any, required in connection with the substitution of a Substitute Property,
including liquor licenses and evidence that such consents, licenses and
approvals are in full force and effect or, in the event that a liquor license
cannot be issued to Borrower until Borrower has acquired title to the Substitute
Property or to the Operating Tenant until the Operating Tenant has taken
possession of the Substitute Property under the related Operating Lease,
certified copies of a temporary liquor license or concession arrangement that is
in full force and effect that permits the sale and consumption of liquor and
alcoholic beverages at the Substitute Property.
(21) a certificate by the related Borrower and the other Borrowers
certifying that all of the representations and warranties contained in the
Security Instruments and in the other Loan Documents, after giving effect to the
substitution of the Substitute Property, are true, accurate and correct in all
respects with respect to the Substitute Property and that there is no Event of
Default hereunder.
(22) a certificate of the related Borrower and the other Borrowers
certifying, together with other evidence that would be satisfactory to a prudent
institutional mortgage lender that, after the substitution of a Substitute
Property and the release of the Release Premises, (i) the Debt Service Coverage
Ratio for the Properties for the twelve (12) month period immediately preceding
the second calendar month prior to the date of the Substitution Release with
respect to all Properties remaining subject to the lien of the Security
Instruments shall be equal to or greater than the greater of (A) the Origination
Debt Service Coverage Ratio, and (B) the Debt Service Coverage Ratio immediately
prior to the Substitution and (ii) the Debt Service Coverage Ratio for the
twelve month period immediately preceding the second calendar month prior to the
Substitution Release with respect to the Substitute
12
<PAGE>
Property is equal to or greater than the greater of (A) the Debt Service
Coverage Ratio at origination with respect to the Release Premises being
replaced by the Substitute Property and (B) the Debt Service Coverage Ratio
immediately prior to the Substitution with respect to the Release Premises being
replaced by the Substitute Property.
(23) current UCC, judgment, bankruptcy and pending litigation searches with
respect to the Substitute Property and the related Borrower in the state where
the Substitute Property is located and the jurisdictions where such person has
its principal place of business.
(24) a franchisor estoppel and recognition letter from the franchisor under
the Franchise Agreement for the Substitute Property in a form and substance
which would be satisfactory to a prudent institutional mortgage lender.
(25) a certified copy of (i) the operating lease for the Substitute
Property between the related Borrower and Operating Tenant or (ii) an amendment
to the Operating Lease to include the Substitute Property, in either case in a
form and substance which would be satisfactory to a prudent institutional
mortgage lender, together with a Subordination, Non-Disturbance and Attornment
Agreement with respect to such operating lease.
(26) a certified copy of (i) the management agreement for the Substitute
Property between Operating Tenant and Manager or (ii) an amendment to the
Management Agreement to include the Substitute Property, in either case in a
form and substance which would be satisfactory to a prudent institutional
mortgage lender together with an Assignment of Management Agreement and
Subordination of Management Fees in the same form and substance as with respect
to the Release Premises and which comply with the terms of Section 3.13 of the
Security Instruments.
(27) a certificate of the related Borrower dated the date of the
substitution, certifying (i) the names and true signatures of the incumbent
officers of such person authorized to sign the applicable Loan Documents, (ii)
the by-laws of such person as in effect on the date of the substitution of the
Substitute Property, (iii) the resolutions of such person's board of directors
approving and authorizing the execution, delivery and performance of all Loan
Documents executed by such person, and (iv) that there have been no changes in
the certificate of incorporation of such person since the date of the most
recent certification thereof by the appropriate Secretary of State.
(28) certified copies of the most recent quality assurance reports or
similar reports of inspection or compliance from the franchisor under any
Franchise Agreement or Management Agreement (the "Quality Assurance Reports"),
-------------------------
if any.
(29) if the related Borrower owns a leasehold estate in the Substitute
Property, (i) a certified copy of the ground lease for the Substitute Property,
together with all amendments and modifications thereto and a recorded memorandum
thereof, which would be satisfactory to a prudent institutional mortgage lender
and which contains customary leasehold mortgagee provisions and protections, and
which shall provide, among other things, (A) for a remaining term of no less
than 25 years from the Maturity Date, (B) that the ground lease shall not be
terminated until Lender has received notice of a default thereunder and has had
a reasonable opportunity to cure or complete foreclosure, and fails to do so in
a diligent manner, (C) for a new lease on the same terms to the Lender as tenant
if the ground lease is terminated for any reason, (D) the non-merger of fee and
leasehold interests, and (E) that insurance proceeds and condemnation awards
(from the fee interest
13
<PAGE>
as well as the leasehold interest) will be applied pursuant to the terms of the
Substitute Security Instrument, and (ii) a ground lease estoppel executed by the
fee owner and ground lessor of the Substitute Property, acceptable to Lender.
(30) such other certificates, opinions, documents and instruments relating
to the substitution reasonably requested by Lender, its counsel or the Rating
Agency, and all corporate and other proceedings and all other documents
(including, without limitation, all documents referred to herein and not
appearing as exhibits hereto) and all legal matters in connection with the
substitution shall be satisfactory in form and substance to Lender in its
reasonable discretion.
(31) if a Securitization has occurred, a Rating Confirmation.
(32) an Officer's Certificate certifying that the aggregate Allocated Loan
Amounts applicable to the total number of Release Premises which shall be the
subject of any Substitution Release pursuant to this Section shall not exceed
30% of the original principal balance of the Note.
(33) if a Low NOI Period exists, evidence satisfactory to Lender in its
sole discretion that, on the first Payment Date after giving effect to the
Substitution (the "Substitution Date"), the aggregate NOI and the Debt Service
Coverage Ratio would be greater than they were prior to such Substitution.
(34) if Borrower owns a leasehold rather than fee interest in the
Substitute Property, evidence of compliance with Lender's customary terms with
respect to leasehold mortgages, including, without limitation, the inclusion of
ground rents in the Escrow Fund pursuant to Section 3.5 of the Security
Instruments, which shall be incorporated into the Security Instrument
encumbering such Substitute Property.
(35) in the event that the jurisdiction in which a Substitute Property is
located imposes a mortgage recording, intangibles or similar tax and does not
permit the allocation of indebtedness for the purpose of determining the amount
of such tax payable, confirmation that the Note and other Loan Documents shall
be modified to reflect that the Loan shall be fully recourse to the Borrower
owning such Substitute Property.
(36) if, as a result of a Substitution, the Philadelphia Property will be
released from the lien of the applicable Security Instrument, evidence that (i)
the Austin Property must be released simultaneously from the lien of the
applicable Security Instrument (in accordance with the terms of Section 4.3 or
Section 5 hereof, as applicable) or (ii) the interest in BA Parkway Associates
II. L.P. held by CapStar AP Partners, L.P. must be simultaneously transferred to
an entity other than one of the Borrowers.
(37) if, as a result of a Substitution, the Madison Property will be
released from the lien of the applicable Security Instrument, evidence that (i)
all of the Properties owned by Meristar Secured Holdings LLC must be released
simultaneously from the lien of the applicable Security Instrument (in
accordance with the terms and subject to compliance with the requirements of
Section 5 hereof, as applicable) or (ii) the interest in the Borrower which owns
Madison Property held by Meristar Secured Holdings LLC must be simultaneously
transferred to an entity other than one of the Borrowers.
14
<PAGE>
Simultaneously with compliance of the conditions set forth above in
this Section 5, Lender shall (i) release the lien of the related Security
Instrument with respect to the Release Premises being replaced with the
Substitute Property, and (ii) adjust the Allocated Loan Amounts as Lender deems
reasonably necessary to incorporate the Substitute Allocated Loan Amount.
Upon the substitution of a Substitute Property in accordance with the
terms and conditions of this Section 5, such Substitute Property shall be deemed
a Property, and the Substitute Allocated Loan Amount shall be deemed an
Allocated Loan Amount for all purposes under this Agreement.
6. Accounts and Reserves; Letter of Credit.
---------------------------------------
6.1 Property Accounts
-----------------
(1) Operating Tenant shall establish and maintain with respect to each
Property, an account or accounts for the receipt of all cash, receivables,
including without limitation credit card receivables and other revenues of any
kind derived from the operation of the Property (each, a "Property Account").
----------------
Each Property Account shall be an Eligible Account (defined below) in the name
of Operating Tenant as debtor and Borrower as secured party pursuant to the
Operating Lease Security Agreement (as defined in the Security Instruments).
Operating Tenant shall cause such depository institutions to deliver to Lender
quarterly statements of such accounts to Lender. Funds in the Property Accounts
shall not be commingled with any other monies at any time.
(2) So long as no default exists under the Operating Lease, the Property
Accounts shall be under the sole dominion and control of the Operating Tenants
which may use the same in its sole discretion.
(3) Pursuant to the Security Instruments, Borrower has pledged and/or
assigned to Lender, as additional security for the Loan, all of its right, title
and interest in and to the Property Accounts and the Operating Lease Security
Agreement.
(e) In the event that an Operating Lease is terminated for any reason
whatsoever and not immediately replaced with a Replacement Operating Lease (as
defined in the Security Instruments), in accordance with the terms of Section
3.7 of the Security Instruments, the Borrowers shall immediately establish and
maintain with respect to each Property, an account for the receipt of all cash,
receivables, including without limitation credit card receivables and other
revenues of any kind derived from the operation of the Property (each, a " Post-
-----
Termination Property Account"). Each Post-Termination Property Account shall be
- ----------------------------
an Eligible Account in the name of Lender as secured party. Borrower hereby
covenants and agrees that it shall (i) immediately upon the termination of the
Operating Lease, issue direction letters to all tenants, credit card companies
and other accounts receivable counterparties to make all payments directly to
the Deposit Account (ii) direct the Manager of the Property to immediately
transfer to the Post-Termination Property Account any funds received by Manager
in respect of the Property (iii) immediately transfer to the Post-Termination
Property Account any funds received by Borrower in respect of the Property and
(iv) on the last Business Day of each month, transfer all funds on deposit in
the Post-Termination Property Accounts to the Deposit Account.
6.2 Deposit Account.
---------------
15
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(1) Borrower shall establish and thereafter maintain with a financial
institution reasonably acceptable to Lender (the "Deposit Account Bank") an
--------------------
operating account (the "Deposit Account"), which shall be an Eligible Account in
---------------
the name of Lender as secured party and under the sole dominion and control of
Lender. Borrower shall have no right to make withdrawals from the Deposit
Account. The Deposit Account Bank and Borrower shall execute and deliver to
Lender on the Closing Date a Deposit Account Agreement which provides, inter
alia, that no party other than Lender shall have the right to withdraw funds
from the Deposit Account.
(2) (i) Borrower and Operating Tenant hereby acknowledge and agree that,
without prior written direction from Lender to the contrary, all rents and other
sums due under the Operating Lease shall be paid by Operating Tenant directly to
the Deposit Account.
(ii) Borrower hereby acknowledges that Lender shall transfer, on a
daily basis or otherwise in Lender's sole discretion, all sums on deposit
in the Post-Termination Property Accounts to the Deposit Account.
(3) On each Payment Date (as defined in the Note) or on such prior date as
the Deposit Account contains the sum applicable to such month of the amounts set
forth in subsections (i) through (x) below (any such prior date, an "Early
-----
Payment Date"), provided no Event of Default has occurred and is continuing,
- ------------
Lender shall transfer from the Deposit Account, to the extent available therein,
the following payments in the following order of priority (the "Waterfall
---------
Payments"); and provided, further, that any sums on deposit in the Deposit
- --------
Account from the Early Payment Date up to but not including the next succeeding
Payment Date, after the Waterfall Payments are made, shall be distributed on a
daily basis to Borrower, provided no Event of Default has occurred and is
continuing and provided that a Low NOI Period does not exist (in which case such
amounts shall be distributed to the Reserve Account):
(2) to the Tax, Insurance and Ground Rents Escrow Account, the
amounts then required to be reserved pursuant to Section 3.5 of
the Security Instruments;
(3) to Lender, the Monthly Debt Service Payment Amount (as defined in
the Note);
(4) in the event that an Operating Lease is terminated, canceled or
surrendered and is not replaced with a Replacement Operating
Lease in accordance with the terms of Section 3.7 of the Security
Instruments, or in the event that the Operating Tenant is in
default under an Operating Lease and so long as a Low NOI Period
exists, to Borrower, an amount equal to the operating
expenditures approved by Lender in the applicable Annual Budget
(the "Budget Operating Amount") for the month immediately prior
-----------------------
to the month in which such Payment Date occurs, exclusive of any
Management Fees and Franchise Fees payable to Affiliates of the
REIT, but inclusive of amounts necessary to reimburse actual
third-party costs of such Property Managers, provided that (a) no
claims are then outstanding against any Borrower for the payment
of money which are delinquent for more than 60 days (in the event
that such claims are outstanding, Lender shall not be obligated
to disburse to Borrower the Budget Operating Amount)(except for
claims such Borrower is both contesting in good faith and as to
which such Borrower has escrowed 125%
16
<PAGE>
of the amount thereof with Lender), and (b) the amounts disbursed
to a Borrower pursuant to this clause (iii) shall be used by such
Borrower solely to pay operating expenses properly allocable to
such month (the receipt by a Borrower on a Payment Date of funds
pursuant to this clause (iii) shall constitute a representation
and covenant by Borrower that the foregoing subclauses (a) and
(b) are true, accurate and complete, unless Borrower shall have
notified Lender of any inaccuracy therein prior to such Payment
Date). Cost savings from one line item in such Annual Budget may
be reallocated to other line items in such budget, provided that
without the consent of Lender, no such reallocation shall cause
an overall variance in the budget of more than 5%;
(5) in the event that an Operating Lease is terminated, canceled or
surrendered and is not replaced with a Replacement Operating
Lease in accordance with the terms of Section 3.7 of the Security
Instruments, or in the event that the Operating Tenant is in
default under an Operating Lease and so long as a Low NOI Period
exists, to Borrower, an amount equal to the Capital Expenditures
(as approved by Lender in the Annual Budget) for the month
immediately prior to the month in which such Payment Date occurs
(the "Budget Capital Amount"), to the extent that such Capital
---------------------
Expenditures exceed amounts required then to be on deposit in the
FF&E Reserve Account pursuant to Section 6(e) hereof, provided
that (a) no claims are then outstanding against a Borrower for
the payment of money which are delinquent for more than 60 days
(in the event that such claims are outstanding, Lender shall not
be obligated to disburse to Borrower the Budget Capital
Amount)(except for claims such Borrower is both contesting in
good faith and as to which such Borrower has escrowed 125% of the
amount thereof with Lender), and (b) the amounts disbursed to a
Borrower pursuant to this clause (iv) shall be used by such
Borrower solely to pay Capital Expenditures properly allocable to
such month (the receipt by such Borrower on a Payment Date of
funds pursuant to this clause (iv) shall constitute a
representation and covenant by Borrower that the foregoing
subclauses (a) and (b) are true, accurate and complete, unless
Borrower shall have notified Lender of any inaccuracy therein
prior to such Payment Date). Cost savings from one line item in
such budget may be reallocated to other line items in such
budget, provided that without the consent of Lender, no such
reallocation shall cause an overall variance in the budget of
more than 5%;
(6) to the FF&E Reserve Account, the amount described in Section 6.5;
(7) following the occurrence of any earthquake with respect to any
Property or Properties for which earthquake insurance is carried
pursuant to Article 3 of the Security Instruments, to the
Earthquake Deductible Account, an amount equal to the deductible
on such insurance policies applicable to such Property or
Properties;
(8) to Lender, an amount equal to all interest, costs, expenses, fees
and other amounts then due and payable under the Loan Documents,
other than amounts
17
<PAGE>
paid to Lender pursuant to clause (ii) above or which would be
payable to Lender pursuant to clause (x) below;
(9) to any Property Managers which are not Affiliates of the REIT an
amount equal to the Management Fee then payable to each such
Manager, unless the payment of such Management Fee is the
obligation of the Operating Tenant;
(10) so long as no Event of Default exists, but if a Low NOI Period
exists, to the Reserve Account;
(11) so long as an Event of Default exists, to Lender, an amount equal
to interest accrued and unpaid under the Note at the excess of
the Default Rate over the Interest Rate;
(12) so long as no Event of Default or Low NOI Period exists, to a
single account of Borrower as Borrower may direct, from which
account Borrower shall first make payments to any Property
Managers which are Affiliates of the REIT, in an amount equal to
the Management Fee then payable to each such Property Manager and
to any Franchisors which are Affiliates of the REIT, in an amount
equal to the Franchise Fee then payable to each such Franchisor.
Notwithstanding anything herein to the contrary, the failure of Borrower to make
any of the payments required hereunder shall constitute an Event of Default. In
the event that on any Payment Date the amount in the Deposit Account shall be
insufficient to make all of the transfers described in Section 6.2(c)(i)-(x)
above, Borrower shall deposit into the Deposit Account on such Payment Date the
amount of such deficiency (without the need for any notice or demand from
Lender), and if Borrower shall fail to make such deposit, the same shall
constitute an Event of Default and, in addition to all other rights and remedies
provided for under the Loan Documents, Lender may disburse and apply the amounts
in the Deposit Account in such manner as Lender may determine. If on any
Payment Date the amount in the Deposit Account shall be sufficient to make all
of the transfers described in Section 6.2(c)(i)-(x), Borrower shall be deemed to
have paid such amounts on such Payment Date unless Lender is legally constrained
from transferring such amounts in accordance with such Section by reason of any
insolvency related to Borrower or any other event.
(d) Lender shall have the right to replace the Deposit Account Bank with
any other financial institution reasonably satisfactory to Borrower which will
promptly execute and deliver to Lender a Deposit Account Agreement (and Borrower
shall cooperate with Lender in connection with such transfer) in the event that
(i) at any time the short-term debt obligations of the Deposit Account Bank are
rated below "A-1" (or the equivalent) by any of the Rating Agencies or the long-
term debt obligations of the Deposit Account Bank are rated below "AA" by any of
the Rating Agencies, (ii) Lender reasonably determines that use of another
financial institution as the Deposit Account Bank would be advisable or
convenient in connection with a Securitization, or (iii) the Deposit Account
Bank fails to execute and deliver, or to comply with, the Deposit Account
Agreement.
6.3 Reserve Account.
---------------
18
<PAGE>
(1) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Deposit Account Bank an account (the "Reserve
-------
Account") which shall be an Eligible Account in the name of Lender as secured
- -------
party and under the sole dominion and control of Lender for the deposit of
amounts required to be deposited therein in accordance herewith. Borrower shall
have no right to make withdrawals from the Reserve Account. Funds in the
Reserve Account shall not be commingled with any other monies at any time.
(2) Lender shall release to the Deposit Account all amounts contained in
the Reserve Account on the first Payment Date after Borrower delivers to Lender
evidence reasonably satisfactory to Lender establishing that a Low NOI Period no
longer exists.
6.4 Tax, Insurance and Ground Rents Escrow Account.
----------------------------------------------
The provisions concerning the Escrow Fund (as defined in Section 3.5 of the
Security Instruments) for taxes, insurance and, if applicable, ground rents, are
set forth in such Section 3.5 of the Security Instruments.
6.5 FF&E Reserve Account.
--------------------
(1) Borrower shall establish and thereafter maintain with the Deposit
Account Bank an account (the "FF&E Reserve Account") which shall be an Eligible
--------------------
Account in the name of Lender as secured party and under the sole dominion and
control of Lender and into which Borrower shall (A) deposit on the Closing Date,
from the proceeds of the Loan or otherwise, an amount equal to the initial FF&E
Required Reserve Amount and (B) maintain thereafter, an amount equal to the
applicable FF&E Required Reserve Amount in each case as determined in accordance
with Section 6.5(b). In no event shall the amount on deposit in the FF&E
Reserve Account be less than the then applicable FF&E Required Reserve Amount at
any time during the term of the Loan.
(2) The FF&E Required Reserve Amount shall be reset on each Reference Date.
Beginning on each Reference Date, Borrower shall, to the extent the amount on
deposit in the FF&E Reserve Account is less than the then applicable FF&E
Required Reserve Amount, deposit into the FF&E Reserve Account an amount equal
to the positive difference between the then applicable FF&E Required Reserve
Amount and the FF&E Required Reserve Amount relating to the prior Reference
Date. To the extent the amount on deposit in the FF&E Reserve Account exceeds
the then applicable FF&E Required Reserve Amount, such excess shall be advanced
to Borrower to pay the costs of FF&E Expenditures for the subsequent Quarterly
Period, upon delivery by Borrower to Lender of an Officer's Certificate
certifying as to the amount of FF&E Expenditures (with, upon Lender's request,
copies of invoices and receipts attached to such certification) actually paid
during the previous Quarterly Period and that the FF&E Items and Work (defined
below) for which prior Quarterly FF&E Shortfall Amounts have been deposited into
the FF&E Reserve Account has been completed or can be completed with the funds
(not inclusive of the then applicable FF&E Required Reserve Amount) which remain
in the FF&E Reserve Account.
(3) (i) During each Quarterly Period, Borrower shall be required to (i)
make FF&E Expenditures in respect of the items and work (the
"FF&E Items and Work") generally described in the Annual Budget
-------------------
applicable to the calendar year containing such Quarterly Period
in an amount at least equal to the then applicable Quarterly FF&E
Reserve Amount less the FF&E Credit Amount,
19
<PAGE>
if any, and (ii) deliver an Officer's Certificate to Lender no
later than the last day of such Quarterly Period certifying as
to (a) the amount of FF&E Expenditures (with copies of invoices
and receipts, with respect to invoices in excess of $25,000 from
any single contractor or trade, attached to such certification)
actually paid during such Quarterly Period and (b) the amount of
any Quarterly FF&E Credit Amount or any Quarterly FF&E Shortfall
Amount, as applicable, relating to such Quarterly Period.
(ii) To the extent there is a Quarterly FF&E Shortfall Amount with
respect to a Quarterly Period, then, beginning on the Payment
Date immediately following such Quarterly Period, Borrower shall
deposit into the FF&E Reserve Account an amount equal to such
Quarterly FF&E Shortfall Amount.
(iii) Borrower shall have no right to make withdrawals from the FF&E
Reserve Account. Funds in the FF&E Reserve Account shall not be
commingled with any other monies at any time.
(4) Borrower hereby agrees that the items and work described on Schedule 5
attached hereto shall be completed within the time periods set forth on such
schedule as part of the FF&E Items and Work for such time periods.
6.6 Deferred Maintenance and Environmental Compliance Reserve Account.
-----------------------------------------------------------------
(1) Borrower shall establish and thereafter maintain with the Deposit
Account Bank an account (the "Deferred Maintenance and Environmental Compliance
-------------------------------------------------
Reserve Account") which shall be an Eligible Account in the name of Lender as
- ---------------
secured party and under the sole dominion and control of Lender and into which
Borrower shall deposit on the Closing Date, from the proceeds of the Loan, an
amount equal to the Deferred Maintenance and Environmental Compliance Reserve
Amount. Borrower shall have no right to make withdrawals from the Deferred
Maintenance and Environmental Compliance Reserve Account. Funds in such Account
shall not be commingled with any other monies at any time.
(2) Borrower shall have the right to obtain disbursements from time to time
(but no more than once per calendar month) from the Deferred Maintenance and
Environmental Compliance Reserve Account, to reimburse Borrower for, or to pay
expenses incurred by any Borrower in remediating any Deferred Maintenance
Condition or Environmental Compliance, in each case on the following terms and
conditions:
(2) disbursements shall be made only to pay to contractors or vendors
or to other parties to whom funds are owing in connection with
such work or to reimburse Borrower in respect of any actual costs
of the work itemized in Schedule 6 attached hereto;
(3) each request for disbursement from the Deferred Maintenance and
Environmental Compliance Reserve Account shall specify the work
for which the disbursement is requested and shall include an
Officer's Certificate certifying that (i) all funds previously
disbursed from the Deferred Maintenance and Environmental
Compliance Reserve Account have been
20
<PAGE>
applied by the applicable Borrower toward the expenses for which
they were disbursed and the Borrower has paid their remaining
share of all such expenses, and (ii) the funds being requested
will be applied to pay or reimburse for materials or work
permitted hereunder and done in accordance herewith;
(4) Lender shall have received from Borrower evidence reasonably
satisfactory to Lender, including lien waivers, if required by
Lender, that such Borrower has incurred such expenses and that
either (A) the materials for which the request is made are on
site at the applicable Property and are properly secured or have
been installed in the Property or (B) such request is in
connection with a deposit required pursuant to the terms of the
contract or contracts under which remediation work with respect
to a Deferred Maintenance Condition or Environmental Compliance
is being performed; and funds remaining in the Deferred
Maintenance and Environmental Compliance Reserve Account after
such disbursements will be, in Lender's reasonable judgment,
sufficient to pay the balance of the items contemplated to be
funded therefrom when required to be so paid, and, with respect
to invoices in excess of $25,000 from any single contractor or
trade, Lender shall receive copies of partial lien releases and
waivers from contractors, subcontractors and others with respect
to amounts for which Borrower have previously received
disbursements under this Section;
(5) Lender shall disburse from the Deferred Maintenance and
Environmental Compliance Reserve Account, or authorize such
disbursement, within five (5) Business Days after the receipt of
Borrower's request for such disbursement and the satisfaction of
the other conditions set forth above in this Section, the amount
requested by Borrower for such expenses.
(c) Borrower shall complete lien free and in a good and workmanlike
manner, all of the work itemized on Schedule 6 attached hereto within one (1)
year of the date hereof.
6.7 Earthquake Deductible Account.
-----------------------------
Borrower shall establish and thereafter maintain with the Deposit
Account Bank an account (the "Earthquake Deductible Account") which shall be an
-----------------------------
Eligible Account in the name of Lender and under the sole dominion and control
of Lender and into which shall be deposited, within thirty (30) days following
the occurrence of any earthquake which damages any Property or Properties for
which earthquake insurance is carried pursuant to Article III of the Security
Instruments (an "Earthquake Insurance Property"), amounts pursuant to Section
-----------------------------
6.2(c) above equal to the lesser of (i) the deductible on such insurance
policies applicable to such Property or Properties and (ii) the replacement cost
with respect to the actual damages to the Earthquake Insurance Property from
such earthquake. Borrower shall have no right to make withdrawals from the
Earthquake Deductible Account. Funds in the Earthquake Deductible Account shall
not be commingled with any other monies at any time.
At any time that an earthquake occurs with respect to an Earthquake
Insurance Property, the amounts in the Earthquake Deductible Account shall be
applied in accordance with the
21
<PAGE>
terms of Section 4.3 of the Security Instruments with respect to such Property
or Properties at which such earthquake damage has occurred.
6.8 Account Collateral.
------------------
(1) Borrower hereby grants a perfected first-priority security interest in
favor of Lender in and to the Account Collateral as security for the Debt,
together with all rights of a secured party with respect thereto. Borrower
shall execute any additional documents that Lender in its reasonable discretion
may require and shall provide all other evidence reasonably requested by Lender
to evidence or perfect its first-priority security interest in the Account
Collateral.
(2) So long as no Event of Default shall be continuing, Borrower shall be
permitted to direct the investment of the funds from time to time held in the
Collateral Accounts in Permitted Investments and to sell and reinvest proceeds
from the sale or liquidation of Permitted Investments in other Permitted
Investments, with all such proceeds and reinvestments to be held in the
applicable Collateral Account; provided, however, that the maturity of an
adequate portion of the Permitted Investments on deposit in the Collateral
Accounts shall be no later than the Business Day immediately preceding the date
on which such funds are required to be withdrawn therefrom pursuant to this
Agreement. All income and gains from the investment of funds in the Collateral
Accounts shall be credited to the Collateral Accounts from which they were
derived. As between Borrower and Lender, Borrower shall treat all income, gains
and losses from the investment of amounts in the Collateral Accounts as its
income or loss for federal, state and local income tax purposes and Borrower
shall receive all benefit from such income.
(3) After the Loans and all other Debt have been paid in full, or in the
event of a Defeasance of the entire outstanding principal balance of the Note,
the Collateral Accounts shall be closed and the balances, if any, therein shall
be disbursed to Borrower.
6.9 Remedies. (a) In addition to other rights and remedies provided
--------
Lender elsewhere in this Agreement and the other Loan Documents, upon the
occurrence and during the continuance of an Event of Default, Lender may, in its
sole discretion, without notice or liability to Borrower, apply any or all
Account Collateral for any of the following purposes relating to the Properties,
the Loan or Borrower's obligations hereunder or under any other Loan Document,
in the following or any other order:
First: reimbursement of Lender for all losses and expenses (including
reasonable legal fees) actually suffered or incurred by such persons as a result
of such Event of Default;
Second: payment of any amount expended in exercising rights and remedies
available to Lender at law or in equity or under this Agreement or under any of
the other Loan Documents;
Third: payment of any other portion or portions of the Debt other than
principal and interest;
Fourth: payment of interest then due and payable on the Loans; and
Fifth: prepayment of the unpaid principal amount of the Loans and payment
of interest accrued thereon and any applicable Yield Maintenance Payments.
22
<PAGE>
Notwithstanding the foregoing, after the occurrence and during the
continuation of an Event of Default, Lender may, in its sole discretion, cause
all or a portion of the Account Collateral to be applied toward payment of
operating expenses and/or Capital Expenditures.
(b) During a Low NOI Period, Lender may undertake, at Borrower's sole cost
and expense, property audits and inspections in addition to any such audits or
inspections otherwise permitted under the Loan Documents and to the extent any
such audits or inspections shall be consistent with Borrower's rights to conduct
same under the Operating Lease.
(c) During a Low NOI Period caused by a Bankruptcy Event with respect to
the Operating Tenant, Lender may, in addition to any other remedies available to
Lender, draw down on the Letter of Credit (defined below).
6.1 Letter of Credit.
----------------
(1) Borrower shall at all times maintain with Lender a Letter of Credit
(defined below) in an amount equal to the Letter of Credit Amount (defined
below). Borrower shall deliver to Lender (i) on the Closing Date, a Letter of
Credit in the Letter of Credit Amount and (ii) on the first Business Day of each
Letter of Credit Year (defined below), a Letter of Credit in an amount equal to
the Letter of Credit Amount, as the same may be adjusted pursuant to this
Section 6.10. Lender shall notify Borrower of any adjustment to the Letter of
Credit Amount forty-five (45) days prior to the commencement of each Letter of
Credit Year. The term "Letter of Credit" shall mean a transferable, clean,
----------------
irrevocable, unconditional standby letter of credit in form and substance
satisfactory to Lender in its sole discretion in the amount of the Letter of
Credit Amount, issued by a commercial bank (the "Issuing Bank") having a long-
------------
term credit rating of "AA" (or its equivalent) or better assigned by each of the
Rating Agencies (the "Minimum L/C Rating") and otherwise satisfactory to Lender
------------------
in its sole discretion. The Letter of Credit shall be payable upon presentation
of a sight draft only to the order of Lender at a New York City location and
shall have an initial expiration date not earlier than one (1) year from the
date of its issuance and shall provide for multiple draws. The Letter of Credit
shall be automatically renewed for successive twelve (12) month periods for the
term of the Loan. The Issuing Bank shall be obligated to deliver to Lender
forty-five (45) days' prior written notice of the expiration of such Letter of
Credit to the extent that such Letter of Credit is not renewed.
(2) Lender shall be entitled to draw immediately on the Letter of Credit
(i) if the Letter of Credit is not renewed forty-five (45) days prior to its
expiration date, (ii) if, in the event that the long-term credit rating of the
Issuing Bank falls below the Minimum L/C Rating, Borrower fails to deliver to
Lender within ten (10) Business Days thereof a Letter of Credit in an amount
equal to the Letter of Credit Amount from an Issuing Bank having a credit rating
of no less than the Minimum L/C Rating, (iii) upon the occurrence of a
Bankruptcy Event (as defined in the Loan Agreement) with respect to the
Operating Tenant, (iv) upon an Event of Default or (v) as described in Section
6.9(c) above, during a Low NOI Period caused by a Bankruptcy Event with respect
to the Operating Tenant.
(3) In addition to the rights of Lender set forth in the preceding
paragraph, in the event that Lender draws on a Letter of Credit, Borrower shall
deliver to Lender, within ten (10) Business Days of such draw, a new Letter of
Credit in an amount equal to the Letter of Credit Amount (unless a draw by
Lender is for less than the Letter of Credit Amount, in which case such new
Letter of Credit shall be in the amount of the amount of such draw by Lender)
issued by an Issuing Bank with the Minimum L/C Rating. Failure by Borrower to
do so shall constitute an Event of Default.
23
<PAGE>
(4) Upon a draw by Lender of the Letter of Credit, all funds therefrom
shall be deposited into the Deposit Account and disbursed in accordance with the
terms and conditions of Section 6 of the Loan Agreement.
(5) So long as the rating assigned to Societe Generale, Southwest Agency
by each of the Rating Agencies does not fall below "AA-" (by Standard & Poor's)
and "Aa3" (by Moody's), Societe Generale, Southwest Agency shall constitute an
acceptable Issuing Bank for purposes of issuing the Letter of Credit.
"Letter of Credit Amount" shall mean, for any Letter of Credit Year
-----------------------
(defined below), the sum, of (i) the Monthly Debt Service Payment Amount (as
defined in the Note) for the first three (3) months of such Letter of Credit
Year and (ii) three (3) times the amount required to be escrowed for Taxes and
Insurance Premiums (each as defined in the Security Instruments) and ground
rents, if any, for the first month of such Letter of Credit Year. The Letter of
Credit Amount for the Letter of Credit Year commencing on the date hereof shall
be $9,750,000.
"Letter of Credit Year" shall mean the twelve (12) month period following
---------------------
the date hereof and each twelve (12) month period thereafter.
(f) If, in accordance with the terms of the Security Instruments, the
Operating Leases are terminated and either Replacement Operating Leases are
executed or the Properties are self-operated by the Borrowers, then provided
that the Borrowers and the Properties are in compliance with the terms of
Section 3.7 of the Security Instruments, no Event of Default exists and upon
delivery of a Rating Confirmation, Lender shall release and return the Letter of
Credit to the Borrowers.
7. Events of Default. The term "Event of Default" as used in this Agreement
----------------- ----------------
shall have the meaning ascribed to such term in the Note and the Security
Instruments. Notwithstanding any provision to the contrary contained herein
or in the other Loan Documents, the occurrence of a Low NOI Period shall
not, of itself, constitute an Event of Default.
8. Incorporation of Provisions. The Note, the Security Instruments and the
---------------------------
other Loan Documents are subject to the conditions, stipulations, agreements
and covenants contained herein to the same extent and effect as if fully set
forth therein until this Agreement is terminated by the payment in full of
the Debt.
9. Further Assurances. Borrower shall on demand of Lender do any act or
------------------
execute any additional documents reasonably required by Lender to confirm
the lien of the Security Instruments.
10. Representations and Warranties. Borrower represents and warrants to Lender
------------------------------
as follows:
(1) Borrower is duly qualified to do business in the States in which the
respective Properties are located unless such qualification is not necessary
pursuant to the applicable laws of the States.
24
<PAGE>
(2) Borrower (and the undersigned representative, if any, of Borrower) has
the full power and authority to execute and deliver this Agreement and the Loan
Documents, and the same constitute the legal, valid and binding obligations of
Borrower.
(3) Borrower is not 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 such individual Borrower's assets or property, and no
individual Borrower has knowledge of any person contemplating the filing of any
such petition against it. For purposes of this provision, any knowledge of any
officer or director of (i) Borrower, (ii) the managing member (or general
partner, as the case may be) of Borrower, (iii) the REIT (as defined in the
Security Instruments), (iv) the Operating Partnership (as defined in the
Security Instruments) or (v) any other affiliate of Borrower shall be imputed to
Borrower.
(4) 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 known to Borrower necessary to make statements
contained herein or therein not misleading. There is no fact presently known to
Borrower which has not been disclosed to Lender which materially and adversely
affects, nor as far as Borrower can foresee, would materially and adversely
affect, any of the Properties or the business prospects, operations or condition
(financial or otherwise) of Borrower.
(5) 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.
11. Construction of Agreement. The titles and headings of the paragraphs of
-------------------------
this Agreement have been inserted for convenience of reference only and are
not intended to summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the construction of
this Agreement. Any of the schedules attached hereto which are not
referenced herein are referenced in the Security Instruments.
12. Parties Bound, Etc. The provisions of this Agreement shall be binding
------------------
upon and inure to the benefit of Borrower, Lender and their respective
heirs, executors, legal representatives, successors and assigns (except as
otherwise prohibited by this Agreement).
13. Waivers. Lender may at any time and from time to time waive any one or
-------
more of the conditions contained herein, but any such waiver shall be
deemed to be made in pursuance hereof and not in modification thereof, and
any such waiver in any instance or under any particular circumstance shall
not be considered a waiver of such condition in any other instance or any
other circumstance.
14. Governing Law. (i) This Agreement shall be deemed to be a contract entered
-------------
into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with
the laws of the State of New York, provided however, that with respect to
the creation, perfection, priority and enforcement of the lien of the
Security Instruments, and the determination of deficiency judgments, the
laws of the State where the related Property is located shall apply.
25
<PAGE>
(ii) Any legal action or proceeding with respect to this Agreement or
any other Loan Document and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, Borrower hereby accepts, each for
itself and in respect of its property, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts and appellate courts from any
thereof. Borrower irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to Borrower at
its address set forth in Article 15 of the Security Instruments. Borrower hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement or any other Loan Document brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum. Nothing herein shall
affect the right of Lender, to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against Borrower in
any other jurisdiction.
15. Severability. If any term, covenant or provision of this Agreement shall
------------
be held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such term, covenant or provision.
16. Notices. All notices required to be given under the terms of this
-------
Agreement shall be given in accordance with and to the addresses set forth
in Article 15 of the Security Instruments.
17. Fees and Expenses. Borrower shall pay to Lender, upon demand, all
-----------------
expenses incurred by Lender in connection with the collection of the Debt,
the enforcement of the Loan Documents, and in curing any defaults under the
Loan Documents (including, without limitation, reasonable attorneys' fees,
which shall include attorney's fees incurred in any trial, appellate or
bankruptcy proceeding), with, if any such expenses are past due, interest
thereon at a rate per annum equal to the rate of interest payable pursuant
to the Note, provided that such interest rate shall in no event exceed the
maximum interest rate which Borrower may by law pay, from the date of
payment by Lender to the date of payment to Lender, which sums and interest
shall be secured by the Security Instruments.
18. Modification. This Agreement may not be modified, amended or terminated,
------------
except by an agreement in writing executed by the parties hereto.
19. No Oral Agreements. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
------------------
CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES
TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY AGREE IN WRITING TO MODIFY IT.
20. Contribution.
------------
26
<PAGE>
(a) As a result of the transactions contemplated by this Agreement, each
Borrower will benefit, directly and indirectly, from the Obligations (as defined
in the Security Instruments) and in consideration therefor desire to enter into
an allocation and contribution agreement among themselves as set forth in this
Section 20 to allocate such benefits among themselves and to provide a fair and
equitable agreement to make contributions among each of the Borrowers in the
event any payment is made by any individual Borrower hereunder to the Lender
(such payment being referred to herein as a "Contribution," and for purposes of
------------
this Section 20, includes any exercise of recourse by the Lender against any
Collateral of a Borrower and application of proceeds of such Collateral in
satisfaction of such Borrower's obligations, to the Lender under the Loan
Documents).
(b) Each Borrower shall be liable hereunder with respect to the Obligations
only for such total maximum amount (if any) that would not render its
Obligations hereunder or under any of the Loan Documents subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
state law.
(c) In order to provide for a fair and equitable contribution among the
Borrowers in the event that any Contribution is made by an individual Borrower
(a "Funding Borrower"), such Funding Borrower shall be entitled to a
----------------
reimbursement Contribution ("Reimbursement Contribution") from all other
--------------------------
Borrowers for all payments, damages and expenses incurred by that Funding
Borrower in discharging any of the Obligations, in the manner and to the extent
set forth in this Section. The amount of any Reimbursement Contribution
hereunder shall be equal to the payment made by the Funding Borrower to the
Lender or any other beneficiary pursuant to this Agreement and shall be
determined as of the date on which such payment is made.
(d) For purposes hereof, the "Benefit Amount" of any individual Borrower as
--------------
of any date of determination shall be the net value of the benefits to such
Borrower and its affiliates from extensions of credit made by the Lender to (a)
such Borrower and (b) to the other Borrowers hereunder and the Loan Documents to
the extent such other Borrowers have guaranteed or mortgaged their Properties to
secure the Obligations of such Borrower to the Lender.
(e) Each Borrower shall be liable to a Funding Borrower in an amount equal
to the greater of (A) the (i) ratio of the Benefit Amount of such Borrower to
the total amount of Obligations, multiplied by (ii) the amount of Obligations
paid by such Funding Borrower, or (B) 95% of the excess of the fair saleable
value of the property of such Borrower over the total liabilities of such
Borrower (including the maximum amount reasonably expected to become due in
respect of contingent liabilities) determined as of the date on which the
payment made by a Funding Borrower is deemed made for purposes hereof (giving
effect to all payments made by other Funding Borrowers as of such date in a
manner to maximize the amount of such Contributions).
(f) In the event that at any time there exists more than one Funding
Borrower with respect to any Contribution (in any such case, the "Applicable
----------
Contribution"), then Reimbursement Contributions from other Borrowers pursuant
- ------------
hereto shall be allocated among such Funding Borrowers in proportion to the
total amount of the Contribution made for or on account of the other Borrowers
by each such Funding Borrower pursuant to the Applicable Contribution. In the
event that at any time any Borrower pays an amount hereunder in excess of the
amount calculated pursuant to Section 20(c) above, that Borrower shall be deemed
to be a Funding Borrower to the extent of such
27
<PAGE>
excess and shall be entitled to a Reimbursement Contribution from the other
Borrowers in accordance with the provisions of this Section.
(g) The Borrowers acknowledge that the right to Reimbursement Contribution
hereunder shall constitute an asset in favor of the Borrower to which such
Reimbursement Contribution is owing.
(h) No Reimbursement Contribution payments payable by a Borrower pursuant
to the terms of this Section 20 shall be paid until all amounts then due and
payable by all of the Borrowers to the Lender, pursuant to the terms of the Loan
Documents, are paid in full in cash. Nothing contained in this Section 20 shall
limit or affect in any way the Obligations of any Borrower to Lender under this
Note or any other Loan Documents.
21. Definitions. Capitalized terms not defined herein shall have the meaning
-----------
set forth in the Security Instruments. In addition to the foregoing, the
word "person" shall include an individual, corporation, partnership,
limited liability company, trust, unincorporated association, government,
governmental authority and any other entity.
"Account Collateral" means, collectively, the Collateral Accounts and
------------------
all sums at any time held, deposited or invested therein, together with any
interest or other earnings thereon, and all proceeds thereof (including, without
limitation, proceeds of sales and other dispositions), whether accounts, general
intangibles, chattel paper, deposit accounts, instruments, documents or
securities.
"Affiliate" shall mean a Person or Persons directly or indirectly,
---------
through one or more intermediaries, Controlling, Controlled by or under common
Control with the Person or Persons in question.
"Allocated Loan Amount" Means, with respect to any Property, the
---------------------
portion of the Loan allocated thereto, as set forth on Schedule A hereto.
"Bankruptcy Event" shall mean (i) the commencement by Operating Tenant
----------------
of any case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or if Operating Tenant shall make a general assignment for the benefit
of its creditors; or (ii) if there shall be commenced against Operating Tenant
any case, proceeding or other action of a nature referred to in clause (i) above
which results in the entry of an order for relief or any such adjudication or
appointment and is not dismissed within sixty (60) days of the entry of such
order.
"Capital Expenditures" means, with respect to each Property, hard and
--------------------
soft costs incurred by the related Borrower with respect to replacements and
capital repairs made to such Property (including, without limitation, repairs
to, and replacements of, the structural components, roofs, building systems,
parking garages and parking lots, and additions to, and replacements of, FF&E),
in each case to the extent such items are capitalized in accordance with GAAP.
28
<PAGE>
"Code" means the United States Internal Revenue Code of 1986, as
----
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"Collateral Accounts" means, collectively the Post-Termination
-------------------
Property Accounts, the Deposit Account, the Tax, Insurance and Ground Rents
Escrow Account, the FF&E Reserve Account, the Deferred Maintenance and
Environmental Compliance Reserve Account, the Reserve Account, the Personal
Property Account (as defined in the Security Instruments) and Borrower's
interest in the Property Accounts,
"Control" shall mean, with respect to a Person that is a corporation,
-------
the right to exercise, directly or indirectly, more than fifty percent (50%) of
the voting rights attributable to the shares of the controlled corporation,
including the ability to exercise a veto, and, with respect to a Person that is
not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the controlled
Person. "Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Closing Date" shall mean August 12, 1999.
------------
"Cooperation Agreement" shall mean that certain Mortgage Loan
---------------------
Cooperation Agreement dated as of the date hereof among, inter alia, Borrower
----- ----
and Lender.
"Debt Service Coverage Ratio" shall mean, as of any Payment Date, a
---------------------------
ratio in which (a) the numerator is the NOI for the Properties for the complete
12-month period immediately preceding the first day of the second calendar month
prior to such Payment Date multiplied by the remaining term of the Loan
(expressed in terms of the number of years and partial years until the Maturity
Date(as defined in the Note)) and (b) the denominator is the sum of all payments
of interest and principal due under the Note for the remaining term of the Loan
(exclusive of (i) any balloon payment due on the Maturity Date pursuant to the
amoritzation schedule attached to the Note and (ii) any debt service with
respect to any Defeased Note or Defeased Notes) prior to the Maturity Date. The
"Origination Debt Service Coverage Ratio" shall be 2.34x.
"Defeasance Collateral" shall mean non-callable securities evidencing
---------------------
an obligation to pay principal and interest in a full and timely manner that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person Controlled
or supervised by and acting as an agency or instrumentality of and guaranteed as
a full faith and credit obligation by the United States of America, which in
either case are not callable or redeemable at the option of the issuer thereof
(including a depository receipt issued by a bank (as defined in Section 3(a)(2)
of the Securities Act) as custodian with respect to any such securities or a
specific payment of principal of or interest on any such securities held by such
custodian for the account of the holder of such depository receipt; provided
--------
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the securities or the
specific payment of principal of or interest on the securities evidenced by such
depository receipt).
"Deferred Maintenance and Environmental Compliance Reserve Amount"
----------------------------------------------------------------
shall mean $2,761,599.
29
<PAGE>
"Eligible Account" shall mean (i) an account or account maintained
----------------
with a federal or state-chartered depository institution or trust company which
complies with the definition of Eligible Institution, or (ii) a segregated trust
account or accounts maintained with the corporate trust department of a federal
depository institution or state-chartered depository institution subject to
regulations regarding fiduciary funds on deposit similar to Title 12 of the Code
of Federal Regulations Section 9.10(b) which, in either case, has corporate
trust powers, acting in its fiduciary capacity.
"Eligible Institution" shall mean an institution whose (i) short-term
--------------------
debt obligations are rated at least "A-1+" (or the equivalent) by each Rating
Agency, if the deposits are to be held in the account for thirty (30) days or
less, or (ii) long-term senior unsecured debt obligations are rated at least
"AA" (or the equivalent) by each Rating Agency, if the deposits are to be held
in the account for more than thirty (30) days.
"Environmental Indemnity" shall mean that certain Environmental
-----------------------
Indemnity Agreement delivered to Lender in connection with the closing of the
Loan.
"Expenses" shall mean, for purposes of calculating NOI with respect to
--------
any Property, for any given period (and shall include the pro rata portion for
such period of all such expenses attributable to, but not paid during, such
period), all expenses, as determined in accordance with the Uniform System of
Accounts, during that period in connection with the operation of such Property
for which it is to be determined, including without limitation (and without
duplication):
1. expenses for cleaning, repair, maintenance, decoration and
painting of the Property (including, without limitation, parking lots and
roadways), net of any insurance proceeds in respect of any of the foregoing;
2. wages (including overtime payments), benefits, payroll taxes and
all other related expenses for Borrower's on-site personnel, up to and including
(but not above) the level of the on-site manager, engaged in the repair,
operation and maintenance of the Property and service to tenants and on-site
personnel engaged in audit and accounting functions performed by Borrower;
3. management fees equal to the greater of (i) the management fee
pursuant to the Management Agreement (as defined in the Security Instruments)
and (ii) four percent (4%) of Gross Income. Such fees shall include all fees for
management services whether such services are performed at such Property or off-
site;
4. franchise fees, reservation fees, national sales and marketing
fees and other royalties or similar payments equal to the greater of (i) such
fees and payments due under the Franchise Agreement (as defined in the Security
Instruments) and (ii) five percent (5%) of Gross Income;
5. the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar item and
the cost of building and cleaning supplies;
6. the cost of any leasing commissions and tenant concessions and
improvements payable by Borrower pursuant to any Leases which are in effect for
such Property during such period as such amounts are recognized in accordance
with the Uniform System of Accounts, provided
30
<PAGE>
however that in no event less than on a straight line basis during the remaining
respective base term (excluding extension, renewal or other option);
7. Insurance Premiums (as defined in the Security Instruments);
8. legal, accounting and other professional fees and expenses;
9. the cost of all equipment to be used in the ordinary course of
business, which is not capitalized in accordance with the Uniform System of
Accounts;
10. Taxes and Other Charges (as such terms are defined in the
Security Instruments);
11. advertising and other marketing costs and expenses;
12. casualty losses to the extent not reimbursed by a third party;
13. all amounts that are reserved for hereunder and the Security
Instruments, including those funds which are deposited into the FF&E Reserve
Account or would be required to be deposited in the FF&E Reserve Account in the
event the FF&E Reserve Account is not yet established;
14. all amounts that are required to be reserved for under the
Operating Lease, including the Capital Expenditure Reserve (as defined in the
Operating Lease), to the extent such amounts are not duplicative of the amounts
set forth in clause (M) above; and
15. a furniture, fixtures and equipment reserve equal to the greater
of (i) such reserves required under the Management Agreement and the Franchise
Agreement and (ii) five percent (5%) of Gross Income, to the extent such amounts
are not duplicative of the amounts set forth in clause (M) above.
Notwithstanding the foregoing, Expenses shall not include (i) depreciation
or amortization or any other non-cash item of expense unless approved by Lender;
(ii) interest, principal, fees, costs and expense reimbursements of Lender in
administering the Loan but not in exercising any of its rights under this
Agreement or the other Loan Documents; or (iii) any expenditure (other than
leasing commissions, tenant concessions and improvements and replacement
reserves) which is properly treatable as a capital item under the Uniform System
of Accounts.
"FF&E" shall mean fixtures, furniture and Personal Property (as
----
defined in the Security Instruments).
"FF&E Credit Amount" shall mean, with respect to any Quarterly Period,
------------------
the amount by which (a) the FF&E Expenditures during such Quarterly Period
exceeds (a) the Quarterly FF&E Reserve Amount applicable to such Quarterly
Period.
"FF&E Expenditures" shall mean, with respect to any period, the
-----------------
amounts spent by Borrower in respect of FF&E for the Properties but shall in no
event include amounts spent in respect of Deferred Maintenance and Environmental
Remediation Conditions.
31
<PAGE>
"FF&E Required Reserve Amount" shall mean an amount equal to the
----------------------------
product of (x) one twelfth (1/12) and (y) four percent (4%) and (z) gross income
derived from the operation of the Properties, including, without limitation,
rents and accounts receivable during the twelve-month period immediately
preceding the first day of the second month immediately preceding the Payment
Date for which such amount is calculated.
"Franchise Fee" shall mean the fee payable to a Franchisor pursuant to
-------------
a Franchise Agreement.
"Guarantors" shall mean the guarantors pursuant to that certain
----------
Guaranty of Recourse Obligations dated as of the date hereof.
"Gross Income" shall mean, for purposes of calculating NOI with
------------
respect to any Property for any given period, the gross income derived from the
operation of such Property for such period.
"Legal Requirements" shall mean:
------------------
(a) all governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental
Authorities (including, without limitation, Environmental Laws)
affecting an Borrower or a Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any
part thereof (whether now or hereafter enacted and in force),
(b) all permits, licenses and authorizations and regulations
relating thereto, and
(c) all covenants, conditions and restrictions contained in any
instruments at any time in force (whether or not involving
Governmental Authorities) affecting a Property or any part thereof
which, in the case of this clause (iii), require repairs,
modifications or alterations in or to a Property or any part thereof,
or in any material way limit or restrict the existing use and
enjoyment thereof.
"Lien" shall mean any mortgage, deed of trust, security title and/or
----
security interest through a security deed, lien (statutory or other), pledge,
hypothecation, assignment, preference, priority, security interest, or any other
encumbrance or charge on or affecting a Property or any portion thereof or an
Borrower, or any interest therein (including, without limitation, any
conditional sale or other title retention agreement, any sale-leaseback, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
Uniform Commercial Code or comparable law of any other jurisdiction, domestic or
foreign, and mechanics', materialmen's and other similar liens and
encumbrances).
"Low NOI Period" shall mean a period (i) beginning with a Payment Date
--------------
(the "Commencement Date") with respect to which (A)(I) NOI has been less than
$57,032,913 (the "Low NOI Amount") or (II) the Debt Service Coverage Ratio is
less than 1.5x (the "Low Debt Service Threshold") for the NOI/DS Test Period
ending on the second Payment Date preceding such Commencement Date or (B) a
Bankruptcy Event has occurred with respect to the Operating Tenant
32
<PAGE>
since the immediately preceding Payment Date, and (ii) ending on, as applicable,
(A) the first Payment Date immediately following the last day of the NOI/DS Test
Period coinciding with the second consecutive fiscal quarter following the
applicable Commencement Date for which (I) Borrower can demonstrate to the
satisfaction of Lender that NOI has been greater than the Low NOI Amount or (II)
the Debt Service Coverage Ratio is greater than the Low Debt Service Threshold,
or (B) the last day of the calendar month in which a Bankruptcy Event no longer
exists with respect to the Operating Tenant.
"Management Fee" shall mean the fee payable to a Manager pursuant to
--------------
the terms of a Management Agreement.
"Mortgage Loan Borrowers" shall mean all of the Borrowers.
-----------------------
"NOI" as used herein shall mean, with respect to any Property, for any
---
given period, the Gross Income for such Property for such period less Expenses
attributable to such Property for such period, as more particularly described on
the operating statements for the Property delivered by Borrower or Operating
Tenant to Lender pursuant to the Security Instruments. NOI shall include only
Rents and Accounts Receivable actually earned by the applicable Operating Tenant
in accordance with the Uniform System of Accounts (as defined in the Security
Instruments) and such other income, including any rent loss or business
interruption insurance proceeds, laundry, parking, vending or concession income,
late fees, forfeited security deposits and other miscellaneous tenant charges
and Expenses actually paid or payable on an accrual basis attributable to such
Property on an annualized basis during the applicable period ending on the last
day of the month that is two calendar months prior to the month during which the
NOI is being calculated, as set forth on operating statements satisfactory to
Lender. NOI shall be calculated on an accrual basis in accordance with the
Uniform System of Accounts. Notwithstanding the foregoing, NOI shall not include
(a) condemnation or insurance proceeds (excluding rent or business interruption
insurance proceeds); (b) any proceeds from the sale, exchange, transfer,
financing or refinancing of all or any portion of the Property for which it is
to be determined, (c) amounts received from tenants as security deposits; or (d)
any other type of income otherwise includible in NOI but paid directly by any
tenant to a person or entity other than Borrower or Operating Tenant or their
respective agents or representatives, unless such amounts are included as an
Expense.
"NOI/DS Test Period" shall mean, with respect to any Payment Date
------------------
commencing with respect to the third Payment Date during the term of the Loan,
each successive twelve month period ending on a Payment Date.
"Officer's Certificate" shall mean a certificate made by an individual
---------------------
authorized to act on behalf of a Borrower pursuant to the organizational
documents of such Borrower.
"Optional Defeasance Date" means the earlier of (a) the third
------------------------
anniversary of the Closing Date and (b) the day after the second anniversary of
the "start-up day" (within the meaning of Section 860G(a)(9) of the Code) of the
REMIC Trust.
"Permitted Investments" shall mean the following, subject to
---------------------
qualifications hereinafter set forth:
33
<PAGE>
1. Obligations of, or obligations 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. These obligations
include, but are not limited to:
Treasury obligations (all direct or fully guaranteed US
obligations)
Farmers Home Administration Certificates of beneficial ownership
General Services Administration Participation certificates
Maritime Administration Guaranteed Title XI financing
Small Business Administration Guaranteed participation
certificates Guaranteed pool certificates
Department of Housing and Urban Development Local authority bonds
Washington Metropolitan Area Transit Authority Guaranteed transit
bonds
2. Obligations of government-sponsored agencies that are not backed
by the full faith and credit of the U.S., where the obligation is
limited to those instruments that have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change. These obligations are limited to:
Federal Home Loan Mortgage Corp. (FHLMC)Debt obligations
Farm Credit System (formerly: Federal Land Banks, Federal
Intermediate Credit Banks, and Banks for
Cooperatives)Consolidated system wide bonds and notes
Federal Home Loan Banks (FHL Banks)Consolidated debt obligations
Federal National Mortgage Association (FNMA)Debt obligations
Student Loan Marketing Association (SLMA)Debt obligations
Financing Corp. (FICO)Debt obligations
Resolution Funding Corp. (REFCORP)Debt obligations.
3. Federal funds, unsecured certificates of deposit, time deposits,
banker's acceptances, and repurchase agreements having maturities
of not more than 365 days of any bank, the short-term debt
obligations of which are rated "A-1+" (or the equivalent) by each
Rating Agency.
4. Deposits that are fully insured by the Federal Deposit Insurance
Corp. (FDIC).
5. Debt obligations maturing in 365 days or less that are rated AAA
or higher (or the equivalent) by each Rating Agency.
6. Commercial paper rated "A-1+" (or the equivalent) by each Rating
Agency and maturing in 365 days or less.
7. Investments in certain short-term debt of issuers rated "A-1+"
(or the equivalent) by each Rating Agency may be permitted with
certain restrictions. The total amount of debt from "A-1+"
issuers must be limited to the investment of an amount equal to
Monthly Debt Service Payment Amount. The total amount of "A-1+"
investments should not represent more than twenty percent (20%)
of the rated issue's outstanding principal amount and each
investment should not mature beyond thirty (30) days. Investment
in "A-1+" (or the equivalent) rated securities
34
<PAGE>
are not eligible for reserve accounts, cash collateral accounts,
or other forms of credit enhancement. Short-term debt for
purposes of this definition includes: commercial paper, federal
funds, repurchase agreements, unsecured certificates of deposit,
time deposits, and banker's acceptances.
8. Investment in money market funds rated "AAAm" or "AAAm-G" (or the
equivalent) by the Rating Agency.
9. Such other investments as shall be approved in writing by means
of a Rating Confirmation.
Notwithstanding the foregoing, "Permitted Investments": (i) shall exclude any
security with the Standard & Poor's "r" symbol (or any other Rating Agency's
corresponding 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"; (ii) shall not have maturities in excess of one year; (iii) as to the
investments described in (1), (2), (3), (4), (5), (6) and (7): the obligations
shall be limited to those instruments that have a predetermined fixed dollar of
principal due at maturity that cannot vary or change; interest may either be
fixed or variable; and any variable interest should be tied to a single interest
rate index plus a single fixed spread (if any), and move proportionately with
that index; and (iv) shall exclude any investment where the right to receive
principal and interest derived from the underlying investment provide a yield to
maturity in excess of 120% of the yield to maturity at par of such underlying
investment. 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, other than those payable on
demand, shall mature or be redeemable upon the option of the holder thereof on
or prior to the earlier of (x) three (3) months from the date of their purchase
or (y) the Business Day preceding the day before the date such amounts are
required to be applied hereunder.
"Person" shall mean any individual, sole proprietorship, corporation,
------
general partnership, limited partnership, limited liability company or
partnership, joint venture, association, joint stock company, bank, trust,
estate, unincorporated organization, any federal, state, county or municipal
government (or any agency or political subdivision thereof), endowment fund or
any other form of entity.
"Property Manager" shall mean, with respect to any Property, the
----------------
Person named in the definition of "Qualified Manager" appointed in accordance
with Section 3.12 of the Security Instruments.
"Quarterly FF&E Credit Amount" shall mean, with respect to any
----------------------------
Quarterly Period, the amount by which (a) the amount of FF&E Expenditures during
such Quarterly Period exceeds (b) the Quarterly FF&E Reserve Amount applicable
to such Quarterly Period.
"Quarterly FF&E Reserve Amount" shall mean three times the applicable
-----------------------------
FF&E Required Reserve Amount.
"Quarterly Period" means, for each calendar year, each successive
----------------
three month period beginning on (and including) the Payment Date in October,
1999, provided, however, that the period from the date of closing through
September 30, 1999 shall be deemed to be a Quarterly Period for
35
<PAGE>
purposes of Section 6.5 hereof and any calculations with respect to such
Quarterly Period shall be on a prorated basis.
"Quarterly FF&E Shortfall Amount" means, with respect to any Quarterly
-------------------------------
Period, the amount by which (a) the Quarterly FF&E Reserve Amount applicable to
such Quarterly Period exceeds (b) the amount of FF&E Expenditures during such
Quarterly Period plus any Quarterly FF&E Credit Amount applicable to such
period.
"Rating Agency (or, as the context requires, "Rating Agencies")" shall
--------------------------------------------------------------
mean each of Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies, Inc. ("Standard & Poor's"), Moody's Investors Service, Inc.
-----------------
("Moody's"), and any other nationally-recognized statistical rating agency from
-------
time to time selected by Lender and rating the Certificates issued in connection
with the Securitization.
"Rating Confirmation" With respect to the matter in question, shall
-------------------
mean that as a condition precedent thereto the Rating Agency shall have
confirmed in writing that (i)such investment, replacement, action or inaction
shall not result, in and of itself, in a downgrade, withdrawal or qualification
of any rating then assigned to any outstanding Certificates (if the
Securitization has occurred), or (ii)such investment, replacement, action or
inaction would not result, in and of itself, in a downgrade, withdrawal or
qualification of any rating for proposed Certificates then under consideration
by the Rating Agency (if the Securitization has not yet occurred).
"Reference Date" shall mean January 1, 2000 and the 1/st/ day of each
--------------
July and January thereafter.
"Release Amount" shall mean, for each Property, 125% of the Allocated
--------------
Loan Amount relating to such Property.
"REMIC" shall mean a "real estate mortgage investment conduit" within
-----
the meaning of Section 860D of the Code.
"REMIC Trust" shall mean a REMIC which holds any Note or Notes.
-----------
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Securitization" shall have the meaning set forth in the Cooperation
--------------
Agreement.
"Treasury Constant Yield" shall mean the arithmetic mean of the rates
-----------------------
published as "Treasury Constant Maturities" as of 5:00 p.m., New York time, for
the five Business Days preceding the date on which acceleration has been
declared, as shown on the USD screen of the Telerate service, or if such service
is not available, the Bloomberg service, or if neither the Telerate nor the
Bloomberg service is available, under Section 504 in the weekly statistical
release designated H.15519 (or any successor publication) published by the Board
of Governors of the Federal Reserve System, for "On the Run" U.S. Treasury
obligations corresponding to the Payment Date occurring on the Maturity Date; if
no such maturity shall so exactly correspond, yields for the two most closely
corresponding published maturities shall be calculated pursuant to the foregoing
sentence and the
36
<PAGE>
Treasury Constant Yield shall be interpolated or extrapolated (as applicable)
from such yields on a straightline basis (rounding, in the case of relevant
periods, to the nearest month).
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Agreement the day and year first above written.
BORROWERS
EQUISTAR IRVINE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
CAPSTAR SACRAMENTO COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
MERISTAR DEL REY, L.L.C., a Delaware limited liability
company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
<PAGE>
Assistant Treasurer
CAPSTAR SAN FRANCISCO COMPANY, L.L.C., a Delaware
limited liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
MERISTAR SECURED HOLDINGS LLC, a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
CAPSTAR ENGLEWOOD COMPANY, L.L.C, a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation., a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
<PAGE>
EQUISTAR COLORADO COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
CAPSTAR LAFAYETTE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
EQUISTAR SOMERSET COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
<PAGE>
CAPSTAR ALBUQUERQUE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
EQUISTAR CHARLOTTE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
BA PARKWAY ASSOCIATES II, L.P., a Delaware limited
partnership
By: MeriStar PA SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
<PAGE>
An Phung
Assistant Treasurer
EQUISTAR ARLINGTON PARTNERS, L.P., a Delaware limited
partnership
By: MeriStar SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Phung
Assistant Treasurer
CAPSTAR AP PARTNERS, L.P., a Delaware limited
partnership
By: MeriStar Austin SPE LLC, a Delaware limited
liability company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Phung
Assistant Treasurer
<PAGE>
CAPSTAR WESTCHASE PARTNERS, L.P., a Delaware limited
partnership
By: Westchase SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Phung
Assistant Treasurer
MERISTAR WEST LOOP, L.P., a Delaware limited
partnership
By: MeriStar SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Phung
Assistant Treasurer
<PAGE>
MADISON MOTEL ASSOCIATES, LLP, a Wisconsin limited
liability partnership
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its limited
liability partner
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Phung
Assistant Treasurer
LENDER:
LEHMAN BROTHERS HOLDINGS, INC. d/b/a Lehman Capital, a
division of Lehman Brothers Holdings, Inc.
By: __________________________________________________
Name:
Title:
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Property Borrower Allocated Loan Loan-to-Value
Amount Ratio
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Hilton Hotel Orange County EquiStar Irvine $18,010,000 53.8%
Airport Company, L.L.C.
Irvine, California
- -----------------------------------------------------------------------------------------------------
2. Hilton Sacramento Arden CapStar Sacramento $18,810,000 53.7%
West Company, L.L.C.
Sacramento, California
- -----------------------------------------------------------------------------------------------------
3. Courtyard by Marriott MeriStar Del Rey, L.L.C. $17,630,000 53.8%
Marina Del Rey, California
- -----------------------------------------------------------------------------------------------------
4. Sheraton at Fisherman's CapStar San Francisco $53,380,000 53.8%
Wharf Company, L.L.C.
San Francisco, California
- -----------------------------------------------------------------------------------------------------
5. Crowne Plaza MeriStar Secured $15,980,000 53.8%
San Jose, California Holdings LLC
- -----------------------------------------------------------------------------------------------------
6. Embassy Suites Denver South CapStar Englewood $14,620,000 44.1%
Denver, Colorado Company, L.L.C.
- -----------------------------------------------------------------------------------------------------
7. Sheraton Colorado Springs Equistar Colorado $14,510,000 53.7%
Colorado Springs, Company, L.L.C.
Colorado
- -----------------------------------------------------------------------------------------------------
8. Holiday Inn Select New MeriStar Secured $13,060,000 53.7%
Orleans Airport Holdings LLC
Kenner, Louisiana
- -----------------------------------------------------------------------------------------------------
9. Hilton & Towers CapStar Lafayette $11,400,000 53.8%
Lafayette, Louisiana Company, L.L.C.
- -----------------------------------------------------------------------------------------------------
10. Hilton Hotel MeriStar Secured $ 8,920,000 53.7%
Grand Rapids, Michigan Holdings LLC
- -----------------------------------------------------------------------------------------------------
11. Marriott Somerset EquiStar Somerset $31,290,000 53.8%
Somerset, New Jersey Company, L.L.C.
- -----------------------------------------------------------------------------------------------------
12. Double Tree CapStar Albuquerque $10,370,000 53.7%
Albuquerque, New Mexico Company, L.L.C.
- -----------------------------------------------------------------------------------------------------
13. Sheraton Airport Plaza Hotel EquiStar Charlotte $11,290,000 53.8%
Charlotte, North Carolina Company, L.L.C.
- -----------------------------------------------------------------------------------------------------
14. Embassy Suites BA Parkway Associates
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Property Borrower Allocated Loan Loan-to-Value
Amount Ratio
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philadelphia, Pennsylvania II, L.P. $15,610,000 44.1%
- -----------------------------------------------------------------------------------------------------
15. Hilton EquiStar Arlington $13,710,000 53.8%
Arlington, Texas Partners, L.P.
- -----------------------------------------------------------------------------------------------------
16. Doubletree Austin CapStar AP Partners, L.P. $13,140,000 44.1%
Austin, Texas
- -----------------------------------------------------------------------------------------------------
17. Hilton Inn Westchase & CapStar Westchase $18,600,000 53.8%
Towers Partners, L.P.
Houston, Texas
- -----------------------------------------------------------------------------------------------------
18. Marriott Houston West Loop MeriStar West Loop, L.P. $20,960,000 53.7%
Houston, Texas
- -----------------------------------------------------------------------------------------------------
19. Crowne Plaza Madison East Madison Motel $ 8,710,000 53.8%
Towne Associates, LLP
Madison, Wisconsin
- -----------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 1
Note One Borrowers
EquiStar Irvine Company, L.L.C.
CapStar Sacramento Company, L.L.C.
MeriStar Del Rey, L.L.C.
CapStar San Francisco Company, L.L.C.
MeriStar Secured Holdings LLC
CapStar Englewood Company, L.L.C.
EquiStar Colorado Company, L.L.C.
CapStar Lafayette Company, L.L.C.
EquiStar Somerset Company, L.L.C.
CapStar Albuquerque Company, L.L.C.
EquiStar Charlotte Company, L.L.C.
EquiStar Arlington Partners, L.P.
CapStar Westchase Partners, L.P.
MeriStar West Loop, L.P.
Madison Motel Associates, LLP
<PAGE>
SCHEDULE 2
Note Two Borrowers
BA Parkway Associates II, L.P.
CapStar AP Partners, L.P.
The Properties owned by the foregoing Note Two Borrowers are sometimes referred
to in the Loan Documents as the JV Properties.
<PAGE>
SCHEDULE 3
San Jose Release
<PAGE>
SCHEDULE 4
Diversity
"Geographic Diversity Threshold" shall mean that (i) the percentage of the
total net cash flow (on a trailing 12 month basis) of all of the Properties
which is derived from the Properties located in the State of California shall
not exceed __% [origination plus 5%], (ii) the percentage of the total net cash
flow (on a trailing 12 month basis) of all of the Properties which is derived
from the Properties located in the State of Texas shall not exceed __%
[origination plus 5%], and (iii) the percentage of the total net cash flow (on a
trailing 12 month basis) of all of the Properties which is derived from the
Properties located in any one State (other than California or Texas) shall not
exceed 15%.
"Franchise Diversity Threshold" shall mean that (i) there shall not be less than
the Minimum Number of Flags (defined below) represented among the Properties,
(ii) with respect to Properties operated under a Hilton Hotel franchise license,
the underwritten net cash flow, as determined be Lender, with respect to such
Properties shall not exceed 40% of such net cash flow of the Properties, (iii)
with respect to Properties operated under a Sheraton Hotel franchise license,
the underwritten net cash flow, as determined be Lender, with respect to such
Properties shall not exceed 37% of such net cash flow of the Properties, (iv)
with respect to Properties operated under a Marriott Hotel franchise license,
the underwritten net cash flow, as determined be Lender, with respect to such
Properties shall not exceed 29% of such net cash flow of the Properties, and
(v) with respect to Properties operated under any franchise license other than
Hilton or Sheraton, the underwritten net cash flow, as determined be Lender,
with respect to such Properties shall not exceed 15.5% of such net cash flow of
the Properties.
"Minimum Number of Flags" shall mean, in terms of actual flags rather than
franchise operators, the lesser of (i) six and (ii) the number of flags defined
as either "luxury" or "upscale" pursuant to Smith Travel Reports.
<PAGE>
SCHEDULE 5
PIPs
Schedule begins on next page.
<PAGE>
SCHEDULE 6
Deferred Maintenance and Environmental Compliance
Schedule begins on next page.
<PAGE>
SCHEDULE 7
Operating Tenants and Franchisors
(The following property nos. correspond to the property nos. on Schedule A)
- ------------------------------------------------------------------------------
Property Operating Tenants Franchisors
No.
- ------------------------------------------------------------------------------
1 MeriStar H&R Operating Hilton Inns, Inc.
Company, L.P. (the "MeriStar
Tenant")
- ------------------------------------------------------------------------------
2. MeriStar Tenant Hilton Inns, Inc.
- ------------------------------------------------------------------------------
3. AGH Leasing, L.P. (the "AGH Marriott International, Inc.
Tenant")
- ------------------------------------------------------------------------------
4. MeriStar Tenant ITT Sheraton Corporation
- ------------------------------------------------------------------------------
5. AGH Tenant Holiday Inns Franchising, Inc.
- ------------------------------------------------------------------------------
6. MeriStar Tenant Promus Hotels, Inc.
- ------------------------------------------------------------------------------
7. MeriStar Tenant ITT Sheraton Corporation
- ------------------------------------------------------------------------------
8. AGH Tenant Holiday Inns Franchising, Inc.
- ------------------------------------------------------------------------------
9. MeriStar Tenant Hilton Inns, Inc.
- ------------------------------------------------------------------------------
10. AGH Tenant Hilton Inns, Inc.
- ------------------------------------------------------------------------------
11. MeriStar Tenant Marriott International, Inc.
- ------------------------------------------------------------------------------
12. MeriStar Tenant Doubletree Systems, Inc.
- ------------------------------------------------------------------------------
13. MeriStar Tenant ITT Sheraton Corporation
- ------------------------------------------------------------------------------
14. MeriStar Tenant Promus Hotels, Inc.
- ------------------------------------------------------------------------------
15. MeriStar Tenant Hilton Inns, Inc.
- ------------------------------------------------------------------------------
16. MeriStar Tenant Doubletree Hotel Systems, Inc.
- ------------------------------------------------------------------------------
17. MeriStar Tenant Marriott International, Inc.
- ------------------------------------------------------------------------------
18. AGH Tenant Hilton Inns, Inc.
- ------------------------------------------------------------------------------
19. AGH Tenant Holiday Inns Franchising, Inc.
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT A
NOTICE OF REQUEST FOR RELEASE
[BORROWER]
______________________, 19_____
[LENDER]
Ladies and Gentlemen:
We refer to that certain mortgage loan made by [Lender] to us in the
original principal sum of $___________ secured by premises known as
____________________________, [City], [State], [_____________________________,
---- -----
[City], [State], and ________________________, [City], [State] evidenced by a
Note (the "Note") and secured by a [those certain] Mortgage(s)/Deed(s) of Trust
covering said premises ([collectively] the "Security Instruments") and Loan
Agreement made by and between us and Lender, each dated as of ________, 1999
(the "Loan"). All capitalized terms used herein shall have the same meanings
herein as they have in the Loan Agreement.
On or about ___________ ____, 19___ (the "Release Date"), we shall deliver
to you $__________, together with all other sums required under the Loan
Agreement.
In connection with the defeasance, we also request a Property Release of
the premises known as ________________________, [City], [State] (the "Release
Premises") pursuant to Section 3 of the Loan Agreement covering the Release
Premises. In order to induce you to make a Property Release of the Release
Premises from the lien of the related Security Instruments, the undersigned
hereby represents and certifies as follows:
20. No Event of Default has occurred and is continuing.
21. The Debt Service Coverage Ratio (as defined in the Loan Agreement) for the
Properties, after giving effect to the Property Release, shall be equal to
or greater than greater of (i) the Origination Debt Service Coverage Ratio
and the (ii) Debt Service Coverage Ratio for the Properties immediately
prior to the Property Release.
22. All legal, record, beneficial and economic interests of the Release
Premises shall, on the Release Date, simultaneously with the Property
Release, be transferred and conveyed to a Release Premises Transferee.
Borrower hereby request a Property Release of the Release Premises from the
lien of the Security Instrument and related Loan Documents.
[BORROWER]
<PAGE>
MERISTAR HOSPITALITY CORPORATION
Statement Regarding Computation of Ratios
EXHIBIT 12
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1996 1997 1998 1999
------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income before minority interests, income tax
expense and extraordinary items (1) $ 213 $ 6,988 $ 40,488 $ 69,528 $116,667
Fixed charges:
Interest expense 2,414 12,346 21,024 64,378 100,398
Interest capitalized 67 461 442 5,182 12,540
Amortization of debt expense 131 986 920 1,635 3,143
Preferred distributions to minority interests - - 488 650 574
Rent deemed as interest 16 22 26 11 -
------ ------- -------- -------- --------
Total fixed charges 2,628 13,815 22,900 71,856 116,655
------ ------- -------- -------- --------
Income before minority interest, income tax
expense, extraordinary items and fixed
charges (excluding capitalized interest and
preferred distributions to minority interests) 2,774 20,342 62,458 135,552 220,208
Divided by fixed charges 2,628 13,815 22,900 71,856 116,655
Ratio of earnings to fixed charges 1.06x 1.47x 2.73x 1.89x 1.89x
</TABLE>
(1) This amount is before minority interests since the minority interests relate
to majority-owned subsidiaries that have fixed charges.
<PAGE>
EXHIBIT 21
JURISDICTION OF
INCORPORATION OR
NAME ORGANIZATION
-------------------------------------------------------------------------------
183 Hotel Associates, Ltd. Texas
2780 Atlanta Limited Partnership Texas
2929 Williams Limited Liability Company Delaware
3100 Glendale Joint Venture Ohio
339742 B.C. Ltd. British Columbia, Canada
339743 B.C. Ltd. British Columbia, Canada
455 Meadowlands Associates, Ltd Texas
75 Arlington Heights Limited Partnership, L.P. Delaware
AGH 2780 Atlanta L.L.C. Delaware
AGH 75 Arlington Heights L.L.C. Delaware
AGH DFW South L.L.C. Delaware
AGH GP, Inc. Nevada
AGH LP, Inc. Nevada
AGH O'Hare Limited Partnership Illinois
AGH O'Hare L.L.C. Delaware
AGH Portland/Shelton L.L.C. Delaware
AGH PSSI, Inc. Delaware
AGH Secaucus L.L.C. Delaware
AGH UPREIT L.L.C. Delaware
BA Parkway Associates II, L.P. Delaware
Ballston Parking Associates Virginia
BCHI Acquisition, L.L.C. Delaware
CapStar Albuquerque Company, L.L.C. Delaware
CapStar AP Partners, L.P. Delaware
CapStar C.S. Company, L.L.C. Delaware
CapStar Cathedral City Company, L.L.C. Delaware
CapStar Cherry Hill Company, L.L.C. Delaware
CapStar Chicago Company, L.L.C. Delaware
CapStar Columbia Company, L.L.C. Maryland
CapStar Cross Keys Company, L.L.C. Maryland
CapStar Dallas Partners, L.P. Delaware
CapStar Detroit Airport Company, L.L.C. Delaware
CapStar Englewood Company, L.L.C. Delaware
CapStar Forrestal Company, L.L.C. New Jersey
CapStar Frazer Company, L.L.C. Delaware
CapStar Georgetown Company, L.L.C. Delaware
CapStar Hartford Company, L.L.C. Connecticut
CapStar Houston SW Partners, L.P. Delaware
CapStar Indianapolis Company, L.L.C. Delaware
CapStar Jekyll Company, L.L.C. Delaware
CapStar KC Company, L.L.C. Delaware
CapStar Lafayette Company, L.L.C. Delaware
CapStar LAJV Company, L.L.C. Delaware
CapStar Lexington Company, L.L.C. Delaware
CapStar Louisville Company, L.L.C. Delaware
CapStar Medallion Austin Partners, L.P. Delaware
CapStar Medallion Dallas Partners, L.P. Delaware
CapStar Medallion Houston Partners, L.P. Delaware
CapStar Mesa Company, L.L.C. Delaware
CapStar Midland Partners, L.P. Delaware
CapStar Mockingbird Partners, L.P. Delaware
CapStar Morristown Company, L.L.C. Delaware
CapStar National Airport Company, L.L.C. Delaware
CapStar Oklahoma City Company, L.L.C. Delaware
CapStar Roland Park Company, L.L.C. Maryland
CapStar Sacramento Company, L.L.C. Delaware
CapStar San Francisco Company, L.L.C. Delaware
CapStar San Pedro Company, L.L.C. Delaware
CapStar Santa Barbara Company, L.L.C. Delaware
CapStar St. Louis Company, L.L.C. Delaware
CapStar Tucson Company, L.L.C. Delaware
CapStar Washington Company, L.L.C. Delaware
CapStar Westchase Partners, L.P. Delaware
CapStar Windsor Locks Company, L.L.C Delaware
Centennial Hotel Ltd. British Columbia, Canada
Cocoa Beach Hotels, Ltd. Florida
DFW South Corporation Delaware
DFW South I Limited Partnership Texas
Durham I-85 Limited Partnership Delaware
EquiStar Arlington Partners, L.P. Delaware
EquiStar Atlanta Company, L.L.C. Delaware
EquiStar Atlanta GP Company, L.L.C. Delaware
EquiStar Atlanta LP Company, L.L.C. Delaware
EquiStar Ballston Company, L.L.C. Delaware
EquiStar Bellevue Company, L.L.C. Delaware
EquiStar Charlotte Company, L.L.C. Delaware
EquiStar Cleveland Company, L.L.C. Delaware
EquiStar Colorado Company, L.L.C. Delaware
EquiStar Irvine Company, L.L.C. Delaware
EquiStar Latham Company, L.L.C. Delaware
EquiStar Salt Lake Company, L.L.C. Delaware
EquiStar Schaumburg Company, L.L.C. Delaware
EquiStar Somerset Company, L.L.C. Delaware
EquiStar Virginia Company, L.L.C. Delaware
Lake Buena Vista Partners, Ltd. Florida
Lepercq Atlanta Renaissance Partners, L.P. Delaware
Madison Motel Associates Wisconsin
Madison Motel Associates, L.L.P. Wisconsin
Madison Washington Associates Wisconsin
MCV Venture, L.L.C. Kentucky
MDV Limited Partnership Texas
<PAGE>
MeriStar Acquisition Company, L.L.C. Delaware
MeriStar Austin SPE Corp. Delaware
MeriStar Austin SPE, L.L.C. Delaware
MeriStar Del Ray, L.L.C. Delaware
MeriStar Hospitality Corporation Maryland
MeriStar Hospitality Operating Partnership, L.P. Delaware
MeriStar Hotel (Burnaby), L.L.C. British Columbia, Canada
MeriStar Hotel (Calgary Airport), L.L.C. Alberta, Canada
MeriStar Hotel (Surrey), L.L.C. British Columbia, Canada
MeriStar Hotel (Vancouver), L.L.C. British Columbia, Canada
MeriStar Lexington SPE Corp. Delaware
MeriStar Lexington SPE, L.L.C. Delaware
MeriStar LP, Inc. Delaware
MeriStar Madison SPE, L.L.C Delaware
MeriStar Marco Island Company, L.L.C. Delaware
MeriStar PA SPE Corp. Delaware
MeriStar PA SPE, L.L.C. Delaware
MeriStar Plantation Shopping Center Company, L.L.C. Delaware
MeriStar Safety Harbor Company, L.L.C. Delaware
MeriStar Sanibel Beach Company, L.L.C. Delaware
MeriStar Sanibel Golf Company, L.L.C. Delaware
MeriStar Sanibel Inn Company, L.L.C. Delaware
MeriStar Seaside Inn Company, L.L.C. Delaware
MeriStar Secured Holdings I, L.L.C. Delaware
MeriStar Secured Holdings, L.L.C. Delaware
MeriStar Shirley's Parcel Company, L.L.C. Delaware
MeriStar Song of the Sea Company, L.L.C. Delaware
MeriStar SPE Corp. Delaware
MeriStar SPE, L.L.C. Delaware
MeriStar SS Plantation Company, L.L.C. Delaware
MeriStar Sundial Beach Company, L.L.C. Delaware
MeriStar West Loop, L.P. Delaware
Metrotown Overseas Holdings, Inc. British Columbia, Canada
Mt. Arlington New Jersey, L.L.C. Delaware
Portland/Shelton Corp. Delaware
Portland/Shelton, L.L.C. Delaware
Richmond Williamsburg Associates, Ltd. Texas
Westchase SPE, Corp. Delaware
Westchase SPE, L.L.C. Delaware
<PAGE>
EXHIBIT 23
[KPMG Letterhead]
INDEPENDENT AUDITORS' CONSENT
` -----------------------------
The Board of Directors
MeriStar Hospitality Corporation:
We consent to the incorporation by reference in the registration statement (No.
333-60463) on Form S-8 (MeriStar Hospitality Corporation Incentive Plan), the
registration statement (No. 333-60465) on Form S-8 (MeriStar Hospitality
Corporation Non-employee Directors' Incentive Plan), and the registration
statement (No. 333-66229) on Form S-3 (for a shelf registration to register
shares for certain operating partnership unit holders) of our report on the
consolidated balance sheets of MeriStar Hospitality Corporation and subsidiaries
as of December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1999, and the related schedule, which
report appears in the December 31, 1999 annual report on Form 10-K of MeriStar
Hospitality Corporation.
/s/ KPMG LLP
Washington, D.C.
January 28, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,556
<SECURITIES> 0
<RECEIVABLES> 1,328
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,118,723
<DEPRECIATION> 182,430
<TOTAL-ASSETS> 3,094,201
<CURRENT-LIABILITIES> 0
<BONDS> 1,676,771
0
0
<COMMON> 477
<OTHER-SE> 1,170,125
<TOTAL-LIABILITY-AND-EQUITY> 3,094,201
<SALES> 0
<TOTAL-REVENUES> 374,904
<CGS> 0
<TOTAL-COSTS> 1,964
<OTHER-EXPENSES> 166,944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,398
<INCOME-PRETAX> 105,598
<INCOME-TAX> 2,102
<INCOME-CONTINUING> 103,496
<DISCONTINUED> 0
<EXTRAORDINARY> 4,532
<CHANGES> 0
<NET-INCOME> 98,964
<EPS-BASIC> 2.09
<EPS-DILUTED> 2.03
</TABLE>
