<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_____________________
SUNBURST HOSPITALITY CORPORATION
(Exact name of registrant as specified in its charter)
_____________________
<TABLE>
<S> <C> <C>
DELAWARE 7011 52-1985619
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
_____________________
JAMES A. MACCUTCHEON
10770 COLUMBIA PIKE 10770 COLUMBIA PIKE
SILVER SPRING, MD 20901 SILVER SPRING, MD 20901
(301) 979-5000 (301) 979-5000
<TABLE>
<S> <C>
(Address, including zip area code, and telephone number, (Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices) including area code, of agent for service)
</TABLE>
_____________________
Copies to:
SCOTT C. HERLIHY, ESQ.
LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300
WASHINGTON, D.C. 20004
(202) 637-2200
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement; as determined
by the Registrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[_]______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1)(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.01 par value per share of
Sunburst Hospitality Corporation (the "Company")
- ------------------------------------------------------------------------------------------------------------------------------------
Debt Securities of the Company (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock $.01 par value per share of the Company
- ------------------------------------------------------------------------------------------------------------------------------------
Warrants of the Company
- ------------------------------------------------------------------------------------------------------------------------------------
Subscription Rights (4) (4)
====================================================================================================================================
Total $250,000,000(4) 100% $250,000,000(4) $73,750
====================================================================================================================================
</TABLE>
(1) The proposed maximum offering price per unit will be determined form time
to time by the Registrant in connection with the issuance by the
Registrant of the securities registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee,
which is calculated in accordance with Rule 457(o) under the Securities
Act.
(3) If any Debt Securities are issued at an original issue discount, then the
offering price shall be in such greater principal amount as shall result
in an aggregate initial offering price not to exceed $250,000.000.
(4) Rights evidencing the right to purchase Debt Securities, Common Stock,
Preferred Stock or Warrants.
(5) In no event will the aggregate offering price of all securities issued
from time to time pursuant to this Registration Statement exceed
$250,000,000 or the equivalent thereof in one or more foreign currencies,
foreign currency units or composite currencies. The aggregate amount of
Common Stock of the Company registered hereunder is further limited to
that which is permissible under Rule 415(a)(4) under the Securities Act.
The securities registered hereunder may be sold separately or as units
with other securities registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with the +
+ Securities and Exchange Commission. These securities may not be sold nor +
+ may offers to buy be accepted prior to the time the registration statement +
+ becomes effective. This prospectus shall not constitute an offer to sell or +
+ the solicitation of an offer to buy nor shall there be any sale of these +
+ securities in any State in which such offer, solicitation or sale would be +
+ unlawful prior to registration or qualification under the securities laws +
+ of any such State. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 19, 1998
PROSPECTUS
$250,000,000
SUNBURST HOSPITALITY CORPORATION
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK, WARRANTS, AND SUBSCRIPTION RIGHTS
_____________________
Sunburst Hospitality Corporation, a Delaware corporation ("Sunburst" or the
"Company"), directly or through agents, dealers, or underwriters designated from
time to time, may offer, issue and sell, (i) debt securities of the Company
consisting of debentures, notes or other evidences of indebtedness (the "Debt
Securities"), (ii) shares of common stock of the Company, par value $.01 per
share (the "Common Stock"), (iii) shares of preferred stock of the Company, par
value $.01 per share (the "Preferred Stock") and (iv) warrants to purchase
Common Stock, Preferred Stock or Debt Securities (the "Warrants"), with an
aggregate public offering price of up to $250,000,000. The Debt Securities may
be issued as exchangeable and/or Convertible Debt Securities, exchangeable for
or convertible into shares of Common Stock or Preferred Stock. The Preferred
Stock may be issued as exchangeable and/or convertible Preferred Stock,
exchangeable for or convertible into Debt Securities or shares of Common Stock.
The Debt Securities, the Common Stock, the Preferred Stock and the Warrants may
be offered, separately or together, in one or more separate classes or series
and in amounts, at prices and on terms to be determined at the time of offering
and to be set forth in one or more supplements to this Prospectus (each, a
"Prospectus Supplement"). Additionally, the Company may issue (any such
issuance, a "Rights Offering") to its stockholders rights ("Rights") to
subscribe for Preferred Stock, Common Stock or Warrants to purchase Preferred
Stock or Common Stock. (The Debt Securities, the Common Stock, the Preferred
Securities and the Rights, together the "Offered Securities").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, designated
currency (or currency unit), purchase price, maturity, interest rate (or manner
of calculation thereof), time of payment of interest (if any), terms (if any) of
the subordination, redemption or conversion thereof, and any other specific
terms of the Debt Securities, (ii) in the case of Common Stock, the number of
shares, purchase price and terms of the offering and sale thereof, (iii) in the
case of Preferred Stock, the specific designation, number of shares, liquidation
preference, purchase price, dividend, voting, redemption, exchange and
conversion provisions and any other specific terms of the Preferred Stock, (iv)
in the case of Warrants, the specific designations, number, duration, purchase
price, exercise price, detachability and any other terms in connection with the
offering, sale and exercise of the Warrants, as well as the terms on which and
the Offered Securities for which such Warrants may be exercised, and (v) in the
case of any Rights Offering, the designations, number, exercise price and
duration, transferability, any overscription privilege and any other terms in
connection with the distribution of the Rights, as well as the terms on which
and the securities for which such Rights may be exercised.
The Company's Common Stock is traded on The New York Stock Exchange (the
"NYSE") under the symbol "SNB." Any Common Stock sold pursuant to a Prospectus
Supplement may be listed on the NYSE. On February 18, 1998, the last reported
sales price of the Common Stock on the NYSE was $9 per share. The Company
has not determined whether any of the other Offered Securities will be listed on
the NYSE. If the Company decides to seek listing of any such Offered Securities,
the Prospectus Supplement relating thereto will disclose such exchange or
market. The applicable Prospectus Supplement will also contain information,
where applicable, about certain material United States Federal income tax
considerations relating to the Offered Securities covered by such Prospectus
Supplement.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________
The Offered Securities may be offered directly to the Company's
stockholders (in the case of Rights) or to purchasers, to or through agents,
underwriters or dealers, as designated from time to time, or through a
combination of such methods, each as set forth in the applicable Prospectus
Supplement. The Company reserves the sole right to accept, and together with its
agents, from time to time, to reject in whole or in part any proposed purchase
of Offered Securities to be made directly or through agents. Certain terms of
the offering and sale of the Offered Securities, including, where applicable,
the names of any underwriters, dealers, or agents, any applicable commission,
discounts and other items constituting compensation of such underwriters,
dealers or agents, and the proceeds to the Company from such sale will be set
forth in the accompanying Prospectus Supplement. See "Plan of Distribution" for
possible indemnification arrangements for underwriters, dealers and agents.
No Offered Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of the
Offered Securities.
THE DATE OF THIS PROSPECTUS IS FEBRUARY __, 1998.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND THEREIN, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY OFFERED SECURITIES IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR
SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN OR IN ANY PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF OR OF SUCH PROSPECTUS SUPPLEMENT.
IN CONNECTION WITH THE OFFERING OF CERTAIN OFFERED SECURITIES, CERTAIN
PERSONS PARTICIPATING IN SUCH OFFERING MAY EFFECT TRANSACTIONS WHICH STABILIZE,
MAINTAIN OR OTHERWISE EFFECT THE MARKET PRICES OF SUCH OFFERED SECURITIES OR
OTHER SECURITIES OF THE COMPANY INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-
COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID,
IN CONNECTION WITH AN OFFERING OF OFFERED SECURITIES AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Offered Securities.
This Prospectus and any Prospectus Supplement do not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information about the Company and the Offered Securities, reference is
hereby made to the Registration Statement, including the exhibits and schedules
filed as a part thereof and otherwise incorporated therein. Statements made in
this Prospectus as to the contents of any agreement or other document referred
to herein are not necessarily complete, and in each instance, reference is made
to the copy of such document so filed, each such statement being qualified in
its entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files periodic reports, proxy statements and other
information with the Commission. The Registration Statement, including the
exhibits thereto, as well as such reports and other information filed by the
Company with the Commission, can be inspected, without charge, and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington D.C., 20549 and at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission
also maintains a site on the World Wide Web at http://www.sec.gov., which
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission and certain of the Company's
filings are available at such web site. Copies of such materials can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are hereby incorporated by reference in, and shall be deemed to be
a part of, this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended May 31, 1997
(the "Form 10-K");
(b) Quarterly Report on Form 10-Q for the quarterly period ended August
31, 1997 filed with the Commission on October 15, 1997;
ii
<PAGE>
(c) Amended Report on Form 10-Q/A for the quarter ended August 31, 1997
filed with the Commission on October 17, 1997;
(d) Current Report on Form 8-K filed with the Commission on October 1,
1997;
(e) Current Report on Form 8-K filed with the Commission on October 29,
1997;
(f) Current Report on Form 8-K filed with the Commission on December 17,
1997.
(g) Quarterly Report on Form 10-Q for the quarterly period ended
November 30, 1997 filed with the Commission on January 14, 1998;
(h) Amended Report on Form 10-Q/A for the quarter ended November 30,
1997 filed with the Commission on February 12, 1998.
(i) Current Report on Form 8-K filed with the Commission on February 12,
1998.
(j) Description of the Company's Common Stock included in a Registration
Statement on Form 10 filed with the Commission on October 10, 1996;
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of all Offered Securities to which this
Prospectus relates shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents. Any statement contained in this Prospectus or in any Prospectus
Supplement or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and any Prospectus Supplement to the extent that a statement
contained herein or in any Prospectus Supplement or in any other subsequently
filed document which also is incorporated or deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon request, a copy of
any of the foregoing documents (other than exhibits incorporated by reference
into such document). Requests for documents should be submitted to the Corporate
Secretary, Sunburst Hospitality Corporation, 10770 Columbia Pike, Silver Spring,
MD 20901. The information relating to the Company contained in this Prospectus
does not purport to be comprehensive and should be read together with the
information contained in the documents incorporated or deemed to be incorporated
by reference herein.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents that are incorporated herein by
reference, contains "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Such forward-
looking statements relate to, among other things, capital expenditures, cost
reduction, cash flow and operating improvements and are indicated by words or
phrases such as "anticipate," "estimate," "plans," "projects," "management
believes," "the Company believes," "the Company intends" and similar words or
phrases. Such statements are subject to inherent uncertainties and risks, that
could cause the actual results, performance or achievements of the Company,
including among others: general business and economic conditions in the
Company's operating regions; pricing pressures and other competitive factors;
the Company's substantial leverage, the Company's plans to realize cash proceeds
through leveraging its remaining assets and its plans to make selected strategic
investments and acquisitions and develop new hotels. Consequently, actual events
and results may vary significantly from those included in or contemplated or
implied by such statements. The Company disclaims any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
iii
<PAGE>
THE COMPANY
Sunburst is a leading national hotel company with a portfolio of 76 hotels
containing 10,859 rooms located in 25 states as of November 30, 1997. Each
hotel is operated by the Company pursuant to a franchise agreement with Choice
Hotels International, Inc. ("Choice"), under one of the Choice franchise brands
(Comfort(R), Quality(R), Clarion(R), Sleep(R), Rodeway(R), Econo Lodge(R) and
MainStay Suites/SM/) and Sunburst is Choice's largest franchisee. Sunburst's
hotels operate in one of three principal segments of the lodging industry:
extended stay, full service and limited service.
The Company was formed under the name Choice Hotels Holdings, Inc. on June
27, 1996 as a wholly owned subsidiary of Manor Care, Inc., a Delaware
corporation, in order to hold Manor Care's hotel ownership and franchising
business. On November 1, 1996, Manor Care distributed to its stockholders, on a
pro rata basis, all of the stock of the Company (which was re-named "Choice
- --- ----
Hotels International, Inc.) (the "Company Spin-off"). At the time of the
Company Spin-off, Choice was a wholly owned subsidiary of the Company under the
name "Choice Hotels Franchising, Inc." As a subsidiary of the Company, Choice
conducted the hotel franchising business that it formerly conducted as a
subsidiary of Manor Care.
On October 15, 1997, the Company distributed to its stockholders, on a pro
---
rata basis, all of the stock of Choice (the "Choice Spin-off"). At the time of
- ----
the Choice Spin-off, the Company changed its name to "Sunburst Hospitality
Corporation" and Choice changed its name to "Choice Hotels International, Inc."
Choice currently operates its hotel franchising business as a separate
corporation.
The Company's principal executive offices are located at 10770 Columbia
Pike, Silver Spring, MD 20901, and its telephone number is (301) 979-5000.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company anticipates that any net proceeds from the sale of Offered Securities
will be used for general corporate purposes, which may include, but are not
limited to, working capital, capital expenditures, acquisitions and the
repayment, refinancing or repurchase of the Company's indebtedness or capital
stock, including the Company's outstanding long-term debt securities. The
factors which the Company will consider in any refinancing will include the
amount and characteristics of any Offered Securities issued and may include,
among others, the impact of such refinancing on the Company's liquidity, debt-
to-capital ratio and earnings per share. When a particular series of Offered
Securities is offered, the Prospectus Supplement relating thereto will set forth
the Company's intended use for the net proceeds received from the sale of such
Offered Securities. Pending the application of the net proceeds, the Company
expects to invest such proceeds in short-term, interest-bearing instruments or
other investment-grade debt securities or to reduce indebtedness under the
Company's bank credit agreement.
RISK FACTORS
CERTAIN OF THE OFFERED SECURITIES TO BE OFFERED HEREBY THEMSELVES MAY
INVOLVE A HIGH DEGREE OF RISK. SUCH RISKS WILL BE SET FORTH IN THE PROSPECTUS
SUPPLEMENT RELATING TO SUCH OFFERED SECURITIES.
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratio of earnings to combined
fixed charges and preferred stock dividends on a historical basis for the
periods indicated.
1
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED NOVEMBER 30, FISCAL YEAR
-----------------------------
1997 1996 1997 1996 1995
-------- -------- ------- -------- --------
(in thousands except ratio data)
<S> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed charges
and preferred stock dividends (a)............ 1.9 2.3 1.7 -- --
Deficiency of earnings to combined fixed
charges and preferred stock dividends (b).... -- -- -- $ 21,874 $ 780
</TABLE>
________________
(a) The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges by total fixed
charges. Fixed charges represent interest expense (including capitalized
interest), the amortization of debt issuance costs and the portion of
rental expense which represents interest.
(b) The deficiency of earnings to fixed charges in fiscal year 1996 is the
result of a $24.5 million provision for asset impairment. The ratio of
earnings to fixed charges for fiscal year 1996 excluding the impact of the
provision for asset impairment is 1.2. The deficiency of earnings to fixed
charges in fiscal year 1995 is largely the result of depreciation and
amortization of $6.0 million.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of "earnings" to fixed charges of
the Company for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED NOVEMBER 30, FISCAL YEAR
-------------------------------
1997 1996 1997 1996 1995
-------- ------- -------- -------- --------
(in thousands except ratio data)
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (a)........ 1.9 2.3 1.7 -- --
Deficiency of earnings to fixed charges (b)... -- -- -- $ 21,874 $ 780
</TABLE>
___________
(a) The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges by total fixed
charges. Fixed charges represent interest expense (including capitalized
interest), the amortization of debt issuance costs and the portion of
rental expense which represents interest.
(b) The deficiency of earnings to fixed charges in fiscal year 1996 is the
result of a $24.5 million provision for asset impairment. The ratio of
earnings to fixed charges for fiscal year 1996 excluding the impact of the
provision for asset impairment is 1.2. The deficiency of earnings to fixed
charges in fiscal year 1995 is largely the result of depreciation and
amortization of $6.0 million.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities offered hereby are to be issued under an indenture (the
"Indenture") to be executed by the Company and a trustee to be identified in the
applicable Prospectus Supplement, as Trustee (the "Trustee"). The terms of the
Debt Securities will include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (the "TIA") as
in effect on the date of the Indenture. The Debt Securities will be subject to
all such terms, and potential purchasers of the Debt Securities are referred to
the Indenture and the TIA for a statement thereof. A copy of the form of
Indenture has been filed as an exhibit to the Registration Statement. Section
references used in this Prospectus refer to sections of the Indenture.
The Company may offer under this Prospectus up to $250,000,000 aggregate
principal amount of Debt Securities, or if Debt Securities are issued at a
discount, or in a foreign currency or composite currency, such principal amount
as may be sold for an initial public offering price of up to $250,000,000.
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will represent direct, unsecured obligations of the Company and will
rank equally with all other unsecured and unsubordinated indebtedness of the
Company.
The following statements relating to the Debt Securities and the Indenture
are summaries and do not purport to be complete. Such summaries may make use of
certain terms defined in the Indenture and are qualified in their entirety by
express reference to the Indenture. Certain other specific terms of any series
of Debt Securities will be described in the applicable Prospectus Supplement.
To the extent that any particular terms of the Debt Securities described in a
Prospectus Supplement differ from any of the terms described herein, then such
terms described herein shall be deemed to have been superseded by such
Prospectus Supplement.
GENERAL
The terms of each series of Debt Securities will be established by or
pursuant to a resolution of the Board of Directors of the Company and set forth
or determined in the manner provided in an Officers' Certificate or by a
supplemental indenture. (Indenture sec. 2.2) The particular terms of each series
of Debt Securities will be described in a Prospectus Supplement relating to such
series (including any pricing supplement thereto).
The Debt Securities that may be offered under the Indenture are not limited
in aggregate principal amount. The Debt Securities may be issued in one or more
series with the same or various maturities, at par, at a premium, or at a
discount. The Prospectus Supplement (including any pricing supplement thereto)
will set forth the initial offering price,
2
<PAGE>
the aggregate principal amount and the following terms of the Debt Securities in
respect of which this Prospectus is delivered: (1) the title of such Debt
Securities; (2) the price or prices (expressed as a percentage of the aggregate
principal amount thereof) at which the Debt Securities will be issued; (3) any
limit on the aggregate principal amount of such Debt Securities; (4) the date or
dates on which principal on such Debt Securities will be payable; (5) the rate
or rates (which may be fixed or variable) per annum or, if applicable, the
method used to determine such rate or rates (including any commodity, commodity
index, stock exchange index or financial index) at which such Debt Securities
will bear interest, if any, the date or dates from which such interest, if any,
will accrue, the date or dates on which such interest, if any, will commence and
be payable and any regular record date for the interest payable on any interest
payment date; (6) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable; (7) the period or
periods within which, the price or prices at which and the terms and conditions
upon which the Debt Securities may be redeemed, in whole or in part, at the
option of the Company; (8) the obligation, if any, of the Company to redeem or
purchase the Debt Securities, in whole or in part, pursuant to any sinking fund
or analogous provisions or at the option of a Holder thereof; (9) the dates, if
any, on which and the price or prices at which the Debt Securities will be
repurchased by the Company at the option of the Holders thereof and other
detailed terms and provisions of such repurchase obligations; (10) the
denominations in which such Debt Securities may be issuable, if other than
denominations of $1,000 and any integral multiple thereof; (11) whether the Debt
Securities are to be issuable in the form of Certificated Debt Securities (as
defined below) or Global Debt Securities (as defined below); (12) the portion of
principal amount of such Debt Securities that shall be payable upon declaration
of acceleration of the maturity date thereof, if other than the principal amount
thereof; (13) the currency of denomination of such Debt Securities; (14) the
designation of the currency, currencies or currency units in which payment of
principal of, premium, if any, and interest, if any, on such Debt Securities
will be made; (15) if payments of principal of, premium, if any, or interest, if
any, on the Debt Securities are to be made in one or more currencies or currency
units other than that or those in which such Debt Securities are denominated,
the manner in which the exchange rate with respect to such payments will be
determined; (16) the manner in which the amounts of payment of principal of,
premium, if any, or interest, if any, on such Debt Securities will be
determined, if such amounts may be determined by reference to an index based on
a currency or currencies other than that in which the Debt Securities are
denominated or designated to be payable or by reference to a commodity,
commodity index, stock exchange index or financial index; (17) the provisions,
if any, relating to any security provided for such Debt Securities; (18) any
addition to or change in the Events of Default described herein or in the
Indenture with respect to such Debt Securities; (19) any addition to or change
in the covenants described herein or in the Indenture with respect to such Debt
Securities and any change in the acceleration provisions described herein or in
the Indenture with respect to such Debt Securities; (20) the terms and
conditions, if any, upon which the Debt Securities shall be exchanged for or
converted into Common Stock or Preferred Stock; (21) any other terms of such
Debt Securities, which may modify or delete any provision of the Indenture
insofar as it applies to such series; (22) any depositories, interest rate
calculation agents, exchange rate calculation agents or other agents with
respect to the Debt Securities; and (23) whether such Debt Securities rank as
senior subordinated Debt Securities or subordinated Debt Securities or any
combination thereof; (Indenture sec. 2.2)
Debt Securities may be issued that provide for an amount less than the
stated principal amount thereof to be due and payable upon declaration of
acceleration of the maturity thereof pursuant to the terms of the Indenture
("Discount Debt Securities"). Federal income tax considerations and other
special considerations applicable to any such Discount Debt Securities will be
described in the applicable Prospectus Supplement.
Debt Securities may be issued in bearer form, with or without coupons.
Federal income tax considerations and other special considerations applicable to
bearer securities will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units, or if the
principal of and any premium and interest, if any, on any series of Debt
Securities is payable in a foreign currency or currencies or a foreign currency
unit or units, the restrictions, elections, general tax considerations, specific
terms and other information with respect to such issue of Debt Securities and
such foreign currency or currencies or foreign currency unit or units will be
set forth in the applicable Prospectus Supplement.
EXCHANGE AND/OR CONVERSION RIGHTS
The terms, if any, on which Debt Securities of a series may be exchanged
for or converted into shares of Common Stock or Preferred Stock will be set
forth in the Prospectus Supplement relating thereto.
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TRANSFER AND EXCHANGE
Each Debt Security will be represented by either one or more global
securities (a "Global Debt Security") registered in the name of The Depository
Trust Company, as Depositary (the "Depositary") or a nominee of the Depositary
(each such Debt Security represented by a Global Debt Security being herein
referred to as a "Book-Entry Debt Security"), or a certificate issued in
definitive registered form (a "Certificated Debt Security"), as set forth in the
applicable Prospectus Supplement. Except as set forth under "-- Global Debt
Securities and Book-Entry System" below, Book-Entry Debt Securities will not be
issuable in certificated form.
CERTIFICATED DEBT SECURITIES. Certificated Debt Securities may be
transferred or exchanged at the Trustee's office or paying agencies in
accordance with the terms of the Indenture. No service charge will be made for
any transfer or exchange of Certificated Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The transfer of Certificated Debt Securities and the right to receive the
principal of, premium, if any, and interest, if any, on such Certificated Debt
Securities may be effected only by surrender of the certificate representing
such Certificated Debt Securities and either reissuance by the Company or the
Trustee of such certificate to the new holder or the issuance by the Company or
the Trustee of a new certificate to the new Holder.
GLOBAL DEBT SECURITIES AND BOOK-ENTRY SYSTEM. Each Global Debt Security
representing Book-Entry Debt Securities will be deposited with, or on behalf of,
the Depositary, and registered in the name of the Depositary or a nominee of the
Depositary. Except as set forth below, Book-Entry Debt Securities will not be
exchangeable for Certificated Debt Securities and will not otherwise be issuable
as Certificated Debt Securities.
The procedures that the Depositary has indicated it intends to follow with
respect to Book-Entry Debt Securities are set forth below.
Ownership of beneficial interests in Book-Entry Debt Securities will be
limited to persons that have accounts with the Depositary for the related Global
Debt Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Global Debt Security, the Depositary will
credit, on its book-entry registration and transfer system, the participants'
accounts with the respective principal amounts of the Book-Entry Debt Securities
represented by such Global Debt Security beneficially owned by such
participants. The accounts to be credited shall be designated by any dealers,
underwriters or agents participating in the distribution of such Book-Entry Debt
Securities. Ownership of Book-Entry Debt Securities will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by the Depositary for the related Global Debt Security (with respect
to interests of participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws of some states
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to own,
transfer or pledge beneficial interests in Book-Entry Debt Securities.
So long as the Depositary for a Global Debt Security, or its nominee, is
the registered owner of such Global Debt Security, the Depositary or such
nominee, as the case may be, will be considered the sole owner or Holder of the
Book-Entry Debt Securities represented by such Global Debt Security for all
purposes under the Indenture. Except as set forth below, beneficial owners of
Book-Entry Debt Securities will not be entitled to have such securities
registered in their names, will not receive or be entitled to receive physical
delivery of a certificate in definitive form representing such securities and
will not be considered the owners or Holders thereof under the Indenture.
Accordingly, each person beneficially owning Book-Entry Debt Securities must
rely on the procedures of the Depositary for the related Global Debt Security
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a Holder
under the Indenture.
The Company understands, however, that under existing industry practice,
the Depositary will authorize the persons on whose behalf it holds a Global Debt
Security to exercise certain rights of Holders of Debt Securities, and the
Indenture provides that the Company, the Trustee and their respective agents
will treat as the Holder of a Debt Security the persons specified in a written
statement of the Depositary with respect to such Global Debt Security for
purposes of obtaining any consents or directions required to be given by Holders
of the Debt Securities pursuant to the Indenture. (Indenture sec. 2.14.6)
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Payments of principal of, premium, if any, and interest on Book-Entry Debt
Securities will be made to the Depositary or its nominee, as the case may be, as
the registered holder of the related Global Debt Security. (Indenture sec.
2.14.5) None of the Company, the Trustee or any other agent of the Company or
agent of the Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in such Global Debt Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary, upon receipt of any payment of
principal of, premium, if any, or interest, if any, on a Global Debt Security,
will immediately credit participants' accounts with payments in amounts
proportionate to the respective amounts of Book-Entry Debt Securities held by
each such participant as shown on the records of such Depositary. The Company
also expects that payments by participants to owners of beneficial interests in
Book-Entry Debt Securities held through such participants will be governed by
standing customer instructions and customary practices, as is now the case with
the securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange Act,
and a successor Depositary registered as a clearing agency under the Exchange
Act is not appointed by the Company within 90 days, the Company will issue
Certificated Debt Securities in exchange for each Global Debt Security. In
addition, the Company may at any time and in its sole discretion determine not
to have the Book-Entry Debt Securities of any series represented by one or more
Global Debt Securities and, in such event, will issue Certificated Debt
Securities in exchange for the Global Debt Securities of such series. Global
Debt Securities will also be exchangeable by the Holders for Certificated Debt
Securities if an Event of Default with respect to the Book Entry Debt Securities
represented by such Global Debt Securities has occurred and is continuing. Any
Certificated Debt Securities issued in exchange for a Global Debt Security will
be registered in such name or names as the Depositary shall instruct the
Trustee. It is expected that such instructions will be based upon directions
received by the Depositary from participants with respect to ownership of Book-
Entry Debt Securities relating to such Global Debt Security.
The foregoing information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
NO PROTECTION IN THE EVENT OF A CHANGE OF CONTROL
Unless otherwise set forth in the Prospectus Supplement, there are no
covenants or other provisions in the Indenture providing for a put or increased
interest or otherwise that would afford holders of Debt Securities additional
protection in the event of a recapitalization transaction, a change of control
of the Company or a highly leveraged transaction.
COVENANTS
Unless otherwise indicated in this Prospectus or a Prospectus Supplement,
the Debt Securities will not have the benefit of any covenants that limit or
restrict the Company's business or operations, the pledging of the Company's
assets or the incurrence of indebtedness of the Company.
The applicable Prospectus Supplement will describe any material covenants
in respect of a series of Debt Securities. Other than the covenants of the
Company included in the Indenture as described above or as described in the
applicable Prospectus Supplement, there are no covenants or other provisions in
the Indenture providing for a put or increased interest or otherwise that would
afford holders of Debt Securities additional protection in the event of a
recapitalization transaction, a change of control of the Company or a highly
leveraged transaction.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of its properties and assets to, any
Person (a "successor Person") unless (i) the Company is the surviving
corporation or the successor Person (if other than the Company) is a
corporation, partnership, trust or other entity organized and validly existing
under the laws of any U.S. domestic jurisdiction and expressly assumes the
Company's obligations on the Debt
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Securities and under the Indenture, (ii) immediately after giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have occurred and be
continuing under the Indenture and (iii) certain other conditions are met.
(Indenture sec. 5.1)
EVENTS OF DEFAULT
Unless otherwise specified in the applicable Prospectus Supplement, the
following will be Events of Default under the Indenture with respect to Debt
Securities of any series: (a) default in the payment of any interest upon any
Debt Security of that series when it becomes due and payable, and continuance of
such default for a period of 30 days (unless the entire amount of such payment
is deposited by the Company with the Trustee or with a paying agent prior to the
expiration of such period of 30 days); (b) default in the payment of principal
of or premium, if any, on any Debt Security of that series when due and payable,
at maturity, upon redemption or otherwise; (c) default in the deposit of any
sinking fund payment, when and as due in respect of any Debt Security of that
series; (d) default in the performance or breach of any other covenant or
warranty of the Company in the Indenture (other than a covenant or warranty that
has been included in the Indenture solely for the benefit of a series of Debt
Securities other than that series), which default continues uncured for a period
of 30 days after written notice to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the outstanding Debt Securities of that series as provided in the Indenture; (e)
certain events of bankruptcy, insolvency or reorganization with respect to the
Company; and (f) any other Event of Default provided with respect to Debt
Securities of that series that is described in the Prospectus Supplement
accompanying this Prospectus. No Event of Default with respect to a particular
series of Debt Securities (except as to certain events in bankruptcy, insolvency
or reorganization with respect to the Company) necessarily constitutes an Event
of Default with respect to any other series of Debt Securities. (Indenture sec.
6.1). The occurrence of an Event of Default may constitute an event of default
under the Company's bank credit agreements in existence from time to time. In
addition, the occurrence of certain Events of Default or an acceleration under
the Indenture may constitute an event of default under certain other
indebtedness of the Company outstanding from time to time.
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, then in every such case the Trustee
or the holders of not less than 25% in principal amount of the outstanding Debt
Securities of that series may, by a notice in writing to the Company (and to the
Trustee if given by the Holders), declare to be due and payable immediately the
principal (or, if the Debt Securities of that series are Discount Debt
Securities, such portion of the principal amount as may be specified in the
terms of that series) of and accrued and unpaid interest, if any, on all Debt
Securities of that series. In the case of an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization, the principal (or
such specified amount) of and accrued and unpaid interest, if any, on all
outstanding Debt Securities shall ipso facto become and be immediately due and
---- -----
payable without any declaration or other act on the part of the Trustee or any
Holder of outstanding Debt Securities. At any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in principal amount of the outstanding
Debt Securities of that series may rescind and annul such acceleration if all
Events of Default, other than the non-payment of accelerated principal and
interest, if any, with respect to Debt Securities of that series, have been
cured or waived as provided in the Indenture. (Indenture sec. 6.2) For
information as to waiver of defaults see the discussion set forth below under "-
Modification and Waiver."
The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of outstanding Debt Securities, unless the Trustee receives indemnity
satisfactory to it against any loss, liability or expense. (Indenture sec.
7.1(e)) Subject to certain rights of the Trustee, the Holders of a majority in
principal amount of the outstanding Debt 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 Debt Securities of that series. (Indenture sec.
6.12)
No Holder of any Debt Security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the Indenture
or for the appointment of a receiver or trustee, or for any remedy under the
Indenture, unless such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default with respect to Debt Securities of that
series and unless also the Holders of at least 25% in principal amount of the
outstanding Debt Securities of that series shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in principal amount of the outstanding Debt Securities of that series a
direction inconsistent with such request and shall have
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failed to institute such proceeding within 60 days. (Indenture sec. 6.7)
Notwithstanding the foregoing, the Holder of any Debt Security will have an
absolute and unconditional right to receive payment of the principal of,
premium, if any, and any interest on such Debt Security on or after the due
dates expressed in such Debt Security and to institute suit for the enforcement
of any such payment. (Indenture sec. 6.8)
The Indenture requires the Company, within 120 days after the end of each
of its fiscal years, to furnish to the Trustee a statement as to compliance with
the Indenture. (Indenture sec. 4.3) The Indenture provides that the Trustee may
withhold notice to the Holders of Debt Securities of any series of any Default
or Event of Default (except in payment on any Debt Securities of such series)
with respect to Debt Securities of such series if it in good faith determines
that withholding such notice is in the interest of the Holders of such Debt
Securities. (Indenture sec. 7.5)
MODIFICATION AND WAIVER
Modifications to, and amendments of, the Indenture may be made by the
Company and the Trustee with the consent of the Holders of at least a majority
in principal amount of the outstanding Debt Securities of each series affected
by such modifications or amendments; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
outstanding Debt Security affected thereby: (a) reduce the amount of Debt
Securities whose Holders must consent to an amendment or waiver; (b) reduce the
rate of or extend the time for payment of interest (including default interest)
on any Debt Security; (c) reduce the principal of or premium, if any, on or
change the fixed maturity of any Debt Security or reduce the amount of, or
postpone the date fixed for, the payment of any sinking fund or analogous
obligation with respect to any series of Debt Securities; (d) reduce the
principal amount of Discount Debt Securities payable upon acceleration of the
maturity thereof; (e) waive a Default or an Event of Default in the payment of
the principal of, premium, if any, or interest, if any, on any Debt Security
(except a rescission of acceleration of the Debt Securities of any series by the
Holders of at least a majority in aggregate principal amount of the then
outstanding Debt Securities of such series and a waiver of the payment default
that resulted from such acceleration); (f) make the principal of or premium, if
any, or interest, if any, on any Debt Security payable in currency other than
that stated in the Debt Security; (g) make any change to certain provisions of
the Indenture relating to, among other things, the right of Holders of Debt
Securities to receive payment of the principal of, premium, if any, and
interest, if any, on such Debt Securities and to institute suit for the
enforcement of any such payment and to waivers or amendments; or (h) waive a
redemption payment with respect to any Debt Security. (Indenture sec. 9.3) The
Company and the Trustee may amend the Indenture of the Debt Securities without
notice to or consent of any holder of a Debt Security; (i) to cure any
ambiguity, defect or inconsistency; (ii) to comply with the Indenture's
provisions regarding successor corporations; (iii) to comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA; (iv) to provide for Global Debt Securities in addition
to or in place of Certificated Debt Securities; (v) to add to, change or
eliminate any of the provisions of the Indenture in respect of one or more
series of Debt Securities; provided however, that any such addition, change or
elimination (A) shall neither (i) apply to any Debt Security of any series
created prior to the execution of such amendment and entitled to the benefit of
such provision, nor (2) modify the rights of a holder of any such Debt Security
with respect to such provision, or (B) shall become effective only when there is
no outstanding Debt Security of any series created prior to such amendment and
entitled to the benefit of such provisions; (vi) to make any change that does
not adversely affect in any material respect the interest of any holder; or
(vii) to establish additional series of Debt Securities as permitted by the
Indenture.
The Holders of at least a majority in principal amount of the outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with provisions of the Indenture other than certain specified
provisions. (Indenture sec. 9.2) The Holders of a majority in principal amount
of the outstanding Debt Securities of any series may on behalf of the Holders of
all the Debt Securities of such series waive any past default under the
Indenture with respect to such series and its consequences, except a default in
the payment of the principal of, premium, if any, or any interest, if any, on
any Debt Security of that series or in respect of a covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Debt Security of such series affected; provided, however, that the
Holders of a majority in principal amount of the outstanding Debt Securities of
any series may rescind an acceleration and its consequences, including any
related payment default that resulted from such acceleration. (Indenture sec.
6.13)
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DEFEASANCE OF SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
LEGAL DEFEASANCE. The Indenture provides that, unless otherwise provided
by the terms of the applicable series of Debt Securities, the Company may be
discharged from any and all Obligations in respect of the Debt Securities of any
series (except for certain obligations to register the transfer or exchange of
Debt Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, and to maintain paying agencies and certain
provisions relating to the treatment of funds held by paying agents) upon the
deposit with the Trustee, in trust, of money and/or U.S. Government obligations
or, in the case of Debt Securities denominated in a single currency other than
U.S. Dollars, Foreign Government Obligations (as defined below), that, through
the payment of interest and principal in respect thereof in accordance with
their terms, will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay and
discharge each installment of principal (and premium, if any) and interest, if
any, on and any mandatory sinking fund payments in respect of the Debt
Securities of such series on the stated maturity of such payments in accordance
with the terms of the Indenture and such Debt Securities. Such discharge may
occur only if, among other things, the Company shall have delivered to the
Trustee an opinion of counsel stating that the Company has received from, or
there has been published by, the United States Internal Revenue Service a ruling
or, since the date of execution of the Indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of the Debt
Securities of such series will not recognize income, gain or loss for United
States federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred. (Indenture sec. 8.3)
DEFEASANCE OF CERTAIN COVENANTS. The Indenture provides that, unless
otherwise provided by the terms of the applicable series of Debt Securities,
upon compliance with certain conditions, (i) the Company may omit to comply with
the covenants described above under "--Consolidation, Merger and Sale of Assets"
and certain other covenants set forth in the Indenture, as well as any
additional restrictive covenants, or other provisions which may be set forth in
the applicable Prospectus Supplement, and any omission to comply with such
covenants will not constitute a Default or an Event of Default with respect to
the Debt Securities of such series ("covenant defeasance"). The conditions
include: the deposit with the Trustee of money and/or U.S. Government
Obligations or, in the case of Debt Securities denominated in a single currency
other than U.S. Dollars, Foreign Government Obligations, that, through the
payment of interest and principal in respect thereof in accordance with their
terms, will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay and discharge each
installment of principal of, premium, if any, and interest, if any, on and any
mandatory sinking fund payments in respect of the Debt Securities of such series
on the stated maturity of such payments in accordance with the terms of the
Indenture and such Debt Securities; and the delivery to the Trustee of an
opinion of counsel to the effect that the Holders of the Debt Securities of such
series will not recognize income, gain or loss for United States federal income
tax purposes as a result of such deposit and related covenant defeasance and
will be subject to United States federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit and related covenant defeasance had not occurred. (Indenture sec. 8.4)
COVENANT DEFEASANCE AND EVENTS OF DEFAULT. In the event the Company
exercises its option to effect covenant defeasance with respect to any series of
Debt Securities and the Debt Securities of such series are declared due and
payable because of the occurrence of any Event of Default, the amount of money
and/or U.S. Government Obligations or Foreign Government obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Debt Securities of
such series at the time of their stated maturity but may not be sufficient to
pay amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company shall
remain liable for such payments.
"Foreign Government Obligations" means, with respect to Debt Securities of
any series that are denominated in a currency other than U.S. Dollars, (i)
direct obligations of the government that issued or caused to be issued such
currency for the payment of which obligations its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by or acting as
an agency or instrumentality of such government the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by such
government, which, in either case under clauses (i) or (ii), are not callable or
redeemable at the option of the issuer thereof.
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GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the internal laws of the State of New York. (Indenture sec.
10.10).
REGARDING THE TRUSTEE
The Trustee with respect to any series of Debt Securities will be
identified in the Prospectus Supplement relating to such Debt Securities. The
Indenture and the provision of the TIA incorporated by reference therein contain
certain limitation on the rights of the Trustee, should it become a creditor of
the Company, to obtain payments of claims in certain cases, or to realize on
certain property received in respect of any such claim, as security or
otherwise. The Trustee and its affiliates may engage in, and will be permitted
to continue to engage in, other transaction with the Company and its affiliates,
provided, however, that if it acquires any conflicting interest (as defined in
the TIA), it must eliminate such conflict or resign.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee. The TIA and the Indenture provide that in the case an Event of Default
shall occur (and be continuing), the Trustee will be required, in the exercise
of its rights and powers, to use the degree of care and skill of a prudent man
in the conduct of his own affairs. Subject to such provision, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the holders of the Debt Securities issued
thereunder, unless they have offered to the Trustee indemnity satisfactory to
it.
DESCRIPTION OF PREFERRED STOCK
Under the Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), shares of Preferred Stock may be issued from
time to time, in one or more classes or series, as authorized by the Board of
Directors, generally without the approval of the stockholders. Prior to
issuance of shares of each series, the Board of Directors is required by the
General Corporation Law of the State of Delaware (the "DGCL") and the
Certificate of Incorporation to adopt resolutions and file a Certificate of
Designation (the "Certificate of Designation") with the Secretary of State of
the State of Delaware, fixing for each such class or series the designation,
powers, preferences and rights of the shares of such class or series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, dividend rights, dividend rate or rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences as are permitted by
the DGCL. The Board of Directors could authorize the issuance of shares of
Preferred Stock with terms and conditions which could have the effect of
discouraging a takeover or other transaction which holders of some, or a
majority, of such shares might believe to be in their best interest or in which
holders of some, or a majority, of such shares might receive a premium for their
shares over the then-market price of such shares.
Subject to limitations prescribed by the DGCL, the Certificate of
Incorporation and the Amended and Restated Bylaws of the Company (the "Bylaws"),
the Board of Directors is authorized to fix the number of shares constituting
each class or series of Preferred Stock and the designations and powers,
preferences and relative, participating, optional or other special rights,
including such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, conversion or exchange,
and such other subjects or matters as may be fixed by resolution of the Board of
Directors or duly authorized committee thereof. The Preferred Stock offered
hereby will, when issued, be fully paid and nonassessable and will not have, or
be subject to, any preemptive or similar rights.
Reference is made to the Prospectus Supplement relating to the class or
series of Preferred Stock being offered for the specific terms thereof,
including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the purchase price of such Preferred Stock;
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(3) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) Whether dividends shall be cumulative or non-cumulative and, if
cumulative, the date from which dividends on such Preferred Stock shall
accumulate;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provisions for a sinking fund, if any, for such Preferred
Stock;
(7) The provisions for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange or
market;
(9) The terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into Common Stock of the Company, including
the conversion price (or manner of calculation thereof) and conversion period;
(10) The terms and conditions, if applicable, upon which Preferred
Stock will be exchangeable into Debt Securities of the Company, including the
exchange price (or manner of calculation thereof) and exchange period);
(11) Voting rights, if any, of such Preferred Stock;
(12) Whether interests in such Preferred Stock will be represented by
depositary shares;
(13) A discussion of any material and/or special United States federal
income tax considerations applicable to such Preferred Stock;
(14) The relative ranking and preferences of such Preferred Stock as
to dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company;
(15) Any limitations on issuance of any class or series of Preferred
Stock ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company; and
(16) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
DESCRIPTION OF COMMON STOCK
The Company's authorized common stock consists of 60,000,000 shares which
are designated as Common Stock, par value, $.01 per share ("Common Stock"),
19,956,912 shares of which were issued and outstanding as of February 4, 1998.
Holders of Common Stock are entitled to receive, subject to preferences that may
be applicable from time to time with respect to any outstanding preferred stock,
such dividends as are declared by the Company's Board of Directors, one vote for
each share at all meetings of stockholders, and, subject to preferences that may
be applicable from time to time with respect to any outstanding preferred stock,
the remaining assets of the Company upon liquidation, dissolution or winding up
of the Company. The Company may issue additional shares of common stock without
further stockholder approval, up to the maximum authorized number of shares,
except as may be otherwise required by applicable law or stock exchange
regulations. The dividend policy of the Company is determined by its Board of
Directors. The terms of the Company's current credit facility restrict the
ability of the Company to pay dividends.
Shares of common stock may be issued from time to time in one or more
classes or series. With respect to the issuance of common shares of any class
or series, the Company's Board of Directors is authorized to determine, without
any further action by the holders of Common Stock, among other things, the
dividend rights, dividend rate, conversion
10
<PAGE>
rights, voting rights and rights and terms of redemption, as well as the number
of shares constituting such class or series. Should the Company's Board of
Directors elect to exercise its authority, the rights and privileges of holders
of Common Stock could be made subject to rights and privileges of any other
series of Common Stock. The Company has no present plans to issue any common
stock of a class or series other than Common Stock.
Holders of shares of Common Stock have no preemptive or other similar
rights. The shares of Common Stock are not subject to redemption or a sinking
fund.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may have the effect of preventing, discouraging or delaying any change of
control of the Company and may maintain the incumbency of the Board of Directors
and management. The authorization of 5,000,000 shares of preferred stock makes
it possible for the Board of Directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
effect a change of control of the Company. In addition, the Certificate of
Incorporation provides for three classes of directors serving for staggered
three-year terms. Under the DGCL, subject to certain inapplicable exceptions,
directors on a classified board may only be removed by shareholders for cause.
This provision could also impede the success of any attempt to effect a change
of control of the Company.
The Company has expressly elected not to be subject to Section 203
("Section 203") of the DGCL. Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, subject to certain
exceptions.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the "Debt
Warrants"), Preferred Stock (the "Preferred Stock Warrants") or Common Stock
(the "Common Stock Warrants" and, collectively with the Debt Warrants and the
Preferred Stock Warrants, the "Warrants"). Warrants may be issued independently
or together with any Offered Securities and may be attached to or separate from
such Offered Securities. The Warrants are to be issued under warrant agreements
(each a "Warrant Agreement") to be entered into between the Company and a bank
or trust company, as warrant agent (the "Warrant Agent"), all as shall be set
forth in the Prospectus Supplement relating to the Warrants being offered
pursuant thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and Debt Warrant certificates representing such Debt Warrants, including the
following:
(1) the title for such Debt Warrants;
(2) the aggregate number of such Debt Warrants;
(3) the price or prices at which such Debt Warrants will be issued;
(4) the designation, aggregate principal amount and terms of the Debt
Securities purchasable upon exercise of such Debt Warrants, and the procedures
and conditions relating to the exercise of such Debt Warrants;
(5) the designation and terms of any related Debt Securities with which
such Debt Warrants are issued, and the number of such Debt Warrants issued with
each such security;
(6) the date, if any, on and after which such Debt Warrants and the
related Debt Securities will be separately transferable;
(7) the principal amount of Debt Securities purchasable upon exercise of
each Debt Warrant, and the price at which such principal amount of Debt
Securities may be purchased upon such exercise;
11
<PAGE>
(8) the date on which such right shall expire;
(9) the maximum or minimum number of such Debt Warrants which may be
exercised at any time;
(10) a discussion of the material United States federal income tax
considerations applicable to the exercise of such Debt Warrants; and
(11) any other terms of such Debt Warrants and terms, procedures and
limitations relating to the exercise of such Debt Warrants.
Debt Warrant certificates will be exchangeable for new Debt Warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of holders of
the securities purchasable upon such exercise and will not be entitled to
payments of principal of (or premium, if any) or interest, if any, on the
securities purchasable upon such exercise.
OTHER WARRANTS
The applicable Prospectus Supplement will describe the following terms of
Preferred Stock Warrants or Common Stock Warrants in respect of which this
Prospectus is being delivered:
(1) the title of such Warrants;
(2) the securities for which such Warrants are exercisable;
(3) the price or prices at which such Warrants will be issued;
(4) the number of such Warrants issued with each share of Preferred Stock
or Common Stock;
(5) any provisions for adjustment of the number or amount of shares of
Preferred Stock or Common Stock receivable upon exercise of such Warrants or the
exercise price of such Warrants;
(6) if applicable, the date on and after which such Warrants and the
related Preferred Stock or Common Stock will be separately transferable;
(7) if applicable, a discussion of the material United States federal
income tax considerations applicable to the exercise of such Warrants;
(8) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants;
(9) the date on which the right to exercise such Warrants shall commence,
and the date on which such right shall expire; and
(10) the maximum or minimum number of such Warrants which may be exercised
at any time.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of Warrants to purchase for cash such
principal amount of Debt Securities or shares of Preferred Stock or Common Stock
at such exercise price as shall in each case be set forth in, or be determinable
as set forth in, the Prospectus Supplement relating to the Warrants offered
thereby. Warrants may be exercised at any time up to the close of business on
the expiration date set forth in the Prospectus Supplement relating to the
Warrants offered thereby. After the close of business on the expiration date,
unexercised Warrants will become void.
12
<PAGE>
Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby. Upon receipt of payment and the
Warrant certificate properly completed and duly executed at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement, the Company will, as soon as practicable, forward the Debt
Securities or shares of Preferred Stock or Common Stock purchasable upon such
exercise. If less than all of the Warrants represented by such Warrant
certificate are exercised, a new Warrant certificate will be issued for the
remaining Warrants.
DESCRIPTION OF RIGHTS
The Company may issue to its stockholders Rights to purchase Preferred
Stock (the "Preferred Stock Rights"), Common Stock (the "Common Stock Rights")
or Warrants to purchase Preferred Stock or Common Stock (the "Warrant Rights"
and, collectively with the Preferred Stock Rights and the Common Stock Rights,
the "Rights"). Rights may be issued independently or together with any other
Offered Security and may or may not be transferable by the stockholder receiving
the Rights in the Rights Offering. In connection with any Rights Offering, the
Company may enter into a standby underwriting arrangement with one or more
underwriters pursuant to which such underwriter will purchase any Offered
Securities remaining unsubscribed for after the Rights Offering. Certificates
evidencing the Rights and a Prospectus Supplement relating to the Rights
Offering will be distributed to the Company's stockholders on the record date
for receiving Rights in such Rights Offering set by the Company.
The applicable Prospectus Supplement will describe the following terms of
Rights in respect of which this Prospectus is being delivered:
(1) the title of such Rights;
(2) the securities for which such Rights are exercisable;
(3) the exercise price for such Rights;
(4) the number of such Rights issued to each stockholder;
(5) the extent to which such Rights are transferable;
(6) if applicable, a discussion of the material United States federal
income tax considerations applicable to the issuance or exercise of such Rights;
(7) any other terms of such Rights, including terms, procedures and
limitations relating to the exchange and exercise of such Rights;
(8) the date on which the right to exercise such Rights shall commence,
and the date on which such right shall expire.
(9) the extent to which such Rights includes an over-subscription
privilege with respect to unsubscribed securities.
(10) if applicable, the material terms of any standby underwriting
arrangement entered into by the Company in connection with the Rights Offering.
EXERCISE OF RIGHTS
Each Right will entitle the holder of Rights to purchase for cash such
principal amount of shares of Preferred Stock, Common Stock, Common Stock
Warrants or Preferred Stock Warrants, or any combination thereof, at such
exercise price as shall in each case be set forth in, or be determinable as set
forth in, the Prospectus Supplement relating to the Rights offered thereby.
Rights may be exercised at any time up to the close of business on the
expiration date for such Rights set forth in the Prospectus Supplement. After
the close of business on the expiration date, all unexercised Rights will become
void.
13
<PAGE>
Rights may be exercised as set forth in the Prospectus Supplement relating
to the Rights offered thereby. Upon receipt of payment and the Rights
certificate properly completed and duly executed at the corporate trust office
of the Rights Agent or any other office indicated in the Prospectus Supplement,
the Company will, as soon as practicable, forward the shares of Preferred Stock
or Common Stock, Common Stock Warrants or Preferred Stock Warrants purchasable
upon such exercise. In the event that not all of the Rights issued in any
Rights Offering are exercised, the Company may determine to offer any
unsubscribed Offered Securities directly to persons other than stockholders, to
or through agents, underwriters or dealers or through a combination of such
methods, (including pursuant to standby underwriting arrangements), as set forth
in the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities being offered hereby: (i)
directly to purchasers; (ii) through agents; (iii) through dealers; (iv) through
underwriters; (v) directly to the Company's stockholders (in the case of
Rights); or (vi) through a combination of any such methods of sale.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions either (i) at a fixed price or prices, which
may be changed, (ii) at market prices prevailing at the time of sale, (iii) at
prices related to such prevailing market prices; or (iv) at negotiated prices.
Offers to purchase Offered Securities may be solicited directly by the
Company. Offers to purchase Offered Securities may also be solicited by agents
designated by the Company from time to time. Any such agent, who may be deemed
to be an "underwriter" as that term is defined in the Securities Act, involved
in the offer or sale of the Offered Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth in the Prospectus Supplement.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, the Company will sell such Offered
Securities to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, may then resell
such Offered Securities to the public at varying prices to be determined by such
dealer at the time of resale.
If an underwriter is, or underwriters are, utilized in the sale, the
Company will execute an underwriting agreement with such underwriters at the
time of sale to them and the names of the underwriters will be set forth in the
Prospectus Supplement, which will be used by the underwriter to make resales of
the Offered Securities in respect of which this Prospectus is delivered to the
public. In connection with the sale of Offered Securities, such underwriter may
be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Offered Securities for whom they may act as agents. Underwriters
may also sell Offered Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commission from the purchasers for whom they may act as
agents. Any underwriting compensation paid by the Company to underwriters in
connection with the offering of Offered Securities, and any discounts,
concessions or commission allowed by underwriters to participating dealers, will
be set forth in the applicable Prospectus Supplement.
Pursuant to any standby underwriting agreement entered into in connection
with a Rights Offering, persons acting as standby underwriters may receive a
commitment fee for all securities underlying the Rights that the underwriter
commits to purchase on a standby basis. Additionally, prior to the expiration
date with respect to any Rights, any standby underwriters in a Rights Offering
may offer such securities on a when-issued basis, including securities to be
acquired through the purchase and exercise of Rights, at prices set from time to
time by the standby underwriters. After the expiration date with respect to
such Rights, the underwriters may offer securities of the type underlying the
Rights, whether acquired pursuant to a standby underwriting agreement, the
exercise of the Rights or the purchase of such securities in the market, to the
public at a price or prices to be determined by the underwriters. The standby
underwriters may thus realize profits or losses independent of the underwriting
discounts or commission paid by the Company. In the event that the Company does
not enter into a standby underwriting arrangement in connection with a Rights
Offering, the Company may elect to retain a dealer-manager to manage the Rights
Offering for the Company. Any such dealer-manager may offer securities of the
type underlying the Rights acquired or to be acquired pursuant to the purchase
and exercise of Rights and may thus realize profits or losses independent of any
dealer-manager fee paid by the Company.
14
<PAGE>
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with the Company, to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which they may be
required to make in respect thereof. Underwriters and agents may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters, dealers or other persons to solicit offers by certain
institutions to purchase Offered Securities pursuant to contracts providing for
payment and delivery on a future date or dates. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others. The obligations of any purchasers under any such contract will not be
subject to any conditions except that (a) the purchase of the Offered Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (b) if the Offered
Securities are also being sold to underwriters, the Company shall have sold to
such underwriters the Offered Securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility in
respect of the validity or performance of such contracts. The Prospectus
Supplement relating to such contracts, the commission payable for solicitation
of such contracts and the date or dates in the future for delivery of Offered
Securities pursuant to such contracts.
Any underwriter may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. The underwriters may over-
allot shares of the Common Stock in connection with an offering of Common Stock,
thereby creating a short position in the underwriters' account. Syndicate
covering transactions involve purchases of the Debt Securities in the open
market after the distribution has been completed in order to cover syndicate
short positions. Stabilizing and syndicate covering transactions may cause the
price of the Debt Securities to be higher than it would otherwise be in the
absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
The anticipated date of delivery of Offered Securities will be set forth in
the applicable Prospectus Supplement relating to each offer.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by Latham & Watkins, Washington, D.C. If the Offered Securities are distributed
in an underwritten offering or through agents, certain legal matters may be
passed upon for any agents or underwriters by counsel for such agents or
underwriters identified in the applicable Prospectus Supplement.
EXPERTS
The consolidated financial statements and related schedule of the Company
for the fiscal years ended May 31, 1997, 1996 and 1995 included in the Company's
Form 10-K and the Company's Form 8-K dated February 12, 1998 and incorporated by
reference in this Prospectus and related registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
15
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING MADE HEREBY AND THEREBY, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY OFFERED SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED
HEREIN OR INCORPORATED BY REFERENCE HEREIN OR IN ANY PROSPECTUS SUPPLEMENT IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR OF SUCH PROSPECTUS
SUPPLEMENT OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................... (ii)
Information Incorporated by Reference.................... (ii)
Disclosure Regarding Forward-Looking
Statements............................................... (iii)
The Company.............................................. 1
Use of Proceeds.......................................... 1
Risk Factors............................................. 1
Ratio of Earnings to Fixed Charges....................... 1
Description of Debt Securities........................... 2
Description of Preferred Stock........................... 9
Description of Common Stock.............................. 10
Description of Warrants.................................. 11
Description of Rights.................................... 13
Plan of Distribution..................................... 14
Legal Matters............................................ 15
Experts.................................................. 15
</TABLE>
$ 250,000,000
SUNBURST HOSPITALITY
CORPORATION
Debt Securities, Preferred Stock
Common Stock,
Warrants and Subscription Rights
____________
PROSPECTUS
____________
February __, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of the fees and expenses, other than
underwriting discounts and commissions, payable or reimbursable by the Company
in connection with the distribution of the Offered Securities:
<TABLE>
<S> <C>
SEC Registration Fee.................................. $ 73,750
Rating Agency Fees.................................... 100,000
Legal Fees and Expenses............................... 300,000
Accounting Fees and Expenses.......................... 200,000
Printing Expenses..................................... 500,000
Trustee/Issuing & Paying Agent Fees and Expenses...... 25,000
Miscellaneous......................................... 100,000
----------
Total............................................ $1,298,750
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to authority conferred by Delaware General Corporation Law Section
102, the Sunburst Restated Certificate of Incorporation, as amended by the
Certificate of Amendment of October 15, 1997 (the "Sunburst Certificate")
provides that no director of Sunburst shall be liable to Sunburst or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for breach of the director's duty of loyalty to Sunburst or the
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for unlawful payment of
dividends, unlawful stock redemptions or repurchases and for any transaction
from which the director derived an improper personal benefit. This provision is
intended to eliminate the risk that a director might incur personal liability to
Sunburst or its stockholders for breach of the duty of care. The Sunburst
Certificate also provides that if Delaware law is amended to further limit the
liability of directors, then the liability of a director of the Company shall be
further limited to the fullest extent permitted by Delaware law as so amended.
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who is, or is threatened to be made, a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation) by reason of the fact that such person is or was
an officer or director of such corporation, or is or was serving at the request
of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation. Where an officer
or director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which he actually and reasonably incurred in connection therewith.
The Sunburst Certificate contains provisions requiring indemnification by
Sunburst of its directors and officers to the fullest extent permitted by law.
Among other things, the Sunburst Certificate provides indemnification for
officers and directors against liabilities for judgments in the settlements of
lawsuits and other proceedings and for the advancement and payment of fees and
expenses reasonably incurred by the director or officer in defense of any such
lawsuit or proceeding.
II-1
<PAGE>
ITEM 16. EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
----------------------
NO.
--
1.1* ___ Form of Underwriting Agreement
3.1 ___ Restated Certificate of Incorporation of Sunburst Hospitality
Corporation and Amendment to the Certificate of Incorporation of
October 15, 1997
3.2 ___ Amended and Restated Bylaws of Sunburst Hospitality Corporation
4.1 ___ Form of Indenture
4.2 ___ Specimen Common Stock Certificate
4.3* ___ Certificate of Designation
4.4* ___ Form of Preferred Stock Certificate
4.5* ___ Form of Warrant Agreement
4.6* ___ Form of Warrant
4.7* ___ Form of Rights Certificate
5.1 ___ Opinion of Latham & Watkins
12.1 ___ Computation of Ratio of Earnings to Fixed Charges
12.2 ___ Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
23.1 ___ Consent of Latham & Watkins (included as part of their opinion
listed as Exhibit 5.1)
23.2 ___ Consent of Arthur Andersen LLP, independent public accountants
24.1 ___ Powers of Attorney (included on signature page)
25.1** ___ Statement of Eligibility of Trustee on Form T-1
_______________
* To be filed by amendment or by a Current Report on Form 8-K pursuant to
Regulation 5-K, Item 601(b).
** To be filed separately pursuant to Trust Indenture Act Section 305(b)(2).
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that the information required to be included in a post-
effective amendment by paragraphs (a)(1)(i) and (a)(1)(ii) above may be
contained in periodic reports filed by the registrant
II-2
<PAGE>
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 and (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period for any subscription
rights, to set forth the results of the subscription offer, the transactions by
the underwriters during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of any subsequent
reoffering thereof. If any public offering by the underwriters is to be made on
terms differing form those set forth on the cover page of the prospectus with
respect to a subscription rights offering, a post-effective amendment will be
filed to set forth the terms of such offering.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issues.
(j) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
Subsection (a) of Section 310 of the Trust Indenture Act (the "Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Silver Spring, State of Maryland, on February
19, 1998.
SUNBURST HOSPITALITY CORPORATION
By: /s/ James A. MacCutcheon
----------------------------------------
James A. MacCutcheon
Executive Vice President and Chief Financial
Officer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints each
of James MacCutcheon and Pamela Williams as his true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for such
person and in his name, place and stead, in any and all capacities, to sign
any or all further amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Donald J. Landry Vice Chairman, Director and Chief Executive Officer February 19, 1998
- --------------------
Donald J. Landry (principal executive officer)
/s/ James A. MacCutcheon Executive Vice President and Chief Financial Officer February 19, 1998
- ------------------------
James A. MacCutcheon (principal financial officer)
/s/ Charles M. Warczak, Jr. Vice President, Accounting and Systems February 19, 1998
- ---------------------------
Charles M. Warczak, Jr.
/s/ Stewart Bainum, Jr. Director February 19, 1998
- -----------------------
Stewart Bainum, Jr.
/s/ Stewart Bainum Director February 19, 1998
- ------------------
Stewart Bainum
/s/ Frederick V. Malek Director February 19, 1998
- ----------------------
Frederick V. Malek
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Paul A. Gould Director February 19, 1998
- -----------------
Paul A. Gould
/s/ Carole Y. Prest Director February 19, 1998
- -------------------
Carole Y. Prest
/s/ Keith B. Pitts Director February 19, 1998
- ------------------
Keith B. Pitts
</TABLE>
II-5
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CHOICE HOTEL HOLDINGS, INC.
Choice Hotels Holdings, Inc. (the Corporations, a corporation
incorporated on June 27, 1996 and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "GCL"), hereby certifies as
follows:
FIRST: The board of directors of the Corporation (the "Board
of Directors) adopted a resolution proposing and declaring advisable the
following amendments to and restatement of the Certificate of Incorporation of
the Corporation.
SECOND: This Restated Certificate of Incorporation was duly
adopted by the sole stockholder of the Corporation in accordance with the
provisions of Sections 228, 242 and 245 of the GCL.
THIRD: The text of the Certificate of Incorporation is hereby
amended and restated as herein set forth in full:
1. The name of the corporation is CHOICE HOTELS INTERNATIONAL,
INC. (the "Corporation").
2. The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
3. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the GCL.
4. The total number of shares of capital stock of all
classifications which the Corporation shall have authority to issue is One
Hundred Sixty-Five Million (165,000,000), of which One Hundred Sixty Million
(160,000,000) shares having a par value of One Cent ($.01) per share shall be
common stock, and Five Million (5,000,000) shares having a par value of One Cent
($.0l) per share shall be preferred stock.
Shares of common stock of the Corporation may be issued from
time to time in on or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the Board
of Directors prior to the issuance of any shares thereof. Each such class or
series of common stock shall have such voting powers (full or limited) or no
voting powers, such preferences and relative participating, optional or other
special rights, relative ranking and such qualifications, limitations or
restrictions, as shall be stated in such resolution or resolutions providing for
the issue of such class or series of common stock as may be adopted from time to
time by the Board of Directors prior to the issuance of any shares thereof
pursuant
<PAGE>
to the authority hereby expressly vested in it, all in accordance with the laws
of the State of Delaware.
Without limiting the generality of the foregoing, shares of a
series of common stock consisting of One Hundred Million (100,000,000) shares,
or such larger number of shares as the Board of Directors shall from time to
time fix by resolution or resolutions, may be issued from time to time by the
Board of Directors. Shares of this series shall be designated, and are
hereinafter called "Common Stock."
The holders of record of the Common Stock shall be entitled to
the following rights:
(a) Subject to the rights of any holders of any class or
series of capital stock as specified in the resolution
providing for such class or series of capital stock, to vote
at all meetings of stockholders of the Corporation, and at all
such meetings such holders shall have one vote in respect of
each share of Common Stock held of record by them;
(b) subject to the rights of any holders of any class or
series of capital stock having a preference with respect to
dividends to receive when, if and as declared by the Board of
Directors out of the assets of the Corporation legally
available therefor, such dividends as may be declared by the
Corporation from time to time to holders of Common Stock; and
(c) subject to the rights of any holders of any class or
series of capital stock having a preference with respect to
distribution of assets upon liquidation, dissolution or
winding-up, to receive the remaining assets of the Corporation
upon liquidation, dissolution or winding-up.
Shares of the preferred stock of the Corporation may be issued
from time to time in one or more classes or series, each or which class or
series shall have such distinctive designation or title as shall be fixed by the
Board of Directors prior to the issuance of any shares thereof. Each such class
or series of preferred stock shall have such voting powers (full or limited) or
no voting powers, such preferences and relative participating, optional or other
special rights, relative ranking and such qualifications, limitations or
restrictions, as shall be stated in such resolution or resolutions providing for
the issue of such class or series of preferred stock as may be adopted from time
to time by the Board of Directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance with
the laws of the State of Delaware.
The stockholders of the Corporation are expressly denied the
preemptive right to subscribe to any or all additional shares of capital stock
of the Corporation or any or all classes or series thereof.
Upon this Restated Certificate of Incorporation becoming
effective pursuant to the General Corporation Law of the State of Delaware (the
"Effective Time"), each share of the
2
<PAGE>
Corporation's common stock, par value $.01 per share (the "Old Common Stock"),
issued and outstanding immediately prior to the Effective Time, will be
automatically reclassified as and converted into one share of Common Stock. Any
stock certificate that, immediately prior to the Effective Time, represents
shares of the Old Common Stock will, from and after the Effective Time,
automatically and without the necessity of presenting the same for exchange,
represent the number of shares of Common Stock as equals the sum obtained by
multiplying the number of shares of Old Common Stock represented by such
certificate immediately prior to the Effective Time by one.
5. The Corporation expressly elects not to be governed by
Section 203 of the GCL.
6. Subject to the rights of any holders of any class or series
of capital stock as specified in the resolution providing for such class or
series of capital stock, any action required to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing of such stockholders in lieu of a meeting.
Special meetings of the stockholders of the Corporation may be
called only by (i) the Chairman of the Board of Directors or (ii) the Secretary
of the Corporation within 10 calendar days after receipt of the written request
of a majority of the total number of directors which the Corporation would have
if there were no vacancies (the "Whole Board").
Meetings of stockholders may be held within or without the
State of Delaware, an the Bylaws may provide. The books of the Corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws.
7. A. Subject to the rights of any holders of any class or
series of capital stock as specified in the resolution providing for such class
or series of capital stock, the business and affairs of the Corporation shall be
managed by or under the direction of the board of Directors consisting of not
less than 3 nor more than 12 directors, the exact number of directors to be
determined from time to time solely by resolution adopted by the affirmative
vote of a majority of the Whole Board. The directors shall be divided into three
classes designated Class I, Class II and Class III. Each Class of directors
shall consist, an nearly as may be possible, of one-third of the total number of
directors constituting the Whole Board. The initial term of the Class I
directors shall expire upon the election and qualification of their successors
at the 1997 annual meeting of stockholders; the initial term of the Class II
directors shall expire upon the election and qualification of their successors
at the 1998 annual meeting of stockholders; and the initial term of the Class
III directors shall expire upon the election and qualification of their
successors at the 1999 annual meeting of stockholders. At each annual meeting of
stockholders beginning with the 1997 annual meeting, successors to the Class of
directors whose term expires at that annual meeting shall be elected for a
three-year term and shall hold office until the annual meeting for the year in
which his or her term expires and until his or her successor shall be
3
<PAGE>
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
B. Subject to the rights of any holders of any class or series
of capital stock as specified in the resolution providing for such class or
series of capital stock, newly created directorships resulting from any increase
in the number of directors and any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other cause will be filled
solely by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors. Increases or
decreases in the number of directors shall be apportioned among the Classes so
as to maintain the number of directors in each Class as nearly equal as
possible, and any additional director of any Class elected to fill a vacancy
resulting from an increase in such Class shall hold office for a term that shall
coincide with the remaining term of that Class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director.
C. The election of directors need not be by written ballot
unless the Bylaws shall so provide.
D. Notwithstanding the foregoing, whenever the holders of any
one or more series of capital stock shall have the right, voting separately as a
class or series, to elect directors, the election, removal, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Restated Certificate of Incorporation applicable thereto,
and such directors so elected shall not be divided into classes pursuant to
Article 6, Section A, unless expressly provided by such terms.
8. The affirmative vote of the holders of the outstanding
shares of capital stock representing not less than two-thirds of the Voting
Power (as defined) of the Corporation shall be required for the approval of any
proposal for the Corporation to dissolve, liquidate, merge, or consolidate with
any other entity (other than an entity 90% of the voting power of which is owned
by the Corporation), or sell, lease or exchange all or substantially all of its
property and assets, including its goodwill and its corporate franchises.
"Voting Power" means the total number of votes that may be cast by holders of
capital stock in the election of directors.
9. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
Notwithstanding anything contained in this Restated Certificate of Incorporation
to the contrary, the affirmative vote of the holders of the outstanding shares
of capital stock representing not less than two-thirds of the Voting Power of
the Corporation shall be required to amend, alter, change or repeal, or to adopt
any provision inconsistent with, Article 8 of this Restated Certificate of
Incorporation. The Board of Directors shall have the power to make, adopt,
alter, amend, change or repeal the Bylaws by resolution adopted by the
affirmative vote of a majority of the Whole Board. Stockholders may not make,
adopt, alter, amend, change or repeal the Bylaws except upon the affirmative
vote of the holders of the outstanding shares of capital stock representing not
less than two-thirds of the Voting Power of the Corporation and no
4
<PAGE>
Bylaws hereafter adopted by the stockholders or otherwise shall invalidate any
prior act of the directors which would have been valid if such Bylaws had not
been adopted.
10. A. No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the directors
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article 10 shall apply to or have any effect on
the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal. If the GCL is amended hereafter to further limit the
liability of a director, then the liability of a director of the Corporation
shall be further limited to the fullest extent permitted by the GCL, as so
amended.
B. The Corporation shall indemnify each person who is or was
or has agreed to become a director or officer of the Corporation, and may
indemnify other employees and agents of the Corporation, to the fullest extent
permitted by Section 145 of the GCL, as the same may be amended or supplemented,
against all expenses and liabilities, including, but not limited to, counsel
fees, reasonably incurred by or imposed upon him in connection with any
proceeding to which he or she may be made a party, or in which he or she may
become involved by reason of his or her being or having been a director,
officer, employee or agent of the Corporation, or any settlement thereof,
whether or not he or she is a director, officer, employee or agent at the time
such expenses are incurred or liability incurred, except in such cases where the
director, officer, employee or agent is adjudged guilty of willful misfeasance
or malfeasance in the performance of his or her duties; provided that in the
event of a settlement the indemnification herein shall apply only when the Board
of Directors approves such settlement and reimbursement as being for the best
interests of the Corporation. Without limiting the generality or the effect of
the foregoing, the Corporation may adopt Bylaws, or enter into one or more
agreements with any person, which provide for indemnification greater or
different than that provided in this Article 10 or the GCL and the foregoing
right of indemnification shall be in addition to and not exclusive of all other
rights to which such director, officer, employee or agent may be entitled.
C. The Corporation may purchase insurance on behalf of any
person who is a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted by him or her and incurred by
him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him or her against such liability under the provisions of this Article
10.
11. The Board of Directors, each committee of the Board of
Directors and each individual director, in discharging their respective duties
under applicable law and this Restated Certificate of Incorporation and in
determining what they each believe to be in the best interests of the
Corporation and its stockholders, may consider the effects, both short-term and
5
<PAGE>
long-term, of any action or proposed action taken or to be taken by the
corporation, the board of Directors or any committee of the Board of Directors
on the interests of (i) the employees, franchisees, licensees, customers,
suppliers and/or creditors of the Corporation and its subsidiaries and (ii) the
communities in which the Corporation and its subsidiaries own or lease property
or conduct business, all to the extent that the Board of Directors, any
committee of the Board of Directors or any individual director deems pertinent
under the circumstances; provided, however, that the provisions of this Article
11 shall not limit in any way the right of the Board of Directors to consider
any other lawful factors in making its determinations, including, without
limitation, the effects, both short-term and long-term, or any action or
proposed action on the Corporation or its stockholders directly; and provided
further that this Article 11 shall be deemed solely to grant discretionary
authority to the Board of Directors, each committee of the Board of Directors
and each individual director and shall not be deemed to provide to any specific
constituency any right to be considered.
12. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
Jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be duly executed in its corporate name.
Dated: November 1, 1996
/s/ James A. MacCutcheon
------------------------------------
Name: James A. MacCutcheon
Title: Executive Vice President and
Chief Financial Officer
6
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CHOICE HOTELS INTERNATIONAL, INC.
Choice Hotels International, Inc., a corporation organized and
existing by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:
FIRST: At a meeting of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth a proposed amendment of
the Restated Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and submitting such amendment to the stockholders of
the corporation for consideration thereof.
SECOND: That thereafter, a meeting of the stockholders of the
Corporation was duly called and held on September 16, 1997, at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendment in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware (the "GCL").
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 and 228 of the GCL.
FOURTH: Paragraph 1 of Article THIRD of the Restated
Certificate of Incorporation shall be amended to read as follows:
1. The name of the corporation is SUNBURST HOSPITALITY
CORPORATION (the "Corporation").
FIFTH: Paragraph 4 of Article Third of the Restated
Certificate of Incorporation shall be amended to read as follows:
4. The total number of shares of capital stock of all
classifications which the Corporation shall have authority to issue is
Sixty-Five Million (65,000,000), of which Sixty Million (60,000,000)
shares having a par value of One Cent ($.0l) per share shall be common
stock, and Five Million (5,000,000) shares having a par value of One
Cent ($.0l) per share shall be preferred stock. Upon the date of the
effectiveness of the amendment of this Article, (the "Effective Date"),
each three (3) shares of Common Stock issued and outstanding and held
in the treasury of the Corporation shall be converted into one (1)
share of Common Stock. No fractional shares shall be issued pursuant to
such conversion, and as of the
7
<PAGE>
effective date of these Amendments, stockholders otherwise entitled to
receive fractions of shares shall have no further interest as a
stockholder in respect of such fractions of shares. The Corporation
will pay in cash the fair value, as determined by the Board of
Directors, of fractions of shares which otherwise would result from
such conversion. Each certificate for Common Stock shall thereupon and
thereafter evidence such number of shares of Common Stock, and/or the
right to receive cash into which such shares have been converted, and
may be surrendered to the Corporation for cancellation in exchange for
new certificates representing such number of shares and/or cash.
Shares of common stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the Board
of Directors prior to the issuance of any shares thereof. Each such class or
series of common stock shall have such voting powers (full or limited) or no
voting powers, such preferences and relative participating, optional or other
special rights, relative ranking and such qualifications, limitations or
restrictions, as shall be stated in such resolution or resolutions providing for
the issue of such class or series of common stock as may be adopted from time to
time by the Board of Directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance with
the laws of the State of Delaware.
Without limiting the generality of the foregoing, shares of a
series of common stock consisting of Twenty-Five Million (25,000,000) shares, or
such larger number of shares as the Board of Directors shall from time to time
fix by resolution or resolutions, may be issued from time to time by the Board
of Directors. Shares of this series shall be designated, and are hereinafter
called "Common Stock."
The holders of record of the Common Stock shall be entitled to
the following rights:
(a) subject to the rights of any holders of any class or series of
capital stock as specified in the resolution providing for such class
or series of capital stock, to vote at all meetings of stockholders of
the Corporation, and at all such meetings such holders shall have one
vote in respect of each share of Common Stock held of record by them;
(b) subject to the rights of any holders of any class or series of
capital stock having a preference with respect to dividends, to receive
when, if and as declared by the Board of Directors out of the assets of
the Corporation legally therefor, such dividends as may be declared by
the Corporation from time to time to holders Common Stock; and
(c) subject to the rights of any holders of' any class or series
of capital stock having a preference with respect to distribution of
assets upon liquidation or
8
<PAGE>
dissolution, to receive the remaining assets of the Corporation upon
liquidation, dissolution or winding-up.
Shares of preferred stock of' the Corporation may be issued
from time to time in one or more classes or series, each of which class or
series shall have such distinctive designation or title as shall be fixed by the
Board of Directors prior to the issuance of any shares thereof. Each such class
or series of preferred stock shall have such voting powers (full or limited) or
no voting powers, such preferences and relative participating, optional or other
special rights, relative ranking and such qualifications, limitations or
restrictions, as shall be stated in such resolution or resolutions providing for
the issue of such class or series of preferred stock as may be adopted from time
to time by the Board of Directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance with
the laws of the State of Delaware.
Subject to the rights of any holders of any class or series of
capital stock, as specified in the resolution providing for such class or series
of capital stock, the holders of Common Stock are expressly denied the
preemptive right to subscribe to any or all additional shares of capital stock
of the Corporation or any or all classes or series thereof.
SIXTH: In accordance with Section 103 of the General
Corporation Law of the State of Delaware, the foregoing amendments shall become
effective on the date hereof.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment to be signed by Michael J. DeSantis, its authorized
officer as of this 15th day of October, 1997.
/s/ Michael J. DeSantis
-----------------------------------------
Name: Michael J. DeSantis
Title: Senior Vice President, General
Counsel and Secretary
9
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
SUNBURST HOSPITALITY CORPORATION
(HEREINAFTER CALLED THE "CORPORATION")
AS AMENDED OCTOBER 11, 1996
ARTICLE I.
OFFICES
Section 1. Office. The registered office of the Corporation shall be
------
in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Additional Office. The Corporation may also have offices
-----------------
at such other places, both within and without the State of Delaware, as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. Meetings of Stockholders for any purpose
--------------
may be held at such time and place, within or without the State of Delaware, as
the Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders shall be
--------------
held on any date in the month of September or October in each year at 9:00 a.m.
or at such other time and such date and time shall be designated, from time to
time, by the Board of Directors and stated in the notice of the meeting. At
such annual meeting, the stockholders shall elect a board of directors and
transact such other business as may properly be brought before the meeting in
accordance with Section 7 of this Article II.
Section 3. Notice of Annual Meeting. Written notice of the annual
------------------------
meeting stating the place, date and time thereof shall be given to each
stockholder entitled to vote at such meeting not less than 10 nor more than 60
days prior to the meeting.
Section 4. List of Stockholders. The officer in charge of the stock
--------------------
ledger of the Corporation or the transfer agent shall prepare and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for purpose germane to the meeting, during ordinary business
hours, for a period of
<PAGE>
at least 10 days prior to the meeting, either at a place within the city where
the meeting is to be held (other than the place of the meeting), which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Notice of Special Meeting. Written notice of a special
-------------------------
meeting stating the place, date and time thereof and the purpose or purposes for
which the meeting is called, shall be given to each stockholder entitled to vote
at such meeting not less than 10 nor more than 60 days prior to the meeting.
Section 6. Stockholder Proposals. To be properly brought before an
---------------------
annual meeting, business must be (1) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (2)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (3) otherwise properly brought before the meeting by a
stockholder entitled to vote thereon. For business to be properly brought
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be received not less than sixty days nor
more than ninety days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty days or delayed by more than sixty days
from such anniversary, notice by the stockholder to be timely must be so
received not earlier than the ninetieth day prior to such annual meeting and not
later of the close of business on the later of (1) the sixtieth day prior to
such annual meeting or (2) the tenth day following the date on which notice of
the date of the annual meeting was mailed or public disclosure thereof was made,
whichever first occurs. For purposes of calculating the first such notice
period following adoption of this Restated Certificate of Incorporation, the
first anniversary of the 1996 annual meeting shall be deemed to be ________,
1997. Each such notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (a) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the meeting, (b) the name and address, as they
appear on the Corporation's books of the stockholder proposing such business and
the name and address of the beneficial owner on whose behalf the proposal is
being made, (c) the class, series and number of shares of the Corporation which
are beneficially owned by the stockholder or by the beneficial owner on whose
behalf the proposal is being made, (d) any material interest of the stockholder,
or the beneficial owner on whose behalf the proposal is being made, in such
business, (e) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting, and (f) a description of all arrangements
or understandings between the stockholder, the beneficial owner on whose behalf
the proposal is being made, or any other person or persons (naming such person
or persons) relating to the matter being proposed.
To be properly brought before a special meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of
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Directors or (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors.
No business shall be conducted at any meeting of the stockholders
except in accordance with the procedures set forth in this Article II, Section
6. The presiding officer of the meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Article II, Section 6 and
if he or she should so determine, any such business not properly brought before
the meeting shall not be transacted. Nothing herein shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
Section 7. Presiding Officer. Meetings of stockholders shall be
----------
presided over by the Chairman of the Board, or, if he is not present, by the
Vice Chairman, or, if he is not present, by the Chief Executive Officer, or if
he is not present, by the President or, if he is not present, by such person who
may have been chosen by the Board of Directors or, if none of such persons is
present, by a chairman to be chosen by the stockholders owning a majority of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote at the meeting and who are present in person or by proxy. The Secretary
of the Corporation or, if he is not present, an Assistant Secretary or, if he is
not present, such person who may have been chosen by the Board of Directors,
shall act as secretary of meetings of stockholders, but if none of such persons
is present the stockholders owning a majority of the Voting Power of the
Corporation and who are present in person or by proxy shall choose any person
present to act as secretary of the meeting. "Voting Power" means the total
number of votes that may be cast by holders of capital stock in the election of
directors.
Section 8. Quorum. The holders of a majority of shares of the Voting
------
Power of the Corporation, present in person or represented by proxy, shall be
necessary to, and shall constitute a quorum for, the transaction of business at
all meetings of stockholders, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, a quorum shall not be present in
person or by proxy at any meeting of the stockholders, the stockholders entitled
to vote thereat, present in person or represented by proxy, shall have the power
to adjourn the meeting from time to time, without notice of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, until a quorum shall be present in person or by proxy. At
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time for good cause, without notice of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, until a date which is not more than 30 days after the date
of the original meeting. At such adjourned meeting, at which a quorum shall be
present in person or by proxy, any business may be transacted which might have
been transacted at the meeting as originally called. If the adjournment is for
more than 30 days or, if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
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Section 9. Voting. (a) At any meeting of stockholders, every
------
stockholder having the right to vote shall be entitled to vote in person or by
proxy. Except as otherwise provided by law or the Certificate of Incorporation
or a resolution of the Board of Directors creating a series or class of capital
stock of the Corporation, each stockholder of record shall be entitled to one
vote for each share of capital stock registered in his name on the books of the
Corporation.
(b) All elections shall be determined by a plurality vote, and
except as otherwise provided by law or the Certificate of Incorporation, all
other matters shall be determined by a vote of a majority of the Voting Power
present in person or by proxy and voting on such other matters.
ARTICLE III.
DIRECTORS
Section 1. General Powers; Number; Tenure. The business of the
------------------------------
Corporation shall be managed or under by its Board of Directors, which may
exercise all powers of the Corporation and perform all lawful acts and things as
are not by law, the Certificate of Incorporation or these Bylaws directed or
required to be exercised or performed by the stockholders. The number of
directors constituting the whole Board of Directors shall be not less than 3 nor
more than 12. The first Board of Directors shall consist of 9 directors.
Thereafter, within the limits of above specified, the number of directors shall
be determined by the Board of Directors. The directors shall be elected and
shall hold office as specified in the Certificate of Incorporation. Directors
need not be stockholders. Directors, other than Stewart Bainum, Sr., shall
retire from the Board of Directors as of the annual meeting of stockholders next
following the date they attain the age of seventy (70) years.
Section 2. Nomination of Directors. Any stockholder entitled to vote in
-----------------------
the election of directors generally may nominate one or more persons for
election as directors at an annual meeting only pursuant to the Corporation's
notice of such meeting or if written notice of such stockholder's intent to make
such nomination or nominations has been received by the Secretary of the
Corporation not less than sixty nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than thirty
days or delayed by more than sixty days from such anniversary, notice by the
stockholder to be timely must be so received not earlier than the ninetieth day
prior to such annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting or (2) the tenth day
following the day on which notice of the date of the annual meeting was mailed
or public disclosure thereof was made by the Corporation, whichever first
occurs. For purposes of calculating the first such notice period following
adoption of this Restated Certificate of Incorporation, the first anniversary of
the 1996 annual meeting shall be deemed to be ________, 1997. Each such notice
shall set forth: (a) the name and address of the stockholder who intends to
make the nomination and the name, age, business address, residence address and
principal occupation of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at
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the meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
relating to the nomination or nominations; (d) the class and number of shares of
the Corporation which are beneficially owned by such stockholder and the person
to be nominated as of the date of such stockholder's notice and by any other
stockholders known by such stockholder to be supporting such nominees as of the
date of such stockholder's notice; (e) such other information regarding each
nominee proposed by such stockholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (f) the consent of each nominee to serve as a director of the
Corporation if so elected.
In addition, in the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors, any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as directors at a special meeting only pursuant to the
Corporation's notice of meeting or if written notice of such stockholder's
intent to make such nomination or nominations, setting forth the information and
complying with the form described in the immediately preceding paragraph, has
been received by the Secretary of the Corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of (i) the sixtieth day prior to such special meeting or (ii) the
tenth day following the day on which notice of the date of the special meeting
was mailed or public disclosure thereof was made by the Corporation, whichever
comes first.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Article
III, Section 2. The presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Article III, Section 2, and if
he or she should so determine, the defective nomination shall be disregarded.
Section 3. Vacancies; Resignations. (a) If any vacancies occur in the
-----------------------
Board of Directors, or if any new directorships are created, they shall be
filled solely by a majority of the directors then in office, although less than
a quorum. Each director so chosen shall hold office until the expiration of the
term of the class into which such director was elected and until his successor
is duly elected and qualified. If there are no directors in office a special
meeting of stockholders shall be called in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
(b) Any director may resign at any time by giving written notice to
the Board of Directors, the Chairman of the Board, the Chief Executive Officer,
the President or the Secretary of the Corporation. Unless otherwise specified in
such written notice, a resignation shall take effect upon delivery thereof to
the Board of Directors or the designated officer. It shall not be necessary for
a resignation to be accepted before it becomes effective.
Section 4. Place of Meeting. The Board of Directors may hold meetings,
----------------
both regular and special, either within or without the State of Delaware.
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Section 5. First Meeting. The first regular meeting of each newly elected
-------------
Board of Directors shall be held immediately following the annual meeting of
stockholders and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. Regular Meeting. Additional regular meetings of the Board of
---------------
Directors may be held without notice, at such time and place as may from time to
time be determined by the Board of Directors.
Section 7. Special Meeting. Special meetings of the Board of Directors
---------------
may be called by the Chairman of the Board of Directors or, in the event of his
disability, by the Vice Chairman, on 2 days' notice to each director in
accordance with Article V. Special meetings shall be called by the Chairman of
the Board, Vice Chairman, Chief Executive Officer, President or Secretary in
like manner and on like notice on the written request of 4 directors or one-half
(1/2) of the number of directors, whichever is less.
Section 8. Quorum. At all meetings of the Board of Directors one-half
------
(1/2) of the number of directors then in office, or such greater number as
equals one-third (1/3) of the total number of directors shall constitute a
Quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by law
or the Certificate of Incorporation. If a quorum is not present at any meeting
of the Board of Directors, the directors present may adjourn the meeting, from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Compensation. Directors shall be entitled to such compensation
------------
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving reasonable compensation for other such services.
Section 10. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
a written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of the proceedings.
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ARTICLE IV.
COMMITTEES
Section 1. Executive Committee. The Board of Directors may appoint any
-------------------
Executive Committee consisting of not less than 3 directors, one of whom shall
be designated as Chairman of the Executive Committee.
Section 2. Powers. The Executive Committee shall have and may exercise
------
those powers of the Board of Directors as may from time to time be granted to it
by the Board of Directors.
Section 3. Procedure; Meetings. The Executive Committee shall fix its own
-------------------
rules of procedure and shall meet at such times and at such place or places as
may be provided by such rules. The Executive Committee shall keep regular
minutes of its meetings and deliver such minutes to the Board of Directors.
The Chairman of the Executive Committee, or, in his absence, a member of
the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee and another member thereof chosen
by the Executive Committee shall act as Secretary of the Executive Committee.
Section 4. Quorum. A majority of the Executive Committee shall constitute
------
a quorum for the transaction of business, and the affirmative vote of a majority
of the members thereof shall be required for any action of the Executive
Committee.
Section 5. Other Committees. The Board of Directors may appoint such
----------------
other committee or committees as it shall deem advisable and with such functions
and duties as the Board of Directors shall prescribe.
Section 6. Vacancies; Changes; Discharge. The Board of Directors shall
-----------------------------
have the power at any time to fill vacancies in, to change the membership of,
and to discharge, any such committee.
Section 7. Compensation. Members of any committee shall be entitled to
------------
such compensation for their services as members of any such committee and to
such reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any
member may waive compensation for any meeting.
Section 8. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if written consent to such action is signed by all members of
the committee and such written consent is filed with the minutes of its
proceedings.
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ARTICLE V.
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
--------------
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given by regular
or overnight mail, addressed to such director or stockholder, at his or her
address as it appears on the records of the Corporation, with postage thereon
prepaid. Notices given by regular mail shall be deemed to be given at the time
they are deposited in the United States mail. Notice to a director may also be
given personally, by telegram sent to his address as it appears on the records
of the Corporation, by facsimile (with a machine generated confirmation) or by
telephone.
Section 2. Waiver. Whenever any notice is required to be given under the
------
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person, or is represented at such meeting by proxy, without protesting prior
to the conclusion of the meeting the lack of notice thereof to him, or any
director who attends a meeting of the Board of Directors without protesting,
prior to the commencement of the meeting, such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE VI.
OFFICERS
Section 1. Designations. The officers of the Corporation shall be chosen
------------
by the Board of Directors and shall be a Chairman of the Board, Vice Chairman of
the Board, a Chief Executive Officer, a President, a Secretary and a Treasurer.
The Board of Directors may also choose one or more Executive or Senior Vice
Presidents, one or more additional vice presidents, one or more assistant
secretaries and assistant treasurers, and such other officers and agents as it
shall deem necessary. All officers of the Corporation shall hold their offices
for such terms and shall exercise such power and perform such duties as shall
from time to time be determined by the Board of Directors. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these Bylaws otherwise provide.
Section 2. Term of Office; Removal. The Board of Directors at its first
-----------------------
meeting after each annual meeting of stockholders shall choose a Chairman, a
Vice Chairman, a Chief Executive Officer, a President, a Secretary and a
Treasurer and such other officers as the Board of Directors shall deem
appropriate. The officers of the Corporation shall hold office until their
successors are chosen and shall qualify. Any officer elected or appointed by
the Board of Directors may be removed, with or without cause, at any time by the
affirmative vote of a majority of the directors then in office. Such removal
shall not prejudice the contract rights, if any, of the person so removed. Any
vacancy occurring in any office of the Corporation may be
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filled by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the Corporation
------------
shall be fixed by the Board of Directors.
Section 4. The Chairman of the Board.
-------------------------
(a) The Chairman of the Board shall have general direction of the
business affairs of the Corporation, subject to the control of the Board of
Directors. The Chairman shall preside at all meetings of stockholders and the
Board of Directors which he shall attend. Except where, by law, the signature of
the President is required, the Chairman shall possess the same power as the
President to execute all certificates, contracts, bonds, mortgages and other
instruments of the Corporation.
(b) Unless otherwise prescribed by the Board of Directors, the
Chairman shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting, the Chairman shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities which the Corporation might have possessed and exercised if
it had been present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
Section 5. Vice Chairman. The Vice Chairman shall, in the absence of the
-------------
Chairman of the Board or in the event of his disability, preside at all meetings
of the Board of Directors and Stockholders and perform the duties and exercise
the powers of the Chairman of the Board and shall perform such other duties and
have such other powers as may from time to time be prescribed by the Board of
Directors.
Section 6. Chief Executive Officer. The Chief Executive Officer shall be
-----------------------
the Chief Administrator of the Corporation, have general direction of
administration of the business affairs of the Corporation, subject to the
direction of the Board of Directors, and shall perform other duties and have
such other powers as may from time to time be prescribed by the Board of
Directors.
Section 7. The President. The President shall be the Chief Operations
-------------
Officer of the Corporation and shall have general direction of the operation of
the Corporation, subject to the direction of the Chief Executive Officer and the
Board of Directors, and shall perform such other duties and shall have such
other powers as may from time to time be prescribed by the Board of Directors.
Section 8. The Vice Presidents. The Vice President (or in the event there
-------------------
by more than one, the Vice Presidents in the order designated, or in the absence
of any designation, then in order of their election) shall, in the absence of
the President or in the event of his disability, perform the duties and exercise
the powers of the President and shall generally assist the President and perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors.
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Section 9. The Secretary. The Secretary shall attend all meetings of the
-------------
Board of Directors and all meetings of stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 10. The Assistant Secretary. The Assistant Secretary (or in the
-----------------------
event there be more than one, the Assistant Secretaries in the order designated,
or in the absence of any designation, then in the order of their election)
shall, in the absence of the Secretary or in the event of his disability,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors.
Section 11. The Treasurer. The Treasurer shall have the custody of the
-------------
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board
or the President, and the Board of Directors, at regular meetings of the Board,
or whenever they may require it, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation.
Section 12. The Assistant Treasurer. The Assistant Treasurer (or in the
-----------------------
event there be more than one, the Assistant Treasurers in the order designated,
or in the absence of any designation, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his disability,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors.
ARTICLE VII.
INDEMMFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 1. Action, Other Than by or in the Right of the Corporation. The
--------------------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding or investigation, whether civil, criminal or administrative, and
whether external or internal to the Corporation (other than a judicial action or
suit brought by or in the right of the Corporation) by reason of the fact that
he
10
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is or was a director, officer, employee or agent of the Corporation, or that,
being or having been such a director, officer, employee or agent, he is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (all such persons being referred to hereafter as an "Agent"), against
expenses (including attorneys fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding, or any appeal thereof, if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding -- whether by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
---- ----------
its equivalent -- shall not, of itself, create a presumption that the person did
not act in good faith and in manner which he or she reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, that he or she had reasonable cause to
believe that his or her conduct was unlawful.
Section 2. Action, by or in the Right of the Corporation. The Corporation
---------------------------------------------
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed judicial action or suit brought by
or in the right of the Corporation to procure a judgment in its favor by reason
of the fact that he or she is or was an Agent (as defined above) against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense, settlement or appeal of such action or suit
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for gross negligence or
misconduct in the performance of his or her duty to the Corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or other such court shall deem proper.
Section 3. Determination of Right of Indemnification. No indemnification
-----------------------------------------
under Section 1 or 2 of this Article VII (unless ordered by a court) shall be
made by the Corporation if a determination is reasonably and promptly made (i)
by the Board of Directors by a majority vote consisting of directors who were
not parties to such action, suit or proceedings, even though less than a quorum
or (ii) if there are no such directors or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders,
that such person did not act in good faith and in a manner that such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal proceeding, that such person
believed or had reasonable cause to believe that his or her conduct was
unlawful.
Section 4. Indemnification Against Expenses of Successful Party.
----------------------------------------------------
Notwithstanding the other provisions of this Article, to the extent that an
Agent has been successful on the merits or otherwise, including the dismissal of
an action without prejudice or the settlement of an action without admission of
liability, in defense of any action, suit or
11
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proceeding or in defense of any claim, issue or matter therein, or on appeal
from any such proceeding, action, claim or matter, such Agent shall be
indemnified against all expenses actually and reasonably incurred in connection
therewith.
Section 5. Advances of Expenses. Except as limited by Section 6 of this
--------------------
Article, expenses incurred in defending any civil, criminal, administrative or
investigative action, suit or proceeding or investigation or any appeal therein
shall be paid by the Corporation in advance of the final disposition of such
matter, if the Agent shall undertake to repay such amount in the event that it
is ultimately determined, as provided herein, that such person is not entitled
to indemnification. Notwithstanding the foregoing, no advance shall be made by
the Corporation if a determination is reasonably and promptly made by the Board
of Directors by a majority vote of disinterested directors, or (if there are no
such directors or such directors so direct) by independent legal counsel in a
written opinion, that, based upon the facts known to the Board or counsel at the
time such determination is made, such person did not act in good faith and in a
manner that such person believed to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal proceeding, that such
person believed or had reasonable cause to believe his or her conduct was
unlawful. In no event shall any advance be made in instances where the Board of
Directors or independent legal counsel reasonably determines that such person
deliberately breached his duty to the Corporation or its shareholders.
Section 6. Right of Agent to Indemnification Upon Application; Procedure
-------------------------------------------------------------
Upon Application. Any indemnification under Sections 1, 2, and 4, or advance
- ----------------
under Section 5 of this Article, shall be made promptly, and in any event within
ninety days, upon the written request of the Agent, unless with respect to
applications under Sections 1, 2, or 5, a determination is reasonably and
promptly be made by the Board of Directors by a majority vote of disinterested
directors that such Agent acted in a manner set forth in such Sections as to
justify the Corporation's not indemnifying or making an advance to the Agent.
In the event there are no such disinterested directors, the Board of Directors
shall promptly direct that independent legal counsel shall decide whether the
Agent acted in the manner set forth in such Sections as to justify the
Corporation's not indemnifying or making an advance to the Agent, The right to
indemnification or advances as granted by this Article- shall be enforceable by
the Agent in any court of competent Jurisdiction, if the Board or independent
legal counsel denies the claim, in whole or in part, or if no disposition of
such claim is made within ninety days. The Agent's expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for in this
Article is held by a court of competent jurisdiction to be unavailable to an
indemnitee in whole or part, the Corporation, shall, in such an event, after
taking into account, among other things, contributions by other directors and
officers of the Corporation pursuant to indemnification agreements or otherwise,
and in the absence of personal enrichment, acts of intentional fraud or
dishonesty or criminal conduct on the part of the Agent, contribute to the
payment of Agent's losses to the extent that, after other contributions are
taken into account, such losses exceed: (i) in the case of a director of the
Corporation or any of its subsidiaries who is not an officer of the Corporation
or any of such
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subsidiaries, the amount of fees paid to him or her for serving as a director
during the 12 months preceding the commencement of the suit, proceeding or
investigation; or (ii) in the case of a director of the Corporation or any of
its subsidiaries who is also an officer of the Corporation or any of such
subsidiaries, the amount set forth in clause (i) plus 5% of the aggregate cash
compensation paid to said director for such office(s) during the 12 months
preceding the commencement of the suit, proceeding or investigation, or (ii) in
the case of an officer of the Corporation or any of its subsidiaries, 5% of the
aggregate cash compensation paid to such officer for service in such office(s)
during the 12 months preceding the commencement of such suit, proceeding or
investigation.
Section 8. Other Rights and Remedies. The indemnification provided by
-------------------------
this Article shall not be deemed exclusive of, and shall not affect, any other
rights to which an Agent seeking indemnification may be entitled under any
Bylaws, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be an Agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. All rights to indemnification under this
Article shall be deemed to be provided by a contract between the Corporation and
the agent who serves in such Capacity at any time while these bylaws and other
relevant provisions of the general corporation law and other applicable law, if
any, are in effect. Any repeat or modification thereof shall not affect any
rights or obligations then existing.
Section 9. Insurance. Upon resolution passed by the Board, the
---------
Corporation may purchase and maintain insurance on behalf of any person who is
or was an Agent against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article. The Corporation may create a trust fund, grant
a security interest or use other means (including, without limitation, a letter
of credit) to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
Section 10. Constituent Corporations. For the purposes of this Article,
------------------------
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee, or trustee of such
a constituent corporation or who, being or having been such a director, officer,
employee or trustee, is or was serving at the request of such constituent
corporation as a director, officer, employee, trustee of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
Section 11. Other Enterprises, Fines, and Serving at Corporation's
------------------------------------------------------
Request. For purposes of this Article, references to "other enterprises" in
- -------
Section 1 and 7 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan- and references to "serving at the request of the Corporation"
shall include any service by Agent as director, officer, employee, trustee or
agent of
13
<PAGE>
the Corporation which imposes duties on, or involves services by, such Agent
with respect to any employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he reasonably believed to
be in the interests of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article.
Section 12. Savings Clause. If this Article or any portion thereof shall
--------------
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Agent as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit, appeal, proceeding or investigation, whether civil,
criminal or administrative, and whether internal or external, including a grand
jury proceeding and an action or suit brought by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated, or by any other applicable law.
ARTICLE VIII.
STOCK CERTIFICATES
Section 1. Form; Signatures. (a) Every holder of stock in the
----------------
Corporation shall be entitled to have a certificate, signed by the Chairman of
the Board or the Chief Executive Officer and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
exhibiting the number, and class (and series, if any), of shares owned by him,
and bearing the seal of the Corporation. Such seal may be a facsimile. Where a
certificate is manually signed (i) by a transfer agent other than the
Corporation or its employee or (ii) by a registrar other than the Corporation or
its employee, the signature of any such officer may be a facsimile. In case any
officer who has signed, or whose facsimile signature was placed on, a
certificate shall have ceased to be such officer before such certificate is
issued, it may nevertheless be issued by the Corporation with the same effect as
if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital stock which
are subject to restrictions on transfer or to other restrictions, may have
imprinted thereon a notation to such effect, as shall be determined by the Board
of Directors.
Section 2. Registration of Transfer. Upon surrender to the Corporation or
------------------------
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to issue
a new certificate to the person entitled thereto, to cancel the old certificate
and to record the transaction upon its books.
Section 3. Registered Stockholders. (a) Except as otherwise provided by
-----------------------
law, the Corporation shall be entitled to recognize the exclusive right of a
person who is registered on its books as the owner of shares of capital stock to
receive dividends or other distributions, to vote as such owner, and to hold
liable for calls and assessments a person who is registered on its books as the
owner of shares of its capital stock. The Corporation shall not be bound to
14
<PAGE>
recognize any equitable or legal claim to or interest in such shares on the part
of any other person.
(b) Stockholders are responsible for giving written notice to the
Corporation or the transfer agent and registrar, if any, of any change of name
or address, and failure to do so shall relieve the Corporation, its directors,
officers and agents, and its transfer agent and registrar, if any, of liability
for failure to send notices or pay dividends or other distributions to a name or
address other than the name or address appearing on the stock ledger maintained
by the Corporation or by the transfer agent and registrar, if any.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors
--------------------------------------
may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate claimed to have been lost, stolen or destroyed.
ARTICLE IX.
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the Certificate of
---------
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property, or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
--------
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors may fix a sum which may
be set aside or reserved over and above the paid-in capital of the Corporation
for working capital or as a reserve for any proper purpose, and may, from time
to time, increase, diminish or vary such fund in its absolute judgment and
discretion.
Section 3. Fiscal Year. The fiscal year of the Corporation shall begin on
-----------
June 1 in each calendar year and end on May 31 in the following calendar year.
Section 4. Seal. The corporate seal shall have inscribed thereon the name
----
of the Corporation, the year of its incorporation and the words "Corporate Seal,
Delaware".
15
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
SUNBURST HOSPITALITY CORPORATION
as issuer
---------------------------------
FORM OF
INDENTURE
Dated as of _________, 199_
---------------------------------
[Name of Trustee]
Trustee
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE........................... 1
SECTION 1.1. DEFINITIONS.................................................... 1
SECTION 1.2. OTHER DEFINITIONS.............................................. 6
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.............. 6
SECTION 1.4. RULES OF CONSTRUCTION.......................................... 6
ARTICLE II. THE SECURITIES...................................................... 7
SECTION 2.1. ISSUABLE IN SERIES............................................. 7
SECTION 2.2. ESTABLISHMENT OF TERMS OF SERIES OF SECURITIES................. 7
SECTION 2.3. EXECUTION AND AUTHENTICATION................................... 10
SECTION 2.4. REGISTRAR AND PAYING AGENT..................................... 11
SECTION 2.5. PAYING AGENT TO HOLD MONEY IN TRUST............................ 11
SECTION 2.6. SECURITYHOLDER LISTS........................................... 12
SECTION 2.7. TRANSFER AND EXCHANGE.......................................... 12
SECTION 2.8. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES............... 12
SECTION 2.9. OUTSTANDING SECURITIES......................................... 13
SECTION 2.10. TREASURY SECURITIES........................................... 14
SECTION 2.11. TEMPORARY SECURITIES.......................................... 14
SECTION 2.12. CANCELLATION.................................................. 14
SECTION 2.13. DEFAULTED INTEREST............................................ 14
SECTION 2.14. GLOBAL SECURITIES............................................. 15
SECTION 2.15. CUSIP NUMBERS................................................. 16
ARTICLE III. REDEMPTION......................................................... 16
SECTION 3.1. NOTICE TO TRUSTEE.............................................. 16
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED......................... 16
SECTION 3.3. NOTICE OF REDEMPTION........................................... 17
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION................................. 17
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.................................... 18
SECTION 3.6. SECURITIES REDEEMED IN PART.................................... 18
ARTICLE IV. COVENANTS........................................................... 18
SECTION 4.1. PAYMENT OF PRINCIPAL AND INTEREST.............................. 18
SECTION 4.2. SEC REPORTS.................................................... 18
SECTION 4.3. COMPLIANCE CERTIFICATE......................................... 18
SECTION 4.4. STAY, EXTENSION AND USURY LAWS................................. 19
SECTION 4.5. CORPORATE EXISTENCE............................................ 19
SECTION 4.6. TAXES.......................................................... 19
ARTICLE V. SUCCESSORS........................................................... 19
SECTION 5.1. WHEN COMPANY MAY MERGE, ETC.................................... 19
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.............................. 20
ARTICLE VI. DEFAULTS AND REMEDIES............................................... 20
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 6.1. EVENTS OF DEFAULT................................................... 20
SECTION 6.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.................. 22
SECTION 6.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE..... 23
SECTION 6.4. TRUSTEE MAY FILE PROOFS OF CLAIM.................................... 24
SECTION 6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES......... 25
SECTION 6.6. APPLICATION OF MONEY COLLECTED...................................... 25
SECTION 6.7. LIMITATION ON SUITS................................................. 25
SECTION 6.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST.... 26
SECTION 6.9. RESTORATION OF RIGHTS AND REMEDIES.................................. 26
SECTION 6.10. RIGHTS AND REMEDIES CUMULATIVE..................................... 26
SECTION 6.11. DELAY OR OMISSION NOT WAIVER....................................... 26
SECTION 6.12. CONTROL BY HOLDERS................................................. 27
SECTION 6.13. WAIVER OF PAST DEFAULTS............................................ 27
SECTION 6.14. UNDERTAKING FOR COSTS.............................................. 27
ARTICLE VII. TRUSTEE................................................................. 28
SECTION 7.1. DUTIES OF TRUSTEE................................................... 28
SECTION 7.2. RIGHTS OF TRUSTEE................................................... 29
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE........................................ 30
SECTION 7.4. TRUSTEE'S DISCLAIMER................................................ 30
SECTION 7.5. NOTICE OF DEFAULTS.................................................. 30
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS....................................... 30
SECTION 7.7. COMPENSATION AND INDEMNITY.......................................... 31
SECTION 7.8. REPLACEMENT OF TRUSTEE.............................................. 31
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.................................... 32
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION...................................... 33
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.................. 33
ARTICLE VIII. SATISFACTION AND DISCHARGE; DEFEASANCE................................. 33
SECTION 8.1. SATISFACTION AND DISCHARGE OF INDENTURE............................. 33
SECTION 8.2. APPLICATION OF TRUST FUNDS; INDEMNIFICATION......................... 34
SECTION 8.3. LEGAL DEFEASANCE OF SECURITIES OF ANY SERIES........................ 35
SECTION 8.4. COVENANT DEFEASANCE................................................. 36
SECTION 8.5. REPAYMENT TO COMPANY................................................ 38
ARTICLE IX. AMENDMENTS AND WAIVERS................................................... 38
SECTION 9.1. WITHOUT CONSENT OF HOLDERS.......................................... 38
SECTION 9.2. WITH CONSENT OF HOLDERS............................................. 38
SECTION 9.3. LIMITATIONS......................................................... 39
SECTION 9.4. COMPLIANCE WITH TRUST INDENTURE ACT................................. 39
SECTION 9.5. REVOCATION AND EFFECT OF CONSENTS................................... 40
SECTION 9.6. NOTATION ON OR EXCHANGE OF SECURITIES............................... 40
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 9.7. TRUSTEE PROTECTED............................................ 40
ARTICLE X. MISCELLANEOUS...................................................... 41
SECTION 10.1. TRUST INDENTURE ACT CONTROLS................................ 41
SECTION 10.2. NOTICES..................................................... 41
SECTION 10.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS................. 42
SECTION 10.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.......... 42
SECTION 10.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION............... 42
SECTION 10.6. RULES BY TRUSTEE AND AGENTS................................. 42
SECTION 10.7. LEGAL HOLIDAYS.............................................. 43
SECTION 10.8. NO RECOURSE AGAINST OTHERS.................................. 43
SECTION 10.9. COUNTERPARTS................................................ 43
SECTION 10.10. GOVERNING LAWS............................................. 43
SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.............. 43
SECTION 10.12. SUCCESSORS................................................. 43
SECTION 10.13. SEVERABILITY............................................... 43
SECTION 10.14. TABLE OF CONTENTS, HEADINGS, ETC........................... 44
SECTION 10.15. SECURITIES IN A FOREIGN CURRENCY OR IN ECU................. 44
SECTION 10.16. JUDGMENT CURRENCY.......................................... 44
ARTICLE XI. SINKING FUNDS..................................................... 45
SECTION 11.1. APPLICABILITY OF ARTICLE.................................... 45
SECTION 11.2. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES....... 45
SECTION 11.3. REDEMPTION OF SECURITIES FOR SINKING FUND................... 46
</TABLE>
<PAGE>
SUNBURST HOSPITALITY CORPORATION.
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of __________, 199_
(S) 310(A)(1) ........................................ 7.10
(A)(2) ........................................ 7.10
(A)(3) ........................................ NOT APPLICABLE
(A)(4) ........................................ NOT APPLICABLE
(A)(5) ........................................ 7.10
(B) ........................................ 7.10
(S) 311(A) ........................................ 7.11
(B) ........................................ 7.11
(C) ........................................ NOT APPLICABLE
(S) 312(A) ........................................ 2.6
(B) ........................................ 10.3
(C) ........................................ 10.3
(S) 313(A) ........................................ 7.6
(B)(1) ........................................ 7.6
(B)(2) ........................................ 7.6
(C)(1) ........................................ 7.6
(D) ........................................ 7.6
(S) 314(A) ........................................ 4.2, 10.5
(B) ........................................ NOT APPLICABLE
(C)(1) ........................................ 10.4
(C)(2) ........................................ 10.4
(C)(3) ........................................ NOT APPLICABLE
(D) ........................................ NOT APPLICABLE
(E) ........................................ 10.5
(F) ........................................ NOT APPLICABLE
(S) 315(A) ........................................ 7.1
(B) ........................................ 7.5
(C) ........................................ 7.1
(D) ........................................ 7.1
(E) ........................................ 6.14
(S) 316(A) ........................................ 2.10
(A)(1)(A) ........................................ 6.12
(A)(1)(B) ........................................ 6.13
(B) ........................................ 6.8
(S) 317(A)(1) ........................................ 6.3
(A)(2) ........................................ 6.4
(B) ........................................ 2.5
(S) 318(A) ........................................ 10.1
___________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
Indenture dated as of ___________, 199_ between Sunburst Hospitality
Corporation, a ____________ ("Company"), and [Name of Trustee], a
________________ ("Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its Securities (as
defined below), as herein provided, up to such principal amount as may from time
to time be authorized in or pursuant to one or more resolution of the Board of
Directors or by supplemental indenture.
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Securities issued under
this Indenture.
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"Additional Amounts" means any additional amounts which are required
hereby or by any Security, under circumstances specified herein or therein, to
be paid by the Company in respect of certain taxes imposed on Holders specified
therein 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" (including, with correlative meanings, the terms "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 or by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or Service Agent.
"Authorized Newspaper" means a newspaper in an official language of
the country of publication customarily published at least once a day for at
least five days in each calendar week and of general circulation in the place in
connection with which the term is used. If it shall be impractical in the
opinion of the Trustee to make any publication of any notice required hereby in
an Authorized Newspaper, any publication or other notice in lieu thereof that is
made or given by the Trustee shall constitute a sufficient publication of such
notice.
"Bearer" means anyone in possession from time to time of a Bearer
Security.
"Bearer Security" means any Security, including any interest coupon
appertaining thereto, that does not provide for the identification of the Holder
thereof.
<PAGE>
"Board of Directors" means the Board of Directors of the Company or
any duly authorized committee thereof.
"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 or pursuant to authorization by the Board of Directors
and to be in full force and effect on the date of the certificate (and delivered
to the Trustee, if appropriate).
"Business Day" means, unless otherwise provided by Board Resolution,
Officers' Certificate or supplemental indenture hereto for a particular Series,
any day except a Saturday, Sunday or a legal holiday in The City of New York on
which banking institutions are authorized or required by law, regulation or
executive order to close.
"Company" means the party named as such above until a successor
replaces it pursuant to this Indenture and thereafter means the successor.
"Company Order" means a written order signed in the name of the
Company by two Officers, one of whom must be the Company's principal executive
officer, principal financial officer or principal accounting officer.
"Company Request" means a written request signed in the name of the
Company by its Chairman of the Board, a President or a Vice President, and by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered.
"Debt" of any person as of any date means, without duplication, all
indebtedness of such person in respect of borrowed money, including all
interest, fees and expenses owed in respect thereto (whether or not the recourse
of the lender is to the whole of the assets of such person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means, with respect to the Securities of any Series
issuable or issued in whole or in part in the form of one or more Global
Securities, the person designated as Depository for such Series by the Company,
which Depository shall be a clearing agency registered under the Exchange Act;
and if at any time there is more than one such person, "Depository" as used with
respect to the Securities of any Series shall mean the Depository with respect
to the Securities of such Series.
2
<PAGE>
"Discount Security" means any Security that provides for an amount
less than the stated principal amount thereof to be due and payable upon
declaration of acceleration of the maturity thereof pursuant to Section 6.2.
"Dollars" means the currency of The United States of America.
"ECU" means the European Currency Unit as determined by the Commission
of the European Union.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Foreign Currency" means any currency or currency unit issued by a
government other than the government of The United States of America.
"Foreign Government Obligations" means with respect to Securities of
any Series that are denominated in a Foreign Currency, (i) direct obligations of
the government that issued or caused to be issued such currency for the payment
of which obligations its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by or acting as an agency or instrumentality
of such government the timely payment of which is unconditionally guaranteed as
a full faith and credit obligation by such government, which, in either case
under clauses (i) or (ii), are not callable or redeemable at the option of the
issuer thereof.
"Global Security" or "Global Securities" means a Security or
Securities, as the case may be, in the form established pursuant to Section 2.2
evidencing all or part of a Series of Securities, issued to the Depository for
such Series or its nominee, and registered in the name of such Depository or
nominee.
"Holder" or "Securityholder" means a person in whose name a Security
is registered or the holder of a Bearer Security.
"Indenture" means this Indenture as amended or supplemented from time
to time and shall include the form and terms of particular Series of Securities
established as contemplated hereunder.
"interest" with respect to any Discount Security which by its terms
bears interest only after Maturity, means interest payable after Maturity.
"Maturity," when used with respect to any Security or installment of
principal thereof, means the date on which the principal of such Security or
such installment of principal becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, notice of option to elect repayment or otherwise.
"Officer" means the Chairman of the Board, the President, any Vice-
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
3
<PAGE>
"Officers' Certificate" means a certificate signed by two Officers,
one of whom must be the Company's principal executive officer, principal
financial officer or principal accounting officer.
"Opinion of Counsel" means a written opinion of legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company.
"person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"principal" of a Security means the principal of the Security plus,
when appropriate, the premium, if any, on, and any Additional Amounts in respect
of, the Security.
"Responsible Officer" means any officer of the Trustee in its
Corporate Trust Office and also means, with respect to a particular corporate
trust matter, any other officer to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with a particular subject.
"SEC" means the Securities and Exchange Commission.
"Securities" means the debentures, notes or other debt instruments of
the Company of any Series authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Series" or "Series of Securities" means each series of debentures,
notes or other debt instruments of the Company created pursuant to Sections 2.1
and 2.2 hereof.
"Significant Subsidiary" means (i) any direct or indirect Subsidiary
of the Company 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, or (ii) any group of direct or
indirect Subsidiaries of the Company that, taken together as a group, 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.
"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 as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" of any specified person means any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power for the election of directors of such corporation (irrespective of
whether or not at the time stock of any
4
<PAGE>
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned by such person, or by one or more other Subsidiaries, or by
such person and one or more other Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as amended from time to time, and as in effect on the date of this
Indenture; provided, however, that in the event the Trust Indenture Act of 1939
-------- -------
is amended after such date, "TIA" means, to the extent required by any such
amendment, the Trust Indenture Act as so amended.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this instrument 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, and
if at any time there is more than one such person, "Trustee" as used with
respect to the Securities of any Series shall mean the Trustee with respect to
Securities of that Series.
"U.S. Government Obligations" means securities which 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 The United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by The United States of America, and which in the case of (i)
and (ii) 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 U.S. Government Obligation or a specific
payment of interest on or principal of any such U.S. 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 U.S.
Government Obligation evidenced by such depository receipt.
5
<PAGE>
Section 1.2. Other Definitions.
------------------
DEFINED IN
TERM SECTION
- ---- -------
"Bankruptcy Law" 6.1
"Custodian" 6.1
"Event of Default" 6.1
"Journal" 10.15
"Judgment Currency" 10.16
"Legal Holiday" 10.7
"mandatory sinking fund payment" 11.1
"Market Exchange Rate" 10.15
"New York Banking Day" 10.16
"optional sinking fund payment" 11.1
"Paying Agent" 2.4
"Registrar" 2.4
"Required Currency" 10.16
"Service Agent" 2.4
"successor person" 5.1
Section 1.3. 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:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the Securities means the Company and any
successor obligor upon the Securities.
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
and not otherwise defined herein are used herein as so defined.
Section 1.4. Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) term has the meaning assigned to it;
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(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
(c) references to "generally accepted accounting principles" shall
mean generally accepted accounting principles in effect as of the time when
and for the period as to which such accounting principles are to be
applied;
(d) "or" is not exclusive;
(e) words in the singular include the plural, and in the plural
include the singular; and
(f) provisions apply to successive events and transactions.
ARTICLE II.
THE SECURITIES
Section 2.1. Issuable in Series.
------------------
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is unlimited. The Securities may be issued
in one or more Series. All Securities of a Series shall be identical except as
may be set forth in a Board Resolution, a supplemental indenture or an Officers'
Certificate detailing the adoption of the terms thereof pursuant to the
authority granted under a Board Resolution. In the case of Securities of a
Series to be issued from time to time, the Board Resolution, Officers'
Certificate or supplemental indenture may provide for the method by which
specified terms (such as interest rate, maturity date, record date or date from
which interest shall accrue) are to be determined. Securities may differ
between Series in respect of any matters, provided that all Series of Securities
shall be equally and ratably entitled to the benefits of the Indenture.
Section 2.2. Establishment of Terms of Series of Securities.
----------------------------------------------
At or prior to the issuance of any Securities within a Series, the
following shall be established (as to the Series generally, in the case of
Subsection 2.2.1 and either as to such Securities within the Series or as to the
Series generally in the case of Subsections 2.2.2 through 2.2.22) by a Board
Resolution, a supplemental indenture or an Officers' Certificate pursuant to
authority granted under a Board Resolution:
2.2.1. the title of the Series (which shall distinguish the
Securities of that particular Series from the Securities of any other Series);
2.2.2. the price or prices (expressed as a percentage of the
principal amount thereof) at which the Securities of the Series will be issued;
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2.2.3. any limit upon the aggregate principal amount of the
Securities of the Series which 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 2.7, 2.8, 2.11, 3.6 or 9.6);
2.2.4. the date or dates on which the principal of the Securities
of the Series is payable;
2.2.5. the rate or rates (which may be fixed or variable) per annum
or, if applicable, the method used to determine such rate or rates (including,
but not limited to, any commodity, commodity index, stock exchange index or
financial index) at which the Securities of the Series shall bear interest, if
any, the date or dates from which such interest, if any, shall accrue, the date
or dates on which such interest, if any, shall commence and be payable and any
regular record date for the interest payable on any interest payment date;
2.2.6. the place or places where the principal of and interest, if
any, on the Securities of the Series shall be payable, or the method of such
payment, if by wire transfer, mail or other means;
2.2.7. if applicable, the period or periods within which, the price
or prices at which and the terms and conditions upon which the Securities of the
Series may be redeemed, in whole or in part, at the option of the Company;
2.2.8. the obligation, if any, of the Company to redeem or purchase
the Securities of the Series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods within
which, the price or prices at which and the terms and conditions upon which
Securities of the Series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
2.2.9. the dates, if any, on which and the price or prices at which
the Securities of the Series will be repurchased by the Company at the option of
the Holders thereof and other detailed terms and provisions of such repurchase
obligations;
2.2.10. if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which the Securities of the Series shall
be issuable;
2.2.11. the forms of the Securities of the Series in bearer or fully
registered form (and, if in fully registered form, whether the Securities will
be issuable as Global Securities);
2.2.12. if other than the principal amount thereof, the portion of
the principal amount of the Securities of the Series that shall be payable upon
declaration of acceleration of the maturity thereof pursuant to Section 6.2;
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2.2.13. the currency of denomination of the Securities of the
Series, which may be Dollars or any Foreign Currency, including, but not limited
to, the ECU, and if such currency of denomination is a composite currency other
than the ECU, the agency or organization, if any, responsible for overseeing
such composite currency;
2.2.14. the designation of the currency, currencies or currency
units in which payment of the principal of and interest, if any, on the
Securities of the Series will be made;
2.2.15. if payments of principal of or interest, if any, on the
Securities of the Series are to be made in one or more currencies or currency
units other than that or those in which such Securities are denominated, the
manner in which the exchange rate with respect to such payments will be
determined;
2.2.16. the manner in which the amounts of payment of principal of
or interest, if any, on the Securities of the Series will be determined, if such
amounts may be determined by reference to an index based on a currency or
currencies or by reference to a commodity, commodity index, stock exchange index
or financial index;
2.2.17. the provisions, if any, relating to any security provided
for the Securities of the Series;
2.2.18. any addition to or change in the Events of Default which
applies to any Securities of the Series and any change in the right of the
Trustee or the requisite Holders of such Securities to declare the principal
amount thereof due and payable pursuant to Section 6.2;
2.2.19. any addition to or change in the covenants set forth in
Articles IV or V which applies to Securities of the Series;
2.2.20. the terms and conditions, if any, upon which the Securities
shall be exchanged for or converted into common stock or preferred stock of the
Company;
2.2.21. any other terms of the Securities of the Series (which terms
shall not be inconsistent with the provisions of this Indenture, except as
permitted by Section 9.1, but which may modify or delete any provision of this
Indenture insofar as it applies to such Series);
2.2.22. any depositories, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to Securities of such
Series if other than those appointed herein; and
2.2.23. whether the Securities rank as senior subordinated
Securities or subordinated Securities or any combination thereof.
All Securities of any one Series need not be issued at the same time
and may be issued from time to time, consistent with the terms of this
Indenture, if so provided by or pursuant to the Board Resolution, supplemental
indenture or Officers' Certificate referred to above, and the authorized
principal amount of any Series may not be increased to provide for issuances of
additional Securities of such Series, unless otherwise provided in such Board
Resolution, supplemental indenture or Officers' Certificate.
9
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Section 2.3. Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall at any time, and from time to time, authenticate
Securities for original issue in the principal amount provided in the Board
Resolution, supplemental indenture hereto or Officers' Certificate, upon receipt
by the Trustee of a Company Order. Such Company Order may authorize
authentication and delivery pursuant to oral or electronic instructions from the
Company or its duly authorized agent or agents, which oral instructions shall be
promptly confirmed in writing. Each Security shall be dated the date of its
authentication unless otherwise provided by a Board Resolution, a supplemental
indenture hereto or an Officers' Certificate.
The aggregate principal amount of Securities of any Series outstanding
at any time may not exceed any limit upon the maximum principal amount for such
Series set forth in the Board Resolution, supplemental indenture hereto or
Officers' Certificate delivered pursuant to Section 2.2, except as provided in
Section 2.8.
Prior to the issuance of Securities of any Series, the Trustee shall
have received and (subject to Section 7.2) shall be fully protected in relying
on: (a) the Board Resolution, supplemental indenture hereto or Officers'
Certificate establishing the form of the Securities of that Series or of
Securities within that Series and the terms of the Securities of that Series or
of Securities within that Series, (b) an Officers' Certificate complying with
Section 10.4, and (c) an Opinion of Counsel complying with Section 10.4.
The Trustee shall have the right to decline to authenticate and
deliver any Securities of such Series: (a) if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken; or (b) if the
Trustee in good faith by its board of directors or trustees, executive committee
or a trust committee of directors and/or vice-presidents shall determine that
such action would expose the Trustee to personal liability to Holders of any
then outstanding Series of Securities.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities 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.
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Section 2.4. Registrar and Paying Agent.
--------------------------
The Company shall maintain, with respect to each Series of Securities,
at the place or places specified with respect to such Series pursuant to Section
2.2, an office or agency where Securities of such Series may be presented or
surrendered for payment ("Paying Agent"), where Securities of such Series may be
surrendered for registration of transfer or exchange ("Registrar") and where
notices and demands to or upon the Company in respect of the Securities of such
Series and this Indenture may be served ("Service Agent"). The Registrar shall
keep a register with respect to each Series of Securities and to their transfer
and exchange. The Company will give prompt written notice to the Trustee of the
name and address, and any change in the name or address, of each Registrar,
Paying Agent or Service Agent. If at any time the Company shall fail to
maintain any such required Registrar, Paying Agent or Service Agent or shall
fail to furnish the Trustee with the name and address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more co-
registrars, additional paying agents or additional service agents 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
obligations to maintain a Registrar, Paying Agent and Service Agent in each
place so specified pursuant to Section 2.2 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 name or address of any
such co-registrar, additional paying agent or additional service agent. The
term "Registrar" includes any co-registrar; the term "Paying Agent" includes any
additional paying agent; and the term "Service Agent" includes any additional
service agent.
The Company hereby appoints the Trustee the initial Registrar, Paying
Agent and Service Agent for each Series unless another Registrar, Paying Agent
or Service Agent, as the case may be, is appointed prior to the time Securities
of that Series are first issued.
Section 2.5. 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
Securityholders of any Series of Securities, or the Trustee, all money held by
the Paying Agent for the payment of principal of or interest on the Series of
Securities, and will notify the Trustee of any default by the Company 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 or
a Subsidiary) shall have no further liability for the money. If the Company or
a Subsidiary acts as Paying Agent, it shall segregate and hold in a
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separate trust fund for the benefit of Securityholders of any Series of
Securities all money held by it as Paying Agent.
Section 2.6. Securityholder 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
Securityholders of each Series of Securities and shall otherwise comply with TIA
(S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to
the Trustee at least ten 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
Securityholders of each Series of Securities.
Section 2.7. Transfer and Exchange.
---------------------
Where Securities of a Series are presented to the Registrar or a co-
registrar with a request to register a transfer or to exchange them for an equal
principal amount of Securities of the same Series, the Registrar shall register
the transfer or make the exchange if its requirements for such transactions are
met. To permit registrations of transfers and exchanges, the Trustee shall
authenticate Securities at the Registrar's request. No service charge shall be
made for any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer tax or similar governmental charge
payable upon exchanges pursuant to Sections 2.11, 3.6 or 9.6).
Neither the Company nor the Registrar shall be required (a) to issue,
register the transfer of, or exchange Securities of any Series for the period
beginning at the opening of business fifteen days immediately preceding the
mailing of a notice of redemption of Securities of that Series selected for
redemption and ending at the close of business on the day of such mailing, or
(b) to register the transfer of or exchange Securities of any Series selected,
called or being called for redemption as a whole or the portion being redeemed
of any such Securities selected, called or being called for redemption in part.
Section 2.8. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same Series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
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 has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
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authenticate and make available for delivery, in lieu of any such destroyed,
lost or stolen Security, a new Security of the same Series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
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 issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security 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 duly issued hereunder.
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.
Section 2.9. Outstanding Securities.
----------------------
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest on a Global Security
effected by the Trustee in accordance with the provisions hereof and those
described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.8, it ceases to be
outstanding until the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds on the Maturity of Securities of a Series money
sufficient to pay such Securities payable on that date, then on and after that
date such Securities of the Series cease to be outstanding and interest on them
ceases to accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
In determining whether the Holders of the requisite principal amount
of outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, the principal amount of a
Discount Security that shall be deemed to be
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outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the Maturity thereof pursuant to Section 6.2.
Section 2.10. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities of a Series have concurred in any request, demand, authorization,
direction, notice, consent or waiver Securities of a Series owned by the Company
or an Affiliate shall be disregarded, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
request, demand, authorization, direction, notice, consent or waiver only
Securities of a Series that the Trustee knows are so owned shall be so
disregarded.
Section 2.11. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon a Company
Order. Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee upon request shall authenticate definitive Securities of the same
Series and date of maturity in exchange for temporary Securities. Until so
exchanged, temporary securities shall have the same rights under this Indenture
as the definitive Securities.
Section 2.12. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for transfer,
exchange, payment, replacement or cancellation and shall destroy such canceled
Securities (subject to the record retention requirement of the Exchange Act) and
deliver a certificate of such destruction to the Company, unless the Company
otherwise directs. The Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for cancellation.
Section 2.13. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on a Series of
Securities, it shall pay the defaulted interest, plus, to the extent permitted
by law, any interest payable on the defaulted interest, to the persons who are
Securityholders of the Series on a subsequent special record date. The Company
shall fix the record date and payment date. At least 30 days before the record
date, the Company shall mail to the Trustee and to each Securityholder of the
Series a notice that states the record date, the payment date and the amount of
interest to be paid. The Company may pay defaulted interest in any other lawful
manner.
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Section 2.14. Global Securities.
-----------------
2.14.1. Terms of Securities. A Board Resolution, a supplemental
-------------------
indenture hereto or an Officers' Certificate shall establish whether the
Securities of a Series shall be issued in whole or in part in the form of one or
more Global Securities and the Depository for such Global Security or
Securities.
2.14.2. Transfer and Exchange. Notwithstanding any provisions to the
---------------------
contrary contained in Section 2.7 of the Indenture and in addition thereto, any
Global Security shall be exchangeable pursuant to Section 2.7 of the Indenture
for Securities registered in the names of Holders other than the Depository for
such Security or its nominee only if (i) such Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a clearing agency
registered under the Exchange Act, and, in either case, the Company fails to
appoint a successor Depository within 90 days of such event, (ii) the Company
executes and delivers to the Trustee an Officers' Certificate to the effect that
such Global Security shall be so exchangeable or (iii) an Event of Default with
respect to the Securities represented by such Global Security shall have
happened and be continuing. Any Global Security that is exchangeable pursuant
to the preceding sentence shall be exchangeable for Securities registered in
such names as the Depository shall direct in writing in an aggregate principal
amount equal to the principal amount of the Global Security with like tenor and
terms.
Except as provided in this Section 2.14.2, a Global Security may not
be transferred except as a whole by the Depository with respect to such Global
Security to a nominee of such Depository, by a nominee of such Depository to
such Depository or another nominee of such Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such a successor
Depository.
2.14.3. Legend. Any Global Security issued hereunder shall bear a
------
legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of the
Depository or a nominee of the Depository. This Security is exchangeable for
Securities registered in the name of a person other than the Depository or its
nominee only in the limited circumstances described in the Indenture, and may
not be transferred except as a whole by the Depository to a nominee of the
Depository, by a nominee of the Depository to the Depository or another nominee
of the Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such a successor Depository."
2.14.4. Acts of Holders. The Depository, as a Holder, may appoint
---------------
agents and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a Holder
is entitled to give or take under the Indenture.
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2.14.5. Payments. Notwithstanding the other provisions of this
--------
Indenture, unless otherwise specified as contemplated by Section 2.2, payment of
the principal of and interest, if any, on any Global Security shall be made to
the Holder thereof.
2.14.6. Consents, Declaration and Directions. Except as provided in
------------------------------------
Section 2.14.5, the Company, the Trustee and any Agent shall treat a person as
the Holder of such principal amount of outstanding Securities of such Series
represented by a Global Security as shall be specified in a written statement of
the Depositary with respect to such Global Security, for purposes of obtaining
any consents, declarations, waivers or directions required to be given by the
Holders pursuant to this Indenture.
Section 2.15. CUSIP Numbers.
--------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
--------
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other elements of
identification printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
ARTICLE III.
REDEMPTION
Section 3.1. Notice to Trustee.
-----------------
The Company may, with respect to any Series of Securities, reserve the
right to redeem and pay the Series of Securities or may covenant to redeem and
pay the Series of Securities or any part thereof prior to the Stated Maturity
thereof at such time and on such terms as provided for in such Securities. If a
Series of Securities is redeemable and the Company wants or is obligated to
redeem prior to the Stated Maturity thereof all or part of the Series of
Securities pursuant to the terms of such Securities, it shall notify the Trustee
of the redemption date and the principal amount of Series of Securities to be
redeemed. The Company shall give the notice at least 45 days before the
redemption date (or such shorter notice as may be acceptable to the Trustee).
Section 3.2. Selection of Securities to be Redeemed.
--------------------------------------
Unless otherwise indicated for a particular Series by a Board
Resolution, a supplemental indenture or an Officers' Certificate, if less than
all the Securities of a Series are to be redeemed, the Trustee shall select the
Securities of the Series to be redeemed in any manner that the Trustee deems
fair and appropriate. The Trustee shall make the selection from Securities of
the Series outstanding not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities of the Series that
have denominations larger
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than $1,000. Securities of the Series and portions of them it selects shall be
in amounts of $1,000 or whole multiples of $1,000 or, with respect to Securities
of any Series issuable in other denominations pursuant to Section 2.2.10, the
minimum principal denomination for each Series and integral multiples thereof.
Provisions of this Indenture that apply to Securities of a Series called for
redemption also apply to portions of Securities of that Series called for
redemption.
Section 3.3. Notice of Redemption.
--------------------
Unless otherwise indicated for a particular Series by Board
Resolution, a supplemental indenture hereto or an Officers' Certificate, at
least 30 days but not more than 60 days before a redemption date, the Company
shall mail a notice of redemption by first-class mail to each Holder whose
Securities are to be redeemed and if any Bearer Securities are outstanding,
publish on one occasion a notice in an Authorized Newspaper.
The notice shall identify the Securities of the Series to be redeemed
and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities of the Series called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(e) that interest on Securities of the Series called for redemption
ceases to accrue on and after the redemption date; and
(f) any other information as may be required by the terms of the
particular Series or the Securities of a Series being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
Section 3.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed or published as provided in
Section 3.3, Securities of a Series called for redemption become due and payable
on the redemption date and at the redemption price. A notice of redemption may
not be conditional. Upon surrender to the Paying Agent, such Securities shall
be paid at the redemption price plus accrued interest to the redemption date.
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Section 3.5. Deposit of Redemption Price.
---------------------------
On or before the redemption date, the Company shall deposit with the
Paying Agent money sufficient to pay the redemption price of and accrued
interest, if any, on all Securities to be redeemed on that date.
Section 3.6. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security of the same Series and the same
maturity equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV.
COVENANTS
Section 4.1. Payment of Principal and Interest.
---------------------------------
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 interest, if any, on the Securities of that Series in accordance with the
terms of such Securities and this Indenture.
Section 4.2. SEC Reports.
-----------
The Company shall deliver to the Trustee within 15 days after it files
them with the SEC copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The
Company also shall comply with the other provisions of TIA (S) 314(a).
Section 4.3. Compliance Certificate.
----------------------
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, 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 the Company 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 knowledge the Company 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 may have knowledge).
The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Default or Event of
Default, an Officers'
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Certificate specifying such Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto.
Section 4.4. Stay, Extension and Usury Laws.
------------------------------
The Company covenants (to the extent that it 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 or the Securities; and the Company (to the
extent it may lawfully do so) hereby expressly waives 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.
Section 4.5. Corporate Existence.
-------------------
Subject to Article V, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Significant
Subsidiary in accordance with the respective organizational documents of each
Significant Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and its Significant Subsidiaries; provided, however,
-------- -------
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any Significant
Subsidiary, if the Board of Directors 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.
Section 4.6. Taxes.
-----
The Company shall, and shall cause each of its Significant
Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies, except as contested in good faith and by appropriate
proceedings.
ARTICLE V.
SUCCESSORS
Section 5.1. When Company May Merge, Etc.
---------------------------
The Company shall not consolidate with or merge into, or convey,
transfer or lease all or substantially all of its properties and assets to, any
person (a "successor person"), and may not permit any person to merge into, or
convey, transfer or lease its properties and assets substantially as an
entirety to, the Company, unless:
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(a) the successor person (if any) is a corporation, partnership, trust
or other entity organized and validly existing under the laws of any U.S.
domestic jurisdiction and expressly assumes the Company's obligations on
the Securities and under this Indenture and
(b) immediately after giving effect to the transaction, no Default or
Event of Default, shall have occurred and be continuing.
The Company 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 stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
Section 5.2. Successor Person Substituted.
-----------------------------
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1, the successor person formed by such consolidation
or into or with which the Company is merged or to which such sale, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor person has been named as the Company
herein; provided, however, that the predecessor Company in the case of a sale,
-------- -------
lease, conveyance or other disposition shall not be released from the obligation
to pay the principal of and interest, if any, on the Securities.
ARTICLE VI.
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein with respect to Securities of
any Series, means any one of the following events, unless in the establishing
Board Resolution, supplemental indenture or Officers' Certificate, it is
provided that such Series shall not have the benefit of said Event of Default:
(a) default in the payment of any interest on any Security of that
Series when it becomes due and payable, and continuance of such default for
a period of 30 days (unless the entire amount of such payment is deposited
by the Company with the Trustee or with a Paying Agent prior to the
expiration of such period of 30 days); or
(b) default in the payment of the principal of any Security of that
Series when such payment becomes due and payable, at its Maturity, upon
redemption or otherwise; or
20
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(c) default in the deposit of any sinking fund payment, when and as
due in respect of any Security of that Series; or
(d) default in the performance or breach of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty that
has been included in this Indenture solely for the benefit of Series of
Securities other than that Series), which default continues uncured for a
period of 30 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 aggregate 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
(e) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is unable to pay its debts as the same become
due; or
(f) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of its
property, or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries,
and the order or decree remains unstayed and in effect for 60 days; or
(g) any other Event of Default provided with respect to Securities of
that Series, which is specified in a Board Resolution, a supplemental
indenture hereto or an Officers' Certificate, in accordance with Section
2.2.18.
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The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 6.2. 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 (other than an Event of Default as to
the Company referred to in Section 6.1(e) or (f)) then 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 amount (or, if
any Securities of that Series are Discount Securities, such portion of the
principal amount as may be specified in the terms of such Securities) of and
accrued and unpaid interest, if any, on all of 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 Holders), and upon any such declaration such principal
amount (or specified amount) and accrued and unpaid interest, if any, shall
become immediately due and payable. If an Event of Default specified in Section
6.1(e) or (f) shall occur as to the Company, the principal amount (or specified
amount) of and accrued and unpaid interest, if any, on all outstanding
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to
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, 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:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest, if any, on all Securities of that
Series,
(ii) the principal of any Securities of that Series which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate or rates prescribed therefor in such
Securities,
(iii) to the extent that payment of such interest is lawful,
interest upon any overdue principal and overdue interest at the rate
or rates prescribed therefor in such Securities, and
(iv) 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
22
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(b) all Events of Default with respect to Securities of that Series,
other than the non-payment of the principal of Securities of that Series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 6.13.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
-------
The Company covenants that if
(a) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of principal of any Security at the
Maturity thereof, or
(c) default is made in the deposit of any sinking fund payment when
and as due by the terms of a Security,
then, the Company will, upon demand of the Trustee, pay to it, for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal or any
overdue interest, at the rate or rates prescribed therefor 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, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or deemed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to any 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 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.
23
<PAGE>
Section 6.4. 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
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 or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal and
interest 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
(b) 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 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 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.
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 Securities
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.
Section 6.5. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities 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 in respect of which such
judgment has been recovered.
24
<PAGE>
Section 6.6. 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 interest,
upon presentation of the Securities 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 under Section
7.7; and
Second: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities 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 amounts due and payable on such
Securities for principal and interest, respectively; and
Third: To the Company.
Section 6.7. Limitation on Suits.
-------------------
No Holder of any Security of any Series 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
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
Series;
(b) 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;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) 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 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.
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Section 6.8. Unconditional Right of Holders to Receive Principal and
-------------------------------------------------------
Interest.
--------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Security on
the Stated Maturity or Stated Maturities expressed in such Security (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.
Section 6.9. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder 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, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
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.
Section 6.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.8, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders 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.
Section 6.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities
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, as the case
may be.
Section 6.12. Control by Holders.
------------------
The Holders of 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
26
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(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer of the Trustee, determine that the
proceeding so directed would involve the Trustee in personal liability.
Section 6.13. 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 waive any past Default hereunder with respect to such
Series and its consequences, except a Default in the payment of the principal of
or interest on any Security of such Series (provided, however, that the Holders
of a majority in principal amount of the outstanding Securities of any Series
may rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration). 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.
Section 6.14. 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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an 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 litigant 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
Company, 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 of any Series, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of or interest on
any Security on or after the Stated Maturity or Stated Maturities expressed in
such Security (or, in the case of redemption, on the redemption date).
27
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ARTICLE VII.
TRUSTEE
Section 7.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise 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.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(ii) 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 Officers'
Certificates or Opinions of Counsel furnished to the Trustee and
conforming to the requirements of this Indenture; however, in the case
-------
of any such Officers' Certificates or Opinions of Counsel which by any
provisions hereof are specifically required to be furnished to the
Trustee, the Trustee shall examine such Officers' Certificates and
Opinions of Counsel to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b)
of this Section.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it with respect to
Securities of any Series in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
outstanding Securities of such Series relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Securities of such Series.
28
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(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraph (a), (b) and (c) of this Section.
(e) 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.
(f) 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.
(g) No provision of this Indenture shall require the Trustee to risk
its own funds or otherwise incur any financial liability in the performance
of any of its duties, 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 is not reasonably assured to it.
(h) The Paying Agent, the Registrar and any authenticating agent shall
be entitled to the protections, immunities and standard of care as are set
forth in paragraphs (a), (b) and (c) of this Section with respect to the
Trustee.
Section 7.2. Rights of Trustee.
-----------------
(a) The Trustee may rely on 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.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. 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.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care. No
Depository shall be deemed an agent of the Trustee and the Trustee shall
not be responsible for any act or omission by any Depository.
(d) 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.
(e) 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.
29
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(f) 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 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.
Section 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee is also subject to Sections 7.10
and 7.11.
Section 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its authentication.
Section 7.5. Notice of Defaults.
------------------
If a Default or Event of Default occurs and is continuing with respect
to the Securities of any Series and if it is known to a Responsible Officer of
the Trustee, the Trustee shall mail to each Securityholder of the Securities of
that Series and, if any Bearer Securities are outstanding, publish on one
occasion in an Authorized Newspaper, notice of a Default or Event of Default
within 90 days after it occurs or, if later, after a Responsible Officer of the
Trustee has knowledge of such Default or Event of Default. Except in the case
of a Default or Event of Default in payment of principal of or interest on any
Security of any Series, the Trustee may withhold the notice if and so long as
its corporate trust committee or a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of
Securityholders of that Series.
Section 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after May 15 in each year, the Trustee shall transmit
by mail to all Securityholders, as their names and addresses appear on the
register kept by the Registrar and, if any Bearer Securities are outstanding,
publish in an Authorized Newspaper, a brief report dated as of such May 15, in
accordance with, and to the extent required under, TIA (S) 313.
A copy of each report at the time of its mailing to Securityholders of
any Series shall be filed with the SEC and each stock exchange on which the
Securities of that Series are listed. The Company shall promptly notify the
Trustee when Securities of any Series are listed on any stock exchange.
30
<PAGE>
Section 7.7. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee (including the cost of
defending itself) against any loss, liability or expense incurred by it except
as set forth in the next paragraph in the performance of its duties under this
Indenture as Trustee or Agent. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and 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. This indemnification shall
apply to officers, directors, employees, shareholders and agents of the Trustee.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee or by any officer, director, employee,
shareholder or agent of the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities of any Series on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Securities of that Series.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8. 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 with respect to the Securities of one or more
Series by so notifying the Company. The Holders of a majority in principal
amount of the Securities of any Series may remove the Trustee with respect to
that Series by so notifying the Trustee and the Company. The Company may remove
the Trustee with respect to Securities of one or more Series if:
(a) the Trustee fails to comply with Section 7.10;
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(b) 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;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
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 Securities may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee with respect to the Securities of any one or
more Series does not take office within 60 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company or the Holders of at
least 10% in principal amount of the Securities of the applicable Series may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee with respect to the Securities of any one or more
Series fails to comply with Section 7.10, any Securityholder of the applicable
Series 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. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee subject to the lien provided for in Section 7.7, 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
with respect to each Series of Securities for which it is acting as Trustee
under this Indenture. A successor Trustee shall mail a notice of its succession
to each Securityholder of each such Series and, if any Bearer Securities are
outstanding, publish such notice on one occasion in an Authorized Newspaper.
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 with respect to expenses and liabilities incurred by it
prior to such replacement.
Section 7.9. Successor Trustee by Merger, etc.
--------------------------------
If the Trustee consolidates with, 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.
Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee shall always have a
combined capital and surplus of at least
32
<PAGE>
$25,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VIII.
SATISFACTION AND DISCHARGE; DEFEASANCE
Section 8.1. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Order cease to be of further effect
(except as hereinafter provided in this Section 8.1), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated and delivered
(other than Securities that have been destroyed, lost or stolen and
that have been replaced or paid) have been delivered to the Trustee
for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee
for cancellation
(1) have become due and payable, or
(2) will become due and payable at their Stated
Maturity within one year, or
(3) 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, or
(4) are deemed paid and discharged pursuant to Section
8.3, as applicable;
and the Company, in the case of (1), (2) or (3) above, has deposited or caused
to be deposited with the Trustee as trust funds in trust an amount sufficient
for the purpose of paying and discharging the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case of Securities
which
33
<PAGE>
have become due and payable on or prior to the date of such deposit) or to the
Stated Maturity or redemption date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) 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 have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 7.7, and, if money shall
have been deposited with the Trustee pursuant to clause (a) of this Section, the
provisions of Sections 2.4, 2.7, 2.8, 8.1 8.2 and 8.5 shall survive.
Section 8.2. Application of Trust Funds; Indemnification.
-------------------------------------------
(a) Subject to the provisions of Section 8.5, all money deposited with
the Trustee pursuant to Section 8.1, all money and U.S. Government
Obligations or Foreign Government Obligations deposited with the Trustee
pursuant to Section 8.3 or 8.4 and all money received by the Trustee in
respect of U.S. Government Obligations or Foreign Government Obligations
deposited with the Trustee pursuant to Section 8.3 or 8.4, shall be held in
trust and applied by it, in accordance with the provisions of the
Securities 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 interest for whose payment such money has been deposited with
or received by the Trustee or to make mandatory sinking fund payments or
analogous payments as contemplated by Sections 8.3 or 8.4.
(b) The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against U.S. Government
Obligations or Foreign Government Obligations deposited pursuant to
Sections 8.3 or 8.4 or the interest and principal received in respect of
such obligations other than any payable by or on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time
upon Company Request any U.S. Government Obligations or Foreign Government
Obligations or money held by it as provided in Sections 8.3 or 8.4 which,
in the opinion of a nationally recognized firm of independent certified
public accountants expressed in a written certification thereof delivered
to the Trustee, are then in excess of the amount thereof which then would
have been required to be deposited for the purpose for which such U.S.
Government Obligations or Foreign Government Obligations or money were
deposited or received. This provision shall not authorize the sale by the
Trustee of any U.S. Government Obligations or Foreign Government
Obligations held under this Indenture.
34
<PAGE>
Section 8.3. Legal Defeasance of Securities of any Series.
--------------------------------------------
Unless this Section 8.3 is otherwise specified, pursuant to Section
2.2.20, to be inapplicable to Securities of any Series, the Company shall be
deemed to have paid and discharged the entire indebtedness on all the
outstanding Securities of such Series on the 91st day after the date of the
deposit referred to in subparagraph (d) hereof, and the provisions of this
Indenture, as it relates to such outstanding Securities of such Series, shall no
longer be in effect (and the Trustee, at the expense of the Company, shall, at
Company Request, execute proper instruments acknowledging the same), except as
to:
(a) the rights of Holders of Securities of such Series to receive,
from the trust funds described in subparagraph (d) hereof, (i) payment of
the principal of and each installment of principal of and interest on the
outstanding Securities of such Series on the Stated Maturity of such
principal or installment of principal or interest and (ii) the benefit of
any mandatory sinking fund payments applicable to the Securities of such
Series on the day on which such payments are due and payable in accordance
with the terms of this Indenture and the Securities of such Series;
(b) the provisions of Sections 2.4, 2.7, 2.8, 8.2, 8.3 and 8.5; and
(c) the rights, powers, trust and immunities of the Trustee hereunder;
provided that, the following conditions shall have been satisfied:
(d) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee 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 (i) in
the case of Securities of such Series denominated in Dollars, cash in
Dollars (or such other money or currencies as shall then be legal tender in
the United States) and/or U.S. Government Obligations, or (ii) in the case
of Securities of such Series denominated in a Foreign Currency (other than
a composite currency), money and/or Foreign Government Obligations, which
through the payment of interest and principal in respect thereof, in
accordance with their terms, will provide (and without reinvestment and
assuming no tax liability will be imposed on such Trustee), not later than
one day before the due date of any payment of money, an amount in cash,
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 each installment of principal
(including mandatory sinking fund or analogous payments) of and interest,
if any, on all the Securities of such Series on the dates such installments
of interest or principal are due;
(e) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
35
<PAGE>
(f) no Default or Event of Default with respect to the Securities of
such Series shall have occurred and be continuing on the date of such
deposit or during the period ending on the 91st day after such date;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel to the effect 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 of Counsel shall
confirm that, the Holders of the Securities of such Series will not
recognize income, gain or loss for Federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount and in the same manner and at the same times
as would have been the case if such deposit, defeasance and discharge had
not occurred;
(h) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Securities of such Series over any
other creditors of the company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company;
(i) such deposit shall not result in the trust arising from such
deposit constituting an investment company (as defined in the Investment
Company Act of 1940, as amended), or such trust shall be qualified under
such Act or exempt from regulation thereunder; and
(j) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the defeasance contemplated by this
Section have been complied with.
Section 8.4. Covenant Defeasance.
-------------------
Unless this Section 8.4 is otherwise specified pursuant to Section
2.2.20 to be inapplicable to Securities of any Series, on and after the 91st day
after the date of the deposit referred to in subparagraph (a) hereof, the
Company may omit to comply with any term, provision or condition set forth under
Sections 4.2, 4.3, 4.4, 4.5, 4.6, and 5.1 as well as any additional covenants
contained in a supplemental indenture hereto for a particular Series of
Securities or a Board Resolution or an Officers' Certificate delivered pursuant
to Section 2.2.20 (and the failure to comply with any such covenants shall not
constitute a Default or Event of Default under Section 6.1), with respect to the
Securities of such Series, provided that the following conditions shall have
been satisfied:
(a) With reference to this Section 8.4, the Company has deposited or
caused to be irrevocably deposited (except as provided in Section 8.2(c))
with the Trustee as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of
36
<PAGE>
the Holders of such Securities (i) in the case of Securities of such Series
denominated in Dollars, cash in Dollars (or such other money or currencies
as shall then be legal tender in the United States) and/or U.S. Government
Obligations, or (ii) in the case of Securities of such Series denominated
in a Foreign Currency (other than a composite currency), money and/or
Foreign Government Obligations, which through the payment of interest and
principal in respect thereof, in accordance with their terms, will provide
(and without reinvestment and assuming no tax liability will be imposed on
such Trustee), not later than one day before the due date of any payment of
money, an amount in cash, sufficient, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, to pay principal
and interest, if any, on and any mandatory sinking fund in respect of the
Securities of such Series on the dates such installments of interest or
principal are due;
(b) Such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(c) No Default or Event of Default with respect to the Securities of
such Series shall have occurred and be continuing on the date of such
deposit or during the period ending on the 91st day after such date;
(d) the Company shall have delivered to the Trustee an Opinion of
Counsel confirming that Holders of the Securities of such Series will not
recognize income, gain or loss for federal income tax purposes as a result
of such deposit and 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 deposit and defeasance had not occurred;
(e) the Company shall have delivered to the Trustee an Officers'
Certificate stating the deposit was not made by the Company with the intent
of preferring the Holders of the Securities of such Series over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company; and
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the defeasance contemplated by
this Section have been complied with.
Section 8.5. Repayment to Company.
--------------------
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal and interest that remains
unclaimed for two years. After that, Securityholders entitled to the money must
look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person.
37
<PAGE>
ARTICLE IX.
AMENDMENTS AND WAIVERS
Section 9.1. Without Consent of Holders.
--------------------------
The Company and the Trustee may amend or supplement this Indenture or
the Securities of one or more Series without the consent of any Securityholder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article V;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(d) to make any change that does not adversely affect the rights of
any Securityholder;
(e) to provide for the issuance of and establish the form and terms
and conditions of Securities of any Series as permitted by this Indenture;
(f) 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
(g) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Section 9.2. With Consent of Holders.
-----------------------
The Company and the Trustee may enter into a supplemental indenture
with the written consent of the Holders of at least a majority in principal
amount of the outstanding Securities of each Series affected by such
supplemental indenture (including consents obtained in connection with a tender
offer or exchange offer for the Securities of such Series), for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Securityholders of each such Series. Except as
provided in Section 6.13, the Holders of at least a majority in principal amount
of the outstanding Securities of each Series affected by such waiver by notice
to the Trustee (including consents obtained in connection with a tender offer or
exchange offer for the Securities of such Series) may waive compliance by the
Company with any provision of this Indenture or the Securities with respect to
such Series.
It shall not be necessary for the consent of the Holders of Securities
under this Section 9.2 to approve the particular form of any proposed
supplemental indenture or waiver, but
38
<PAGE>
it shall be sufficient if such consent approves the substance thereof. After a
supplemental indenture or waiver under this section becomes effective, the
Company shall mail to the Holders of Securities affected thereby and, if any
Bearer Securities affected thereby are outstanding, publish on one occasion in
an Authorized Newspaper, a notice briefly describing the supplemental indenture
or waiver. Any failure by the Company to mail or publish such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture or waiver.
Section 9.3. Limitations.
-----------
Without the consent of each Securityholder affected, an amendment or
waiver may not:
(a) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the rate of or change the time for payment of interest
(including default interest) on any Security;
(c) reduce the principal or change the Stated Maturity of any Security
or reduce the amount of, or postpone the date fixed for, the payment of any
sinking fund or analogous obligation;
(d) reduce the principal amount of Discount Securities payable upon
acceleration of the maturity thereof;
(e) waive a Default or Event of Default in the payment of the
principal of or interest, if any, on any Security (except a rescission of
acceleration of the Securities of any Series by the Holders of at least a
majority in principal amount of the outstanding Securities of such Series
and a waiver of the payment default that resulted from such acceleration);
(f) make the principal of or interest, if any, on any Security payable
in any currency other than that stated in the Security;
(g) make any change in Sections 6.8, 6.13, 9.3 (this sentence), 10.15
or 10.16; or
(h) waive a redemption payment with respect to any Security or change
any of the provisions with respect to the redemption of any Securities.
Section 9.4. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Securities of one or more
Series shall be set forth in a supplemental indenture hereto that complies with
the TIA as then in effect.
39
<PAGE>
Section 9.5. Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security if the Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
Any amendment or waiver once effective shall bind every Securityholder
of each Series affected by such amendment or waiver unless it is of the type
described in any of clauses (a) through (g) of Section 9.3. In that case, the
amendment or waiver shall bind each Holder of a Security who has consented to it
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
Section 9.6. Notation on or Exchange of Securities.
-------------------------------------
The Trustee may place an appropriate notation about an amendment or
waiver on any Security of any Series thereafter authenticated. The Company in
exchange for Securities of that Series may issue and the Trustee shall
authenticate upon request new Securities of that Series that reflect the
amendment or waiver.
Section 9.7. Trustee Protected.
-----------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 7.1) 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 shall sign all
supplemental indentures, except that the Trustee need not sign any supplemental
indenture that adversely affects its rights.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required or deemed to be included in this
Indenture by the TIA, such required or deemed provision shall control.
40
<PAGE>
Section 10.2. 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:
if to the Company:
Sunburst Hospitality Corporation
10770 Columbia Pike
Silver Spring, MD 20901
Attention: James MacCuthcheon
if to the Trustee:
[Name of Trustee]
[Address]
_______________________
_______________________
Attention: ______________
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar and,
if any Bearer Securities are outstanding, published in an Authorized Newspaper.
Failure to mail a notice or communication to a Securityholder of any Series or
any defect in it shall not affect its sufficiency with respect to other
Securityholders of that or any other Series.
If a notice or communication is mailed or published in the manner
provided above, within the time prescribed, it is duly given, whether or not the
Securityholder receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 10.3. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders of any Series may communicate pursuant to TIA (S)
312(b) with other Securityholders of that Series or any other Series with
respect to their rights under this Indenture or the Securities of that Series or
all Series. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
Section 10.4. 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:
41
<PAGE>
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 10.5. 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 TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the person making such certificate or opinion has
read such covenant or condition;
(b) 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;
(c) 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
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
Section 10.6. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or a meeting of
Securityholders of one or more Series. Any Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 10.7. Legal Holidays.
--------------
Unless otherwise provided by Board Resolution, Officers' Certificate
or supplemental indenture for a particular Series, a "Legal Holiday" is any day
that is not a Business Day. 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 for the intervening period.
Section 10.8. No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each
42
<PAGE>
Securityholder by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Securities.
Section 10.9. Counterparts.
------------
This Indenture may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Section 10.10. Governing Laws.
--------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH
STATE, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
Section 10.11. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 10.12. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 10.13. Severability.
------------
In case any provision in this Indenture or in the Securities 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.
Section 10.14. 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.
Section 10.15. Securities in a Foreign Currency or in ECU.
------------------------------------------
Unless otherwise specified in a Board Resolution, a supplemental
indenture hereto or an Officers' Certificate delivered pursuant to Section 2.2
of this Indenture with respect to a particular Series of Securities, whenever
for purposes of this Indenture any action may be taken by the Holders of a
specified percentage in aggregate principal amount of Securities of all Series
43
<PAGE>
or all Series affected by a particular action at the time outstanding and, at
such time, there are outstanding Securities of any Series which are denominated
in a coin or currency other than Dollars (including ECUs), then the principal
amount of Securities of such Series which shall be deemed to be outstanding for
the purpose of taking such action shall be that amount of Dollars that could be
obtained for such amount at the Market Exchange Rate at such time. For purposes
of this Section 10.15, "Market Exchange Rate" shall mean the noon Dollar buying
rate in New York City for cable transfers of that currency as published by the
Federal Reserve Bank of New York; provided, however, in the case of ECUs, Market
-------- -------
Exchange Rate shall mean the rate of exchange determined by the Commission of
the European Union (or any successor thereto) as published in the Official
Journal of the European Union (such publication or any successor publication,
the "Journal"). If such Market Exchange Rate is not available for any reason
with respect to such currency, the Trustee shall use, in its sole discretion and
without liability on its part, such quotation of the Federal Reserve Bank of New
York or, in the case of ECUs, the rate of exchange as published in the Journal,
as of the most recent available date, or quotations or, in the case of ECUs,
rates of exchange from one or more major banks in The City of New York or in the
country of issue of the currency in question or, in the case of ECUs, in
Luxembourg or such other quotations or, in the case of ECUs, rates of exchange
as the Trustee, upon consultation with the Company, shall deem appropriate. The
provisions of this paragraph shall apply in determining the equivalent principal
amount in respect of Securities of a Series denominated in currency other than
Dollars in connection with any action taken by Holders of Securities pursuant to
the terms of this Indenture.
All decisions and determinations of the Trustee regarding the Market
Exchange Rate or any alternative determination provided for in the preceding
paragraph shall be in its sole discretion and shall, in the absence of manifest
error, be conclusive to the extent permitted by law for all purposes and
irrevocably binding upon the Company and all Holders.
Section 10.16. Judgment Currency.
-----------------
The Company agrees, to the fullest extent that it may effectively do
so under applicable law, that (a) if for the purpose of obtaining judgment in
any court it is necessary to convert the sum due in respect of the principal of
or interest or other amount on the Securities of any Series (the "Required
Currency") into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the day on which final
unappealable judgment is entered, unless such day is not a New York Banking Day,
then, the rate of exchange used shall be the rate at which in accordance with
normal banking procedures the Trustee could purchase in The City of New York the
Required Currency with the Judgment Currency on the New York Banking Day
preceding the day on which final unappealable judgment is entered and (b) its
obligations under this Indenture to make payments in the Required Currency (i)
shall not be discharged or satisfied by any tender, any recovery pursuant to any
judgment (whether or not entered in accordance with subsection (a)), in any
currency other than the Required Currency, except to the extent that such tender
or recovery shall result in the actual receipt, by the payee, of
44
<PAGE>
the full amount of the Required Currency expressed to be payable in respect of
such payments, (ii) shall be enforceable as an alternative or additional cause
of action for the purpose of recovering in the Required Currency the amount, if
any, by which such actual receipt shall fall short of the full amount of the
Required Currency so expressed to be payable, and (iii) shall not be affected by
judgment being obtained for any other sum due under this Indenture. For purposes
of the foregoing, "New York Banking Day" means any day except a Saturday, Sunday
or a legal holiday in The City of New York on which banking institutions are
authorized or required by law, regulation or executive order to close.
ARTICLE XI.
SINKING FUNDS
Section 11.1. Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of the Securities of a Series, except as otherwise permitted
or required by any form of Security of such Series issued pursuant to this
Indenture.
The minimum amount of any sinking fund payment provided for by the
terms of the Securities of any Series is herein referred to as a "mandatory
sinking fund payment" and any other amount provided for by the terms of
Securities of such Series is herein referred to as an "optional sinking fund
payment." If provided for by the terms of Securities of any Series, the cash
amount of any sinking fund payment may be subject to reduction as provided in
Section 11.2. Each sinking fund payment shall be applied to the redemption of
Securities of any Series as provided for by the terms of the Securities of such
Series.
Section 11.2. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company may, in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of any Series to be made pursuant to
the terms of such Securities (1) deliver outstanding Securities of such Series
to which such sinking fund payment is applicable (other than any of such
Securities previously called for mandatory sinking fund redemption) and (2)
apply as credit Securities of such Series to which such sinking fund payment is
applicable and which have been redeemed either at the election of the Company
pursuant to the terms of such Series of Securities (except pursuant to any
mandatory sinking fund) or through the application of permitted optional sinking
fund payments or other optional redemptions pursuant to the terms of such
Securities, provided that such Securities have not been previously so credited.
Such Securities shall be received by the Trustee, together with an Officers'
Certificate with respect thereto, not later than 15 days prior to the date on
which the Trustee begins the process of selecting Securities for redemption, and
shall be credited for such purpose by the Trustee at the price specified in such
Securities for redemption through operation of the sinking fund and the amount
of such sinking fund payment shall be reduced accordingly. If as a result of
the delivery or credit of Securities in lieu of cash payments pursuant to this
Section 11.2, the principal amount of Securities of such Series to be redeemed
in order to exhaust
45
<PAGE>
the aforesaid cash payment shall be less than $100,000, the Trustee need not
call Securities of such Series for redemption, except upon receipt of a Company
Order that such action be taken, and such cash payment shall be held by the
Trustee or a Paying Agent and applied to the next succeeding sinking fund
payment, provided, however, that the Trustee or such Paying Agent shall from
--------- --------
time to time upon receipt of a Company Order pay over and deliver to the Company
any cash payment so being held by the Trustee or such Paying Agent upon delivery
by the Company to the Trustee of Securities of that Series purchased by the
Company having an unpaid principal amount equal to the cash payment required to
be released to the Company.
Section 11.3. Redemption of Securities for Sinking Fund.
-----------------------------------------
Not less than 45 days (unless otherwise indicated in the Board
Resolution, supplemental indenture hereto or Officers' Certificate in respect of
a particular Series of Securities) prior to each sinking fund payment date for
any Series of Securities, 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 and the portion
thereof, if any, which is to be satisfied by delivering and crediting of
Securities of that Series pursuant to Section 11.2, and the optional amount, if
any, to be added in cash to the next ensuing mandatory sinking fund payment, and
the Company shall thereupon be obligated to pay the amount therein specified.
Not less than 30 days (unless otherwise indicated in the Board Resolution,
Officers' Certificate or supplemental indenture in respect of a particular
Series of Securities) 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 3.2 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 3.3. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 3.4, 3.5 and 3.6.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
SUNBURST HOSPITALITY CORPORATION
By:_______________________________
Name:
Its:
[Name of Trustee]
By:_______________________________
Name:
Its:
47
<PAGE>
EXHIBIT 4.2
COMMON STOCK
PAR VALUE $.01
THIS CERTIFICATE IS TRANSFERABLE IN RIDGEFIELD PARK NJ AND IN NEW YORK, NY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SHARES
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 866948 10 2
SUNBURST HOSPITALITY CORPORATION
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Sunburst Hospitality Corporation transferable only on the books of the
Corporation by the holder hereof in person or by Attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed.
Dated:
Countersigned and Registered
ChaseMellon Shareholder Services, L.L.C.
as Transfer Agent
and Registrar
By
/s/ Edward A. Kubis /s/ Donald J. Landry
Authorized Signature Secretary Chief Executive Officer
[CORPORATE SEAL APPEARS HERE]
<PAGE>
__________________
The Corporation will furnish to any stockholder on request and without charge a
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue, of the differences in the
relative rights and preferences between the shares of each series of a preferred
or special class in series which the Corporation is authorized to issue, to the
extent they have been set, and the authority of the Board of Directors to set
the relative rights and preferences of subsequent series of a preferred or
special class of stock. Such request may be made to the Secretary of the
Corporation.
__________________
Keep this certificate in a safe place. If it is lost, stolen or destroyed the
Corporation will require a Bond of Indemnity as a condition to the issuance of a
replacement certificate.
__________________
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- _______Custodian_______
(CUST) (Minor)
under Uniform Gifts to Minors
Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________ hereby sell, assign and transfer unto.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
________________________________________________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
________________________________________________________________________________
________________________________________________________________________________
______________________________________________________________________ Shares of
the Capital stock represented by the within Certificate and do hereby
irrevocably constitute and appoint _____________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated,_____________________
_______________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
_______________________________________________________
SIGNATURE(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION, BANKS, STOCK-BROKERS, SAVINGS
AND LOAN ASSOCIATION AND CREDIT UNIONS WITH MEMBERSHIP
IN ANY APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM,
PURSUANT TO S.E.C. RULE 17(A)(d)-15.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF LATHAM & WATKINS]
February 19, 1998
File No. 026335-0000
Sunburst Hospitality Corporation
10770 Columbia Pike
Silver Spring, MD 20901
Re: $250,000,000 Aggregate Offering Price of Securities of Sunburst
Hospitality Corporation
----------------------------------------------------------------
Ladies and Gentlemen:
In connection with the registration statement on Form S-3 (the
"Registration Statement") filed on February 19, 1998 with the Securities
and Exchange Commission (the "Commission") under the Securities Act of
1933, as amended (the "Securities Act"), you have requested our opinion
with respect to the matters set forth below.
You have provided us with a draft prospectus (the "Prospectus")
which is a part of the Registration Statement. The Prospectus provides
that it will be supplemented in the future by one or more supplements to
the Prospectus (each a "Prospectus Supplement"). The Prospectus as
supplemented by various Prospectus Supplements will provide for the
issuance and sale by Sunburst Hospitality Corporation, a Delaware
corporation (the "Company"), of up to $250,000,000 aggregate offering price
of (i) one or more series of debt securities of the Company consisting of
debentures, notes or other evidences of indebtedness (the "Debt
Securities"), (ii) shares of common stock, par value $.01 per share of the
Company (the "Common Stock"), (iii) shares of preferred stock, par value
$.01 per share of the Company (the "Preferred Stock"), (iv) warrants to
purchase Common Stock, Preferred Stock or Debt Securities (the "Warrants")
and (v) subscription rights to purchase Debt Securities, Common Stock,
Preferred Stock or warrants to purchase Common Stock or Preferred Stock
("Subscription Rights"). The Debt
<PAGE>
LATHAM & WATKINS
Sunburst Hospitality Corporation
February 19, 1998
Page 2
Securities, the Common Stock, the Preferred Stock, the Warrants and the
Subscription Rights are collectively referred to herein as the
"Securities." The Registration Statement provides that Debt Securities may
be convertible into shares of Common Stock or shares of Preferred Stock,
and that shares of Preferred Stock may be convertible into shares of Common
Stock or Debt Securities.
The Debt Securities will be issued pursuant to one or more
indentures in the form filed as an exhibit to the Registration Statement,
as amended or supplemented from time to time (each, an "Indenture") between
the Company, as obligor, and a trustee chosen by the Company and qualified
to act as such under the Trust Indenture Act of 1939, as amended (each, a
"Trustee"). The Warrants will be issued under one or more warrant
agreements (each, a "Warrant Agreement"), by and among the Company and a
financial institution identified therein as warrant agent (each, a "Warrant
Agent").
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of
the Securities. For purposes of this opinion, we have assumed that such
proceedings will be timely and properly completed, in accordance with all
requirements of applicable federal, Delaware and New York laws, in the
manner presently proposed.
We have made such legal and factual examinations and inquiries,
including an examination of originals and copies certified or otherwise
identified to our satisfaction, of all such documents, corporate records
and instruments of the Company as we have deemed necessary or appropriate
for purposes of this opinion. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted
to us as originals, and the conformity to authentic original documents of
all documents submitted to us as copies.
We have been furnished with, and with your consent have
exclusively relied upon, certificates of officers of the Company with
respect to certain factual matters. In addition, we have obtained and
relied upon such certificates and assurances from public officials as we
have deemed necessary.
We are opining herein as to the effect on the subject transaction
only of the General Corporation Law of the State of Delaware (the "DGCL")
and, with respect to the opinions set forth in paragraphs 1 and 4 below,
the internal laws of the State of New York, and we express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of
any other jurisdiction or, in the case of Delaware, any other laws, or as
to any matters of municipal law or the laws of any local agencies within
any state.
Subject to the foregoing and the other qualifications set forth
herein, it is our opinion that, as of the date hereof:
<PAGE>
LATHAM & WATKINS
Sunburst Hospitality Corporation
February 19, 1998
Page 3
1. (a) When the Company and the Trustee duly execute and
deliver an Indenture and the specific terms of a particular Debt Security
have been duly established in accordance with the terms of such Indenture,
and such Debt Securities have been duly authenticated by the Trustee and
duly executed and delivered on behalf of the Company against payment
therefor in accordance with the terms and provisions of the Indenture and
as contemplated by the Registration Statement, the Prospectus and the
related Prospectus Supplement(s), and (b) when the Registration Statement
and any required post-effective amendments thereto have all become
effective under the Securities Act, and assuming that (c)(i) the terms of
the Debt Securities as executed and delivered are as described in the
Registration Statement, the Prospectus and the related Prospectus
Supplement(s), (ii) the Debt Securities as executed and delivered do not
violate any law applicable to the Company or result in a default under or
breach of any agreement or instrument binding upon the Company, (iii) the
Debt Securities as executed and delivered comply with all requirements and
restrictions, if any, applicable to the Company, whether imposed by law or
by any court or governmental or regulatory body having jurisdiction over
the Company and (iv) that the Debt Securities are then issued and sold as
contemplated in the Registration Statement, the Prospectus and the related
Prospectus Supplement(s), the Debt Securities will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with the terms of the Debt Securities.
2. The Company has the authority pursuant to its Restated
Certificate of Incorporation as amended as of the date hereof (the
"Certificate") to issue up to 60,000,000 shares of Common Stock. (a) When
shares of a series or class of Common Stock have been duly designated for
sale under the Registration Statement in accordance with the terms of the
Company's Certificate and applicable law, (b) upon (i) adoption by the
Board of Directors of the Company of resolutions in form and content as
required by the DGCL with respect to such issuance, (ii) a certificate of
designations setting forth a copy of such resolutions having been executed,
acknowledged and filed under the DGCL and having become effective
thereunder (if applicable), and (iii) issuance and delivery of and
payment for such shares in the manner contemplated by the Registration
Statement, the Prospectus and the related Prospectus Supplement(s) and by
such resolutions, such shares of such series or class of Common Stock will
be validly issued, fully paid and nonassessable.
3. The Company has the authority pursuant to the Company's
Certificate to issue up to 5,000,000 shares of Preferred Stock. (a) When
shares of a series or class of Preferred Stock have been duly designated
for sale under the Registration Statement in accordance with the terms of
the Company's Certificate and applicable law, (b) upon (i) adoption by the
Board of Directors of the Company of a resolution in form and content as
required by the DGCL with respect to such issuance, (ii) a certificate
of designations setting forth a copy of such resolutions having been
executed, acknowledged and filed under the DGCL and having become effective
thereunder, and (iii) issuance and delivery of and payment for such shares
in the manner contemplated by the Registration Statement, the Prospectus
and the related Prospectus Supplement(s) and by such resolutions, such
shares of such series or class of Preferred Stock will be validly issued,
fully paid and nonassessable.
<PAGE>
LATHAM & WATKINS
Sunburst Hospitality Corporation
February 19, 1998
Page 4
4. (a) When the Company and the Warrant Agent duly execute and
deliver a Warrant Agreement and the specific terms of a particular Warrant
have been duly established in accordance with the terms of such Warrant
Agreement, and such Warrants have been duly authenticated by the Warrant
Agent and duly executed and delivered on behalf of the Company against
payment therefor in accordance with the terms and provisions of the Warrant
Agreement and as contemplated by the Registration Statement, the Prospectus
and the related Prospectus Supplement(s), and (b) when the Registration
Statement and any required post-effective amendments thereto have all
become effective under the Securities Act, and assuming that (c)(i) the
terms of the Warrants as executed and delivered are as described in the
Registration Statement, the Prospectus and the related Prospectus
Supplement(s), (ii) the Warrants as executed and delivered do not violate
any law applicable to the Company or result in a default under or breach of
any agreement or instrument binding upon the Company, (iii) the
Warrants as executed and delivered comply with all requirements and
restrictions, if any, applicable to the Company, whether imposed by any
court or governmental or regulatory body having jurisdiction over the
Company and (iv) the Warrants are then issued and sold as contemplated in
the Registration Statement, the Prospectus and the related Prospectus
Supplement(s), the Warrants will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms.
5. (a) When the specific terms of Subscription Rights have been
duly established and certificates bearing such terms (the "Subscription
Rights Certificates") have been duly executed and delivered by or on behalf
of the Company as contemplated in the Registration Statement, the
Prospectus and the related Prospectus Supplement(s), and (b) when the
Registration Statement and any required post-effective amendments thereto
have all become effective under the Securities Act, and assuming that
(c)(i) the terms of the Subscription Rights as set forth in the
Subscription Rights Certificates are as described in the Registration
Statement, the Prospectus and the related Prospectus Supplement(s),
(ii) the Subscription Rights as set forth in the Subscription Rights
Certificates do not violate any law applicable to the Company or result in
a default under a breach of any agreement or instrument binding upon the
Company, (iii) the Subscription Rights as set forth in the Subscription
Rights Certificates comply with all requirements and restrictions, if any,
applicable to the Company, whether imposed by law or by any court or
governmental or regulatory body having jurisdiction over the Company and
(iv) the Subscription Rights are then issued as contemplated in the
Registration Statement, the Prospectus and the related Prospectus
Supplement(s), the Subscription Rights will be validly issued.
The opinions set forth in paragraphs 1 and 4 above are subject to
the following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to or affecting
the rights and remedies of creditors; (ii) the effect of general
<PAGE>
LATHAM & WATKINS
Sunburst Hospitality Corporation
February 18, 1998
Page 5
principles of equity, whether enforcement is considered in a proceeding in
equity or at law, and the discretion of the court before which any
proceeding therefor may be brought; (iii) the unenforceability under
certain circumstances under law or court decisions of provisions providing
for the indemnification of, or contribution to, a party with respect to a
liability where such indemnification or contribution is contrary to public
policy; (iv) we express no opinion concerning the enforceability of any
waiver of rights or defenses with respect to stay, extension or usury laws;
and (v) we express no opinion with respect to whether acceleration of Debt
Securities may affect the collectibility of any portion of the stated
principal amount thereof which might be determined to constitute unearned
interest thereon.
To the extent that the obligations of the Company under an
Indenture may be dependent upon such matters, we assume for purposes of
this opinion that the Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Delaware and has
the corporate power and authority to issue and sell the Debt Securities;
that the applicable Indenture has been duly authorized by all necessary
corporate action by the Company and has been duly executed and delivered by
the Company; that the Trustee for such Indenture is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; that the Trustee is duly qualified to engage in the
activities contemplated by the applicable Indenture; that the applicable
Indenture has been duly authorized, executed and delivered by the Trustee
and constitutes a legally valid, binding and enforceable obligation of the
Trustee, enforceable against the Trustee in accordance with its terms; that
the Trustee is in compliance, generally and with respect to acting as
Trustee under the applicable Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and
legal power and authority to perform its obligations under the applicable
Indenture.
To the extent that the obligations of the Company under a Warrant
Agreement may be dependent upon such matters, we assume for purposes of
this opinion that the Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Delaware and has
the corporate power and authority to issue and sell the Warrants and any
Securities issuable thereunder; that the applicable Warrant Agreement has
been duly authorized by all necessary corporate action by the Company and
has been duly executed and delivered by the Company; that the Warrant Agent
is duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization; that the Warrant Agent is duly qualified
to engage in the activities contemplated by the Warrant Agreement; that the
Warrant Agreement has been duly authorized, executed and delivered by the
Warrant Agent and
<PAGE>
LATHAM & WATKINS
Sunburst Hospitality Corporation
February 19, 1998
Page 6
constitutes the legally valid, binding and enforceable obligation of the
Warrant Agent, enforceable against the Warrant Agent in accordance with its
terms; that the Warrant Agent is in compliance, generally and with respect
to acting as a Warrant Agent under the Warrant Agreement, with all
applicable laws and regulations; and that the Warrant Agent has the
requisite organizational and legal power and authority to perform its
obligations under the Warrant Agreement.
To the extent that the obligations of the Company under
Subscription Rights may be dependent upon such matters, we assume for
purposes of this opinion that the Company has been duly organized and is
validly existing as a corporation under the laws of the State of Delaware
and has the corporate power and authority to issue and sell the
Subscription Rights and any Securities issuable thereunder; that the
applicable Subscription Rights have been duly authorized by all necessary
corporate action by the Company and that the applicable Subscription Rights
Certificates have been duly executed and delivered by the Company.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus included therein.
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 12.1
SUNBURST HOSPITALITY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30, FISCAL YEAR ENDED MAY 31,
---------------------- -----------------------------------
1997 1996 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations
before income taxes..................... $ 9,101 $ 8,811 $ 11,840 $ (21,874) $ (780)
Fixed charges............................ 10,516 7,034 17,018 13,036 10,128
--------- --------- --------- --------- ---------
Earnings, as adjusted (A)................ $ 19,617 $ 15,845 $ 28,858 $ (8,838) $ 9,348
========= ========= ========= ========= =========
Fixed charges:
Interest expense......................... $ 9,690 $ 6,865 $ 16,680 $ 12,839 $ 9,988
Amortization of deferred financing
costs................................... 210 -- -- -- --
Interest element of rental expense....... 616 169 338 197 140
--------- --------- --------- --------- ---------
Fixed charges, as adjusted (B)........... $ 10,516 $ 7,034 $ 17,018 $ 13,036 $ 10,128
========= ========= ========= ========= =========
Ratio of earnings to fixed charges
(A) divided by (B)...................... 1.9 2.3 1.7 -- --
Deficiency of earnings to fixed
charges (b)............................. 21,874 780
</TABLE>
(b) The deficiency of earnings to fixed charges in fiscal year 1996 is the
result of a $24.5 million provision for asset impairment. The ratio of earnings
to fixed charge for fiscal year 1996 excluding the impact of the provision for
asset impairment is 1.2. The deficiency of earnings to fixed charges in fiscal
year 1995 is largely the result of depreciation and amortization of $6.0
million.
<PAGE>
EXHIBIT 12.2
SUNBURST HOSPITALITY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30 FISCAL YEAR ENDED MAY 31,
-------------------------- ---------------------------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations
before income taxes................... $ 9,101 $ 8,811 $11,840 $(21,874) $ (780)
Fixed charges.......................... 10,516 7,034 17,018 13,036 10,128
------- ------- ------- -------- -------
Earnings, as adjusted (A).............. $19,617 $15,845 $28,858 $ (8,838) $ 9,348
======= ======= ======= ======== =======
Fixed charges:
Interest expense....................... $ 9,690 $ 6,865 $16,680 $ 12,839 $ 9,988
Amortization of deferred financing
costs................................. 210 -- -- -- --
Interest element of rental expense..... 616 169 338 197 140
Fixed charges, as adjusted ............ $10,516 $ 7,034 $17,018 $ 13,036 $10,128
Preferred Stock dividends.............. -- -- -- -- --
Total fixed charges and preferred
stock dividends (B)................... $10,516 $ 7,034 $17,018 $ 13,036 $10,128
======= ======= ======= ======== =======
Ratio of earnings to combined fixed
charges and preferred stock dividends
(A) divided by (B).................... 1.9 2.3 1.7 -- --
Deficiency of earnings to combined
fixed charges and preferred stock
dividends (b)......................... 21,874 780
</TABLE>
(b) The deficiency of earnings to fixed charges in fiscal year 1996 is the
result of a $24.5 million provision for asset impairment. The ratio of earnings
to fixed charge for fiscal year 1996 excluding the impact of the provision for
asset impairment is 1.2. The deficiency of earnings to fixed charges in fiscal
year 1995 is largely the result of depreciation and amortization of $6.0
million.
1
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports for Sunburst Hospitality
Corporation (formerly Choice Hotels International, Inc.) dated June 24, 1997
included in Sunburst Hospitality Corporation's Form 10-K for the year ended
May 31, 1997 and our report for Sunburst Hospitality Corporation dated January
27, 1998 included in Sunburst Hospitality Corporation's Form 8-K dated February
12, 1998 and to all references to our Firm included in this registration
statement.
Washington, D.C.
February 16, 1998
