<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1997
REGISTRATION NO. 333-33723
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
HMH PROPERTIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7011 52-1822042
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR NUMBER)
ORGANIZATION)
AFFILIATE REGISTRANTS
<TABLE>
<S> <C> <C> <C>
HMC RETIREMENT PROPERTIES, INC. DELAWARE 6519 52-1536288
HMH PENTAGON CORPORATION DELAWARE 7011 52-1859615
HOST AIRPORT HOTELS, INC. DELAWARE 6519 95-2744596
MARRIOTT FINANCIAL SERVICES, INC. DELAWARE 7389 52-1320896
MARRIOTT SBM TWO CORPORATION DELAWARE 6519 52-1694383
HMH RIVERS, INC. DELAWARE 7011 52-1928290
HMH MARINA, INC. DELAWARE 7011 52-1943709
HMC SFO, INC. DELAWARE 7011 52-1888778
HMC AP CANADA INC. PROVINCE OF ONTARIO 7011 -- --
HOST OF HOUSTON, LTD. TEXAS 7011 52-1874039
HOST OF BOSTON, LTD. MASSACHUSETTS 7011 52-1398538
HOST OF HOUSTON 1979 DELAWARE 7011 95-3552476
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER (PRIMARY (I.R.S.
SPECIFIED IN ITS CHARTER) JURISDICTION OF STANDARD EMPLOYER
INCORPORATION OR INDUSTRIAL IDENTIFICATION
ORGANIZATION) CLASSIFICATION NUMBER)
CODE NUMBER)
</TABLE>
10400 FERNWOOD ROAD
BETHESDA, MD 20817-1109
(301) 380-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHRISTOPHER G. TOWNSEND, ESQ.
EXECUTIVE VICE PRESIDENT
10400 FERNWOOD ROAD
BETHESDA, MD 20817-1109
(301) 380-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH A COPY TO:
BRUCE E. ROSENBLUM, ESQ.
LATHAM & WATKINS
1001 PENNSYLVANIA AVE., N.W. SUITE 1300
WASHINGTON, D.C. 20004-2505
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 7/8% Senior Notes Due 2007............. $600,000,000 100% $600,000,000 $181,819(4)
- -----------------------------------------------------------------------------------------------------------
Guarantees of each of the Guarantors(2).. (3) (3) (3) None(3)
===========================================================================================================
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee pursuant
to Rule 457(f) of the Securities Act.
(2) The 8 7/8% Series B Senior Notes due 2007 of HMH Properties, Inc. being
registered will be guaranteed by the Subsidiary Guarantors (defined
herein).
(3) No additional consideration will be paid by the recipients of the 8 7/8%
Series B Senior Notes due 2007 for the Guarantees. Pursuant to Rule 457(n)
under the Securities Act of 1933, no separate fee is payable for the
Guarantees.
(4) The filing fee was paid on August 15, 1997.
---------------
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>
HMH PROPERTIES, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-
4 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
------------------------- -------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement
and Outside Cover Pageof Prospectus..................... Forepart of Registration Statement; Outside
Front Cover Page; Inside Front Cover
2. Inside Front and Outside Back Cover Pages of
Prospectus.............................................. Inside Front Cover; Available Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........................... Prospectus Summary; Risk Factors; The
Exchange Offer; Pro Forma Condensed Combined
Consolidated Financial Data; Selected
Historical Financial Data
4. Terms of the Transaction................................. Prospectus Summary; The Exchange Offer;
Description of Senior Notes; Material
Federal Income Tax Considerations
5. Pro Forma Financial Information.......................... Prospectus Summary; Pro Forma Condensed
Combined Consolidated Financial Data
6. Material Contracts with the Company Being
Acquired................................................ Not Applicable
7. Additional Information Required for Reoffering
by Persons and PartiesDeemed to be
Underwriters............................................ Not Applicable
8. Interest of Named Experts and Counsel.................... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.......... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants.............. Available Information; Incorporation of
Certain Documents By Reference; Prospectus
Summary; Risk Factors; Capitalization; Pro
Forma Condensed Consolidated Financial Data;
Selected Historical Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business and Properties;
Management; Sole Shareholder; Relationship
with Host Marriott; Relationship with
Marriott International; Description of
Senior Notes; Financial Statements
11. Incorporation of Certain Information by
Reference............................................... Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2 or S-3
Registrants............................................. Not Applicable
13. Incorporation of Certain Information by
Reference............................................... Not Applicable
14. Information With Respect to Registrants Other
than S-2 or S-3 Registrants............................. Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies................ Not Applicable
16. Information With Respect to S-2 or S-3
Companies............................................... Not Applicable
17. Information With Respect to Companies Other than
S-2 or S-3 Companies.................................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited..................................... Not Applicable
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange
Offer................................................... Summary; Risk Factors; Management; Sole
Shareholder; Relationship with Host
Marriott; Relationship with Marriott
International;
</TABLE>
i
<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 SEPTEMBER 19, 1997
PROSPECTUS
OFFER TO EXCHANGE
8 7/8% SENIOR NOTES DUE 2007, SERIES B FOR ALL OUTSTANDING
8 7/8% SENIOR NOTES DUE 2007, SERIES A
OF
HMH PROPERTIES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1997,
UNLESS EXTENDED
-----------
HMH Properties, Inc., a Delaware corporation (the "Company" or "Properties")
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange its outstanding 8 7/8%
senior notes due 2007, series A (the "Original Notes"), of which an aggregate
of $600 million in principal amount is outstanding as of the date hereof, for
an equal principal amount of newly issued 8 7/8% senior notes due 2007, series
B (the "Exchange Notes"). The Company is a wholly owned subsidiary of Host
Marriott Hospitality, Inc. ("Hospitality"), which is a wholly owned subsidiary
of Host Marriott Corporation ("Host Marriott").
The form and terms of the Exchange Notes will be the same as the form and
terms of the Original Notes except that (i) the Exchange Notes will be
registered under the Securities Act of 1933, as amended (the "Securities Act")
and hence will not bear legends restricting the transfer thereof, and (ii) the
holders of the Exchange Notes will not be entitled to certain rights of holders
of Original Notes under the Registration Rights Agreement (as defined) which
rights will terminate upon the consummation of the Exchange Offer. The Exchange
Notes will evidence the same debt as the Original Notes and will be entitled to
the benefits of an indenture dated as of July 15, 1997 governing the Original
Notes and the Exchange Notes (the "Indenture"). The Indenture provides for the
issuance of both the Exchange Notes and the Original Notes. The Exchange Notes
and the Original Notes are sometimes referred to herein collectively as the
"Senior Notes." Interest on the Exchange Notes will be payable semi-annually on
July 15 and January 15 of each year, commencing January 15, 1998. Holders of
the Exchange Notes will receive interest on January 15, 1998 from the date of
initial issuance of the Exchange Notes, plus an amount equal to the accrued
interest on the Original Notes from the date of initial delivery to, but not
including, the date of exchange thereof for the Exchange Notes. Such interest
will be paid with the first interest payment on the Exchange Notes. Interest on
the Original Notes accepted for exchange will cease to accrue upon issuance of
the Exchange Notes. The Company will not be required to make any mandatory
redemption or sinking fund payment with respect to the Senior Notes prior to
maturity. The Senior Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2002 at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. In the event of a Change of Control Triggering Event (as defined
herein), the Company will be required to make an offer to repurchase the Senior
Notes, at a price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase. See "Description
of Senior Notes."
The Original Notes are, and the Exchange Notes will be, senior obligations of
the Company secured on an equal and ratable basis with certain other
Indebtedness (as defined herein) of the Company by a pledge of the capital
stock of all but one of the Subsidiary Guarantors (as defined herein) and will
rank pari passu in right of payment with all existing and future senior
Indebtedness of the Company; provided, however, that certain Indebtedness of
the Company and its subsidiaries currently is, and Indebtedness incurred by the
Company and its subsidiaries may be, secured by assets held by the Company or
its subsidiaries subject to certain restrictions described herein. See
"Description of Senior Notes--Limitation on Liens." At June 20, 1997 on a pro
forma basis as adjusted to give effect to the Offering (as defined herein), the
aggregate principal amount of senior Indebtedness of the Company was
approximately $1.7 billion, of which approximately $100 million is secured by
assets held by the Company or its subsidiaries. The Indenture limits the
ability of the Company and its subsidiaries to incur additional Indebtedness.
The Original Notes are, and the Exchange Notes will be guaranteed on a joint
and several basis (the "Guarantees") by certain of the Company's existing and
future subsidiaries (collectively, the "Subsidiary Guarantors"), which
Guarantees will be senior obligations of the Subsidiary Guarantors and will
rank pari passu in right of payment with all other existing and future senior
Indebtedness of the Subsidiary Guarantors, provided that certain Indebtedness
of the Subsidiary Guarantors and their subsidiaries is, and
(continued on next page)
SEE "RISK FACTORS" ON PAGE 16 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS WHICH HOLDERS OF ORIGINAL NOTES SHOULD CONSIDER IN CONNECTION WITH THIS
EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
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 DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
(Continued from previous page)
Indebtedness incurred by the Subsidiary Guarantors and their subsidiaries may
be secured by assets held by such Subsidiary Guarantors and their
subsidiaries, subject to certain restrictions described herein.
The Company will accept for exchange any and all validly tendered Original
Notes on or prior to 5:00 p.m., New York City time, on , 1997 (if and as
extended, the "Expiration Date"). Tenders of Original Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
The Exchange Offer is not conditioned upon any minimum principal amount of
notes being tendered for exchange. The Original Notes may be tendered only in
integral multiples of $1,000. In the event the Company terminates the Exchange
Offer and does not accept for exchange any Original Notes, the Company will
promptly return all previously tendered Original Notes to the Holders thereof.
The Original Notes were originally issued and sold on July 15, 1997 in a
transaction not registered under the Securities Act in reliance upon the
exemption provided in Rule 144A and Regulation S of the Securities Act (the
"Offering"). Accordingly, the Original Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration
requirements of the Securities Act is available. Based upon interpretations by
the staff (the "Staff") of the Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued to third parties, the
Company believes that the Exchange Notes issued pursuant to the Exchange Offer
in exchange for the Original Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder which is
(i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired the Original Notes directly
from the Company or (iii) a broker-dealer who acquired the Original Notes as a
result of market making or other trading activities) without compliance with
the registration and prospectus delivery requirements of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Each broker-dealer that
receives the Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Broker-dealers who acquired Original Notes as a result of
market making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of the Exchange Notes. The
Company has agreed that, for a period not to exceed 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution." Any
holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Original Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, and
tendered but unaccepted, Original Notes could be adversely affected. Following
consummation of the Exchange Offer, the holders of Original Notes will
continue to be subject to the existing restrictions on transfer thereof and
the Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the Original Notes. (See "Original
Notes Registration Rights; Liquidated Damages.") No assurance can be given as
to the liquidity of the trading market for either the Original Notes or the
Exchange Notes.
The Company believes that none of the registered holders of the Original
Notes (the "Registered Holders") is an affiliate (as such term is defined in
Rule 405 under the Securities Act) of the Company. Prior to this Exchange
Offer, there has been no public market for the Exchange Notes. The Company
does not intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop. To
the extent that a market for the Exchange Notes does develop, the market value
of the Senior Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Company's financial
condition and other conditions. Such conditions might cause the Senior Notes,
to the extent that they are actively traded, to trade at a significant
discount from face value. See "Risk Factors--Absence of Public Market for the
Senior Notes."
The Company will not receive any proceeds from this Exchange Offer. The
Company has agreed to bear the expenses of this Exchange Offer. No underwriter
is being used in connection with this Exchange Offer.
---------------
2
<PAGE>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS EXCHANGE OFFER COVERED BY THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect
to the financial condition, results of operations, business and prospects of
the Company and the lodging industry generally, including, without limitation,
statements under the captions "Prospectus Summary," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included herein. These forward-looking statements involve certain risks and
uncertainties, and as such may involve known and unknown risks, uncertainties,
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements contained herein speak
only as of the date of this Prospectus. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in its
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based. Further information on
other factors that could affect the financial results of the Company and such
forward-looking statements is included in the section herein entitled "Risk
Factors."
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Offer. As permitted
by the rules and regulations of the Commission, this Prospectus omits certain
information, exhibits and undertakings contained in the Registration
Statement. For further information with respect to the Company and this
Exchange Offer, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as a
part thereof.
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy materials and other information with the
Commission. The reports, proxy materials and other information filed by the
Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven
World Trade Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
also can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. The Indenture
requires the Company to file with the Commission and provide to holders of the
Senior Notes the reports and other information required to be filed with the
Commission by the Exchange Act, whether or not the Company is then subject to
such requirements. See "Description of Senior Notes--Reports."
3
<PAGE>
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or
all of the above documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into the documents that this Prospectus incorporates). Requests
should be directed to HMH Properties, Inc., Office of General Counsel, 10400
Fernwood Road, Bethesda, Maryland, 20817-1109 (telephone: (301) 380-9000).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents, each of which has been filed with the Commission:
(i)the Company's Annual Report on Form 10-K for the fiscal year ended
January 3, 1997 (the "Form 10-K");
(ii)the Company's Quarterly Report on Form 10-Q for the quarters ended
March 28, 1997 and June 20, 1997; and
(iii)the Company's Current Report on Form 8-K dated July 10, 1997.
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 Exchange Offer shall be deemed to be incorporated by
reference in the Prospectus and made a part hereof from the date of filing of
such documents. Any statement contained 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 to the extent that a statement
contained herein or in any other document subsequently filed with the
Commission which also is or is 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.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or
all of the above documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into the documents that this Prospectus incorporates). Requests
should be directed to HMH Properties, Inc., 10400 Fernwood Road, Bethesda,
Maryland, 20817-1109, Attention: Christopher G. Townsend, Esq., Executive Vice
President, (301) 380-7574.
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
Prospectus Summary....................................................... 5
Risk Factors............................................................. 16
The Exchange Offer....................................................... 19
Use of Proceeds.......................................................... 28
Capitalization........................................................... 28
Pro Forma Condensed Combined Consolidated Financial Data................. 29
Selected Historical Financial Data....................................... 35
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 37
Business and Properties ................................................. 47
Management............................................................... 55
Sole Shareholder......................................................... 56
Relationship with Host Marriott.......................................... 56
Relationship with Marriott International................................. 57
Description of Senior Notes.............................................. 59
Material Federal Income Tax Considerations............................... 86
Plan of Distribution..................................................... 87
Legal Matters............................................................ 87
Experts.................................................................. 87
Index to Financial Statements ........................................... F-1
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context otherwise requires, the term "Company" refers to HMH
Properties, Inc. and its subsidiaries. On July 10, 1997, HMC Acquisition
Properties, Inc. ("Acquisitions"), an indirect wholly owned subsidiary of Host
Marriott, was merged with and into the Company. The following information and
the combined consolidated financial statements included elsewhere herein are
presented as if Acquisitions was merged into the Company for all periods
presented as discussed in Note 1 to the combined consolidated financial
statements. References herein to "Smith Travel Research" and to "industry data"
are to industry data provided by Smith Travel Research, which data has been
customized to reflect that of the upscale full-service lodging segment, in
which the Company primarily competes. "Upscale full-service" lodging segment,
as used herein, includes Marriott Hotels, Resorts and Suites; Crowne Plaza;
Doubletree; Hyatt; Hilton; Radisson; Red Lion; Sheraton; Westin; and Wyndham.
THE COMPANY
The Company, an indirect wholly owned subsidiary of Host Marriott, owns the
majority of Host Marriott's lodging properties. The Company's assets
principally consist of 50 full-service hotel properties, one partnership
investment and a note receivable from an affiliate. All but ten of the
Company's 50 full-service lodging properties are managed by Marriott
International, Inc. ("Marriott International") and all but two are operated
under the Marriott or Ritz-Carlton brands, which are among the most respected
and widely recognized in the lodging industry. Based on industry data, the
Company believes that its hotels as a group consistently outperform the
industry's average occupancy rate by a significant margin, and averaged 76.4%
occupancy for 1996 compared to a 71.1% average occupancy for competing full-
service hotels in the upscale full-service segment of the lodging industry (the
segment which is most representative of the Company's full-service hotels).
The lodging industry as a whole, and the upscale and luxury full-service
hotel segments in particular, are benefiting from a favorable supply and demand
relationship in the United States. Based on data provided by Smith Travel
Research, the Company believes that demand for upscale full-service rooms,
measured as annual domestic occupied room nights for its competitive set,
increased 3.8% in 1994, 1.5% in 1995 and 2.3% in 1996. Management believes that
demand increases have resulted primarily from an improved economic environment
and a corresponding increase in business travel. In spite of increased demand
for rooms, the room supply growth rate in the upscale full-service segment has
been minimal. Management believes that the low supply growth rate in the
upscale full-service segment is attributable to many factors including the
limited availability of attractive building sites for full-service hotels, the
lack of available financing for new full-service hotel construction and the
availability of existing full-service properties for sale at a discount to
their replacement cost. The relatively high occupancy rates of the Company's
hotels, along with the increased demand for full-service hotel rooms have
allowed the managers of the Company's hotels to increase average daily room
rates by selectively raising room rates and by replacing certain discounted
group business with higher-rated group and transient business. As a result, on
a comparable basis, room revenues per available room ("REVPAR") for the
Company's full-service properties increased approximately 15% for the twenty-
four weeks ended June 20, 1997 ("First Two Quarters 1997") over the comparable
period for the prior year. Furthermore, because the lodging property operations
have a high fixed cost component, increases in REVPAR generally yield greater
percentage increases in EBITDA (as defined herein). Accordingly, the
approximate 15% increase in REVPAR resulted in an approximate 23% increase in
comparable full-service hotel EBITDA for the First Two Quarters 1997. The
Company expects this supply/demand imbalance in the upscale and luxury full-
service segments to continue which should result in improved REVPAR and EBITDA
at its hotel properties in the near term. There can be no assurance, however,
that such supply/demand imbalance will continue or that REVPAR and EBITDA will
continue to improve.
5
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to continue to focus on maximizing the
profitability of its existing full-service portfolio and acquiring additional
high-quality, full-service hotel properties, including controlling interests in
joint ventures, partnerships or other entities holding such properties. The
Company believes that the upscale and luxury full-service segments of the
market offer numerous opportunities to acquire assets at attractive multiples
of cash flow and at substantial discounts to replacement value, including
under-performing hotels which can be improved by conversion to the Marriott or
Ritz-Carlton brands. The Company believes that the upscale full-service segment
is very promising because:
. The Company believes that there is a very limited new supply of upscale
and luxury full-service hotel rooms currently under construction.
According to Smith Travel Research, from 1988 to 1991, upscale full-
service room supply for the Company's competitive set increased an
average of approximately 4% annually which resulted in an oversupply of
rooms in the industry. However, this growth slowed to an average of
approximately 1.0% from 1992 through 1996. Furthermore, the lead time
from conception to completion of a full-service hotel is generally five
years or more in the markets the Company is principally pursuing, which
management believes will contribute to the continued low growth of
supply in the upscale and luxury full-service segments through 2000.
. Many desirable hotel properties are currently held by inadvertent owners
such as banks, insurance companies and other financial institutions
which are motivated and willing sellers. In recent years, the Company
has acquired a number of properties from inadvertent owners at
significant discounts to replacement cost, including luxury hotels
operating under the Ritz-Carlton brand. While in the Company's
experience to date, these sellers have been primarily U.S. financial
organizations, the Company believes that numerous international
financial institutions are also inadvertent owners of U.S. lodging
properties and have only recently begun to dispose of such properties.
The Company expects that there will be increased opportunities to
acquire U.S. lodging properties from international financial
institutions and expects to dedicate significant resources to
aggressively pursue these opportunities.
. The Company believes that there are numerous opportunities to improve
the performance of acquired hotels by replacing the existing hotel
manager with Marriott International and converting the hotel to the
Marriott brand. Based on industry data, the Company believes that
Marriott-flagged properties have consistently outperformed the industry.
Demonstrating the strength of the Marriott brand name, the average
occupancy rate for the Company's comparable full-service properties was
76.1%, compared to an average occupancy rate of 71.1% for competing
upscale full-service hotels. Accordingly, management anticipates that
any additional full-service properties acquired by the Company in the
future and converted from other brands to the Marriott brand should
achieve higher occupancy rates and average room rates than has
previously been the case for those properties as the properties begin to
benefit from Marriott's brand recognition, reservation system and group
sales organization. Eleven of the Company's 36 acquired full-service
hotels were converted to the Marriott brand following their acquisition.
The Company believes it is well qualified to pursue its acquisition strategy.
Management has extensive experience in acquiring and financing lodging
properties and believes its industry knowledge, relationships and access to
market information provide a competitive advantage with respect to identifying,
evaluating and acquiring hotel assets. In addition, the Company is well
positioned to convert acquired properties to the Marriott and Ritz-Carlton
brand names due to its relationship with Marriott International.
In 1996, the Company acquired nine full-service properties with 3,124 rooms
for approximately $292 million, including the acquisition, through foreclosure,
of a controlling interest in the 250-room Newport Beach Marriott Suites and the
acquisition of a controlling interest in a venture that owns the 400-room
Pittsburgh Marriott City Center. In 1997, the Company has acquired the 306-room
Ritz-Carlton, Marina del Rey for approximately $57 million and controlling
interests in the 404-room Norfolk Waterside Marriott for approximately $33
million and the Manhattan Beach Radisson Plaza Hotel, which was converted to
the Marriott
6
<PAGE>
brand, for $38 million. The Company acquired seven full-service properties
(3,133 rooms) for approximately $329 million in 1995. During 1994, the Company
acquired 15 full-service properties with 6,044 rooms for approximately $441
million. In 1994, the Company also provided 100% financing totaling $35 million
to a partnership, in which a related party of the Company owns the sole general
partner interest, for the partnership's acquisition of two full-service hotels
with 684 rooms which the Company consolidates in the accompanying financial
statements. The Company believes that each of these acquisitions was made at an
attractive valuation and at a significant discount to replacement value.
On September 10, 1997, Host Marriott successfully completed the purchase of
98.6% of the limited partnership units in Chesapeake Hotel Limited Partnership
("CHLP"), increasing its ownership of CHLP to 99.9%. CHLP owns six hotels, the
Key Bridge Marriott, the Chicago O'Hare Marriott, the Boston Newton Marriott,
the Denver Southeast Marriott, the Bloomington Minnesota Marriott and the
Saddlebrook New Jersey Marriott. The Company is considering the acquisition of
Host Marriott's general and limited partnership interests, along with certain
notes and other receivables due from CHLP, which would allow the Company to
consolidate CHLP. The Company currently owns the nonrecourse second mortgages
on the six properties (totalling $139 million at June 20, 1997).
Consistent with its strategy of focusing on the full-service segment of the
lodging industry, the Company has opportunistically sold certain of its
properties. During 1994, the Company sold 26 of its 30 Fairfield Inns and all
of its 14 senior living communities. During the first and third quarters of
1995, the Company sold to and leased back from an unrelated real estate
investment trust (the "REIT") 37 of its Courtyard properties. The leases and
related obligations were transferred to Host Marriott in 1995. Also, in the
second quarter of 1995, the Company sold its remaining four Fairfield Inns. In
the first and second quarters of 1996, the Company sold to and leased back from
the REIT its remaining 16 Courtyard properties and 18 Residence Inns for
approximately $349 million (10% of which was deferred). Host Marriott purchased
the Company's rights to the deferred proceeds and obligations under the lease
for the 16 Courtyard properties at their fair market value. With the completion
of these transactions, 100% of the Company's owned properties are in the full-
service segment, although the Company retains the rights to the deferred
proceeds and the lease obligation with respect to the 18 Residence Inns. The
Company has reinvested substantially all of the proceeds in the acquisition of
full-service lodging properties.
The Company is a Delaware corporation and its principal executive office is
located at 10400 Fernwood Road, Bethesda, Maryland, 20817-1109 (telephone:
(301) 380-9000).
THE CONSENT SOLICITATION
On May 12, 1997, the Company commenced a solicitation of consents (the
"Consent Solicitation") of registered holders of its 9 1/2% Senior Notes due
2005 (the "Existing Senior Notes") to certain amendments to the indenture
pursuant to which the Existing Senior Notes were issued (the "Existing Senior
Notes Indenture"). Such amendments facilitated Properties' ability to merge
with HMC Acquisition Properties, Inc. ("Acquisitions"), another indirect,
wholly owned subsidiary of Host Marriott (the "Merger"), and such amendments
facilitate the Company's ability to acquire (i) through certain subsidiaries,
additional properties subject to non-recourse indebtedness and (ii) less than
majority controlling interests in corporations, partnerships and other entities
holding attractive hotel lodging properties. On May 12, 1997, Acquisitions
commenced a substantially similar consent solicitation (the "Acquisitions
Consent Solicitation") of registered holders of its 9% Senior Notes due 2007
(the "Acquisitions Notes"). The Consent Solicitation expired on July 9, 1997
with the Company having obtained the consents to the amendments required under
the Existing Senior Notes Indenture. On July 10, 1997, the Company executed a
supplemental indenture adopting the amendments to the Existing Senior Notes
Indenture. The Acquisitions Consent Solicitation was also successfully
consummated. As part of the Consent Solicitation, the Company made a payment
(the "Consent Payment") of $7,500,000 which
7
<PAGE>
was allocated pro rata by the Company to each registered holder consenting
thereto. As part of the Acquisitions Consent Solicitation, Acquisitions made a
consent payment of $4,375,000 which was allocated pro rata by Acquisitions to
each registered holder consenting thereto.
The Merger was consummated on July 10, 1997 and the proposed amendments to
the Existing Senior Notes Indenture and to the indenture governing the
Acquisitions Notes became effective on such date. As a result of the Merger,
the Company conducts the operations and business formerly conducted by
Acquisitions. The terms of the respective indentures governing the Existing
Senior Notes and the Acquisition Notes, as amended pursuant to the
aforementioned consent solicitations, are substantially similar to those of the
Indenture. See "Description of Senior Notes."
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.......... The Company is offering to exchange up to $600
million principal amount of Exchange Notes for a
like principal amount of Original Notes. The
Exchange Notes may be exchanged only in multiples
of $1,000 principal amount. The Company will
issue the Exchange Notes on or promptly after the
Expiration Date. See "The Exchange Offer."
Based on interpretations by the Staff set forth
in no-action letters issued to third parties, the
Company believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for
the Original Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is (i)
an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired the Original Notes
directly from the Company or (iii) a broker-
dealer who acquired the Original Notes as a
result of market making or other trading
activities) without compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and such holder
is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with
any person to participate in the distribution of
such Exchange Notes. Each broker-dealer that
receives the Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan
of Distribution." To comply with the securities
laws of certain jurisdictions, it may be
necessary to qualify for sale or register the
Exchange Notes prior to offering or selling such
Exchange Notes. If a holder of Original Notes
does not exchange such Original Notes for the
Exchange Notes pursuant to the Exchange Offer,
such Original Notes will continue to be subject
to the restrictions on transfer contained in the
legend thereon. In general, the Original Notes
may not be offered or sold, unless registered
under the Securities Act, except pursuant to an
exception from, or in a transaction not subject
to the Securities Act and applicable state
securities laws. See "The Exchange Offer--
Consequences of Failure to Exchange" and
"Description of Senior Notes."
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, unless extended
in which case the term "Expiration Date" shall
mean the latest date and time to which the
Exchange Offer is so extended.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain
customary conditions, which may be waived by the
Company in whole or in part and from time to time
in its sole discretion. See "The Exchange Offer--
Certain Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Procedures for Tendering
the Original Notes......... Each Registered Holder of Original Notes wishing
to accept the Exchange Offer must complete, sign
and date the Letter of
9
<PAGE>
Transmittal, or a facsimile thereof in accordance
with the instructions contained herein and
therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with such Original Notes and any other
required documentation, to the Exchange Agent at
the address set forth herein; or indicate assent
to the terms of the Letter of Transmittal by
complying with the Automated Tender Offer Program
("ATOP") procedures of the Depository Trust
Company ("DTC"),. By executing the Letter of
Transmittal, each holder of the Original Notes
(other than participating broker-dealers) will
represent to the Company that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not the
holder of the Original Notes, that neither the
holder of the Original Notes nor any such other
person has an arrangement or understanding with
any person to participate in the distribution of
such Original Notes and that neither the holder
nor any such person is an "affiliate," as defined
in Rule 405 under the Securities Act, of the
Company. Any Original Notes not accepted for
exchange for any reason will be returned without
expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer. See "The
Exchange Offer--Procedures for Tendering Original
Notes."
Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender, should contact such
Registered Holder promptly and instruct such
Registered Holder to tender on such beneficial
owner's behalf. If such beneficial holder wishes
to tender on its own behalf, such beneficial
holder must, prior to completing and executing
the Letter of Transmittal, and delivering its
Original Notes, either make appropriate
arrangements to register ownership of the
Original Notes in such holder's name or obtain a
properly completed bond power from the Registered
Holder. The transfer of registered ownership may
take considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer--Procedures for Tendering Original
Notes."
Guaranteed Delivery
Procedures.................. Holders of the Original Notes who wish to tender
their Original Notes and whose Original Notes are
not immediately available or who cannot deliver
their Original Notes or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date, must
tender their Original Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders of Original Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. For a withdrawal to be
effective, a written or facsimile notice of
withdrawal must be received by the Exchange Agent
at its address set forth herein or
10
<PAGE>
holders must comply with the appropriate
procedures of DTC's ATOP. And such notice must
(i) specify the name of the person having
tendered the Original Notes to be withdrawn; (ii)
identify the Original Notes to be withdrawn
(including the serial number or numbers and
principal amount of Original Notes to be
withdrawn); (iii) be signed by the holder in the
same manner as the original signature on the
Letter of Transmittal by which such Original
Notes were tendered; and (iv) specify the name in
which the Original Notes are to be registered, if
different from that of the withdrawing holder.
See "The Exchange Offer--Withdrawal Rights."
Acceptance of Original
Notes and Delivery of
Exchange Notes............. The Company will accept for exchange any and all
Original Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
Consequences of Failure to
Exchange................... Holders of Original Notes who do not exchange
their Original Notes for the Exchange Notes
pursuant to the Exchange Offer will continue to
be subject to the restrictions on transfer of
such Original Notes as set forth in the legend
thereon. In general, the Original Notes that are
not exchanged pursuant to the Exchange Offer may
not be offered or sold except pursuant to a
registration statement under Securities Act or an
exemption from registration thereunder and in
compliance with applicable state securities laws.
In the event the Company completes the Exchange
Offer, the interest rate on Original Notes will
remain as stated thereon and holders of Original
Notes will have no further rights under the
Registration Rights Agreements (as defined
below).
Certain Tax
Considerations............. Latham & Watkins, counsel to the Company, has
advised the Company that because the Exchange
Notes should not be considered to differ
materially from the Original Notes, the exchange
of the Original Notes for Exchange Notes should
not result in any material federal income tax
consequences to holders exchanging the Original
Notes for the Exchange Notes. For a full
description of the basis of, and limitations on,
this opinion, see "Material Federal Income Tax
Considerations."
Registration Rights
Agreement.................. Pursuant to a registration rights agreement (the
"Registration Rights Agreement") among the
Company, the Subsidiary Guarantors and the
initial purchasers of the Original Notes (the
"Initial Purchasers"), the Company and the
Subsidiary Guarantors have agreed (i) to file a
registration statement with respect to an offer
to exchange the Original Notes for a like
principal amount of Exchange Notes and (ii) to
use their reasonable best efforts to cause such
registration statement to become effective under
the Securities Act. The Exchange Offer is
intended to satisfy the rights of holders of
Original Notes under the Registration Rights
Agreement, which rights terminate upon
consummation of the Exchange Offer. The holders
of the Exchange Notes are not entitled to any
exchange or registration rights with respect to
the Exchange Notes.
Exchange Agent.............. Marine Midland Bank is the Exchange Agent. The
address and telephone number of the Exchange
Agent are set forth in the "The Exchange Offer--
Exchange Agent."
11
<PAGE>
SUMMARY TERMS OF THE SENIOR NOTES
The Exchange Offer applies to $600 million aggregate principal amount of the
Original Notes. The form and terms of the Exchange Notes will be the same as
the form and terms of the Original Notes except that (i) the Exchange Notes
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) the holders of the Exchange
Notes will not be entitled to certain rights of the holders of the Original
Notes under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Original Notes and both series of Senior Notes will be entitled to
the benefits of the Indenture and treated as a single class of debt securities
thereunder. See "Description of Senior Notes."
Issuer...................... HMH Properties, Inc.
Securities Offered.......... $600 million in aggregate principal amount of 8
7/8% Senior Notes due 2007.
Maturity.................... July 15, 2007
Interest Payment Dates...... July 15 and January 15, commencing January 15,
1998.
Ranking..................... The Senior Notes are senior obligations of the
Company. The Senior Notes rank pari passu in
right of payment with all existing and future
senior Indebtedness of the Company, provided,
however, that certain Indebtedness of the Company
and its subsidiaries currently is, and
Indebtedness incurred by the Company and its
subsidiaries may be, secured by assets held by
the Company or its subsidiaries subject to
certain restrictions described herein. As of June
20, 1997, on a pro forma basis as adjusted to
give effect to the Offering, the aggregate
principal amount of outstanding senior
Indebtedness of the Company was approximately
$1.7 billion, of which approximately $100 million
was secured by assets held by the Company or its
subsidiaries.
Security.................... The Senior Notes are secured (on an equal and
ratable basis with the Existing Senior Notes, the
Acquisitions Notes and pari passu indebtedness)
by a first priority pledge of all of the capital
stock of all but one of the Subsidiary
Guarantors, subject to certain exceptions.
Guarantees.................. The Senior Notes will be guaranteed on a joint
and several basis by the Subsidiary Guarantors.
Optional Redemption......... The Senior Notes may be redeemed at the option of
the Company, in whole or in part, on or after
July 15, 2002 at a premium to par declining to
par in 2005, plus accrued and unpaid interest, if
any, through the redemption date.
Change of Control........... Upon the occurrence of a Change of Control
Triggering Event (as defined herein), the Company
will be required to make an offer to repurchase
the Senior Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued
and unpaid interest, if any, to the date of
repurchase.
Certain Covenants........... The Indenture contains certain covenants that,
among other things, restrict the ability of the
Company and its subsidiaries to (i) incur
additional Indebtedness and issue preferred
stock, (ii) pay dividends
12
<PAGE>
or make other distributions, (iii) repurchase
capital stock or subordinated Indebtedness, (iv)
create certain liens, (v) enter into certain
transactions with affiliates, (vi) issue or sell
capital stock of the Company's subsidiaries,
(vii) enter into certain mergers and
consolidations or (viii) invest in Subsidiaries
that are not, or do not become, Subsidiary
Guarantors. In addition, under certain
circumstances, the Company will be required to
offer to purchase the Exchange Notes at a price
equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of purchase, with the proceeds of certain
Asset Sales (as defined herein).
RISK FACTORS
Holders of the Original Notes should carefully consider the matters set forth
herein under "Risk Factors," as well as other information and data included
elsewhere in this Prospectus.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary combined consolidated historical
financial data of the Company (after giving effect to the Merger) for the
fiscal year ended January 3, 1997 and First Two Quarters 1997 and summary
combined consolidated pro forma financial data of the Company for the fiscal
year ended January 3, 1997, the twenty-four weeks ended June 14, 1996 ("First
Two Quarters 1996") and First Two Quarters 1997. The unaudited pro forma
financial data reflects (i) inclusion of the operating results of hotels
acquired in 1996 and First Two Quarters 1997 and exclusion of operating results
of hotels sold in 1996 as if each acquisition or disposition had occurred at
beginning of the period indicated and (ii) the sale of the Original Notes. The
pro forma financial data set forth below may not necessarily be indicative of
the results that would have been achieved had such transactions been
consummated as of the dates indicated or that may be achieved in the future.
The information presented below is derived from and should be read in
conjunction with the Company's audited Combined Consolidated Financial
Statements and Notes thereto, the unaudited First Two Quarters 1997 Combined
Consolidated Financial Statements and Notes thereto, the "Selected Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the "Pro Forma Condensed Combined Consolidated
Financial Data" included elsewhere herein. The data presented below is
unaudited except for the historical income statement data for fiscal year 1996
which has been audited. The Company's fiscal year ends on the Friday closest to
December 31.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
--------------- -----------------
FIRST FIRST TWO
FISCAL TWO FISCAL QUARTERS
YEAR QUARTERS YEAR ----------
1996 1997 1996 1996 1997
------ -------- ------ ---- ----
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $319 $195 $358 $166 $198
Operating profit...................... 144 94 164 78 95
Corporate expenses.................... 15 6 15 6 6
Interest expense...................... 101 46 158 72 72
Interest income....................... 26 9 16 11 9
Net income............................ 32 30 4 6 15
OTHER OPERATING DATA:
EBITDA(2)............................. $226 $131 $239 $115 $133
Cash interest expense(3).............. 99 45 152 70 70
Depreciation and amortization......... 64 35 68 33 36
Maintenance capital expenditures(4)... 39 21 43 25 22
RATIO DATA:
EBITDA to cash interest expense....... 2.3x 2.9x 1.6x 1.6x 1.9x
EBITDA less maintenance capital
expenditures to cash interest
expense.............................. 1.9x 2.4x 1.3x 1.3x 1.6x
Ratio of earnings to fixed
charges(5)........................... 1.5x 2.0x 1.1x 1.1x 1.3x
<CAPTION>
AS OF JUNE 20, 1997
-------------------
ACTUAL PRO FORMA(6)
------ ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 86 $ 656
Total assets.............................................. 1,891 2,491
Total debt................................................ 1,080 1,680
Shareholder's equity...................................... 624 624
</TABLE>
(footnotes on following page)
14
<PAGE>
HOTEL PERFORMANCE
The following table sets forth key performance statistics of the Company's
properties:
<TABLE>
<CAPTION>
FIRST TWO QUARTERS FISCAL YEAR
-------------------- ----------------
1997 1996 1996 1995
--------- --------- ------- -------
<S> <C> <C> <C> <C>
COMPARABLE FULL-SERVICE HOTELS(7)
Number of properties.................. 36 36 31 31
Number of rooms....................... 15,327 15,297 12,465 12,465
Average daily rate.................... $ 121.12 $ 107.73 $103.64 $ 96.91
Occupancy %........................... 79.7% 77.6% 76.1% 73.7%
REVPAR(8)............................. $ 96.47 $ 83.57 $ 78.84 $ 71.38
REVPAR % change....................... 15.4% -- 10.5% --
TOTAL FULL-SERVICE HOTELS
Number of properties.................. 50 44 48 38
Number of rooms....................... 19,716 17,490 18,976 15,552
Average daily rate(9)(10)............. $ 120.84 $ 107.47 $107.38 $ 97.57
Occupancy %(9)(10).................... 78.9% 77.6% 76.4% 73.9%
REVPAR(8)(9)(10)...................... $ 95.31 $ 83.36 $ 82.03 $ 72.07
REVPAR % change....................... 14.3% -- 13.8% --
</TABLE>
- --------------------
(1) See "Pro Forma Condensed Combined Consolidated Financial Data."
(2) EBITDA consists of the sum of consolidated net income, interest expense,
income taxes, depreciation and amortization and certain other noncash
charges (principally noncash write-downs of lodging properties and equity
in earnings of affiliates, net of distributions received). The Company
considers EBITDA to be an indicative measure of the Company's operating
performance due to the significance of the Company's long-lived assets (and
the related depreciation thereon). EBITDA can be used to measure the
Company's ability to service debt, fund capital expenditures and expand its
business and is used in the Company's indentures as part of the tests
determining the Company's ability to incur debt and to make certain
restricted payments. However, such information should not be considered as
an alternative to net income, operating profit, cash flows from operations,
or any other operating or liquidity performance measure prescribed by
generally accepted accounting principles ("GAAP"). Cash expenditures for
various long-term assets, interest expense and income taxes have been, and
will be, incurred which are not reflected in the EBITDA presentation. On a
historical basis, cash from operations totaled $128 million and $81 million
for fiscal year 1996 and First Two Quarters 1997, respectively. On a
historical basis, cash used in investing activities totaled $76 million and
$102 million for fiscal year 1996 and First Two Quarters 1997,
respectively. On a historical basis, cash used in financing activities
totaled $34 million, for each of fiscal year 1996 and First Two Quarters
1997.
(3) Cash interest expense is calculated as GAAP interest expense less
amortization of deferred financing costs.
(4) Maintenance capital expenditures represent disbursements which are
generally equal to 5% of gross hotel sales and are utilized for renewals
and replacements of the hotels' property and equipment.
(5) The ratio of earnings to fixed charges is computed by dividing net income
before taxes, interest expense and other fixed charges by total fixed
charges, including interest expense, amortization of debt issuance costs
and the portion of rent expense which represents interest.
(6) Pro Forma for the Offering. See "Pro Forma Condensed Combined Consolidated
Financial Data."
(7) Consists of 31 properties owned by the Company for the entire 1996 and 1995
fiscal years, respectively, and the 36 properties owned by the Company for
the entire First Two Quarters 1997 and 1996, respectively, except for the
255-room Elk Grove Suites Hotel, which was leased to a national hotel chain
through August 1997 and was recently sold to the lessee for $16 million.
(8) REVPAR represents room revenues generated per available room and excludes
food and beverage and other ancillary revenues generated by the property.
(9) Excludes the 255-room Elk Grove Suites Hotel, which was leased to a
national hotel chain through August 1997 and was recently sold to the
lessee and the Springfield Radisson which was sold in December 1995.
(10) Financial data for fiscal year 1995 excludes the 820-room Marriott World
Trade Center, which was acquired in December 1995.
15
<PAGE>
RISK FACTORS
Holders of Original Notes that are considering participation in the Exchange
Offer should carefully consider the following risk factors in addition to the
other information contained in this Prospectus.
SUBSTANTIAL LEVERAGE
At June 20, 1997, on a pro forma basis as adjusted to give effect to the
Offering, the Company had approximately $1.7 billion of outstanding
Indebtedness, representing 73% of its total capitalization. The Company's
level of debt presents risks to the holders of the Senior Notes, including the
risk that the Company might not generate sufficient cash to service the Senior
Notes. In the event that the Company's cash flow and working capital are not
sufficient to fund the Company's expenditures or to service its Indebtedness,
including the Senior Notes, the Company would be required to raise additional
funds through capital contributions, the refinancing of all or part of its
Indebtedness, the incurrence of additional permitted Indebtedness, or the sale
of assets. There can be no assurance that any of these sources of funds, if
available at all, would be available in amounts sufficient for the Company to
meet its obligations. Moreover, even if the Company were able to meet its
obligations, its leveraged capital structure could significantly limit its
ability to finance its acquisition program and other capital expenditures to
compete effectively or to operate successfully, especially under adverse
economic conditions. The Indenture and the indentures governing the Existing
Senior Notes and the Acquisitions Notes each contain financial and operating
covenants, including, but not limited to, restrictions on the Company's
ability to incur additional Indebtedness and issue preferred stock, pay
dividends or make other distributions, create liens, sell assets, enter into
certain transactions with affiliates, and enter into certain mergers and
consolidations. See "Description of Senior Notes." The Company's ability to
comply with the terms of the Indenture (including its ability to comply with
such covenants), to make cash payments with respect to the Senior Notes and to
satisfy its other debt obligations will depend on the future performance of
the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Capital Resources" and "Description of
Senior Notes. "
COMPETITION AND RISKS OF THE LODGING INDUSTRY
The Company's hotels generally operate in areas that contain numerous other
competitors. During the 1980s, construction of lodging facilities in the
United States resulted in an excess supply of available rooms. This over-
supply had an adverse effect on occupancy levels and room rates in the
industry. Although the current outlook for the industry has improved, the
lodging industry, including the Company, may be adversely affected in the
future by (i) national and regional economic conditions, (ii) changes in
travel patterns, (iii) taxes and government regulations which influence or
determine wages, prices, interest rates, construction procedures and costs and
(iv) the availability of credit. Hotel investments are relatively illiquid.
Such illiquidity will tend to limit the ability of the Company to respond to
changes in economic or other conditions. There can be no assurance that
downturns or prolonged adverse conditions in real estate or capital markets or
the economy as a whole will not have a material adverse impact on the Company.
RELATIONSHIP WITH MARRIOTT INTERNATIONAL
Marriott International serves as the manager for all but ten of the
Company's lodging properties and provides various other services to Host
Marriott and its subsidiaries including the Company. With respect to these
various contractual arrangements, the potential exists for disagreement as to
contract compliance. Additionally, the possible desire of the Company, from
time-to-time, to finance, refinance or effect a sale of any of the properties
managed by Marriott International may, depending upon the structure of such
transactions, result in a need to modify the management agreements with
Marriott International with respect to such property. Any such modification
proposed by the Company may not be acceptable to Marriott International, and
the lack of consent from Marriott International could adversely affect the
Company's ability to consummate such financing or sale. In addition, certain
situations could arise where actions taken by Marriott International in its
capacity as manager of competing lodging properties would not necessarily be
in the best interests of the Company. Nevertheless, the
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Company believes that there is sufficient mutuality of interest between the
Company and Marriott International to result in a mutually productive
relationship. In addition, Host Marriott and Marriott International share two
common directors:--J.W. Marriott, Jr. serves as Chairman of the Board of
Directors, Chief Executive Officer and President of Marriott International and
also serves as a director of Host Marriott; Richard E. Marriott is a director
of Marriott International and Chairman of the Board of Directors of Host
Marriott. Messrs. J.W. Marriott, Jr., Richard E. Marriott, as well as certain
other officers and directors of Marriott International and Host Marriott, also
own shares (and/or options or other rights to acquire shares) in both
companies. Appropriate policies and procedures are followed by the Board of
Directors of Host Marriott and Marriott International to limit the involvement
of Messrs. J.W. Marriott, Jr. and Richard E. Marriott (and, if appropriate,
other officers and directors of such companies) in conflict situations,
including requiring them to abstain from voting as directors of either Host
Marriott or Marriott International (or as directors of any of their
subsidiaries) on certain matters which present a conflict between the
companies. See "Relationship with Marriott International."
FRAUDULENT TRANSFER
The Company's obligations under the Senior Notes will be guaranteed by the
Subsidiary Guarantors. The Guarantees may be subject to review under state or
Federal fraudulent transfer laws in the event of the bankruptcy or other
financial difficulty of a Subsidiary Guarantor. Under those laws, if a court
in a lawsuit by an unpaid creditor or representative of creditors of a
Subsidiary Guarantor, such as a trustee in bankruptcy or a Subsidiary
Guarantor as debtor in possession, were to find that at the time the
Subsidiary Guarantor issued its Guarantee, it either (i) was insolvent, (ii)
was rendered insolvent, (iii) was engaged in a business or transaction for
which its remaining unencumbered assets constituted unreasonably small
capital, or (iv) intended to incur or believed that it would incur debts
beyond its ability to pay as such debts matured, such court could avoid the
Guarantee and the Subsidiary Guarantor's obligations thereunder, and direct
the return of any amounts paid thereunder to the Company or to a fund for the
benefit of its creditors. Moreover, regardless of the factors identified in
the foregoing clauses (i) through (iv), the court could avoid the Guarantee
and direct such repayment if it found that the Guarantee was issued with
actual intent to hinder, delay, or defraud the Subsidiary Guarantor's
creditors.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such
Original Notes in exchange for the Exchange Notes should allow sufficient time
to ensure timely delivery. Neither the Exchange Agent nor the Company is under
any duty to give notification of defects or irregularities with respect to
tenders of Original Notes for exchange. Original Notes that are not tendered
or are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Original Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Original Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Original Notes
could be adversely affected. See "Exchange Offer."
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ABSENCE OF PUBLIC MARKET FOR THE SENIOR NOTES
The Original Notes have not been registered under the Securities Act and are
subject to significant restrictions. The Exchange Notes will constitute a new
issue of securities with no established trading market. The Company does not
intend to list the Senior Notes on any national securities exchange or to seek
the admission thereof to trading in the National Association of Securities
Dealers Automated Quotation system. The Company has been advised by Donaldson,
Lufkin & Jenrette Securities Corporation, BT Securities Corporation, Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Montgomery
Securities, the initial purchasers of the Original Notes (the "Initial
Purchasers") that they presently intend to make a market in the Exchange
Notes. However, the Initial Purchasers are not obligated to do so, and any
market-making activity with respect to the Exchange Notes may be discontinued
at any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Exchange Act, and may be limited during
the Exchange Offer. If a trading market does not develop or is not maintained,
holders of the Exchange Notes may experience difficulty in reselling the
Exchange Notes or may be unable to sell them at all. If a trading market does
not develop or is not maintained, holders of the Senior Notes may experience
difficulty in reselling the Senior Notes or may be unable to sell them at all.
If a market for the Senior Notes develops, any such market may be discontinued
at any time. If a public trading market develops for the Senior Notes, future
trading prices of the Senior Notes will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on prevailing
interest rates, the market for similar securities and other factors, including
the financial condition of the Company, the Senior Notes may trade at a
discount from their principal amount.
RISK INVOLVED IN INVESTMENTS THROUGH PARTNERSHIPS OR JOINT VENTURES
Instead of purchasing hotel properties directly, the Company may invest as a
co-venturer. Joint venturers often have equal control over the operation of
the joint venture assets. Therefore, such investments may, under certain
circumstances, involve risks such as the possibility that the co-venturer in
an investment might become bankrupt, or have economic or business interests or
goals that are inconsistent with the business interests or goals of the
Company, or be in a position to take action contrary to the instructions or
the requests of the Company or contrary to the Company's policies or
objectives. Consequently, actions by a co-venturer might result in subjecting
hotel properties owned by the joint venture to additional risk. Although the
Company will seek to maintain sufficient control of any joint venture to
permit the Company's objectives to be achieved, it may be unable to take
action without the approval of its joint venture partners or its joint venture
partners could take actions binding on the joint venture without the Company's
consent. Additionally, should a joint venture partner become bankrupt, the
Company could become liable for such partner's share of joint venture
liabilities.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on July 15, 1997 (the "Closing
Date") to the Initial Purchasers. The Initial Purchasers subsequently placed
the Original Notes in transactions not requiring registration under the
Securities Act or applicable state securities laws, including sales to persons
the Initial Purchasers reasonably believe to be qualified institutional buyers
in reliance on Rule 144A and to certain persons outside the United States
pursuant to Regulation S under the Securities Act. As a condition to the sale
of the Original Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on July 15, 1997. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would (i) file with the
Commission a registration statement (the "Registration Statement") under the
Securities Act with respect to the Exchange Notes as soon as practicable after
the Closing Date, but in no event later than the 60th day after the Closing
Date, (ii) use its reasonable best efforts to cause such Registration
Statement to become effective under the Securities Act on or before the 150th
day after the Closing Date, (iii) keep the Exchange Offer open for not less
than 30 days (or such longer period required by applicable law) after the date
that the notice of the Exchange Offer (as defined in the Registration Rights
Agreement), and (iv) consummate the Exchange Offer within 180 days after the
Closing Date, and deliver to the Exchange Agent, Exchange Notes in the same
aggregate principal amount as the Original Notes that were properly tendered
by holders thereof pursuant to the Exchange Offer. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Registration Statement of which this
Prospectus is a part is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Original
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Original Notes accepted in the Exchange Offer. Holders may tender some or all
of their Original Notes pursuant to the Exchange Offer. However, the Original
Notes may be tendered only in integral multiples of $1,000.
The Exchange Notes will evidence the same debt as the Original Notes for
which they are exchanged, and are entitled to the benefits of the Indenture.
The form and terms of the Exchange Notes are the same as the form and terms of
the Original Notes except that the Exchange Notes have been registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof.
Holders do not have an appraisal or dissenters' rights under the Delaware
General Corporation Law or under the Indenture in connection with the Exchange
Offer. The Company intends to conduct the Exchange Offer in accordance with
the applicable requirements of Regulation 14E under the Exchange Act.
The Company shall be deemed to have accepted validly tendered Exchange Notes
when, as and if, the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders whose Original Notes are not tendered or are tendered but not
accepted in the Exchange Offer will continue to hold such Original Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the
Securities Act of the Original Notes held by
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them. To the extent that Original Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Original Notes could be adversely affected.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of the
Original Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "--Fees and Expenses; Solicitation of Tenders."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997, unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is so
extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
Registered Holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that the Company is extending the Exchange
Offer for a specified period of time or on a daily basis until 5:00 p.m., New
York City time, on the date on which a specified percentage of Original Notes
are tendered.
The Company reserves the right (i) to delay accepting any Original Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept
Original Notes not previously accepted if any of the conditions set forth
below under "--Certain Conditions to the Exchange Offer" shall have occurred
and shall not have been waived by the Company, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (ii)
to amend the terms of the Exchange Offer in any manner deemed by it to be
advantageous to the holders. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the holders. If the Exchange Offer is amended in
a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to all Registered Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure
to Registered Holders, if the Exchange Offer would otherwise expire during
such five to ten business day period. During any extension of the Expiration
Date, all Original Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely
release to the Dow Jones News Service.
INTEREST ON THE SENIOR NOTES
Interest will accrue on the Exchange Notes from and including their
respective dates of issuance, at the rate of 8 7/8% per annum and will be
payable in cash semiannually in arrears on each July 15 and January 15,
commencing on January 15, 1998. Holders whose Original Notes are accepted for
exchange will receive accrued interest thereon to, but not including, the date
of issuance of the Exchange Notes, such interest to be payable with the first
interest payment on the Exchange Notes, but will not receive any payment in
respect of interest on the Original Notes accrued after the issuance of the
Exchange Notes. No interest will be payable on the Original Notes on the date
of the exchange for the Exchange Notes and therefore no interest will be paid
thereon to the holders at such time.
PROCEDURES FOR TENDERING ORIGINAL NOTES
The tender to the Company of the Original Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender the Original Notes for exchange pursuant
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to the Exchange Offer must transmit a properly completed and duly executed
Letter of Transmittal, including all other documents required by such Letter
of Transmittal, to the Exchange Agent at the addresses set forth below under
"--Exchange Agent" and on the back cover of this Prospectus on or prior to the
Exchange Dates or, in the alternative, comply with the approved procedures of
DTC's ATOP. In addition, either (i) certificates for such Original Notes must
be received by the Exchange Agent, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Original Notes, if such
procedure is available, into the Exchange Agent's account at DTC pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. THE METHOD OF
DELIVERY OF THE ORIGINAL NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED, IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE
SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Original Notes surrendered for exchange
pursuant thereto are tendered (i) by a Registered Holder of the Original Notes
who has not completed the boxes entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a firm (an
"Eligible Institution") that is a member of a recognized signature guarantee
medallion program (an "Eligible Program") within the meaning of Rule 17Ad-15
under the Exchange Act. If the Exchange Notes and/or Original Notes not
exchanged are to be delivered to an address other than that of the Registered
Holder appearing on the note register for the Original Notes, the signature on
the Letter of Transmittal must be guaranteed by an Eligible Institution. If
the Original Notes are registered in the name of a person other than the
person signing the Letter of Transmittal, the Original Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the Registered Holder with
the signature thereon guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact the Registered Holder promptly and
instruct such Registered Holder to tender Original Notes on such beneficial
owner's behalf. If such beneficial owner wishes to tender such Original Notes
himself, such beneficial owner must, prior to completing and executing the
Letter of Transmittal and delivering such Original Notes in such beneficial
owner's name, either make appropriate arrangements to register ownership of
the Original Notes in such beneficial owner's name or obtain a properly
completed bond power from the Registered Holder of the Original Notes. The
transfer of registered ownership may take considerable time and may not be
able to be completed prior to the Expiration Date.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing the
Depositary to transfer the Original Notes to the Exchange Agent in accordance
with the Depositary's ATOP procedures for transfer. The Depositary will then
send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which
states that the Depositary has received an express acknowledgment from a
participant in DTC's ATOP that is tendering Original Notes which are the
subject of such book entry confirmation, that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal (or, in the
case of an Agent's Message relating to guaranteed delivery, that such
participant has received and agrees to be bound by the applicable Notice of
Guaranteed Delivery), and that the agreement may be enforced against such
participant.
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All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the Original Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Original Note not properly tendered or to not
accept any particular Original Note which acceptance might, in the judgment of
the Company or its counsel, be unlawful. The Company also reserves the
absolute right at its sole discretion to waive any defects or irregularities
or conditions of the Exchange Offer as to any particular Original Note either
before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender the Original Notes in the
Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Original Note either before or after the
Expiration Date (including the Letter of Transmittal and instructions thereto)
by the Company shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with the tenders of Original Notes for
exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity
with respect to any tender of the Original Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
Registered Holder or holders of Original Notes, such Original Notes must be
endorsed or accompanied by a properly completed bond power, in either case
signed exactly as the names of the Registered Holder or holders that appear on
the Original Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Original Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such person should so indicate when signing and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original
Notes properly tendered and will issue the Exchange Notes promptly after
acceptance of the Original Notes. See "--Certain Conditions to the Exchange
Offer" below. For purposes of the Exchange Offer, the Company shall be deemed
to have accepted properly tendered Original Notes for exchange when, and if,
the Company has given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Original Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Original Notes
or a timely Book-Entry Confirmation of such Original Notes into the Exchange
Agent's account at DTC, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Original Notes
are not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if certificates representing the Original Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Original Notes will be returned without
expense to the tendering holder thereof (or, in the case of Original Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described below, such non-
exchanged Original Notes will be credited to an account maintained with DTC)
as promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in DTC's systems may make book-entry delivery of the
Original Notes by causing
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DTC to transfer such Original Notes into the Exchange Agent's account at DTC
in accordance with DTC's procedure for transfer. However, although delivery of
the Original Notes may be effected through book-entry transfer at DTC, the
Letter of Transmittal or a facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at one of the addresses set forth below
under "--Exchange Agent" on or prior to the Expiration Date, or comply with
DTC's ATOP procedures or the guaranteed delivery procedures described below
must be complied with or DTC's ATOP procedures must be complied with. Delivery
of documents to the book-entry transfer facility does not constitute delivery
to the Exchange Agent.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of Federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the holder
does not provide its taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to the Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Original Notes desires to tender such Original
Notes and the Original Notes are not immediately available, or time will not
permit such holder's Original Notes or other required documents to reach the
Exchange Agent before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
(i) the tender is made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), and Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of
the holder of the Original Notes and the principal amount of Original Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three business days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Original
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and the holder
has complied with DTC's ATOP procedures and (iii) the certificates for all
physically tendered Original Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three
business days after the date of execution of the Notice of Guaranteed
Delivery. Unless Original Notes being tendered by the above-described method
(or a timely Book-Entry Confirmation) are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the Company
may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are being delivered with this Prospectus and the related
Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder'sproperly completed and duly signed Letter of Transmittal,
accompanied by the Original Notes (or a timelyBook-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchangefor
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or
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<PAGE>
facsimile transmissions to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal
(and any other required documents) and the tendered Original Notes (or a
timely Book-Entry Confirmation).
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such
tendered Original Notes, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title to the tendered Original
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The Transferor also warrants that it will,
upon request, execute and deliver any additional documents
deemed by the Company to be necessary or desirable to complete the exchange,
assignment and transfer of tendered Original Notes. The Transferor further
agrees that acceptance of any tendered Original Notes by the Company and the
issuance of Exchange Notes in exchange therefor shall constitute performance
in full by the Company of its obligations under the Registration Rights
Agreement and that the Company shall have no further obligations or
liabilities thereunder (except in certain limited circumstances). All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Original Notes acquired directly
from the Company or an affiliate of the Company, that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes or (b) that it is an
"affiliate" (as so defined) of the Company or of the Initial Purchasers, and
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal to be effective, (i) a written or facsimile notice of
withdrawal must be received by the Exchange Agent at its address set forth
below under "--Exchange Agent" or (ii) holders must comply with the
appropriate procedures of DTC's ATOP. Any such notice of withdrawal must (i)
specify the name of the person having tendered the Original Notes to be
withdrawn, (ii) identify the Original Notes to be withdrawn (including the
serial number or numbers and the principal amount of Original Notes to be
withdrawn), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Original Notes were
tendered and (iv) specify the name in which such Original Notes are to be
registered, if different from that of the withdrawing holder. If Original
Notes have been tendered pursuant to the procedure for book-entry described
above, any notice of withdrawal must specify, in lieu of certificate numbers,
the name and number of the account at DTC to be credited with the withdrawn
Original Notes and otherwise comply with the procedures of such facility. Any
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall
be final and binding on all parties. Any Original Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Original Notes which have been tendered for exchange but
which are not exchanged for any reason
24
<PAGE>
will be returned to the holder thereof without cost to such holder (or, in the
case of Original Notes tendered by book-entry transfer into the Exchange
Agent's account at DTC pursuant to the book-entry transfer procedures
described above, such Original Notes will be credited to an account maintained
with DTC for the Original Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Original Notes may be retendered by following one of the procedures described
under "--Procedures for Tendering Original Notes" above at any time on or
prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company's
obligation to accept for exchange, or exchange Exchange Notes for, any
Original Notes not theretofore accepted for exchange is subject to the
following conditions:
(a) no action or proceeding having been instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offer which, in the judgment of the Company, might impair the ability of
the Company to proceed with the Exchange Offer or have a material adverse
effect on the Company or there shall not have occurred any material adverse
development in any existing action or proceeding with respect to the
Company or any of its subsidiaries;
(b) there shall not have been any material change, or development
involving a prospective change, in the business or financial affairs of the
Company or any of its subsidiaries which, in the judgment of the Company,
would materially impair the Company's ability to consummate the Exchange
Offer or have a material adverse impact on the Company if the Exchange
Offer is consummated;
(c) there shall not have been proposed, adopted or enacted any law,
statute, rule or regulation which, in the judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer or have a material adverse effect on the Company if the Exchange
Offer is consummated; or
(d) all governmental approvals which the Company shall deem necessary for
the consummation of the Exchange Offer as contemplated hereby shall have
been obtained.
If the Company determines in good faith that any of the conditions are not
met, the Company may (i) refuse to accept any Original Notes and return all
tendered Original Notes to exchanging Holders, (ii) extend the Exchange Offer
and retain all Original Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Original
Notes (see "--Withdrawal Rights") or (iii) waive certain of such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Original Notes which have not been withdrawn or revoked. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to all Registered Holders.
Holders have certain rights and remedies against the Company under the
Registration Rights Agreement, including liquidated damages of up to $.30 per
week per $1,000 principal amount of Original Notes, should the Company fail to
consummate the Exchange Offer, notwithstanding a failure of the conditions
stated above. Such conditions are not intended to modify those rights or
remedies in any respect.
The foregoing conditions are solely for the benefit of the Company and may
be asserted by the Company in good faith regardless of the circumstances
giving rise to such conditions or may be waived by the Company in whole or in
part at any time and from time to time in its discretion. The failure by the
Company at any time to exercise the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of
the foregoing, to terminate or amend the Exchange Offer.
25
<PAGE>
EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies
of this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail; By Overnight Courier; or By Hand:
Marine Midland Bank
140 Broadway
A Level
New York, New York 10005-1180
Attention: Corporate Trust Services
(212) 658-5931
By Facsimile:
(212) 658-2292
Attention: Corporate Trust Services
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; SOLICITATION OF TENDERS
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be $500,000 and
include fees and expenses of the Exchange Agent and accounting and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Original Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes, or the Original Notes not tendered
or tendered but not accepted for exchange, are to be delivered to, or are to
be registered or issued in the name of, any person other than the Registered
Holder of the Original Notes tendered, or if tendered Original Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of the Original Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the original Registered Holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus or the accompanying Letter of Transmittal. If
given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus and/or the accompanying
Letter of Transmittal does not constitute an offer to sell, or a solicitation
of an offer to buy, the Exchange Notes in any jurisdiction where, or to any
person to whom, it is unlawful to make such an offer or a solicitation.
Neither the delivery of the Prospectus or the accompanying
26
<PAGE>
Letter of Transmittal, nor any sale made thereunder shall, under any
circumstances, create any implication that there has not been any change in
the facts set forth in this Prospectus or in the affairs of the Company since
the date hereof.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized. The costs of the Exchange Offer will
be expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Original Notes as set forth in the legend
thereon. In general, the Original Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not intend to register the Original Notes
under the Securities Act. The Company believes that, based upon
interpretations contained in no-action letters issued to third parties by the
Staff, the Exchange Notes issued pursuant to the Exchange Offer in exchange
for Original Notes may be offered for resale, resold or otherwise transferred
by holders thereof (other than any such holder which is (i) an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired the Original Notes directly from the Company or
(iii) a broker-dealer who acquired the Original Notes as a result of market
making or other trading activities) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holder is not engaged in, and does not intend to engage in, and has
no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." If any Holder (other than a broker-dealer
described in the preceding sentence) has any arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to
the Exchange Offer, such Holder (i) may not rely on the applicable
interpretations of the Staff and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange. See "Material Federal Income Tax Considerations."
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged
to consult their financial and tax advisors in making their own decisions on
what action to take.
To the extent that Original Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Original Notes could be adversely
affected. See "Risk Factors--Consequences of Failure to Exchange." The Company
may in the future seek to acquire untendered Original Notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. The Company has no present plan to acquire any Original Notes which
are not tendered in the Exchange Offer.
27
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes hereby. In consideration for issuing the Exchange Notes as
contemplated in this Prospectus, the Company will receive in exchange,
Original Notes in like principal amount, the terms of which are identical to
the Exchange Notes. The Original Notes surrendered in exchange for the
Exchange Notes will not result in any increase in the indebtedness of the
Company.
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
as of June 20, 1997, and (ii) the pro forma capitalization of the Company as
of June 20, 1997, after giving effect to the Offering. The capitalization of
the Company should be read in conjunction with the Company's Combined
Consolidated Financial Statements and Notes thereto, the "Pro Forma Condensed
Combined Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," each contained
elsewhere herein.
<TABLE>
<CAPTION>
AS OF JUNE 20, 1997
--------------------------
ACTUAL PRO FORMA
------------ -------------
(UNAUDITED, IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents.................... $ 86 $ 656(1)
============ ============
9 1/2% Senior Secured Notes due 2005......... $ 600 $ 600
9% Senior Notes due 2007..................... 350 350
8 7/8% Senior Notes due 2007................. -- 600
Notes secured by real estate assets.......... 97 97
Other notes.................................. 33 33
------------ ------------
Total debt................................. 1,080 1,680
Shareholder's equity......................... 624 624
------------ ------------
Total capitalization....................... $ 1,704 $ 2,304
============ ============
</TABLE>
- ---------------------
(1) Amount is net of the expenses of the Offering, the Consent Solicitation
and the Acquisitions Consent Solicitation.
28
<PAGE>
PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL DATA
The unaudited Pro Forma Condensed Combined Consolidated Financial Data of
the Company reflect the following transactions for First Two Quarters 1997,
First Two Quarters 1996 and for the fiscal year ended January 3, 1997, as if
such transactions had been completed at the beginning of each of the periods:
. 1997 acquisition of The Ritz-Carlton, Marina del Rey and a controlling
interest in Norfolk Waterside Marriott;
. 1996 acquisition of nine full-service hotel properties;
. 1996 sale/leaseback of 18 Residence Inn properties;
. 1996 sale of 16 Courtyard properties;
. Consummation of the Offering, the Consent Solicitation, the Acquisitions
Consent Solicitation and the Exchange Offer.
The unaudited Pro Forma Condensed Combined Consolidated Balance Sheet of the
Company as of June 20, 1997 reflects the issuance of the $600 million
aggregate principal amount of Original Notes in the Offering.
In 1996, the Company acquired nine full-service properties with 3,124 rooms
for approximately $292 million, including the acquisition, through
foreclosure, of a controlling interest in the 250-room Newport Beach Marriott
Suites and the acquisition of a controlling interest in a venture that owns
the 400-room Pittsburgh Marriott City Center. During the first half of 1996,
the Company sold, subject to leaseback, 18 Residence Inns to the REIT. The
Company also sold 16 Courtyard properties to the REIT during 1996, the
deferred proceeds and gain related to the sale of which were sold to Host
Marriott for $13 million.
The Pro Forma Condensed Combined Consolidated Financial Data of the Company
are unaudited and presented for informational purposes only and may not
reflect the Company's future results of operations and financial position or
what the results of operations and financial position of the Company would
have been had such transactions occurred as of the dates indicated. The
unaudited Pro Forma Condensed Combined Consolidated Financial Data and Notes
thereto should be read in conjunction with the Company's Combined Consolidated
Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained elsewhere
herein.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF JUNE 20, 1997
---------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Property and equipment, net................... $1,555 $-- $1,555
Note receivables from affiliate............... 139 -- 139
Due from hotel managers....................... 40 -- 40
Investment in affiliate....................... 18 -- 18
Other assets.................................. 53 30 (A) 83
Cash and cash equivalents..................... 86 570 (A) 656
------ ---- ------
$1,891 $600 $2,491
====== ==== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
9 1/2% Senior Secured Notes due 2005.......... $ 600 $-- $ 600
9% Senior Notes due 2007...................... 350 -- 350
8 7/8% Senior Notes due 2007.................. -- 600 (A) 600
Notes secured by real estate assets........... 97 -- 97
Other notes................................... 33 -- 33
------ ---- ------
Total debt.................................. 1,080 600 1,680
Deferred income taxes......................... 89 -- 89
Other liabilities............................. 98 -- 98
------ ---- ------
Total liabilities........................... 1,267 600 1,867
Shareholder's equity.......................... 624 -- 624
------ ---- ------
$1,891 $600 $2,491
====== ==== ======
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial
Data.
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
FIRST TWO QUARTERS 1997
---------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues
Hotels.................................... $192 $ 3 (B) $195
Other..................................... 3 -- 3
---- ---- ----
195 3 198
Operating costs and expenses
Hotels.................................... 101 2 (B) 103
---- ---- ----
Operating profit before corporate expenses
and interest............................... 94 1 95
Corporate expenses.......................... (6) -- (6)
Interest expense............................ (46) (26)(F) (72)
Interest income............................. 9 -- 9
---- ---- ----
Income (loss) before income taxes........... 51 (25) 26
Benefit (provision) for income taxes........ (21) 10 (G) (11)
---- ---- ----
Net income (loss)........................... $ 30 $(15) $ 15
==== ==== ====
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial
Data.
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
FIRST TWO QUARTERS 1996
----------------------------------------------
DISPOSITION ACQUISITION
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Hotels....................... $142 $ (5)(D) $ 7 (B) $164
20 (E)
Other........................ 2 -- -- 2
---- ---- ---- ----
144 (5) 27 166
---- ---- ---- ----
Operating costs and expenses
Hotels....................... 75 3 (C) 4 (B) 88
(3)(D) 9 (E)
---- ---- ---- ----
75 -- 13 88
---- ---- ---- ----
Operating profit before corpo-
rate expenses and interest.... 69 (5) 14 78
Corporate expenses............. (6) -- -- (6)
Interest expense............... (46) -- (26)(F) (72)
Interest income................ 11 -- -- 11
---- ---- ---- ----
Income (loss) before income
taxes......................... 28 (5) (12) 11
Benefit (provision) for income
taxes......................... (12) 2 (G) 5 (G) (5)
---- ---- ---- ----
Net income (loss).............. $ 16 $ (3) $ (7) $ 6
==== ==== ==== ====
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial
Data.
32
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR 1996
----------------------------------------------
DISPOSITION ACQUISITION
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Hotels....................... $ 313 $ (5)(D) $ 16 (B) $ 352
28 (E)
Other........................ 6 -- -- 6
----- ---- ---- -----
319 (5) 44 358
----- ---- ---- -----
Operating costs and expenses
Hotels....................... 175 4 (C) 8 (B) 194
(4)(D) 11 (E)
----- ---- ---- -----
175 -- 19 194
----- ---- ---- -----
Operating profit before corpo-
rate expenses and interest.... 144 (5) 25 164
Corporate expenses............. (15) -- -- (15)
Interest expense............... (101) -- (57)(F) (158)
Interest income................ 26 -- (3)(B) 16
(7)(E)
----- ---- ---- -----
Income (loss) before income
taxes......................... 54 (5) (42) 7
Benefit (provision) for income
taxes......................... (22) 2 (G) 17 (G) (3)
----- ---- ---- -----
Net income (loss).............. $ 32 $ (3) $(25) $ 4
===== ==== ==== =====
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial
Data.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL DATA
A. Represents the adjustment to record the consummation of the Offering, the
Consent Solicitation, the Acquisitions Consent Solicitation and the Exchange
Offer as follows:
-- Record the issuance of the Original Notes of $600 million.
-- Record the net cash proceeds of $570 million.
-- Record the deferred financing fees of $30 million.
B. Represents the adjustment to record the revenue, operating costs and to
reduce interest income for the 1997 acquisition of The Ritz-Carlton, Marina
del Rey and the acquisition of a controlling interest in the Norfolk
Waterside Marriott.
C. Represents the net adjustment to eliminate the depreciation expense and
record the incremental lease expense for the 1996 sale/leaseback of the 18
Residence Inns.
D. Represents the net adjustment to eliminate revenues, operating costs and
depreciation for the 1996 sale of 16 Courtyard properties.
E. Represents the adjustment to record the revenue and operating costs, and to
reduce interest income for the 1996 acquisitions of nine full-service hotel
properties, including the acquisition of controlling interests in two full-
service properties.
F. Represents the adjustment to record interest expense and related
amortization of deferred financing fees as a result of the Offering, the
Consent Solicitation, the Acquisitions Consent Solicitation and the Exchange
Offer.
G. Represents the income tax impact of pro forma adjustments at statutory
rates.
34
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected historical combined consolidated
financial statement data derived from the Company's Combined Consolidated
Financial Statements as of and for First Two Quarters 1997, First Two Quarters
1996 and for the five most recent fiscal years ended January 3, 1997. The
Company's Combined Consolidated Financial Statements present the combined
financial position, results of operations, and cash flows of the Company and
Acquisitions giving effect to the Merger as if Acquisitions was merged into
the Company for all periods presented. See Note 1 to the Company's Combined
Consolidated Financial Statements. The combined consolidated balance sheet
data for 1992 through 1994 and the income statement and other data for 1992
and 1993 and the financial data for First Two Quarters 1997 and First Two
Quarters 1996, respectively, has been derived from unaudited combined
consolidated financial statements of the Company, which in the opinion of
management include all material adjustments necessary for those periods. The
financial data for fiscal year 1992 and 1993 includes the operating results of
the hotels recorded by Host Marriott or its affiliates for the periods prior
to formation of the Company.
<TABLE>
<CAPTION>
FIRST TWO
QUARTERS FISCAL YEAR
-------------- ---------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
------ ------ ------- ------ ------ ------ ------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues(2)............ $ 195 $ 144 $ 319 $ 255 $ 232 $ 440 $ 471
Operating profit before
corporate expenses and
interest.............. 94 69 144 117 109 77 66
Income before
extraordinary item and
cumulative effect of
accounting
changes(3)............ 30 16 32 26 31 10 14
Net income............. 30 16 32 9 31 6 14
BALANCE SHEET DATA:
Total assets........... $1,891 $1,872 $1,872 $1,810 $1,734 $1,696 $1,815
Debt................... 1,080 1,082 1,082 1,084 785 658 660
OTHER DATA:
EBITDA(4).............. $ 131 $ 102 $ 226 $ 194 $ 178 $ 166 $ 146
Depreciation and amor-
tization.............. 35 29 64 62 64 71 73
Cash provided by oper-
ating activities...... 81 57 128 112 118 75 84
Cash provided by (used
in) investing activi-
ties.................. (102) 70 (76) (76) (107) (23) (38)
Cash provided by (used
in) financing activi-
ties(5)............... (34) (18) (34) 77 (1) (52) (46)
Ratio of earnings to
fixed charges(6)...... 2.0x 1.6x 1.5x 1.5x 1.7x 1.3x 1.3x
</TABLE>
- ---------------------
(1) Fiscal year 1996 includes 53 weeks.
(2) Prior to October 1993, revenues included room sales and food and beverage
sales at hotel properties, as well as sales from senior living
communities. Subsequent to October 1993, revenues include house profit
from the Company's hotel properties, lease rentals from the Company's
senior living communities (in 1994), net gains (losses) on real estate
transactions and equity in earnings of an affiliate. House profit
represents hotel sales, less property-level expenses, excluding
depreciation, management fees, real and personal property taxes, ground
and equipment rent, insurance and certain other costs, which are
classified as operating costs and expenses. See Note 1 to the Company's
Combined Consolidated Financial Statements.
(3) Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes," was adopted in the first quarter of 1993. In the second
quarter of 1993, the Company changed its accounting method for assets held
for sale. The Company recorded a $24 million credit to reflect the
adoption of SFAS No. 109 and a $28 million charge, net of taxes of $19
million, to reflect the change in its accounting method for assets held
for sale. In the second and fourth quarters of 1995, the Company recorded
extraordinary losses on the extinguishments of debt of $14 million and $3
million, respectively, net of taxes, in connection with the redemption and
defeasance of senior notes and the repayment of the Acquisitions Revolver
(as defined herein).
(4) EBITDA consists of the sum of consolidated net income, interest expense,
income taxes, depreciation and amortization and certain other noncash
charges (principally noncash write-downs of lodging properties and equity
in earnings of affiliates, net of distributions received). The Company
considers EBITDA to be an indicative measure of it's operating performance
due to the significance of the Company's long-lived assets (and the
related depreciation thereon). EBITDA can be used to measure the Company's
ability to service debt, fund capital expenditures and expand its business
and is used in the Company's indentures as part of the tests to determine
the Company's ability to incur debt and to make certain restricted
payments. However, such information should not be considered as an
alternative to net income, operating profit, cash flows from operations,
or any other operating or liquidity performance measure prescribed by
GAAP. Cash expenditures for various long-term assets, interest expense and
income taxes have been, and will be, incurred which are not reflected in
the EBITDA presentations.
35
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(5) Cash used in financing activities includes the transfer of asset sales
proceeds and operating cash to Hospitality for the required Hospitality
Notes (as defined herein) redemptions, dividends by Acquisitions to HMC
Acquisitions, Inc. prior to the Merger and dividends by the Company to
Hospitality, as well as other Hospitality corporate uses.
(6) The ratio of earnings to fixed charges is computed by dividing net income
before taxes, interest expense and other fixed charges by total fixed
charges, including interest expense, amortization of debt issuance costs
and the portion of rent expense which represents interest.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company was formed on October 8, 1993 in connection with Host Marriott's
pro rata distribution of Marriott International (the "Distribution") to hold
the majority of Host Marriott's lodging properties not financed by mortgage
debt. The following analysis and the related combined consolidated financial
statements included elsewhere herein are presented as if Acquisitions was
merged into the Company for all periods presented as discussed in Note 1 to
the Combined Consolidated Financial Statements.
Revenues include house profit from the Company's hotel properties, net gains
(losses) on real estate transactions, equity in the earnings of an affiliate
and lease rentals from the Company's senior living communities. House profit
reflects the net revenues flowing to the Company as property owner and
represents hotel sales less property-level expenses excluding depreciation,
management fees, real and personal property taxes, ground and equipment rent,
lease payments, insurance and certain other costs which are classified as
operating costs and expenses. The operating costs and expenses of the senior
living communities consist of depreciation and amortization, while other
operating costs and expenses primarily represent idle land carrying costs.
The Company's hotel operating costs and expenses are, to a great extent,
fixed. Therefore, the Company derives substantial operating leverage from
increases in revenue. This operating leverage is somewhat diluted, however, by
the impact of base management fees which are calculated as a percentage of
sales, variable lease payments and incentive management fees tied to operating
performance above certain established levels. Successful full-service hotel
performance resulted in certain of the Company's properties reaching levels
which allowed the managers to share in the growth of profits in the form of
higher management fees. The Company views this as a positive development as it
helps to strengthen the alignment of the managers' interest with the
Company's. The Company expects that this trend will continue in 1997 as the
hotel industry continues to strengthen.
For the periods discussed herein, the Company's properties have experienced
substantial increases in room revenues generated per available room (excluding
food and beverage and other ancillary revenue) ("REVPAR"). REVPAR is a
commonly used indicator of market performance for hotels which represents the
combination of the average daily room rate charged and the average daily
occupancy achieved. The REVPAR increase primarily represents strong percentage
increases in room rates, while occupancies have generally increased slightly
or remained flat for properties that were already operating under the Marriott
brand and increased significantly for those properties converted to the
Marriott brand. Increases in room rates have generally been achieved by the
managers through shifting occupancies away from discounted group business to
higher-rated group and transient business. This has been made possible by
increased travel due to improved economic conditions and by the favorable
supply/demand characteristics existing in the hotel industry today,
particularly in the full-service segment. The Company expects this
supply/demand imbalance, particularly in the full-service segment, to
continue, which management believes should result in improved REVPAR and
operating profits at its hotel properties in the near term. However, there can
be no assurance that REVPAR will continue to increase in the future.
FIRST TWO QUARTERS 1997 COMPARED TO FIRST TWO QUARTERS 1996
The following discussion and analysis of operations and financial condition
presents the combined consolidated results of the Company as if the merger
discussed in footnote 1 to the financial statements was effective for all
periods presented.
Revenues. Revenues consist of house profit from the Company's hotel
properties and equity in earnings of an affiliate. The Company's second
quarter 1997 revenues of $98 million represented a $24 million, or 32%,
increase from the second quarter of 1996. Year-to-date revenues increased $51
million, or 35%, to $195 million. The Company's revenue and operating profit
were impacted by:
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. improved lodging results from comparable properties;
. the addition of eleven full-service hotel properties during 1996 and 1997;
. the 1996 sale and leaseback of 18 of the Company's Residence Inn
properties; and
. the sale of 16 of the Company's Courtyard properties during 1996.
Hotel revenues increased $24 million, or 33%, to $97 million in the second
quarter of 1997. Year-to-date 1997 hotel revenues increased $50 million, or
35% to $192 million. The 1997 hotel revenue increases reflect the addition of
eleven full-service hotel properties in 1996 and 1997 and overall improved
lodging results, partially offset by the sale of 16 Courtyard properties in
the first and second quarters of 1996. The Company's full-service hotels and
Residence Inn properties reported growth in revenue per available room
("REVPAR") for comparable hotels. REVPAR is a commonly used indicator of
market performance for hotels which represents the combination of the average
daily room rate charged and the average daily occupancy achieved. REVPAR does
not include food and beverage or other ancillary revenues generated by the
property.
Overall second quarter revenues for nearly all of the Company's full-service
hotels were improved or comparable to second quarter of 1996 results. Improved
results were driven by strong increases in REVPAR of nearly 13% for comparable
units for the second quarter and 15% year-to-date. The Company's 1997 year-to-
date results were substantially impacted by the exclusion of the New Year's
holiday from the 1997 results due to the timing of the Company's fiscal year-
end and the milder winter weather in 1997. Hotel sales increased $51 million,
or 27%, to $242 million for the quarter, and $103 million, or 27%, to $484
million year-to-date, reflecting REVPAR increases for comparable units and the
increase in full-service properties during 1996 and 1997. On a comparable
basis, average room rates increased 12% for the quarter and year-to-date,
while average occupancy increased one percentage point for the quarter and two
percentage points year-to-date because the Company's hotels are obtaining
better operating leverage as a result of increased room rates. Results were
further enhanced by an increase in the house profit margin for comparable
properties of two percentage points for the quarter and three percentage
points year-to-date. Management believes REVPAR will continue to grow through
steady increases in average room rates, combined with minor changes in
occupancy rates. However, there can be no assurance that REVPAR will continue
to increase in the future.
The Company's extended-stay Residence Inn properties, reported a 9% increase
in REVPAR for second quarter 1997 due primarily to an increase in average room
rates of 12%, while average occupancy decreased over two percentage points.
Year-to-date REVPAR increased 8% with an increase in average room rates of
11%, partially offset by a decrease in occupancy of almost three percentage
points. Due to the high occupancy of these properties, the Company expects
future increases in REVPAR to be driven by room rate increases, rather than
occupancy increases. However, there can be no assurance that REVPAR will
continue to increase in the future.
Operating Costs and Expenses. Operating costs and expenses consist of
depreciation, amortization, management fees, real and personal property taxes,
ground and equipment rent, insurance, lease payments and certain other costs.
The Company's operating costs and expenses increased $10 million to $49
million for the second quarter of 1997. Year-to-date operating costs and
expenses increased $26 million to $101 million primarily reflecting the
addition of eleven full-service properties during 1996 and 1997, increased
management fees and rentals tied to improved operating results and the impact
of the lease payments on the Residence Inn properties which have been sold and
leased back. As a percentage of hotel revenues, hotel operating costs and
expenses were 51% and 53% of revenues for second quarter 1997 and 1996,
respectively. Hotel operating costs and expenses were 53% of revenues for both
year-to-date 1997 and 1996.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, the Company's operating profit increased by $14
million to $49 million, or 50% of revenues, in the second quarter of 1997 from
$35 million, or 47% of revenues, in the second quarter of 1996. Year-to-date
operating profit increased $25 million to $94 million, or 48% of revenues.
Most of the Company's hotels recorded substantial improvements in operating
results. Several hotels, including the Bethesda Marriott, the Denver Marriott
West, the Denver Marriott Tech Center, the Marriott World Trade Center, the
Marina Beach Marriott
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and the San Francisco Airport Marriott posted particularly significant
improvements in operating profit for the quarter, which were partially offset
by a decrease in the results for some of the Company's suburban Atlanta
properties due to higher activity in 1996 related to the Summer Olympics.
Corporate Expenses. Corporate expenses remained unchanged at $3 million for
the second quarter of 1997 and $6 million year-to-date. As a percentage of
revenues, corporate expenses decreased to 3% of revenues for the 1997 second
quarter and year-to-date, respectively, compared to 4% of revenues for the
prior year periods.
Interest Expense. Interest expense remained unchanged at $23 million for the
second quarter of 1997 and $46 million year-to-date.
Net Income. The Company's net income for the second quarter of 1997
increased $7 million to $16 million, or 16% of revenues, compared to net
income of $9 million, or 12% of revenues, for the second quarter of 1996.
Year-to-date net income for 1997 was $30 million, or 15% of revenues, compared
to $16 million, or 11% of revenues for 1996.
1996 COMPARED TO 1995
Revenues. Revenues increased $64 million, or 25%, to $319 million for 1996.
The Company's revenue and operating profit were impacted by several items,
including:
. the addition of 16 full-service hotel properties during 1995 and 1996;
. improved lodging results for comparable properties;
. the 1996 sale and leaseback of 18 of the Company's Residence Inns;
. the 1995 and 1996 sale of 53 of the Company's Courtyard hotel properties;
. the 1996 results including 53 weeks versus 52 weeks in 1995;
. the $10 million pre-tax charge in 1995 to write down the carrying value of
certain Courtyard and Residence Inn properties held for sale to their net
realizable value; and
. the 1995 sale of four of the Company's Fairfield Inns.
Hotel revenues increased $52 million, or 20%, to $313 million in 1996 as the
Company's full-service hotels and Residence Inn properties reported growth in
REVPAR. Hotel sales increased $156 million, or 22%, to $865 million reflecting
the REVPAR increases for comparable units and the addition of full-service
properties, partially offset by the sale of the Courtyard properties.
Overall 1996 revenue and operating profit for nearly all of the Company's
full-service hotels were improved or comparable to 1995 results. Improved
results were driven by strong increases in REVPAR of 10% for comparable units.
On a comparable basis, average room rates increased 7%, while average
occupancy increased over two percentage points.
Residence Inn, the Company's extended-stay lodging concept, also reported
significant increases in revenues in 1996 due to REVPAR increases. REVPAR
increased nearly 5% due primarily to an increase in average room rates of
almost 7%, while average occupancy decreased over one percentage point.
The net loss on property transactions for 1995 includes the pretax charge of
$10 million to write down the carrying value of five individual Courtyard and
Residence Inn properties held for sale to their net realizable value.
Operating Costs and Expenses. The Company's operating costs and expenses for
1996 increased $37 million to $175 million, primarily reflecting the addition
of 16 full-service properties during 1995 and 1996, increased management fees
and rentals tied to improved operating results and properties sold and leased
back, partially offset by the sale of certain limited-service properties.
Hotel operating costs increased $38 million to $175 million. Hotel operating
costs and expenses represented 56% of hotel revenues in 1996 and 52% of hotel
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revenues in 1995, reflecting the shifting emphasis to full-service hotels and
the impact of the lease payments on the Residence Inn properties.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, the Company's operating profit increased $27
million to $144 million, or 45% of revenues, from $117 million, or 46% of
revenues, in 1995. Hotel operating profit increased $14 million to $138
million, or 44% of hotel revenues, from $124 million, or 48% of hotel
revenues, in 1995. Nearly all of the Company's hotels recorded substantial
improvements in operating results. Several hotels, including the San Francisco
Airport Marriott, the San Francisco Marriott Fisherman's Wharf, Westfields
Conference Resort, Houston Airport Marriott and the Miami Airport Marriott,
posted particularly significant improvements in operating profit for the year.
Portions of the Miami Airport Marriott were converted to limited-service rooms
in order to increase the overall occupancy and operating results of the
property. The Company's Atlanta properties (1,469 rooms) also posted
outstanding results due, in part, to the 1996 Summer Olympics. Three
properties which were renovated and converted to the Marriott brand in 1995,
the Denver Marriott Tech Center, Marriott's Mountain Resort at Vail and the
Williamsburg Marriott, have also shown significant improvement over the prior
year.
Corporate Expenses. Corporate expenses increased $1 million to $15 million,
primarily due to higher average assets for the Company during the year, which
resulted in an increase in the allocation of corporate expenses to the
Company. As a percentage of revenues, corporate expenses were 4.7% of revenues
for 1996 and 5.5% of revenues for 1995.
Interest Expense. Interest expense increased $24 million to $101 million
primarily due to the increase in the overall level of debt, as well as a
higher average interest rate, as a result of the Acquisitions Offering (as
defined herein), a full year of expense related to debt incurred in
conjunction with the acquisition of certain hotel properties in 1995 and the
impact of the Properties Offering (as defined herein).
Income Before Extraordinary Item. The Company reported income before
extraordinary item of $32 million which represented a $6 million increase from
$26 million in 1995. The increase is due to the changes in operating profit
and interest expense discussed above, including the $10 million charge in 1995
to write down the carrying value of certain limited service properties held
for sale to their net realizable value.
Extraordinary Item. In connection with the redemption and defeasance of debt
in the second quarter of 1995 and the repayment of the Acquisitions Revolver
(as defined herein) in December 1995, the Company recognized an extraordinary
loss of $17 million, after taxes, primarily representing premiums paid on the
redemption of debt and the write-off of deferred financing fees.
Net Income. The Company's net income was $32 million for 1996, compared to
net income of $9 million for 1995. The increase is primarily due to the
increase in operating profit discussed above and the $17 million extraordinary
loss on the extinguishment of debt in 1995, partially offset by the increase
in interest expense discussed above.
1995 COMPARED TO 1994
Revenues. The Company's 1995 revenues of $255 million represented a $23
million, or 10%, increase from 1994 results. The Company's revenues were
impacted by several items, including:
. the addition of 25 full-service hotel properties during 1994 and 1995;
. improved lodging results for comparable properties;
. the 1995 sale of 37 of the Company's Courtyard hotel properties;
. the $10 million pre-tax charge in 1995 to write down the carrying value of
certain Courtyard and Residence Inn properties held for sale to their net
realizable value; the 1994 sale of the Company's senior living communities;
and
. the 1994 and 1995 sales of the Company's Fairfield Inns.
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Hotel revenues increased $47 million, or 22%, to $261 million in 1995. The
increase in hotel revenue for 1995 reflects the addition of 25 full-service
hotel properties in 1994 and 1995 and overall improved lodging results,
partially offset by the sale of the Company's Fairfield Inns in 1994 and 1995
and the sale of 37 Courtyard hotel properties in 1995. Each of the Company's
lodging segments reported growth in REVPAR for comparable hotels.
Overall 1995 revenue and operating profit for nearly all of the Company's
full-service hotels were improved or comparable to 1994 results, however, the
revenues for 1995 for five properties were adversely impacted by the
conversion of five properties to the Marriott brand. The conversion process
typically causes periods of disruption to those properties as selected rooms
and common areas are taken out of service. Due to these disruptive periods,
the time necessary for integration into the nationwide Marriott system and the
Company's realization of the anticipated effect of these improvements, the
operating results for 1995 do not reflect the full impact of conversion for
these five properties. The Company expects to begin to realize the benefits of
conversion improvements within six to 12 months of their completion. Improved
results were driven by strong increases in REVPAR of approximately 4% for
comparable units. On a comparable basis, average room rates increased nearly
11%, while average occupancy decreased over four percentage points. Management
of the Company believes that the decrease in occupancies for the period is due
to a concentrated effort by its managers to displace a large amount of deeply
discounted group and contract business, which also resulted in the substantial
increase in room rates.
Courtyard, the Company's moderate-priced lodging properties, reported
increases in comparable revenues in 1995 primarily due to a 7% increase in
REVPAR for comparable units due to a 6% increase in average room rates and a
slight increase in average occupancy.
Residence Inn, the Company's extended-stay lodging properties, also reported
significant increases in revenues in 1995 due to REVPAR increases. REVPAR
increased over 8% due primarily to an increase in average room rates of 7%
combined with a one percentage point increase in average occupancy.
In the third quarter of 1994, the Company sold 26 of its 30 Fairfield Inns
for $114 million and in the second quarter of 1995, the Company sold its four
remaining Fairfield Inns to the same party for $6 million. Through their
disposition, 1995 revenues and operating profit for the four remaining
Fairfield Inns were comparable to 1994.
The Company did not report any senior living communities' revenues in 1995
compared to $14 million in 1994 due to the sale of all the senior living
communities during the second and third quarters of 1994.
The net loss on property transactions for 1995 includes the pretax charge of
$10 million to write down the carrying value of five individual Courtyard and
Residence Inn properties held for sale to their net realizable value.
Operating Costs and Expenses. The Company's operating costs and expenses for
1995 increased $15 million to $138 million, primarily reflecting the addition
of 25 full-service hotel properties, partially offset by the sale of limited-
service properties and the senior living communities. Hotel operating costs
increased $23 million to $137 million. As a percentage of hotel revenues,
hotel operating costs and expenses represented 52% of revenues in 1995 and 53%
of revenues in 1994.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, the Company's operating profit increased $8
million to $117 million, or 46% of revenues, from $109 million, or 47% of
revenues, in 1994. Hotel operating profit increased $24 million to $124
million, or 48% of hotel revenues, from $100 million, or 47% of hotel
revenues, in 1994.
Corporate Expenses. Corporate expenses increased $5 million to $14 million
in 1995 primarily due to the substantial increase in the number of hotels
acquired in 1994 and 1995 and overall higher corporate
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administrative and travel costs for Host Marriott, which resulted in an
increase in the allocation of corporate expenses to the Company.
Interest Expense. Interest expense increased $12 million to $77 million
primarily due to the Company incurring a full year of interest expense on the
Acquisitions Revolver (which was entered into during the fourth quarter of
1994) and the impact of the substantial increase in debt as a result of the
acquisition of full-service properties during 1995, partially offset by the
lower interest rate as a result of the Properties Offering and the repayment
in the second and third quarters of 1994 of secured debt related to certain
senior living community properties.
Income Before Extraordinary Item. The Company reported income before
extraordinary item of $26 million which represented a $5 million decrease from
$31 million in 1994. The decrease is due primarily to the increase in interest
expense and corporate expenses, partially offset by the increase in operating
profit discussed above.
Extraordinary Item. In connection with the redemption and defeasance of debt
in the second quarter of 1995 and the repayment of the Acquisitions Revolver
in December 1995, the Company recognized an extraordinary loss of $17 million,
after taxes, primarily representing premiums paid on the redemption of debt
and the write-off of deferred financing fees.
Net Income. The Company's net income was $9 million for 1995, compared to
net income of $31 million for 1994. The decrease is primarily due to the $17
million extraordinary loss on the extinguishment of debt in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its capital requirements with a combination of operating
cash flow, debt financing and proceeds from sales of selected properties. The
Company utilizes these sources of capital to acquire new properties, fund
capital additions and improvements and make principal payments on debt. The
Company believes that the financial resources generated from ongoing
operations will be sufficient to enable it to meet its capital expenditure and
debt service needs for the foreseeable future. However, certain events such as
significant acquisitions would require additional financing.
Capital Transactions. In May 1995, the Company issued an aggregate of $600
million of 9 1/2% senior secured notes (the "Existing Senior Notes"),
collectively, the "Properties Offering." The Existing Senior Notes were issued
at par and have a final maturity of May 2005. The net proceeds were used to
defease, and subsequently redeem, all of the senior notes (the "Hospitality
Notes") issued by Host Marriott Hospitality, Inc. and to repay borrowings
under the line of credit with Marriott International. In connection with the
redemptions and defeasance, the Company recognized an extraordinary loss in
1995 of $14 million, net of taxes. The Existing Senior Notes are secured (on
an equal and ratable basis with the Acquisition Notes discussed below) by a
pledge of the stock of certain of the Company's subsidiaries and are
guaranteed, jointly and severally, by certain of the Company's subsidiaries.
In December 1995, Acquisitions issued $350 million of 9% senior notes (the
"Acquisitions Notes"), collectively the "Acquisitions Offering." The
Acquisitions Notes were issued at par and have a final maturity of December
2007. A portion of the net proceeds were utilized to repay in full the
outstanding borrowings under the $230 million revolving line of credit (the
"Acquisition Revolver"), which was then terminated. In connection with the
termination of the Acquisition Revolver, the Company recognized an
extraordinary loss in 1995 of $3 million, net of taxes. As a result of the
Merger, the Company became the principal obligor under the Acquisitions Notes,
which are guaranteed, jointly and severally, by certain of the Company's
subsidiaries and which are secured (on an equal and ratable basis with the
Existing Senior Notes) by a pledge of the stock of certain of the Company's
subsidiaries.
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The indentures governing the Existing Senior Notes and the Acquisitions
Notes each contain covenants that, among other things, limit the ability to
incur additional indebtedness and issue preferred stock, pay dividends or make
other distributions, repurchase capital stock or subordinated indebtedness,
create certain liens, enter into certain transactions with affiliates, sell
certain assets, issue or sell stock of subsidiaries, and enter into certain
mergers and consolidations. The Company is required to make semi-annual cash
interest payments on the notes at their stated interest rate. The Company is
not required to make principal payments until maturity except in the event of
(i) certain changes in control or (ii) certain asset sales in which the
proceeds are not reinvested in other hotel properties within a specified
period of time.
On July 10, 1997, the Company completed the Consent Solicitation and
Acquisitions completed the Acquisitions Consent Solicitation. In connection
with the completion of the Consent Solicitation and the Acquisitions Consent
Solicitation, the Merger was consummated on July 10, 1997. In addition to the
Merger, the consent solicitations increased the ability of the Company to
acquire, through certain subsidiaries, additional properties subject to non-
recourse indebtedness and controlling interests in corporations, partnerships
and other entities holding attractive properties and increased the threshold
for distributions to affiliates to the excess of the Company's earnings before
interest expense, income taxes, depreciation and amortization and other non-
cash items (EBITDA) subsequent to the consent solicitations over 220% of the
Company's interest expense.
On July 15, 1997, the Company issued $600 million of 8 7/8% senior notes
(the "Senior Notes") at par maturing in 2007 (the "Offering"). The Company
received net proceeds from the Offering of approximately $570 million, which
will be used to fund future acquisitions of, or the purchase of interests in,
full-service hotels and other lodging-related properties, which may include
senior living communities, as well as for general corporate purposes. The
Senior Notes are guaranteed on a joint and several basis by certain of the
Company's subsidiaries and rank pari passu in right of payment with all other
existing and future senior indebtedness of the Company.
The Company (excluding Acquisitions) paid dividends of approximately $12
million, $9 million and $36 million in First Two Quarters 1997, and fiscal
years 1996 and 1995, respectively, and Acquisitions paid dividends of
approximately $7 million, $13 million and $20 million in First Two Quarters
1997, First Two Quarters 1996 and fiscal year 1996, respectively. Prior to the
Properties Offering, all of the Company's (excluding Acquisitions') net cash
flow was transferred to Hospitality, and therefore, the Company maintained no
cash balances. Subsequent to the Properties Offering, the Company established
and maintains separate cash balances.
Capital Acquisitions, Additions and Improvements. The Company continues to
focus on maximizing the profitability of its existing full-service portfolio
and acquiring additional high-quality, full-service hotel properties as
conditions, principally the availability of capital, permit. The Company
believes that the upscale and luxury full-service segments of the market offer
opportunities to acquire assets at attractive multiples of cash flow and at
substantial discounts to replacement value, including under-performing hotels
which can be improved by conversion to the Marriott or Ritz-Carlton brands. In
1997, the Company acquired the 306-room Ritz-Carlton, Marina del Rey for
approximately $57 million and controlling interests in the 404-room Norfolk
Waterside Marriott for approximately $33 million and the Manhattan Beach
Radisson Plaza Hotel, which was converted to the Marriott brand, for $38
million. During 1996, the Company acquired nine full-service properties
totaling 3,124 rooms for approximately $292 million, including the
acquisition, through foreclosure, of a controlling interest in the 250-room
Newport Beach Marriott Suites and a controlling interest in a venture that
owns the 400-room Pittsburgh Marriott City Center. The acquisition of the Salt
Lake City Marriott for $67 million included the purchase of a 20% general
partner interest from Host Marriott. The difference between the cash
transferred to Host Marriott and the carried-over cost basis of the 20%
interest, net of the related tax effect, has been charged to additional paid-
in capital. The Company also completed construction and opened the Pentagon
City Residence Inn in April 1996. In addition, during the first quarter of
1996, the Company acquired, for $20 million, a minority interest in a joint
venture owned by Host Marriott that controls two hotels in Mexico City,
Mexico. The Company subsequently sold its interest to Host Marriott for $20
million in the third quarter of 1996.
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During 1995, the Company acquired seven full-service properties totaling
3,133 rooms for approximately $329 million (including $94 million of first
mortgage financing on two of the hotels). During 1994, the Company acquired 15
full-service hotels totaling 6,044 rooms for approximately $441 million. A
subsidiary of the Company also provided 100% financing totaling approximately
$35 million to an affiliated partnership, in which a related party of the
Company owns the sole general partner interest, for the acquisition of two
full-service hotels totaling another 684 rooms. The Company consolidates these
properties in the accompanying financial statements. In the first quarter of
1994 the Company acquired from Host Marriott a 49% limited partner interest in
an affiliate that owns a hotel in Santa Clara, California for $30 million.
The Company's capital expenditures in First Two Quarters 1997, First Two
Quarters 1996, and fiscal years 1996, 1995 and 1994 (excluding the acquisition
of properties) totaled $21 million, $23 million, $85 million, $72 million and
$29 million, respectively. The Company incurs capital expenditures for
upgrading acquired hotels to the Company's and the managers' standards as well
as a result of certain improvement projects for non-conversion hotels. The
Company incurred approximately $24 million and $14 million in conversion costs
for the converted hotels in fiscal years 1996 and 1995, respectively. The
Company anticipates spending approximately $55 million to $60 million in
capital expenditures for the renovation and refurbishment of the Company's
existing properties in 1997.
Asset Dispositions. The Company historically has sold, and may from time to
time in the future consider opportunities to sell, certain of its real estate
properties at attractive prices when the proceeds could be redeployed into
investments with more favorable returns. During the first and second quarters
of 1996, the Company completed a sale and leaseback with the REIT for its 16
remaining Courtyard properties and all 18 of its Residence Inn properties for
$349 million (10% of which was deferred). During the second quarter of 1996,
Host Marriott purchased the Company's rights to the deferred proceeds and
obligations under the lease for the 16 Courtyard properties for $13 million.
The Company retained its rights to the deferred proceeds and obligations under
the lease for the 18 Residence Inns.
During 1995, the Company sold to and leased back from the REIT 37 of its
Courtyard properties for a total of $330 million (10% of which was deferred).
The Company transferred its rights to receive the deferred proceeds and
obligations to perform under the leases to a subsidiary of Hospitality during
1995. The Company sold the Springfield Radisson Hotel (which was acquired in
December 1994 as part of a portfolio of seven hotels) in December 1995 for net
cash proceeds of $3 million, which approximated its carrying value. Also,
during 1995, the Company sold its remaining four Fairfield Inns for net cash
proceeds of approximately $6 million.
During the second and third quarters of 1994, the Company sold all 14 of its
senior living communities to an unrelated party for $320 million.
Additionally, during the third quarter of 1994, the Company sold 26 of its
Fairfield Inns to an unrelated party. The net proceeds from the sale of these
hotels were approximately $114 million, which exceeded the carrying value of
the hotels by approximately $12 million. Approximately $27 million of the
proceeds was payable in the form of a note from the purchaser due in 2001. The
gain on the sale of these hotels has been deferred. The note receivable and
deferred gain were transferred to Hospitality in connection with the
Properties Offering.
Cash Flows. The Company's cash flow provided by operations in 1996, 1995 and
1994 totaled $128 million, $112 million and $118 million, respectively. The
Company's cash flow provided by operations for First Two Quarters 1997 and
First Two Quarters 1996 totaled $81 million and $57 million, respectively.
The Company's cash used in investing activities was $76 million in each of
1996 and 1995 and $107 million in 1994. Cash used in investing activities for
First Two Quarters 1997 was $102 million. The Company's cash used in investing
activities consists primarily of acquisitions of hotel properties and capital
expenditures for conversions, improvements and renewals and replacements,
partially offset by the net proceeds of sales of certain assets previously
discussed. Cash provided by investing activities for First Two Quarters 1996
was $70 million which primarily represents the sale of the Courtyard and
Residence Inn properties, net of acquisitions and capital expenditures.
44
<PAGE>
The Company's cash used in financing activities was $34 million in 1996, and
$1 million in 1994, while cash provided by financing activities was $77
million in 1995. Cash used in financing activities for First Two Quarters 1997
and First Two Quarters 1996 was $34 million and $18 million, respectively. The
Company's cash from financing activities consists primarily of the issuance
and repayment of debt as a result of the Properties Offering, the Acquisitions
Offering and the Acquisitions Revolver, dividends and contributed capital. The
Company made draws on the Acquisitions Revolver of $59 million and $168
million in fiscal year 1995 and 1994, respectively, to fund the acquisition of
full-service properties. During fiscal year 1995 and 1994, the Company made
repayments of $226 million and $1 million, respectively, under the
Acquisitions Revolver which was extinguished in 1995. In 1995 and 1994, the
Company transferred $151 million and $345 million, respectively, of cash to
Hospitality, including $100 million and $292 million in 1995 and 1994,
respectively, from asset sales proceeds used by Hospitality for redemption of
the Hospitality Notes. As the net proceeds from the Properties Offering were
used to repay Hospitality Notes and a portion of the outstanding balance on
Host Marriott's former $630 million revolving line of credit with Marriott
International (the "Line of Credit") the Company's historical financial
statements present the pushed down portion of the Hospitality Notes and the
Line of Credit so repaid. Pursuant to the Hospitality Notes Indenture,
Hospitality Notes were required to be repaid to the extent of 50% to 75% of
the net proceeds from certain asset sales and 100% of net refinancing
proceeds.
EBITDA
The Company believes that consolidated earnings before interest expense,
taxes, depreciation, amortization and other non-cash items (principally non-
cash writedowns of lodging properties and equity in earnings of an affiliate,
net of distribution received) ("EBITDA") is a meaningful measure of its
operating performance due to the significance of the Company's long-lived
assets (and the related depreciation thereon). EBITDA can be used to measure
the Company's ability to service debt, fund capital expenditures and expand
its business and is used in the Company's indentures as part of the tests
determining the Company's ability to incur debt and to make certain restricted
payments. However, such information should not be considered as an alternative
to net income, operating profit, cash flows from operations, or any other
operating or liquidity performance measure prescribed by generally accepted
accounting principles. Cash expenditures for various long-term assets,
interest expense and income taxes have been, and will be, incurred which are
not reflected in the EBITDA presentation.
For First Two Quarters 1997, EBITDA increased $29 million to $131 million
from $102 million in First Two Quarters 1996. Hotel EBITDA increased $30
million, or 32%, to $126 million for First Quarter 1997. The increase in hotel
EBITDA is due to the increase in comparable full-service EBITDA of 23% and the
addition of ten properties during 1996 and First Two Quarters 1997, partially
offset by the sale and leaseback of limited-service properties in 1996. Full-
service EBITDA increased $40 million, or 48%, to $124 million for First Two
Quarters 1997. On a comparable basis, full-service EBITDA increased 23% on a
REVPAR increase of 15%.
For fiscal year 1996, EBITDA increased $32 million to $226 million from $194
million in 1995. Hotel EBITDA increased $18 million to $205 million for 1996.
The increase in hotel EBITDA is due to the increase in comparable full-service
EBITDA of nearly 18% and the addition of 16 full-service hotels in 1995 and
1996, partially offset by the sales of limited-service properties in 1995 and
1996, the proceeds from which could not be immediately reinvested. On a
comparable basis, full-service EBITDA increased nearly 18% on a REVPAR
increase of over 10% for fiscal year 1996. Full-service hotel EBITDA increased
$69 million, or 57%, to $191 million for 1996. As a percentage of hotel
EBITDA, full-service hotel EBITDA represented 93% of hotel EBITDA in 1996
compared to 65% of hotel EBITDA in 1995. In 1997, the Company anticipates that
nearly all of its hotel EBITDA will be from full-service properties.
The Company's ratio of EBITDA to cash interest expense (defined as GAAP
interest expense less amortization of deferred financing costs) was 2.3 to
1.0, 2.6 to 1.0, 2.8 to 1.0, 2.9 to 1.0 and 2.2 to 1.0 in fiscal years 1996,
1995, 1994, First Two Quarters 1997 and First Two Quarters 1996, respectively.
The ratio of earnings to fixed charges was 1.5 to 1.0, 1.5 to 1.0 and 1.7 to
1.0, 2.0 to 1.0 and 1.6 to 1.0 in fiscal years 1996, 1995, 1994, First Two
Quarters 1997 and First Two Quarters 1996, respectively.
45
<PAGE>
The following is a reconciliation of EBITDA to income before extraordinary
item (in millions):
<TABLE>
<CAPTION>
FIFTY-THREE WEEKS FIFTY-TWO WEEKS
ENDED ENDED
JANUARY 3, 1997 DECEMBER 29, 1995
------------------ ------------------
<S> <C> <C>
EBITDA................................... $226 $194
Interest expense......................... (101) (77)
Depreciation and amortization............ (64) (62)
Income taxes applicable to operations.... (22) (17)
Gain (loss) on dispositions of assets and
other non-cash charges, net............. (7) (12)
---- ----
Income before extraordinary item....... $ 32 $ 26
==== ====
<CAPTION>
FIRST TWO QUARTERS FIRST TWO QUARTERS
1997 1996
------------------ ------------------
<S> <C> <C>
EBITDA................................... $131 $102
Interest expense......................... (46) (46)
Depreciation and amortization............ (35) (29)
Income taxes applicable to operations.... (21) (12)
Gain (loss) on dispositions of assets and
other non-cash charges, net............. 1 1
---- ----
Net income............................. $ 30 $ 16
==== ====
</TABLE>
INFLATION
The Company's lodging properties are impacted by inflation through its
effect on increasing costs and on the managers' ability to increase room
rates. Unlike other real estate operations, hotels have the ability to change
room rates on a daily basis, so the impact of higher inflation generally can
be passed on to customers.
NEW ACCOUNTING STANDARDS
The Company adopted SFAS No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" and SFAS 114
"Accounting for Creditors for Impairment of a Loan" during 1995. The adoption
of these standards did not have a material effect on the Company's combined
consolidated financial statements.
The Company is required to adopt Statement Financial Accounting Standards
("SFAS") No. 130 "Reporting Comprehensive Income," and SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information" in
fiscal year 1998. The adoption of these statements is not expected to have a
material impact on the Company's combined consolidated financial statements.
46
<PAGE>
BUSINESS AND PROPERTIES
GENERAL
The Company is an indirect wholly owned subsidiary of Host Marriott and owns
the majority of Host Marriott's lodging properties. The Company's assets
principally consist of 50 full-service hotel properties, one partnership
investment and a note receivable from an affiliate. All but ten of the
Company's 50 lodging properties are managed by Marriott International and all
but two are operated under the Marriott or Ritz-Carlton brands, which are
among the most respected and widely recognized in the lodging industry. Based
on industry data, the Company believes that its hotels as a group consistently
outperform the industry's average occupancy rate by a significant margin, and
averaged 76.4% occupancy for 1996 compared to a 71.1% average occupancy for
competing full-service hotels in the upscale full-service segment of the
lodging industry (the segment which is most representative of the Company's
full-service hotels).
The lodging industry as a whole, and the upscale and luxury full-service
hotel segments in particular, are benefiting from a favorable supply and
demand relationship in the United States. Based on data provided by Smith
Travel Research, the Company believes that demand for upscale full-service
rooms, measured as annual domestic occupied room nights for its competitive
set, increased 3.8% in 1994, 1.5% in 1995 and 2.3% in 1996. Management
believes that demand increases have resulted primarily from an improved
economic environment and a corresponding increase in business travel. In spite
of increased demand for rooms, the room supply growth rate in the upscale
full-service segment has been minimal. Management believes that this low
supply growth rate in the upscale full-service segment is attributable to many
factors including the limited availability of attractive building sites for
full-service hotels, the lack of available financing for new full-service
hotel construction and the availability of existing full-service properties
for sale at a discount to their replacement cost. The relatively high
occupancy rates of the Company's hotels, along with the increased demand for
full-service hotel rooms have allowed the managers of the Company's hotels to
increase average daily room rates by selectively raising room rates and by
primarily replacing certain discounted group business with higher-rated group
and transient business. As a result, on a comparable basis, room revenues per
available room ("REVPAR") for the Company's full-service properties increased
nearly 15% for First Two Quarters 1997 over the comparable period for the
prior year. Furthermore, because the lodging property operations have a high
fixed cost component, increases in REVPAR generally yield greater percentage
increases in EBITDA (as defined herein). Accordingly, the approximate 15%
increases in REVPAR resulted in an approximate 23% increase in comparable
full-service hotel EBITDA in First Two Quarters 1997. The Company expects this
supply/demand imbalance in the upscale and luxury full-service segments to
continue which should result in improved REVPAR and EBITDA at its hotel
properties in the near term, however, there can be no assurance that such
supply/demand imbalance will continue or that REVPAR and EBITDA will continue
to improve.
BUSINESS STRATEGY
The Company's business strategy is to continue to focus on maximizing the
profitability of its existing full-service portfolio and acquiring additional
high-quality, full-service hotel properties, including controlling interests
in joint ventures, partnerships or other entities holding such properties. The
Company believes that the upscale and luxury full-service segments of the
market offer numerous opportunities to acquire assets at attractive multiples
of cash flow and at substantial discounts to replacement value, including
under-performing hotels which can be improved by conversion to the Marriott or
Ritz-Carlton brands. The Company believes that the upscale full-service
segment is very promising because:
. The Company believes that there is a very limited new supply of upscale
and luxury full-service hotel rooms currently under construction.
According to Smith Travel Research, from 1988 to 1991, upscale full-
service room supply for the Company's competitive set increased an
average of approximately 4% annually which resulted in an oversupply of
rooms in the industry. However, this growth slowed to an average of
approximately 1.0% from 1992 through 1996. Furthermore, the lead time
from conception to completion of a full-service hotel is generally five
years or more in the markets the Company is principally pursuing, which
management believes will contribute to the continued low growth of
supply in the upscale and luxury full-service segments through 2000.
47
<PAGE>
. Many desirable hotel properties are currently held by inadvertent owners
such as banks, insurance companies and other financial institutions
which are motivated and willing sellers. In recent years, the Company
has acquired a number of properties from inadvertent owners at
significant discounts to replacement cost, including luxury hotels
operating under the Ritz-Carlton brand. While in the Company's
experience to date, these sellers have been primarily U.S. financial
organizations, the Company believes that numerous international
financial institutions are also inadvertent owners of U.S. lodging
properties and have only recently begun to dispose of such properties.
The Company expects that there will be increased opportunities to
acquire U.S. lodging properties from international financial
institutions and expects to dedicate significant resources to
aggressively pursue these opportunities.
. The Company believes that there are numerous opportunities to improve
the performance of acquired hotels by replacing the existing hotel
manager with Marriott International and converting the hotel to the
Marriott brand. Based on industry data, the Company believes that
Marriott-flagged properties have consistently outperformed the industry.
Demonstrating the strength of the Marriott brand name, the average
occupancy rate for the Company's comparable full-service properties was
76.1%, compared to an average occupancy rate of 71.1% for competing
upscale full-service hotels. Accordingly, management anticipates that
any additional full-service properties acquired by the Company in the
future and converted from other brands to the Marriott brand should
achieve higher occupancy rates and average room rates than has
previously been the case for those properties as the properties begin to
benefit from Marriott's brand recognition, reservation system and group
sales organization. The Company intends to pursue additional full-
service hotel acquisitions, some of which may be conversion
opportunities. Eleven of the Company's 36 acquired full-service hotels
were converted to the Marriott brand following their acquisition.
The Company believes it is well qualified to pursue its acquisition
strategy. Management has extensive experience in acquiring and financing
lodging properties and believes its industry knowledge, relationships and
access to market information provide a competitive advantage with respect to
identifying, evaluating and acquiring hotel assets. In addition, the Company
is well positioned to convert acquired properties to the Marriott and Ritz-
Carlton brand names due to its relationship with Marriott International.
In 1996, the Company acquired nine full-service properties with 3,124 rooms
for approximately $292 million, including the acquisition, through
foreclosure, of a controlling interest in the 250-room Newport Beach Marriott
Suites and the acquisition of a controlling interest in a venture that owns
the 400-room Pittsburgh Marriott City Center. Subsequent to year end, the
Company acquired the 306-room Ritz-Carlton, Marina del Rey, for approximately
$57 million and controlling interests in the 404-room Norfolk Waterside
Marriott for approximately $33 million and the Manhattan Beach Radisson Plaza
Hotel, which was converted to the Marriott brand, for $38 million. The Company
acquired seven full-service properties (3,133 rooms) for approximately $329
million in 1995. During 1994, the Company acquired 15 full-service properties
with 6,044 rooms for approximately $441 million. In 1994, the Company also
provided 100% financing totaling $35 million to a partnership in which a
related party of the Company owns the sole general partner interest, for the
partnership's acquisition of two full-service hotels with 684 rooms which the
Company consolidates in the accompanying financial statements. The Company
believes that each of these acquisitions were made at an attractive valuation
and at a significant discount to replacement value.
On September 10, 1997, Host Marriott successfully completed the purchase of
98.6% of the limited partnership units in Chesapeake Hotel Limited Partnership
("CHLP"), increasing its ownership of CHLP to 99.9%. CHLP owns six hotels, the
Key Bridge Marriott, the Chicago O'Hare Marriott, the Boston Newton Marriott,
the Denver Southeast Marriott, the Bloomington Minnesota Marriott and the
Saddlebrook New Jersey Marriott. The Company is considering the acquisition of
Host Marriott's general and limited partnership interests, along with certain
notes and other receivables due from CHLP, which would allow the Company to
consolidate CHLP. The Company currently owns the nonrecourse second mortgages
on the six properties (totalling $139 million at June 20, 1997).
48
<PAGE>
Consistent with its strategy of focusing on the full-service segment of the
lodging industry, the Company has opportunistically sold certain of its
properties. During 1994, the Company sold 26 of its 30 Fairfield Inns and all
of its 14 senior living communities. During the first and third quarters of
1995, the Company sold to and leased back from the REIT 37 of its Courtyard
properties. The leases and rental obligations were transferred to Host
Marriott in 1995. Also, in the second quarter of 1995, the Company sold its
remaining four Fairfield Inns. In the first and second quarters of 1996, the
Company sold to and leased back from the REIT its remaining 16 Courtyard
properties and 18 Residence Inns for approximately $349 million (10% of which
was deferred). Host Marriott purchased the Company's rights to the deferred
proceeds and obligations under the lease for the 16 Courtyard properties at
their fair market value. With the completion of these transactions, 100% of
the Company's owned properties are in the full-service segment, although the
Company retains the rights to the deferred proceeds and the lease obligations
with respect to the 18 Residence Inns. The Company has reinvested
substantially all of the proceeds in the acquisition of full-service lodging
properties.
HOTEL LODGING INDUSTRY
The lodging industry as a whole, and the upscale and luxury full-service
segment in particular, is benefiting from a cyclical recovery as well as a
shift in the supply/demand relationship with supply relatively flat and demand
strengthening. The lodging industry posted strong gains in revenues and
profits in 1996, as demand growth continued to outpace additions to supply.
The Company believes that upscale full-service hotel room supply growth will
remain limited through at least 1998. Accordingly, the Company believes this
supply/demand imbalance will result in improving occupancy and room rates
which should result in improved REVPAR and operating profit.
Following a period of significant overbuilding in the mid-to-late 1980s, the
lodging industry experienced a severe downturn. Since 1991, new hotel
construction, excluding casino-related construction, has been modest, largely
offset by the number of rooms taken out of service each year. Due to an
increase in travel and an improving economy, hotel occupancy has grown
steadily over the past several years, and room rates have improved. The
Company believes that room demand for upscale full-service properties will
continue to grow at approximately the rate of inflation. Increased room demand
should result in increased hotel occupancy and room rates. According to Smith
Travel Research, upscale full-service occupancy for the Company and its
competitive set grew in 1996 to 72.4%, while room rate growth continued to
exceed inflation. While room demand has been rising, new hotel supply growth
has been minimal. Smith Travel Research data shows that upscale full-service
room supply increased an average of only 1.0% annually from 1990 through 1996.
The increase in room demand and minimal growth in new hotel supply has also
led to increased room rates. The Company believes that these recent trends
will continue with overall occupancy increasing slightly and room rates
increasing at more than one and one-half times the rate of inflation in 1997
and 1998.
As a result of the over-building in the mid-to-late 1980s, many full-service
hotels built have not performed as originally planned. Cash flow has often not
covered debt service requirements, causing lenders (e.g., banks, insurance
companies, and savings and loans) to foreclose and become "inadvertent owners"
who are motivated to sell these assets. In the Company's experience to date,
these sellers have been primarily U.S. financial organizations. The Company
believes that numerous international financial institutions are also
inadvertent owners of lodging properties and expects there will be increased
opportunities to acquire lodging properties from international financial
institutions. While the interest of inadvertent owners to sell has created
attractive acquisition opportunities with strong current yields, the lack of
supply growth and increasing room night demand should contribute to higher
long-term returns on invested capital. Given the relatively long lead time to
develop urban, convention and resort hotels, as well as the lack of project
financing, management believes the growth in room supply in this segment will
be limited for an extended period of time.
HOTEL LODGING PROPERTIES
The Company's hotel lodging properties represent quality assets in the full-
service lodging segments. All but two of the Company's hotel properties are
operated under the Marriott or Ritz-Carlton brand names. The two hotels
(representing an aggregate of 596 rooms, or approximately 3% of the Company's
total rooms) that do not
49
<PAGE>
carry the Marriott or Ritz-Carlton brand have not been converted to the
Marriott or Ritz-Carlton brand because their size, quality and/or contractual
commitments would not permit such conversion. The Company's lodging portfolio
consists of 50 properties with 19,841 rooms as of September 15, 1997.
One commonly used indicator of market performance for hotels is revenue per
available room, or REVPAR, which measures daily room revenues generated on a
per room basis. This does not include food and beverage or other ancillary
revenues generated by the property. REVPAR represents the combination of the
average daily room rate charged and the average daily occupancy achieved. The
Company has reported annual increases in REVPAR since 1993.
To maintain the overall quality of the Company's lodging properties, each
property undergoes refurbishments and capital improvements on a regularly
scheduled basis. Typically, refurbishing has been provided at intervals of
five years, based on an annual review of the condition of each property. In
the First Two Quarters 1997, First Two Quarters 1996 and fiscal years 1996,
1995 and 1994, the Company spent $21 million, $23 million, $39 million, $28
million and $31 million, respectively, on capital improvements to existing
properties. As a result of these expenditures, the Company has been able to
maintain high quality rooms at its properties.
Full-Service Hotels. The Company's full-service hotels primarily include
Marriott and Ritz-Carlton brand hotels and generally contain from 300 to 600
rooms. Hotel facilities typically include meeting and banquet facilities, a
variety of restaurants and lounges, swimming pools, gift shops and parking
facilities. The Company's full-service hotels primarily serve business and
pleasure travelers and group meetings at locations in downtown and suburban
areas, near airports and at resort locations throughout the United States. The
properties are well situated in locations where there are significant barriers
to entry by competitors. All but ten of the full-service hotels owned by the
Company are managed by Marriott International and all but three are part of
Marriott International's full-service hotel system. The average age of the
full-service properties is 12 years, several of which have had substantial
renovations or major additions.
The chart below sets forth performance information for the Company's
comparable full-service hotels:
<TABLE>
<CAPTION>
FIRST TWO QUARTERS FISCAL YEAR
-------------------- ----------------
1997 1996 1996 1995
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Number of properties(1).............. 36 36 31 31
Number of rooms...................... 15,327 15,297 12,465 12,465
Average daily rate................... $ 121.12 $ 107.73 $103.64 $ 96.91
Occupancy %.......................... 79.7% 77.6% 76.1% 73.7%
REVPAR............................... $ 96.47 $ 83.57 $ 78.84 $ 71.38
REVPAR % change...................... 15.4% -- 10.5% --
</TABLE>
The chart below sets forth performance information for the Company's
existing full-service hotels.
<TABLE>
<CAPTION>
FIRST TWO QUARTERS FISCAL YEAR
-------------------- -------------------------
1997 1996 1996 1995 1994
--------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Number of properties...... 50 44 48 38 30
Number of rooms........... 19,716 17,490 18,976 15,552 12,032
Average daily
rate(1)(2)(3)............ $ 120.84 $ 107.47 $107.38 $ 97.57 $ 85.50
Occupancy %(1)(2)(3)...... 78.9% 77.6% 76.4% 73.9% 76.6%
REVPAR(1)(2)(3)........... $ 95.31 $ 83.36 $ 82.03 $ 72.07 $ 65.49
REVPAR % change........... 14.3% -- 13.8% 10.0% --
</TABLE>
- ---------------------
(1) Excludes the 255-room Elk Grove Suites hotel, which was leased to a
national hotel chain through August 1997 and was recently sold to the
lessee for $16 million, and the Springfield Radisson which was sold in
December 1995.
(2) Financial data for fiscal year 1995 excludes the 820-room Marriott World
Trade Center which was acquired in December 1995.
(3) Financial data for fiscal year 1994 does not include seven properties
purchased in December 1994.
50
<PAGE>
Revenues for First Two Quarters 1997 for nearly all of the Company's full-
service hotels were improved or comparable to First Quarter 1996 results.
REVPAR for comparable properties increased 15% as average room rates increased
12% and average occupancy increased two percentage points. Overall, this
resulted in excellent growth in sales, which expanded at a 13% rate for
comparable hotels including a three percentage point increase in house profit
margin. The Company believes that its hotels consistently outperform the
industry's average REVPAR growth rates. The relatively high occupancy rates of
the Company's hotels, along with increased demand for full-service hotel
rooms, allowed the managers of the Company's hotels to increase average room
rates by selectively raising room rates and by replacing certain discounted
group business with higher-rated group and transient business. The Company
believes that these favorable REVPAR growth trends should continue due to the
limited new construction of full-service properties.
A number of the Company's full-service hotel acquisitions were converted to
the Marriott brand upon acquisition. The conversion of these properties to the
Marriott brand is intended to increase occupancy and room rates as a result of
Marriott International's nationwide marketing and reservation systems and
Marriott Rewards program, as well as customer recognition of the Marriott
brand name. The Company actively manages these conversions and, in many cases,
has worked closely with the manager to selectively invest in enhancements to
the physical product to make the property more attractive to guests or more
efficient to operate. The invested capital with respect to these properties is
primarily used for the improvement of common areas, as well as upgrading soft
and hard goods (i.e., carpets, drapes, paint, furniture and additional
amenities). The conversion process typically causes periods of disruption to
these properties as selected rooms and common areas are temporarily taken out
of service. Historically, conversion properties have shown improvements as the
benefits of Marriott International's marketing and reservation programs and
customer service initiatives take hold. In addition, these properties have
generally been integrated into Marriott's systems covering purchasing and
distribution, insurance, telecommunications and payroll processing.
The Company's focus is on maximizing profitability throughout the portfolio
by concentrating on key objectives. The Company works with the hotel managers
to achieve these key objectives, which include evaluating marginal restaurant
operations, exiting low rate airline room contracts in strengthening markets,
reducing property-level overhead by sharing management positions with other
jointly-managed hotels in the vicinity, and selectively making additional
investments where favorable incremental returns are expected.
The Company and the hotel managers will continue to focus on cost control in
an attempt to ensure that hotel sales increases serve to maximize house and
operating profit. While control of fixed costs serves to improve profit
margins as hotel sales increase, it also results in more properties reaching
financial performance levels that allow the managers to share in growth of
profits in the form of incentive management fees. The Company believes this is
a positive development as it strengthens the alignment of the Company's and
the managers' interests.
Residence Inns. The Company's leased Residence Inns are extended-stay,
limited-service hotels which cater primarily to business and family travelers
who stay more than five consecutive nights. Residence Inns typically have 80
to 130 studio and two-story penthouse suites. Residence Inns generally are
located in suburban settings throughout the United States and feature a series
of residential style buildings with landscaped walkways, courtyards and
recreational areas. Residence Inns do not have restaurants, but offer
complimentary continental breakfast. In addition, most Residence Inns provide
a complimentary evening hospitality hour. Each suite contains a fully equipped
kitchen, and many suites have woodburning fireplaces. The Residence Inns
leased by the Company are among the newest in the Residence Inn system,
averaging only six years old.
The table below sets forth performance information for the Residence Inns:
<TABLE>
<CAPTION>
FIRST TWO QUARTERS FISCAL YEAR
-------------------- ----------------------
1997 1996 1996 1995 1994
--------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of properties.............. 18 18 18 18 18
Number of rooms................... 2,178 2,178 2,178 2,178 2,178
Average daily rate................ $ 99.09 $ 89.29 $90.82 $85.07 $79.58
Occupancy %....................... 83.3% 86.0% 85.1% 86.6% 85.6%
REVPAR............................ $ 82.54 $ 76.79 $77.29 $73.67 $68.12
REVPAR % change................... 7.5% -- 4.9% 8.1% --
</TABLE>
51
<PAGE>
For First Two Quarters 1997, the Company's Residence Inns performed well
with advances in room rates of 11%, although occupancy decreased by
approximately three percentage points. Continued popularity of this product
with customers combined with increasing business travel resulted in superior
performance for 1997. At an average occupancy rate of almost 83% for First Two
Quarters 1997, these properties were near full occupancy during the business
week and enjoyed high occupancy during the weekends. Given this strong demand,
the Company's Residence Inns were able to improve room rates through managing
their mix of business.
During the First Two Quarters 1996, the Company entered into an agreement
with the REIT whereby it sold and leased back all 18 of its Residence Inns for
approximately $172 million. The Company received net proceeds of $155 million
and will receive approximately $17 million upon expiration of the leases.
Courtyard. During the first and third quarters of 1995, 37 of the Company's
Courtyard properties were sold to and leased back from the REIT. The Company
transferred its rights to receive the deferred proceeds and obligations to
perform under the leases to a subsidiary of Host Marriott in the second and
third quarters of 1995.
During the First Two Quarters of 1996, the Company sold and leased back 16
additional Courtyard properties from the REIT. A subsidiary of Host Marriott
purchased the Company's rights to the deferred proceeds and obligations under
the lease for the properties at their fair market value of approximately $13
million. Through the date of their disposition, 1996 revenues and operating
profit for the Courtyard properties were comparable to 1995.
MARKETING
All but ten of the Company's hotel properties are managed by Marriott
International as Marriott or Ritz-Carlton brand hotels. Eight of the ten
remaining hotels are operated as Marriott brand hotels under franchise
agreements with Marriott International. The Company believes that these
Marriott managed and franchised properties will continue to enjoy competitive
advantages arising from their participation in the Marriott International
hotel system. Marriott International's nationwide marketing programs and
reservation systems as well as the advantage of the strong customer preference
for Marriott brands should also help these properties to maintain or increase
their premium over competitors in both occupancy and room rates. Repeat guest
business in the Marriott hotel system is enhanced by the recently created
Marriott Rewards program, which expanded the previous Marriott Honored Guest
Awards program. Marriott Rewards membership includes more than nine million
members.
The Marriott reservation system provides Marriott reservation agents
complete descriptions of the rooms available for sale, and up-to-date rate
information from the properties. The reservation system also features
connectivity to airline reservation systems, providing travel agents with
access to available rooms inventory for all Marriott and Ritz-Carlton lodging
properties. In addition, software at Marriott's centralized reservations
centers enables agents to immediately identify the nearest Marriott brand
property with available rooms when a caller's first choice is fully occupied.
PROPERTIES
The following table sets forth certain information relating to each of the
Company's hotels. All of the properties are operated as full-service Marriott
hotels by Marriott International, unless otherwise indicated.
<TABLE>
<CAPTION>
LOCATION ROOMS
- -------- -----
<S> <C>
California
Napa Valley.................. 191
Newport Beach................ 570
Newport Beach Suites......... 250
San Francisco Airport........ 684
San Francisco Fisherman's
Wharf(4).................... 285
Manhattan Beach(4)........... 380
Marina Beach(2).............. 368
The Ritz-Carlton, Marina del
Rey(3)...................... 306
Colorado
Denver Tech.................. 625
Denver West(2)............... 307
Vail Mountain Resort......... 349
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
LOCATION ROOMS
-------- -----
<S> <C>
Connecticut
Hartford--Rocky Hill(2)...... 251
Florida
Fort Lauderdale Marina....... 580
Jacksonville(2)(4)........... 256
Miami Airport(2)............. 782
Palm Beach Gardens(4)........ 279
Singer Island (Holiday
Inn)(3)..................... 222
Tampa Airport(2)............. 295
Tampa Westshore(1)........... 309
Georgia
Atlanta Norcross............. 222
Atlanta Northwest............ 400
Atlanta Perimeter(2)......... 400
The Ritz-Carlton,
Atlanta(3).................. 447
Illinois
Chicago-Deerfield Suites..... 248
Chicago-Downtown Courtyard... 334
Indiana
South Bend(2)................ 300
Maryland
Bethesda(2).................. 407
Gaithersburg-Washingtonian
Center...................... 284
Missouri
Kansas City Airport(2)....... 382
New Jersey
Newark Airport(2)............ 590
New York
Marriott World Trade
Center(2)................... 820
North Carolina
Charlotte(4)................. 298
Raleigh Crabtree Valley(1)... 375
Oklahoma
Oklahoma City................ 354
Oregon
Portland..................... 503
Pennsylvania
Pittsburgh(2)(4)............. 400
Texas
Dallas/Fort Worth............ 492
Dallas Quorum(2)............. 547
Houston Airport (2).......... 566
J.W. Marriott Houston........ 503
Plaza San Antonio(4)......... 252
San Antonio Riverwalk (2).... 500
Utah
Salt Lake City(2)............ 510
Virginia
Pentagon City................ 300
Norfolk Waterside(2)(4)...... 404
Westfields Conference
Center...................... 335
Washington-Dulles Suites..... 254
Williamsburg................. 295
Washington, D.C.
Washington Metro Center...... 456
Canada
Toronto Delta Meadowvale(3).. 374
</TABLE>
- ---------------------
(1) These hotels are owned by an affiliated partnership of the Company. A
subsidiary of the Company provided 100% non-recourse financing totaling
approximately $35 million to the partnership, in which an affiliate of
the Company owns the sole general partner interest, for the acquisition
of these hotels. The Company consolidates these properties in the
accompanying financial statements.
(2) The land on which the hotel is built is leased by the Company under a
long-term lease agreement.
(3) Property is not operated as Marriott and is not managed by Marriott
International.
(4) Property is operated as a Marriott franchised property.
SENIOR LIVING COMMUNITIES
Until mid-1994, the Company owned 14 senior living communities located in
seven states. These communities offer independent living apartments, assisted
living services and skilled nursing care. During the second and third quarters
of 1994, the Company sold its 14 senior living communities to an unrelated
third party for $320 million, which approximated the communities' carrying
value.
While the Company's portfolio of lodging properties currently consists
almost entirely of upscale and luxury full-service hotels, management
continually considers the merits of diversifying into other compatible
lodging- related properties. Host Marriott has recently acquired 29 senior
living communities with 6,127 units. The Company may, from time to time, seek
to opportunistically invest in senior living communities.
53
<PAGE>
INVESTMENTS IN AFFILIATED PARTNERSHIP AND NOTES RECEIVABLE
In connection with the 1984 sale of seven hotels to Chesapeake Hotel Limited
Partnership ("CHLP"), an affiliated partnership, the Company received $168
million ($139 million at June 20, 1997) in notes receivable that are secured
by non-recourse mortgages on the underlying properties. The notes mature on
December 31, 2003 and bear interest at 9%. These notes require principal
paydown of approximately 44% of the original principal amount prior to
maturity. While payments on these notes have been current since 1994, there
have been instances in the past when payments were delinquent, and there can
be no assurance that such delinquencies will not occur in the future.
On September 10, 1997, Host Marriott successfully completed the purchase of
98.6% of the limited partnership units in CHLP, increasing its ownership of
CHLP to 99.9%. CHLP owns six hotels, the Key Bridge Marriott, the Chicago
O'Hare Marriott, the Boston Newton Marriott, the Denver Southeast Marriott,
the Bloomington Minnesota Marriott and the Saddlebrook New Jersey Marriott.
The Company is considering the acquisition of Host Marriott's general and
limited partnership interests, along with certain notes and other receivables
due from CHLP, which would allow the Company to consolidate CHLP.
During 1994, Host Marriott transferred to the Company a 49% limited partner
interest in an affiliate that owns a hotel in Santa Clara, California in
exchange for $30 million in cash. The difference between the cash transferred
to Host Marriott and the carried-over cost basis of the 49% interest, net of
the related tax effects, has been charged to additional paid-in capital. The
investment is accounted for using the equity method.
COMPETITION
The Company's hotels compete with several other major lodging brands.
Competition in the industry is based primarily on the level of service,
quality of accommodations, convenience of locations and room rates. The
following table presents key participants in segments of the lodging industry
in which the Company competes:
<TABLE>
<CAPTION>
SEGMENT REPRESENTATIVE PARTICIPANTS
- ------- ---------------------------
<S> <C>
Luxury/Full-Service..... Ritz-Carlton; Four Seasons
Upscale/Full-Service.... Marriott Hotels, Resorts and Suites; Crowne Plaza; Doubletree; Hyatt; Hilton;
Radisson; Red Lion; Sheraton; Westin; Wyndham
Extended-Stay........... Residence Inn; Homewood Suites; Embassy Suites; Oakwood Apartments
</TABLE>
EMPLOYEES
The Company has no employees. All of its management services are provided by
employees of Host Marriott.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic
substances on, under or in such property. Such laws may impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In addition, certain
environmental laws and common law principles could be used to impose liability
for release of asbestos-containing materials ("ACMs"), and third parties may
seek recovery from owners or operators of real properties for personal injury
associated with exposure to released ACMs. Environmental laws also may impose
restrictions on the manner in which property may be used or business may be
operated, and these restrictions may require expenditures. In connection with
its current or prior ownership or operation of hotels, the Company may be
potentially liable for any such costs or liabilities. Although the Company is
currently not aware of any material environmental claims pending or threatened
against it, no assurance can be given that a material environmental claim will
not be asserted against the Company.
LEGAL PROCEEDINGS
The Company is from time to time the subject of, or involved in, judicial
proceedings. Management believes that any liability or loss resulting from
such matters will not have a material adverse effect on the financial position
or results of operations of the Company.
54
<PAGE>
MANAGEMENT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors, executive officers and management are employees of
Host Marriott. Set forth below is certain information with respect to the
persons who are executive officers of the Company.
<TABLE>
<CAPTION>
OTHER POSITIONS AND BUSINESS EXPERIENCE PRIOR TO BECOMING AN
NAME AND TITLE AGE EXECUTIVE OFFICER OF THE COMPANY
- -------------- --- ------------------------------------------------------------
<S> <C> <C>
Robert E. Parsons, Jr.
President and
Director.............. 42 Robert E. Parsons, Jr. joined Host Marriott's
Corporate Financial Planning staff in 1981 and was
made Assistant Treasurer in 1988. In 1993, Mr.
Parsons was elected Senior Vice President and
Treasurer of Host Marriott, and in 1995, he was
elected Executive Vice President and Chief Financial
Officer of Host Marriott. Mr. Parsons was elected
Vice President of the Company in 1993 and was
elected Senior Vice President in 1995. In 1996, Mr.
Parsons was elected President and Director of the
Company.
Christopher G. Townsend
Executive Vice
President and
Director.............. 50 Christopher G. Townsend joined Host Marriott's Law
Department in 1982 as a Senior Attorney. In 1984,
Mr. Townsend was made Assistant Secretary of Host
Marriott, and in 1986, he was made Assistant General
Counsel. In 1993, Mr. Townsend was elected Senior
Vice President, Corporate Secretary and Deputy
General Counsel of Host Marriott. In January 1997,
he was elected General Counsel of Host Marriott. Mr.
Townsend was elected Vice President of the Company
in 1993, Senior Vice President in 1995, and
Executive Vice President and Director in 1996.
Christopher J. Nassetta
Executive Vice
President............. 34 Christopher J. Nassetta joined Host Marriott in
October 1995 as Executive Vice President. Mr.
Nassetta was elected Executive Vice President of the
Company in 1995. Prior to joining Host Marriott, Mr.
Nassetta served as President of Bailey Realty
Corporation from 1991 until 1995. He had previously
served as Chief Development Officer and in various
other positions with The Oliver Carr Company from
1984 through 1991.
Bruce D. Wardinski
Vice President and
Treasurer............. 37 Bruce Wardinski joined Host Marriott in 1987 as
Senior Financial Analyst of Financial Planning &
Analysis and was named Manager in June 1988. He was
appointed Host Marriott's Director of Financial
Planning & Analysis in 1989, Director of Project
Finance in June 1993, Vice President of Project
Finance in June 1994, and Senior Vice President of
International Development in October 1995. In 1996,
Mr. Wardinski was named Senior Vice President and
Treasurer of Host Marriott. Also in 1996, Mr.
Wardinski was named Vice President and Treasurer of
the Company. Prior to joining Host Marriott, Mr.
Wardinski was with the public accounting firm of
Price Waterhouse.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
OTHER POSITIONS AND BUSINESS EXPERIENCE PRIOR TO BECOMING AN
NAME AND TITLE AGE EXECUTIVE OFFICER OF THE COMPANY
- -------------- --- ------------------------------------------------------------
<S> <C> <C>
Donald D. Olinger
Vice President and
Corporate Controller.. 38 Donald D. Olinger joined Host Marriott in 1993 as
Director of Corporate Accounting. Later in 1993, Mr.
Olinger was promoted to Senior Director and
Assistant Controller of Host Marriott. He was
promoted to Vice President of Corporate Accounting
in 1995. In 1996, he was elected Senior Vice
President and Corporate Controller of Host Marriott.
Mr. Olinger was elected Vice President and Corporate
Controller of the Company in 1996. Prior to joining
Host Marriott, Mr. Olinger was with the public
accounting firm of Deloitte & Touche.
</TABLE>
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
The directors and executive officers of the Company are employees of Host
Marriott and are compensated by Host Marriott. The directors and executive
officers are required to devote to the Company such time as may be necessary
for proper performance of their duties, but are not required to devote their
full time to the performance of such duties. No directors and executive
officers of the Company receive any compensation from the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There is no compensation committee or other board committee performing the
equivalent function. Compensation for executive officers is determined by the
Compensation Policy Committee of Host Marriott.
SOLE SHAREHOLDER
The Company has 100 shares of common stock with no par value issued and
outstanding, all of which are held beneficially and of record by Hospitality.
No executive officer or director of the Company owns any shares of the
Company's common stock.
RELATIONSHIP WITH HOST MARRIOTT
The Company operates as a unit of Host Marriott, utilizing Host Marriott's
employees, centralized systems for cash management, insurance and
administrative services. Host Marriott contracts with Marriott International
for certain of these services. In addition, Host Marriott provides certain
corporate, general and administrative services to the Company. Certain of
these expenses have been allocated to the Company primarily based on the
Company's utilization of specific functions.
The Company has no employees. Host Marriott provides the services of certain
employees (including the Company's executive officers) to the Company. The
Company anticipates that each of its executive officers will generally devote
a sufficient portion of his or her time to the business of the Company.
However, such executive officers also will devote a significant portion of his
or her time to the business of Host Marriott and its other subsidiaries.
Implementation of the Company's future business strategy to acquire full-
service hotels primarily in the U.S. will be dependent upon officers of the
Company who may have similar obligations to Host Marriott or its affiliates.
Accordingly, there can be no assurance that the Company will be provided the
opportunity to purchase or acquire an economically desirable full-service
hotel which also may be available to Host Marriott or one of its other
subsidiaries.
56
<PAGE>
The Internal Revenue Service (the "Service"), as a result of an examination
of Host Marriott's tax returns for the taxable years 1986-1990, has proposed
certain adjustments that would result in the acceleration of significant tax
liabilities of Host Marriott for such years. Host Marriott is currently
contesting such adjustments. Under tax sharing arrangements between the
Company and Host Marriott, Host Marriott would be principally responsible for
any such liability should the Service prevail in these matters, and no
material portion of any resulting liability would be a Permitted Tax Payment
under the Senior Notes Indenture. Management believes that Host Marriott will
have adequate financial resources to pay any such liability should the Service
prevail in this matter. Nevertheless, if Host Marriott were not to pay any
such tax liability, the Service could seek payment from the Company or its
subsidiaries.
RELATIONSHIP WITH MARRIOTT INTERNATIONAL
Marriott International serves as the manager for all but ten of the
Company's full-service hotels and for the 18 Residence Inns leased by the
Company. Marriott International also provides various other services to Host
Marriott and its subsidiaries, including the Company.
MANAGEMENT AGREEMENTS
The Company is party to management agreements with respect to 40 of its 50
full service hotels (the "Management Agreements") which provide for Marriott
International to manage the hotels generally for an initial term of 15 to 30
years with renewal terms of up to an additional 16 to 30 years. The Management
Agreements generally provide for payment of base management fees equal to two
to four percent of sales and incentive management fees generally equal to 40%
to 50% of hotel operating profits over a priority return to the Company, with
total incentive management fees not to exceed 20% of operating profits. For
full-service hotels acquired after September 1995, the incentive management
fee is generally equal to 20% of operating profits. The Company may terminate
certain Management Agreements if specified performance threshholds are not
met, subject to the right of Marriott International to cure. In the event of
early termination of any Management Agreement, Marriott International will
receive additional fees based on the unexpired term and expected future base
and incentive management fees. No Management Agreement with respect to a
single lodging facility is cross-collateralized with or cross-defaulted to any
other Management Agreement and a single Management Agreement may be cancelled
under certain conditions without triggering a cancellation of any other
Management Agreement. Under each Management Agreement for full-service hotels,
Marriott International collects all revenue generated at a particular lodging
property. Marriott International holds such amounts on behalf of the Company
in segregated accounts and forwards to the Company every two weeks all amounts
in excess of certain expenses and management fees (as described more fully
below). Because amounts collected by Marriott International are held on the
Company's behalf, the Company does not depend upon the creditworthiness of
Marriott International for receipt of such payments.
Pursuant to the terms of the Management Agreements, Marriott International
is required to furnish the hotels with certain services ("Chain Services")
which are generally provided on a central or regional basis to all hotels in
the Marriott International hotel system. Chain Services include central
training, advertising and promotion, a national reservation system,
computerized payroll and accounting services, and such additional services as
needed which may be more efficiently performed on a centralized basis. Costs
and expenses incurred in providing such services are allocated among all
domestic hotels managed, owned or leased by Marriott International or its
subsidiaries. In addition, all the Company's properties participate in the
Marriott Rewards program which replaced the Marriott Honored Guest Awards
program as well as other Marriott frequent guest programs as of May 1997. The
Marriott Rewards program generally includes all Marriott brand properties as
well as select Ritz-Carlton properties. The cost of this program is charged to
all hotels in the respective hotel system.
The Company is obligated to provide the manager with sufficient funds to
cover the cost of certain non-routine repairs and maintenance to the hotels
which are normally capitalized and replacements and renewals to the hotels'
property and improvements. Under certain circumstances, the Company will be
required to establish
57
<PAGE>
escrow accounts for such purposes under terms outlined in the Management
Agreements. The Company is also required to provide Marriott International
with funding for working capital to meet the operating needs of the hotels.
Marriott International converts cash advanced by the Company into other forms
of working capital consisting primarily of operating cash, inventories and
trade receivables. Under the terms of the Management Agreements, Marriott
International maintains possession of and sole control over the components of
working capital and accordingly, the Company reports the total amounts so
advanced to Marriott International as a component of other assets. Upon
termination of the Management Agreements, the working capital will be returned
to the Company.
FRANCHISE AGREEMENTS
The Company has entered into franchise agreements with Marriott
International for eight hotels. Pursuant to these franchise agreements, the
Company generally pays a franchise fee based on a percentage of room sales and
food and beverage sales as well as certain other fees for advertising and
reservations. Franchise fees for room sales vary from four to six percent of
room sales, while fees for food and beverage sales vary from two to three
percent of sales. The initial terms of the franchise agreements are from 20 to
25 years. Franchise fees paid to Marriott International were $2 million and $1
million for 1996 and 1995, respectively.
RESIDENCE INNS
The agreements pursuant to which Marriott International operates the 18
Residence Inns subject to the sale-leaseback transaction with the REIT (the
"Residence Inn Agreements"), each provide for a system fee equal to four
percent of annual gross revenue, and a base fee equal to two percent of annual
gross revenues. In addition, the agreements provide for an incentive
management fee equal to 50% of "Available Cash Flow" for each fiscal year
(provided that the cumulative incentive management fee may not on any date
exceed 20% of the cumulative Operating Profit (as defined in the Residence Inn
Agreements) of the hotel through such date). Available Cash Flow is defined to
be the excess of Operating Profit (after deduction of the base fee, including
any portion of the base fee that is deferred or waived) over the Owner's
Priority (as defined in the Residence Inn Agreements). Under such forms of
agreement, Marriott International is also entitled to reimbursement for
certain costs attributable to Chain Services of Marriott International. The
Company or its subsidiaries have the option to terminate the agreement if
specified performance thresholds regarding Operating Profit are not satisfied
and if specified revenue market share tests are not met (provided that
Marriott International can elect to avoid such termination by making cure
payments to the extent necessary to allow the specified Operating Profit
thresholds to be satisfied).
POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS
The on-going relationships between Marriott International and Host Marriott
may present certain conflict situations for J.W. Marriott, Jr. who serves as
Chairman of the Board of Directors, Chief Executive Officer and President of
Marriott International and also serves as a director of Host Marriott and for
Richard E. Marriott, who serves as a director of Marriott International, and
as the Chairman of the Board of Directors of Host Marriott. Mr. Richard E.
Marriott and J.W. Marriott, Jr., as well as other executive officers and
directors of Host Marriott and Marriott International, also own (or have
options or other rights to acquire) a significant number of shares of common
stock in both Host Marriott and Marriott International. Host Marriott and
Marriott International have adopted appropriate policies and procedures to be
followed by the Board of Directors of each company to limit the involvement of
Richard E. Marriott and J.W. Marriott, Jr. (or such other executive officers
and directors having a significant ownership interest in the companies) in
conflict situations, including matters relating to contractual relationships
or litigation between Marriott International and Host Marriott. Such
procedures include requiring Richard E. Marriott and J.W. Marriott, Jr. (or
such other executive officers or directors having a significant ownership
interest in the companies) to abstain from making management decisions in
their capacities as officers of Marriott International and Host Marriott
respectively, and to abstain from voting as directors of each company, with
respect to matters that present a significant conflict of interest between the
58
<PAGE>
companies. Whether or not a significant conflict of interest situation exists
is determined on a case-by-case basis depending on such factors as the dollar
value of the matter, the degree of personal interest of Richard E. Marriott
and J.W. Marriott, Jr. (or such other executive officers and directors having
a significant ownership interest in the companies) in the matter and the
likelihood that resolution of the matter has significant strategic,
operational or financial implications for the business of the Company. It is a
principal responsibility of the general counsel of the Company to monitor this
issue in consultation with the Board of Directors. See "Risk Factors--
Relationship with Marriott International."
DESCRIPTION OF SENIOR NOTES
Set forth below is a summary of certain provisions of the Senior Notes. The
Original Notes were issued pursuant to the Indenture dated as of July 15,
1997, by and among the Company, the Subsidiary Guarantors and Marine Midland
Bank, as trustee (the "Trustee"). The terms of the Indenture are also governed
by certain provisions contained in the Trust Indenture Act of 1939, as amended
(the "TIA"). The following summaries of certain provisions of the Indenture
are summaries only, do not purport to be complete and are qualified in their
entirety by reference to all of the provisions of the Indenture, a copy of
which may be obtained from the Company. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Indenture.
Wherever particular provisions of the Indenture are referred to in this
summary, such provisions are incorporated by reference as a part of the
statements made and such statements are qualified in their entirety by such
reference.
GENERAL
The Senior Notes are senior obligations of the Company secured by the
Capital Stock of the Subsidiary Guarantors and are limited in aggregate
principal amount to $600 million. The Senior Notes rank pari passu with all
other existing and future senior Indebtedness of the Company (including the
Existing Senior Notes and the Acquisitions Notes); provided, however, certain
Indebtedness of the Company and its Subsidiaries currently is, and
Indebtedness incurred by the Company and its Subsidiaries may be, secured by
assets held by the Company or its Subsidiaries subject to certain restrictions
described herein. The Senior Notes are guaranteed on a senior basis by the
Initial Subsidiary Guarantors, and subject to certain exceptions, will be
guaranteed by each of the Company's future Subsidiaries. See "--Future
Subsidiary Guarantors." The Initial Subsidiary Guarantors are: HMH Rivers
Inc., Marriott SBM Two Corporation, Host of Houston, Ltd., Host of Boston,
Ltd., HMC Retirement Properties, Inc., HMH Marina, Inc., HMH Pentagon
Corporation, Host Airport Hotels, Inc., Marriott Financial Services, Inc., HMC
SFO, Inc., HMC AP Canada, Inc. and Host of Houston 1979.
The Senior Notes mature on July 15, 2007. The Senior Notes bear interest at
the rate of 8 7/8% per annum from the respective date of issuance or from the
most recent Interest Payment Date to which interest has been paid or provided
for, payable semi-annually on July 15 and January 15 of each year, commencing
January 15, 1998, to the persons in whose names such Senior Notes are
registered at the close of business on the July 1 or the January 1 immediately
preceding such Interest Payment Date. Interest is calculated on the basis of a
360-day year consisting of twelve 30-day months. The Senior Notes are issued
only in fully registered form, without coupons, in denominations of $1,000 and
integral multiples thereof.
Principal of, premium, if any, and interest on the Senior Notes is payable,
and the Senior Notes may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose,
which office or agency shall be maintained in the Borough of Manhattan, The
City of New York. At the option of the Company, payment of interest may be
made by check mailed to the holders of the Senior Notes (the "Holders") at the
addresses set forth upon the registry books of the Company; provided, however,
Holders of Certificated Senior Notes are entitled to receive interest payments
(other than at maturity) by wire transfer of immediately available funds, if
appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 days prior to the applicable Interest Payment Date.
Such wire instructions, upon receipt by the
59
<PAGE>
Trustee, shall remain in effect until revoked by such Holder. No service
charge is made for any registration of transfer or exchange of Senior Notes,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. Until otherwise
designated by the Company, the Company's office or agency is the corporate
trust office of the Trustee presently located at 140 Broadway, New York, New
York.
OPTIONAL REDEMPTION
The Company does not have the right to redeem any Senior Notes prior to July
15, 2002. The Senior Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2002 upon not less than 30
days nor more than 60 days notice to each Holder of Senior Notes, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing July 15 of the years
indicated below, in each case (subject to the right of Holders of record on a
Record Date that is on or prior to such Redemption Date to receive interest
due on the corresponding Interest Payment Date) together with accrued and
unpaid interest thereon to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002.............................................................. 104.438%
2003.............................................................. 102.958%
2004.............................................................. 101.479%
2005 and thereafter............................................... 100.000%
</TABLE>
In the case of a partial redemption, the Trustee shall select the Senior
Notes or portions thereof for redemption on a pro rata basis, by lot or in
such other manner it deems appropriate and fair. The Senior Notes may be
redeemed in part in multiples of $1,000 only.
The Senior Notes do not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the Holder
of each Senior Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. Any notice which relates to a Senior
Note to be redeemed in part only must state the portion of the principal
amount equal to the unredeemed portion thereof and must state that on and
after the date of redemption, upon surrender of such Senior Note, a new note
or notes in a principal amount equal to the unredeemed portion thereof will be
issued. On and after the date of redemption, interest will cease to accrue on
the Senior Notes or portions thereof called for redemption.
CERTAIN COVENANTS
REPURCHASE OF SENIOR NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL
Upon the occurrence of a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Senior Notes pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash (the "Change of Control Payment") equal to
101% of the aggregate principal amount thereof plus (subject to the right of
Holders of record on a Record Date to receive interest due on the
corresponding Interest Payment Date) accrued and unpaid interest thereon to
the date of purchase on a date that is not more than 45 Business Days after
the occurrence of such Change of Control Triggering Event (the "Change of
Control Payment Date").
On or before the Change of Control Payment Date, the Company will (i) accept
for payment Senior Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Payment (together with accrued and unpaid interest)
of all Senior Notes so tendered and (iii) deliver to the Trustee Senior Notes
so accepted together with an Officers' Certificate listing the aggregate
principal amount of the Senior Notes or portions thereof being purchased by
the Company.
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<PAGE>
The Paying Agent will promptly mail to the Holders of Senior Notes so accepted
payment in an amount equal to the Change of Control Payment, and the Trustee
will promptly authenticate and mail or deliver (or cause to be transferred by
book entry) to such Holders a new Note equal in principal amount to any
unpurchased portion of the Senior Note surrendered; provided, that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. Any Senior Notes not so accepted will be promptly mailed or delivered
by the Company to the Holder thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
consummation thereof.
The provisions of the Indenture relating to a Change of Control Triggering
Event may not afford the Holders protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger, spin-off or similar
transaction that may adversely affect Holders, if such transaction does not
constitute a Change of Control Triggering Event, as defined. In addition, the
Company may not have sufficient financial resources available to fulfill its
obligation to repurchase the Senior Notes upon a Change of Control Triggering
Event.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
The Indenture provides that, except as set forth below in this covenant,
neither the Company nor any of the Company's Subsidiaries will, directly or
indirectly, issue, assume, guaranty, incur, become directly or indirectly
liable with respect to (including as a result of an Acquisition), or otherwise
become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"), any
Indebtedness or any Disqualified Capital Stock (including Acquired
Indebtedness). Notwithstanding the foregoing:
(a) if on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving effect, on a pro
forma basis, to such incurrence of such Indebtedness or Disqualified
Capital Stock and, to the extent set forth in the definition of
Consolidated Coverage Ratio, the use of proceeds thereof, would be at least
2.2 to 1 (the "Debt Incurrence Ratio"), then the Company and its
Subsidiaries may incur Indebtedness or Disqualified Capital Stock;
provided, however, any Indebtedness incurred by the Non-Guarantor
Subsidiaries in reliance on this clause (a) shall be limited to an
aggregate amount outstanding at any time of up to $100 million of
Indebtedness, which Indebtedness shall be secured by liens permitted under
clause (m) of the definition of "Permitted Liens;"
(b) the Company and the Subsidiary Guarantors may incur Indebtedness
evidenced by the Senior Notes and represented by the Indenture up to the
amounts specified therein as of the date thereof;
(c) the Company and its Subsidiaries or Subsidiary Guarantors, as
applicable, may incur Refinancing Indebtedness with respect to any
Indebtedness or Disqualified Capital Stock, as applicable, described in
clauses (a), (b) or (e) of this covenant or described in this clause (c) or
which was outstanding on the date of issuance of the Existing Senior Notes
or that was outstanding at Acquisitions or its Subsidiaries as of the
Acquisitions Issue Date;
(d) the Company and its Subsidiaries or its Subsidiary Guarantors, as
applicable, may incur Permitted Indebtedness;
(e) the Company and its Subsidiaries may incur Non-recourse Purchase
Money Indebtedness; and
(f) the Company and its Subsidiary Guarantors may incur Indebtedness (in
addition to Indebtedness permitted by any other clause of this paragraph)
in an aggregate amount outstanding at any time (including any Indebtedness
issued to refinance, replace, or refund such Indebtedness) of up to $65
million.
Notwithstanding the foregoing, no Non-Guarantor Subsidiary may Incur any
Indebtedness or Disqualified Capital Stock unless on the Incurrence Date the
Consolidated Coverage Ratio for all Non-Guarantor Subsidiaries,
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on a combined basis, for the Reference Period immediately preceding the
Incurrence Date, after giving effect, on a pro forma basis to such incurrence
of such Indebtedness or Disqualified Capital Stock and, to the extent set
forth in the definition of Consolidated Coverage Ratio, the use of proceeds
thereof, would be at least 2.0 to 1.
Indebtedness of any Person that is not a Subsidiary of the Company, which
Indebtedness is outstanding at the time such Person becomes a Subsidiary of
the Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, shall be deemed to have been incurred at the time
such Person becomes a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company and Indebtedness
which is assumed at the time of the acquisition of any asset shall be deemed
to have been incurred at the time of such acquisition.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that on and after the Issue Date the Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
make any Restricted Payment, if (a) on the date of such Restricted Payment a
Default or an Event of Default would exist and be continuing or would occur as
a consequence of (after giving effect, on a pro forma basis, to) such
Restricted Payment or (b) immediately prior to such Restricted Payment or
after giving effect thereto, the aggregate amount of all Restricted Payments
made by the Company and its Subsidiaries, including such proposed Restricted
Payment (if not made in cash, then the fair market value of any property used
therefor as evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) from and after the
Amendment Date and on or prior to the date of such Restricted Payment, shall
exceed the sum of (i) the amount determined by subtracting (x) 2.2 times the
aggregate Consolidated Interest Expense of the Company for the period (taken
as one accounting period) from the first day of the fiscal quarter in which
the Amendment Date occurs to the last day of the last full fiscal quarter
prior to the date of the proposed Restricted Payment (the "Computation
Period") from (y) Consolidated EBITDA of the Company for the Computation
Period, plus (ii) the aggregate Net Cash Proceeds received by the Company from
the sale (other than to a Subsidiary of the Company and other than in
connection with a Qualified Exchange) of its Qualified Capital Stock or as a
capital contribution from its Parent, in either case, which Net Cash Proceeds
are received by the Company after the Amendment Date and on or prior to the
date of such Restricted Payment.
Notwithstanding the foregoing, the provisions set forth in clause (b) of the
immediately preceding paragraph will not prohibit (i) the payment of any
dividend within 60 days after the date of its declaration if such dividend
could have been made on the date of its declaration in compliance with the
foregoing provisions, (ii) a Qualified Exchange, or (iii) a Permitted Sharing
Arrangements Payment; provided, however, that any amounts expended pursuant to
clause (i) of this paragraph shall be included as Restricted Payments made for
purposes of clause (b) of the immediately preceding paragraph, whereas amounts
received and expended in connection with a Qualified Exchange or a Permitted
Sharing Arrangements Payment shall neither be counted as Restricted Payments
made nor be credited as Net Cash Proceeds received for purposes of clause
(b)(ii) of the immediately preceding paragraph.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that neither the Company nor the Subsidiary
Guarantors will, directly or indirectly, create, assume or suffer to exist any
consensual restriction on the ability of any Subsidiary Guarantors to pay
dividends or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to transfer assets or property to
or on behalf of, or make or pay loans or advances to or on behalf of, the
Company or any Subsidiary Guarantor except (a) restrictions imposed by the
Senior Notes or the Indenture, (b) restrictions imposed by applicable law, (c)
existing restrictions under specified Indebtedness outstanding on the Issue
Date or under any Acquired Indebtedness not incurred in violation of the
Indenture or any agreement relating to any property, asset, or business
acquired by the Company or any of the Subsidiary Guarantors, which
restrictions existed at the time of acquisition, were not put in place in
connection with or in anticipation of such acquisition and are not applicable
to any person, other than the person acquired, or to any property, asset or
business, other than the property, assets and business so acquired, (d) any
such restriction or requirement imposed by
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Indebtedness incurred under paragraph (e) of the covenant "Limitation of
Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
provided such restriction or requirement relates only to the transfer of the
property subject to such Non-recourse Purchase Money Indebtedness, (e)
restrictions with respect to a Subsidiary Guarantor imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such Subsidiary
Guarantor, provided such restrictions apply solely to the Capital Stock or
assets of such Subsidiary Guarantor which are being sold, and (f) in
connection with and pursuant to permitted refinancings thereof, replacements
of restrictions imposed pursuant to clause (c) or (d) of this paragraph that
are not more restrictive than those being replaced and do not apply to any
other person or assets other than those that would have been covered by the
restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing,
customary provisions restricting subletting or assignment of any lease entered
into in the ordinary course of business, consistent with industry practice
shall not in and of themselves be deemed to be a restriction on the ability of
the Company or any of its Subsidiary Guarantors to transfer such property.
LIMITATIONS ON LIENS
The Indenture provides that the Company and the Subsidiary Guarantors will
not, and will not permit any of their Subsidiaries to, directly or indirectly,
incur, or suffer to exist any Lien on any assets or properties of the Company
or any of its Subsidiaries now owned or hereafter acquired, or any income or
profits therefrom, except Permitted Liens, unless all payments due under the
Indenture and the Senior Notes are secured on an equal and ratable basis with
the obligations so secured until such time as such obligations are no longer
secured by such Lien.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, in one or a series of related transactions convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, business or assets, including by merger or consolidation (in the
case of a Subsidiary Guarantor or a Subsidiary of the Company), and including
any sale or other transfer or issuance of any Capital Stock of any Subsidiary
of the Company, whether by the Company or a Subsidiary of either or through
the issuance, sale or transfer of Capital Stock by a Subsidiary of the Company
(an "Asset Sale"), unless (i) the Board of Directors of the Company determines
in good faith that the Company or such Subsidiary, as applicable, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets or Capital Stock issued or sold or otherwise disposed of,
(ii) no Default or Event of Default would occur as a consequence of (after
giving effect, on a pro forma basis, to) such Asset Sale, and (iii) at least
75% of the consideration therefor received by the Company or such Subsidiary
is in the form of cash or Cash Equivalents: provided that for purposes of this
provision, the amount of (A) any Indebtedness (other than Senior Notes) that
is required to be repaid or assumed (and is either repaid or assumed by the
transferee of the related assets) by virtue of such Asset Sale and which is
secured by a Lien on the property or assets sold and (B) any securities or
other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary
into cash (or as to which the Company or such Subsidiary has received at or
prior to the consummation of the Asset Sale a commitment (which may be subject
to customary conditions) from a nationally recognized investment, merchant or
commercial bank to convert into cash within 90 days of the consummation of
such Asset Sale and which are thereafter actually converted into cash within
such 90-day period) will be deemed to be cash.
Within 365 days after the receipt of any Net Cash Proceeds from an Asset
Sale, the Company may invest or commit such Net Cash Proceeds, pursuant to a
binding commitment subject only to reasonable, customary closing conditions,
to be invested (and providing such Net Cash Proceeds are, in fact, so
invested, within an additional 180 days) in (x) fixed assets and property
(other than notes, bonds, obligations and securities) which in the good faith
reasonable judgment of the Board of Directors of the Company will immediately
constitute or be part of a Related Business of the Company or such Subsidiary
(if it continues to be a Subsidiary) immediately following such transaction,
(y) Permitted Mortgage Investments or (z) a controlling interest in the
Capital Stock
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of an entity engaged in a Related Business; provided, that concurrently with
an Investment specified in clause (z), such entity becomes a Subsidiary
Guarantor. Pending the application of any such Net Cash Proceeds as described
above, the Company may invest such Net Cash Proceeds in any manner that is not
prohibited by the Indenture. Any Net Cash Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph
(including any Net Cash Proceeds which were committed to be invested as
provided in such sentence but which are not in fact invested within the time
period provided) will be deemed to constitute "Excess Proceeds." Within 30
days following each date on which the aggregate amount of Excess Proceeds
exceeds $15 million, the Company will make a cash offer to all Holders of
Senior Notes and holders of any other Indebtedness of the Company ranking on a
parity with the Senior Notes from time to time outstanding with similar
provisions requiring the Company to make an offer to purchase or to redeem
such Indebtedness with the proceeds from such Asset Sale, pro rata in
proportion to the respective principal amounts pursuant to an irrevocable,
unconditional offer (an "Asset Sale Offer") to purchase the maximum principal
amount of Senior Notes and such other senior Indebtedness then outstanding
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Senior Notes and other senior Indebtedness tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Senior Notes and other senior Indebtedness tendered pursuant to an
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the Senior Notes to be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at
zero.
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Subsidiaries may, in the ordinary course of
business, convey, sell, lease, transfer, assign or otherwise dispose of
inventory acquired and held for resale in the ordinary course of business;
(ii) the Company and its Subsidiaries may convey, sell, lease, transfer,
assign or otherwise dispose of assets pursuant to and in accordance with
the limitation on mergers, sales or consolidations provisions in the
Indenture;
(iii) the Company and its Subsidiaries may sell or dispose of damaged,
worn out or other obsolete property in the ordinary course of business so
long as such property is no longer necessary for the proper conduct of the
business of the Company or such Subsidiary, as applicable;
(iv) the Company and its Subsidiaries may consummate any sale or series
of related sales (including, without limitation, sale and leaseback
transactions) of assets or properties of the Company and its Subsidiaries
having a Fair Market Value of less than $2 million; and
(v) the Company and its Subsidiaries may exchange assets held by the
Company or a Subsidiary for one or more hotels and/or one or more Related
Businesses of any person or entity owning one or more hotels and/or one or
more Related Businesses; provided, that the Board of Directors of the
Company has determined that the terms of any exchange are fair and
reasonable and the Fair Market Value of the assets received by the Company
are approximately equal to the Fair Market Value of the assets exchanged by
the Company.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that neither the Company nor any of its Subsidiaries
will be permitted after the Issue Date to enter into any contract, agreement,
arrangement or transaction with any Affiliate (an "Affiliate Transaction") or
any series of related Affiliate Transactions (other than Exempted Affiliate
Transactions), except
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for such Affiliate Transactions made in good faith, the terms of which are
fair and reasonable to the Company or such Subsidiary, as the case may be, and
are at least as favorable as the terms which could be obtained by the Company
or such Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis with persons who are not Affiliates.
Without limiting the foregoing, (a) any Affiliate Transaction or series of
related Affiliate Transactions (other than Exempted Affiliate Transactions)
with an aggregate value in excess of $5 million must first be approved
pursuant to a Board Resolution by a majority of the Board of Directors of the
Company who are disinterested in the subject matter of the transaction, and
(b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions (other than Exempted Affiliate Transactions) with an aggregate
value in excess of $20 million the Company must first obtain (i) a favorable
written opinion from an independent financial advisor of national reputation
as to the fairness from a financial point of view of such transaction to the
Company or such Subsidiary or (ii) in the case of a real estate transaction or
related real estate transactions with an aggregate value in excess of $20
million but not in excess of $50 million an opinion from an independent,
qualified appraiser that the consideration received in connection with such
transaction was comparable to the Fair Market Value of the subject assets;
provided, however, in the case of an individual who serves on the Board of
Directors or as an officer of Host Marriott or any of its Subsidiaries on the
one hand, and of the Company or any of its Subsidiaries on the other hand,
such service, in and of itself, shall not affect such person's status as a
disinterested member of the Board of Directors of the Company for purposes of
clause (a) of this paragraph.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company will not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey
or transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions,
to another Person or group of affiliated Persons, unless (i) either (a) the
Company is the continuing entity or (b) the resulting, surviving or transferee
entity is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company in connection
with the Senior Notes and the Indenture; (ii) no Default or Event of Default
would occur as a consequence of (after giving effect, on a pro forma basis,
to) such transaction; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net Worth of the
consolidated resulting, surviving or transferee entity is at least equal to
90% of the Consolidated Net Worth of the Company immediately prior to such
transaction; and (iv) immediately after giving effect to such transaction on a
pro forma basis, the consolidated resulting, surviving or transferee entity
would immediately thereafter be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio set forth in
paragraph (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such transfer is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor corporation had been named therein
as the Company, and the Company shall be released from the obligations under
the Senior Notes and the Indenture except with respect to any obligations that
arise from, or are related to, such transaction.
FUTURE SUBSIDIARY GUARANTORS
The Indenture provides that all Initial Subsidiary Guarantors and each
future Subsidiary of the Company other than any Leaseback Subsidiary, Excluded
Guaranty Subsidiary or Special Purpose Subsidiary (each, a "Future Subsidiary
Guarantor"), jointly and severally, will guaranty irrevocably and
unconditionally all principal, premium, if any, and interest on the Senior
Notes on a senior basis. No Leaseback Subsidiary or Special Purpose Subsidiary
will be required to become a Subsidiary Guarantor and no Subsidiary of the
Company or any Subsidiary Guarantor that is prohibited by law or by the terms
of an agreement from
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guaranteeing the Senior Notes (each, an "Excluded Guaranty Subsidiary") will
be required to become a Subsidiary Guarantor, provided, however that the
assets of all Excluded Guaranty Subsidiaries may not exceed 15% of the
aggregate assets of the Company and its Subsidiaries (other than Leaseback
Subsidiaries) on a consolidated basis.
LIMITATION ON INVESTMENTS IN NON-GUARANTOR SUBSIDIARIES
The Indenture provides that from and after the Issue Date, the Company will
not, and will not permit any Subsidiary Guarantor to, directly or indirectly,
make any Investment in a Non-Guarantor Subsidiary if, after giving effect
thereto, the Net Non-Guarantor Investment would exceed an amount equal to (a)
the aggregate of all capital contributions made to the Company on or after the
Amendment Date, plus (b) the Applicable Percentage of the sum of (i) the
combined total assets of the Company and the Subsidiary Guarantors, excluding
the assets of the Non-Guarantor Subsidiaries (determined by the Company in
accordance with GAAP) plus (ii) the Net Non-Guarantor Investment.
LIMITATION OF STATUS AS INVESTMENT COMPANY
The Indenture prohibits the Company and its Subsidiaries from being required
to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming
subject to regulation under the Investment Company Act.
SECURITY
The obligations of the Company to pay the principal of, premium, if any, and
interest on the Senior Notes are secured, on an equal and ratable basis with
other indebtedness ranking pari passu with the Senior Notes, including without
limitation, the Existing Senior Notes and the Acquisitions Notes, by a pledge
of the capital stock of each Initial Subsidiary Guarantor, other than Marriott
Financial Services, Inc. The Indenture also provides that the capital stock of
any Person that becomes a Future Subsidiary Guarantor, or that is a successor
of any Subsidiary Guarantor and assumes such Subsidiary Guarantor's
obligations under the Indenture, will be pledged to secure the Senior Notes on
an equal and ratable basis with other indebtedness ranking pari passu with the
Senior Notes, including, without limitation, the Existing Senior Notes and the
Acquisitions Notes; provided, however, that any shares of the capital stock of
any Future Subsidiary Guarantor (an "Excluded Share Subsidiary") will not be
pledged to secure the Senior Notes if the pledge of or grant of a security
interest in such shares is prohibited by law or the terms of an agreement
(other than an agreement entered into in connection with the transaction
resulting in such Person becoming a Future Subsidiary Guarantor) binding on
such Future Subsidiary Guarantor or the Person owning such shares of such
Future Subsidiary Guarantor, and provided that the assets of all Excluded
Share Subsidiaries (determined in accordance with GAAP) shall in no event
exceed 15% of the aggregate assets of the Company and its Subsidiaries (other
than Leaseback Subsidiaries) on a consolidated basis (determined in accordance
with GAAP).
Upon the release of any Subsidiary Guarantor from its obligations under its
guarantee of the Senior Notes in accordance with the Indenture, the pledge of
such Subsidiary Guarantor's capital stock and the Capital Stock of any of its
Subsidiaries shall be automatically released; provided, however, that if any
such Subsidiary Guarantor ceases to be a Subsidiary Guarantor as a result of
the sale of less than 100% of the capital stock of such Subsidiary Guarantor,
the pledge of any security interest in the capital stock of such Subsidiary
Guarantor shall not be released with respect to the capital stock of such
Subsidiary Guarantor that continues to be held by the Company or any
Subsidiary Guarantor after the consummation of such sale, unless otherwise
released pursuant to the Indenture.
GUARANTEES
The Senior Notes are guaranteed irrevocably and unconditionally as to
principal, premium, if any, and interest, jointly and severally, by the
Subsidiary Guarantors. If the Company or a Subsidiary Guarantor defaults
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in the payment of the principal of, premium, if any, or interest on, the
Senior Notes when and as the same shall become due, whether upon maturity,
acceleration, call for redemption, Offer to Purchase or otherwise, without the
necessity of action by the Trustee or any Holder, each Subsidiary Guarantor
shall be required, jointly and severally, to promptly make such payment in
full. The Indenture provides that the Subsidiary Guarantors will be released
from their obligations as guarantors under the Senior Notes under certain
circumstances. The obligations of each Subsidiary Guarantor under its
Guarantee is limited so as to avoid it being construed as a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Transfer."
REPORTS
The Indenture provides that whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee and to each Holder and to prospective purchasers
of Senior Notes identified to the Company by an Initial Purchaser, within 15
days after it is or would have been required to file such with the Commission,
annual and quarterly financial statements substantially equivalent to
financial statements that would have been included in reports filed with the
Commission, if the Company were subject to the requirements of Section 13 or
15(d) of the Exchange Act, including, with respect to annual information only,
a report thereon by the Company's certified independent public accountants as
such would be required in such reports to the Commission, and, in each case,
together with a management's discussion and analysis of financial condition
and results of operations which would be so required. Whether or not required
by the rules and regulations of the Commission, the Company will file a copy
of all such information and reports with the Commission for public
availability and will make such information available to securities analysts
and prospective investors upon request. In addition, for so long as the Senior
Notes are outstanding, the Company will continue to provide to holders of
Senior Notes and to prospective purchasers of the Senior Notes the information
required by Rule 144A(d)(4).
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on the Senior Notes as and when the same
becomes due and payable and the continuance of any such failure for 30 days,
(ii) the failure by the Company to pay all or any part of the principal of, or
premium, if any, on, the Senior Notes when and as the same becomes due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Change of Control Purchase Price or the
Asset Sale Offer Price, or otherwise, (iii) the failure by the Company or any
Subsidiary to observe or perform any other covenant or agreement contained in
the Senior Notes or the Indenture and, subject to certain exceptions, the
continuance of such failure for a period of 30 days after written notice is
given 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 Senior Notes
outstanding, (iv) certain events of bankruptcy, insolvency or reorganization
in respect of the Company or any of its Significant Subsidiaries, (v) a
default in any (1) Non-recourse Purchase Money Indebtedness of the Company or
any of its Subsidiaries with an aggregate principal amount in excess of 10% of
the aggregate assets of the Company and its Subsidiaries, or (2) other
Indebtedness of the Company or any of its Subsidiaries with an aggregate
principal amount in excess of $20 million, in either case (a) resulting from
the failure to pay principal or interest when due or (b) as a result of which
the maturity of such Indebtedness has been accelerated prior to its stated
maturity; and (vi) final unsatisfied judgments not covered by insurance
aggregating in excess of $10 million, at any one time rendered against the
Company or any of its Subsidiaries and not stayed, bonded or discharged within
60 days. The Indenture provides that if a Default occurs and is continuing,
the Trustee must, within 90 days after the occurrence of such default, give to
the Holders notice of such default; provided, that the Trustee may withhold
from Holders of the Senior Notes notice of any continuing Default or Event of
Default (except a Default or Events of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv) above, relating to the Company or certain of
its Subsidiaries), then in every such case, unless the principal of all of the
Senior Notes shall have already become due and payable, either the Trustee or
the Holders of 25% in
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aggregate principal amount of the Senior Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal, determined as set forth
below, and accrued interest thereon to be due and payable immediately. If an
Event of Default specified in clause (iv), above, relating to the Company or
certain of its Subsidiaries occurs, all principal and accrued interest thereon
will be immediately due and payable on all outstanding Senior Notes without
any declaration or other act on the part of Trustee or the Holders. The
Holders of a majority in aggregate principal amount of Senior Notes generally
are authorized to rescind such acceleration if all existing Events of Default,
other than the non-payment of the principal of, premium, if any, and interest
on the Senior Notes which have become due solely by such acceleration, have
been cured or waived. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Senior Notes may direct the Trustee
in its exercise of any trust or power.
The Holders of a majority in aggregate principal amount of the Senior Notes
at the time outstanding may waive on behalf of all the Holders any default,
except a default with respect to any provision requiring supermajority
approval to amend, which default may only be waived by such a supermajority,
and except a default in the payment of principal of or interest on any Senior
Note not yet cured or a default with respect to any covenant or provision
which cannot be modified or amended without the consent of the Holder of each
outstanding Senior Note affected. Subject to the provisions of the Indenture
relating to the duties of the Trustee, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the Holders, unless such Holders have offered to
the Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Senior Notes at the time outstanding will 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time
within one year of the Stated Maturity of the Senior Notes, elect to have its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented, and the
Indenture shall cease to be of further effect as to all outstanding Senior
Notes and Guarantees, except as to (i) rights of Holders to receive payments
in respect of the principal of, premium, if any, and interest on such Senior
Notes when such payments are due from the trust funds; (ii) the Company's
obligations with respect to such Senior Notes concerning issuing temporary
Senior Notes, registration of Senior Notes, mutilated, destroyed, lost or
stolen Senior Notes, and the maintenance of an office or agency for payment
and money for security payments held in trust; (iii) the rights, powers,
trust, duties, and immunities of the Trustee, and the Company's and the
Subsidiary Guarantors' obligations in connection therewith; and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and the
Subsidiary Guarantors released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any failure
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Senior Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, U.S. legal tender, noncallable government
securities or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on such Senior Notes on
the stated date for payment thereof or on the redemption date of such
principal or installment of principal of, premium, if any, or interest on such
Senior Notes; (ii) in the case of the Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to Trustee confirming that (A) the Company has received from, or
there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the Indenture, there has been a change in the
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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 such
Senior Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of such Legal Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
such Trustee confirming that the Holders of such Senior Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) 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 such Senior Notes over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others; and (vii) the Company
shall have delivered to the Trustee an Officers' Certificate stating that the
conditions precedent provided for have been complied with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company, the Subsidiary
Guarantors and the Trustee to enter into a supplemental indenture for certain
limited purposes without the consent of the Holders. With the consent of the
Holders of not less than a majority in aggregate principal amount of the
Senior Notes at the time outstanding, the Company, the Subsidiary Guarantors
and the Trustee are permitted to amend or supplement the Indenture or any
supplemental indenture or modify the rights of the Holders, except that any
amendments or supplements to the provisions relating to Article 12 (with
respect to security interests) or Section 13.3 (with respect to Future
Subsidiary Guarantors) shall require the consent of the Holders of not less
than 66 2/3% of the aggregate principal amount of the Senior Notes at the time
outstanding; and provided, further, that no such modification may, without the
consent of each Holder affected thereby: (i) change the Stated Maturity on any
Senior Note, or reduce the principal amount thereof or the rate (or extend the
time for payment) of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Senior Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or reduce the Change of Control
Payment or the Asset Sale Offer or alter the redemption provisions or the
provisions of the "Repurchase of Securities at the Option of the Holder Upon a
Change of Control" covenant in a manner adverse to the Holders, or (ii) reduce
the percentage in principal amount of the outstanding Senior Notes, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, (iii) modify or amend the
ranking of the Senior Notes in a manner adverse to the Holders, or (iv) modify
any of the waiver provisions, except to increase any required percentage or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each outstanding Senior Note
affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, partner,
employee, officer or director, as such, past, present or future of the
Company, the Subsidiary Guarantors or any successor entity shall have any
personal liability in respect of the obligations of the Company or the
Subsidiary Guarantors under the Indenture or the Senior Notes by reason of his
or its status as such stockholder, partner, employee, officer or director.
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CERTAIN DEFINITIONS
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Acquisitions" means HMC Acquisition Properties, Inc., a Delaware
corporation and an indirect subsidiary of Host Marriott.
"Acquisitions Indenture" means the indenture dated as of December 20, 1995,
as amended by that certain First Supplemental Indenture dated as of June 6,
1997, among Acquisitions, the Initial Guarantor named therein and Marine
Midland Bank, as trustee pursuant to which the Acquisitions Notes were issued,
as amended and restated.
"Acquisitions Notes" means the 9% Senior Notes due 2007 of Acquisitions,
which became the principal obligations of the Company upon consummation of the
Merger.
"Acquisitions Notes Issue Date" means the date of first issuance of the
Acquisitions Notes under the Acquisitions Indenture.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise; provided, that a beneficial owner of 10% or more of
the total voting power normally entitled to vote in the election of directors,
managers or trustees, as applicable, shall for such purposes be deemed to
constitute control.
"Amendment Date" means July 10, 1997.
"Applicable Percentage" means (i) 15% for the 12 month period commencing on
the Amendment Date and (ii) 20% thereafter.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products obtained by multiplying (a) the number of years from the date of
determination to the date of each successive scheduled principal (or
redemption) payment of such security or instrument times (b) the amount of
such respective principal (or redemption) payment by (ii) the sum of all such
principal (or redemption) payments.
"Beneficial Owner" or "beneficial ownership" for purposes of the definition
of Change of Control has the meaning attributed to it in Rules 13d-3 and 13d-5
under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participation or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America are pledged in support thereof), or (ii) time deposits and
certificates of deposit and commercial
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paper issued by the parent corporation of any domestic commercial bank of
recognized standing having capital and surplus in excess of $500 million and
commercial paper issued by others rated at least A-2 or the equivalent thereof
by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by
Moody's Investors Service, Inc. and in each case maturing within one year
after the date of acquisition.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company or Host Marriott (for so long as Host Marriott is a Parent of the
Company), on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) other than an Excluded
Person is or becomes the "beneficial owner," directly or indirectly, of more
than 50% of the total voting power in the aggregate normally entitled to vote
in the election of directors, managers, or trustees, as applicable, of the
transferee, (ii) any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
other than an Excluded Person is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total voting power in the aggregate of
all classes of Capital Stock of the Company or Host Marriott for so long as
Host Marriott is a Parent of the Company then outstanding normally entitled to
vote in elections of directors, (iii) during any period of 12 consecutive
months after the Issue Date, individuals who at the beginning of such 12-month
period constituted the Board of Directors of the Company or Host Marriott (for
so long as Host Marriott is a Parent of the Company) (together with any new
directors whose election by such Board or whose nomination for election by the
shareholders of the Company or Host Marriott, as applicable, was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or Host Marriott, as
applicable, then in office, (iv) a "change of control" or similar event shall
occur under any other issue of Indebtedness of the Company, Host Marriott (for
so long as Host Marriott is a Parent of the Company) or their respective
Subsidiaries with an aggregate principal amount in excess of $20 million, or
(v) in the case of the Company only, Host Marriott ceases to own directly or
indirectly a majority of the equity interests of the Company; provided,
however, the pro rata distribution by Host Marriott to its shareholders of
shares of the Company or shares of any of Host Marriott's other Subsidiaries,
shall not, in and of itself, constitute a Change of Control for purposes of
this paragraph.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.
"Consolidated Coverage Ratio" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Interest Expense of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense would no longer
be obligations contributing to such person's Consolidated Interest Expense
subsequent to the Transaction Date) during the Reference Period; provided,
that for purposes of such calculation, (i) acquisitions of operations,
businesses or other income-producing assets (including any reinvestment of
disposition proceeds in income-producing assets held as of and not disposed on
the Transaction Date) which occurred during the Reference Period or subsequent
to the Reference Period and on or prior to the Transaction Date shall be
assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Coverage
Ratio shall be assumed to have occurred on the first day of the Reference
Period, (iii) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (and the application
of the proceeds therefrom to the extent used to refinance or retire other
Indebtedness or invested in income-producing assets held as of and not
disposed on the Transaction Date) shall be assumed to have occurred on the
first day of such Reference Period, and (iv) the Consolidated Interest Expense
of such person attributable
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to interest on any Indebtedness or dividends on any Disqualified Capital Stock
bearing a floating interest (or dividend) rate shall be computed on a pro
forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation (which shall remain in effect for the 12-
month period immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which case such
rate (whether higher or lower) shall be used.
"Consolidated EBITDA" means, for any Person and period, the Consolidated Net
Income of such Person for such period adjusted to add thereto (to the extent
deducted from net revenues in determining Consolidated Net Income), without
duplication, the sum of (A)(i) Consolidated Interest Expense, (ii) provisions
for taxes based on income, (iii) depreciation and amortization expense
(provided, that the depreciation and amortization expense of a Consolidated
Subsidiary that is not wholly owned shall be included only to the extent of
the interest of the referent person in such Subsidiary), (iv) any other
noncash items reducing the Consolidated Net Income of such Person for such
period, (v) any dividends or distributions during such period to such Person
or a Consolidated Subsidiary of such Person from any other Person which is not
a Subsidiary of such Person or which is accounted for by such Person by the
equity method of accounting, to the extent that (a) such dividends or
distributions are not included in the Consolidated Net Income of such Person
for such period and (b) (x) the sum of such dividends and distributions, plus
the aggregate amount of dividends or distributions from such other Person
since the Issue Date that have been included in Consolidated EBITDA pursuant
to this clause (v), do not exceed (y) the cumulative net income of such other
Person attributable to the equity interests of the Person (or Subsidiary of
the Person) whose Consolidated EBITDA is being determined, and (vi) any cash
receipts of such Person or a Consolidated Subsidiary of such Person during
such period that represent items included in Consolidated Net Income of such
Person for a prior period which were excluded from Consolidated EBITDA of such
Person for such prior period by virtue of clause (B) of this definition, minus
(B) the sum of (i) all non-cash items increasing the Consolidated Net Income
of such Person for such period and (ii) any cash expenditures of such Person
during such period to the extent such cash expenditures (x) did not reduce the
Consolidated Net Income of such Person for such period and (y) were applied
against reserves or accruals that constituted noncash items reducing the
Consolidated Net Income of such Person when reserved or accrued; all as
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Interest Expense" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease Obligations but
excluding the amortization of fees or expenses incurred in order to consummate
the sale of the Senior Notes as described herein) of such person and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and noncash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period,
(b) the amount of dividends accrued or payable by such person or any of its
Consolidated Subsidiaries in respect of Disqualified Capital Stock (other than
by Subsidiaries of such person to such person or such person's Subsidiary
Guarantors); provided, however, that interest, dividends or other payments or
accruals of a Consolidated Subsidiary that is not wholly owned shall be
included only to the extent of the interest of the referent Person in such
Subsidiary. For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such person or
a Subsidiary of such person of an obligation of another person shall be deemed
to be the interest expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such Person and its Consolidated Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP;
provided, that (i) net income (or loss) of any other Person which is not a
Subsidiary of the Person
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or is accounted for by such specified Person by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to the specified Person or a Subsidiary of such Person,
(ii) the net income (or loss) of any other Person acquired by such specified
Person or a Subsidiary of such Person in a pooling of interests transaction
for any period prior to the date of such acquisition shall be excluded, (iii)
all gains and losses which are either extraordinary (as determined in
accordance with GAAP) or are either unusual or nonrecurring (including any
gain from the sale or other disposition of assets or from the issuance or sale
of any capital stock), shall be excluded, and (iv) the net income, if
positive, of any of such Person's Consolidated Subsidiaries (other than Non-
Guarantor Subsidiaries) to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation
of the terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to such Consolidated Subsidiary shall be excluded; provided, however, in the
case of exclusions from Consolidated Net Income set forth in clauses (ii),
(iii) and (iv), such amounts shall be excluded only to the extent included in
computing such net income (or loss) in accordance with GAAP and without
duplication.
"Consolidated Net Worth" of any person at any date means the aggregate
consolidated stockholders' equity of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would
be shown on the consolidated balance sheet of such person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity), (a) the amount of any such stockholders' equity
attributable to Disqualified Capital Stock or treasury stock of such person
and its Consolidated Subsidiaries, (b) all upward revaluations and other
write-ups in the book value of any asset of such person or a Consolidated
Subsidiary of such person subsequent to the Issue Date, and (c) all
investments in Subsidiaries that are not Consolidated Subsidiaries and in
persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"Disqualified Capital Stock" means (a) except as set forth in clause (b),
with respect to any person, Capital Stock of such person that, by its terms or
by the terms of any security clause into which it is convertible, exercisable
or exchangeable, is, or upon the happening of an event or the passage of time
would be, required to be redeemed or repurchased (including at the option of
the holder thereof) by such person or any of its Subsidiaries, in whole or in
part, on or prior to the Stated Maturity of the Senior Notes and (b) with
respect to any Subsidiary of such person (including with respect to any
Subsidiary of the Company), any Capital Stock other than any common stock with
no preference, or redemption or repayment provisions.
"Excluded Person" means, in the case of the Company, Host Marriott or any
wholly owned subsidiary of Host Marriott.
"Exempted Affiliate Transaction" means (a) employee compensation
arrangements approved by a majority of independent (as to such transactions)
members of the Board of Directors of the Company, (b) payments of reasonable
directors' fees and expenses, (c) transactions solely between the Company and
any of its Subsidiaries or solely among Subsidiaries of the Company, (d)
Permitted Tax Payments, (e) Permitted Sharing Arrangements, (f) Procurement
Contracts, (g) Management Agreements and (h) Restricted Payments permitted
under the "Limitation on Restricted Payments" covenant.
"Existing Assets" means assets of the Company and its Subsidiaries existing
at the Amendment Date (other than cash, Cash Equivalents or inventory held for
resale in the ordinary course of business) and including proceeds of any sale,
transfer or other disposition of such assets and assets acquired in whole or
in part with proceeds from the sale, transfer or other distribution from any
such assets.
"Existing Senior Notes Indenture" means the indenture, dated as of May 25,
1995, as amended by that certain First Supplemental Indenture thereto dated
October 20, 1995 and that certain Second Supplemental
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Indenture thereto dated as of June 6, 1997 (as amended, the "Indenture"),
among the Company, the Subsidiary Guarantors named therein, and Marine Midland
Bank, as trustee, as amended and restated.
"Existing Senior Notes" means the 9 1/2% Senior Notes due 2005 issued under
the Existing Company Indenture.
"Existing Senior Notes Issue Date" means May 25, 1995, the date on which the
Existing Senior Notes were issued.
"Fair Market Value" means, with respect to any assets or properties, the
amount at which such assets or properties would change hands between a willing
buyer and a willing seller, within a commercially reasonable time, each having
reasonable knowledge of the relevant facts, neither being under a compulsion
to sell or buy, as such amount is determined by (i) the Board of Directors of
the Company acting in good faith or (ii) an appraisal or valuation firm of
national or regional standing selected by the Company, with experience in the
appraisal or valuation of properties or assets of the type for which Fair
Market Value is being determined.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect from time to time.
"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of such person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances, (v) for the payment of money relating to a Capitalized
Lease Obligation, or (vi) evidenced by a letter of credit or a reimbursement
obligation of such person with respect to any letter of credit; (b) all net
obligations of such person under Interest Swap and Hedging Obligations; (c)
all liabilities and obligations of others of the kind described in the
preceding clause (a) or (b) that such person has guaranteed or that is
otherwise its legal liability or which are secured by any assets or property
of such person; and (d) all obligations to purchase, redeem or acquire any
Capital Stock.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swaps, caps, collars and similar arrangements
providing protection against fluctuations in interest rates. For purposes of
the Indenture, the amount of such obligations shall be the amount determined
in respect thereof as of the end of the then most recently ended fiscal
quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such obligation provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligations shall be the
net amount so determined, plus any premium due upon default by such Person.
"Investment" by any person in any other person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise)
by such person (whether for cash, property, services, securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such
other person or any agreement to make any such acquisition; (b) the making by
such person of any deposit with, or advance, loan or other extension of credit
to, such other person (including the purchase of property from another person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) other than guarantees of
Indebtedness of the Company or any Subsidiary to the extent permitted
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by the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," the entering into by such person of any guarantee
of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other person; (d) the making of any
capital contribution by such person to such other person, and (e) the
designation by the Board of Directors of the Company of any person to be an
Unrestricted Subsidiary. The Company shall be deemed to make an Investment in
an amount equal to the fair market value of the net assets of any Subsidiary
or, if neither the Company nor any of its Subsidiaries has theretofore made an
Investment in such Subsidiary, in an amount equal to the Investments being
made) at the time that such Subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from
the Company or a Subsidiary shall be deemed an Investment valued at its fair
market value at the time of such transfer.
"Investment Grade" means a currently effective rating by Standard & Poor's
Corporation and its successors ("S&P") of BBB- (or subsequent equivalent
rating) or higher, and Moody's Investors Service, Inc. and its successors
("Moody's") of Baa3 (or subsequent equivalent rating) or higher (or if S&P or
Moody's or both shall not make a rating of the Senior Notes publicly
available, a nationally recognized securities rating agency or agencies, as
the case may be, reasonably selected by the Company in good faith, which shall
be substituted for S&P or Moody's or both, as the case may be).
"Issue Date" means the date of first issuance of the Senior Notes under the
Indenture.
"Leaseback Subsidiary" means a Subsidiary of the Company which has no assets
other than (i) leases, management agreements, rights to deferred sales
proceeds, and other rights pertaining to Residence Inns sold to an
unaffiliated Person by the Company or its Subsidiaries and leased back by such
Subsidiary, (ii) working capital and other assets associated with the
Residence Inns leased by such Subsidiary and (iii) a de minimis amount of
other assets related to the foregoing.
"Management Agreements" means the management agreements and franchise
agreements between the Company and Marriott International or another person
relating to the operation of the Company's lodging properties.
"Merger" means the merger of Acquisitions with and into the Company.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash Equivalents
received by the Company, in the case of a sale of Qualified Capital Stock and
by the Company and its Subsidiaries in respect of an Asset Sale plus, in the
case of an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible
or exchangeable debt) of the Company that were issued for cash on or after the
Issue Date, the amount of cash originally received by the Company, upon the
issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, (i) the sum of all
payments, fees, commissions and (in the case of Asset Sales, reasonable and
customary) expenses (including, without limitation, the fees and expenses of
legal counsel and investment banking fees and expenses) incurred in connection
with such Asset Sale or sale of Qualified Capital Stock, and (ii) (in the case
of an Asset Sale only) less the amount (estimated reasonably and in good faith
by the Company) of income, franchise, sales and other applicable taxes
required to be paid by the Company or any of its respective Subsidiaries in
connection with such Asset Sale; provided, however, that in the case of Cash
or Cash Equivalents received, or expenses paid or payable by a Subsidiary that
is not a wholly owned Subsidiary of the Company, only that portion of the
receipts and expenses which are equal to the Company's proportionate ownership
of such Subsidiary shall be included in calculating Net Cash Proceeds.
"Net Non-Guarantor Investment" means the amount equal to the aggregate
Investments made by the Company and the Subsidiary Guarantors in Non-Guarantor
Subsidiaries from and after the Amendment Date, minus the aggregate amount of
any dividends, distributions or other payments received from and after the
Amendment Date by the Company and/or any Subsidiary Guarantor(s) in respect of
Investments in Non-Guarantor Subsidiaries.
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"Non-Guarantor Subsidiary" means any Subsidiary that is not a Subsidiary
Guarantor.
"Non-recourse Purchase Money Indebtedness" means Indebtedness of the Company
or its Subsidiaries to the extent that, (i) under the terms thereof or
pursuant to law, no personal recourse may be had against the Company or its
Subsidiaries (other than Special Purpose Subsidiaries) for the payment of the
principal of or interest or premium on such Indebtedness, and enforcement of
obligations on such Indebtedness (except with respect to fraud, willful
misconduct, misrepresentation, misapplication of funds, reckless damage to
assets and undertakings with respect to environmental matters or construction
defects) is limited only to recourse against interests in specified assets and
property (the "Subject Assets"), accounts and proceeds arising therefrom, and
rights under purchase agreements or other agreements with respect to such
Subject Assets; (ii) such Indebtedness (x) is incurred concurrently with the
acquisition by the Company or its Subsidiaries of such Subject Assets or a
Person (or interests in a Person) holding such Subject Assets, or (y)
constitutes Refinancing Indebtedness with respect to Indebtedness so incurred;
and (iii) the Subject Assets are not Existing Assets and no Existing Assets or
proceeds from the sale, transfer of other disposition of Existing Assets were
used to acquire such Subject Assets.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the confidential Offering Memorandum dated July
10, 1997, distributed to prospective purchasers of the Original Notes in
connection with the sale of the Original Notes by the Company.
"Parent" of any person means a corporation which at the date of
determination owns, directly or indirectly, a majority of the Voting Stock of
such person or of a Parent of such person.
"Permitted Indebtedness" means any of the following:
(a) The Company and its Subsidiaries may incur Indebtedness solely in
respect of surety and appeal bonds, performance bonds and other obligations
of a like nature (to the extent that such incurrence does not result in the
incurrence of any obligation to repay any obligation relating to borrowed
money of others), all in the ordinary course of business in accordance with
customary industry practices;
(b) The Company and its Subsidiary Guarantors may incur Indebtedness
under revolving credit loans for funded Indebtedness from time to time in
the ordinary course of business up to an aggregate amount outstanding of
$60 million;
(c) The Company and its Subsidiaries may incur Indebtedness under
Interest Swap and Hedging Obligations that do not increase the Indebtedness
of the Company other than as a result of fluctuations in interest or
foreign currency exchange rates provided that such Interest Swap and
Hedging Obligations are incurred for the purpose of providing interest rate
protection with respect to Indebtedness permitted under the Indenture or to
provide currency exchange protection in connection with revenues generated
in currencies other than U.S. dollars;
(d) The Company may incur Indebtedness to any Subsidiary Guarantor, and
any Subsidiary Guarantor may incur Indebtedness to any other Subsidiary
Guarantor or to the Company and any Subsidiary may incur Indebtedness to
the Company or a Subsidiary Guarantor (subject to the requirements of the
"Limitation on Restricted Payments" covenant); provided, that, in the case
of Indebtedness of the Company, such obligations shall be unsecured and
subordinated in all respects to the Company's obligations pursuant to the
Senior Notes;
(e) The Company and its Subsidiary Guarantors may guarantee Indebtedness
of the Company, the Subsidiary Guarantors or the Subsidiaries, as
applicable, to the extent such guaranteed Indebtedness was permitted to be
incurred under the Indenture; and
(f) The Company and its Subsidiaries may incur Indebtedness solely in
respect of bankers' acceptances and letters of credit all in the ordinary
course of business in accordance with customary industry practices
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in an aggregate amount outstanding at any time, not to exceed $100 million
less the aggregate principal amount of revolving Indebtedness incurred
pursuant to clause (b) above.
"Permitted Investment" means any of the following: (a) an Investment in Cash
Equivalents; (b) Investments in a Person substantially all of whose assets are
of a type generally used in a Related Business (an "Acquired Person") if, as a
result of such Investments, (i) the Acquired Person immediately thereupon is
or becomes a Subsidiary of the Company, or (ii) the Acquired Person
immediately thereupon either (1) is merged or consolidated with or into the
Company or any of its Subsidiaries and the surviving Person is the Company or
a Subsidiary of the Company or (2) transfers or conveys all or substantially
all of its assets to, or is liquidated into, the Company or any of its
Subsidiaries; (c) an Investment in a Person, provided that (i) such Person is
principally engaged in a Related Business; (ii) the Company or one or more of
its Subsidiaries participates in the management of such Person, as a general
partner, member of such Person's governing board or otherwise and (iii) the
aggregate amount of (x) Investments made in reliance on this clause (c)
subsequent to the date of the Issue Date, (y) Investments made by Acquisitions
or its Subsidiaries from and after the Acquisitions Notes Issue Date to the
date of the Merger in reliance on clause (c) of the definition of Permitted
Investments under the Acquisitions Indenture, and (z) Investments made by the
Company or its Subsidiaries from and after the Existing Senior Notes Issue
Date to the date of this Indenture in reliance on clause (c) of the definition
of Permitted Investments under the Existing Senior Notes Indenture shall not
exceed in the aggregate $50 million; (d) Permitted Sharing Arrangement
Payments; (e) securities received in connection with an Asset Sale so long as
such Asset Sale complied with the Indenture including the covenant "Limitation
on Sale of Assets and Subsidiary Stock" (but, only to the extent the Fair
Market Value of such securities and all other non-cash and non-cash equivalent
consideration received complies with clause (iii) of the "Limitation on Sale
of Assets and Subsidiary Stock" covenant); and (f) Permitted Mortgage
Investments.
"Permitted Lien" means any of the following: (a) Liens existing on the Issue
Date; (b) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with GAAP;
(c) statutory liens of carriers, warehousemen, mechanics, materialmen,
landlords, repairmen or other like Liens arising by operation of law in the
ordinary course of business provided that (i) the underlying obligations are
not overdue for a period of more than 30 days, or (ii) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of the Company in accordance
with GAAP; (d) Liens securing the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business; (e) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects which, singly or
in the aggregate, do not in any case materially detract from the value of the
property, subject thereto (as such property is used by the Company or any of
its Subsidiaries) or interfere with the ordinary conduct of the business of
the Company or any of its Subsidiaries; (f) Liens arising by operation of law
in connection with judgments, only to the extent, for an amount and for a
period not resulting in an Event of Default with respect thereto; (g) pledges
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security legislation; (h) Liens securing on an equal and ratable basis the
Senior Notes and any other Indebtedness, including without limitation, the
Existing Senior Notes and the Acquisitions Notes, (i) Liens securing
Indebtedness of a Person existing at the time such Person becomes a Subsidiary
or is merged with or into the Company or a Subsidiary or Liens securing
Indebtedness incurred in connection with an Acquisition, provided that (i)
such Liens were in existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not extend to
any other assets and (ii) no Existing Assets or proceeds from the sale,
transfer or other disposition of Existing Assets were used to acquire such
Person; (j) Liens arising from Non-recourse Purchase Money Indebtedness
permitted to be incurred under the Indenture provided such Liens relate only
to the property which is subject to such Non-recourse Purchase Money
Indebtedness; (k) Liens securing Refinancing Indebtedness incurred to
refinance any, Indebtedness that was previously so secured in a manner no more
adverse to the Holders of the Senior Notes than the terms of the Liens
securing such refinanced Indebtedness (provided, however, that cross-
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collateralization, creation of "collateral pools" or similar arrangements in
and of themselves shall not be considered more adverse to the Holders of the
Senior Notes for the purposes of the foregoing); (l) Liens securing revolving
debt incurred under clause (b) of the definition of Permitted Indebtedness
which revolving debt shall not exceed an aggregate principal amount
outstanding at any time of $60 million; (m) Liens securing any other
Indebtedness permitted to be incurred under the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock" not to
exceed an aggregate principal amount outstanding at any time of $100 million;
and (n) Liens securing bankers' acceptances and letters of credit incurred
under clause (f) of the definition of Permitted Indebtedness which do not
exceed an aggregate principal amount outstanding at any time of $115 million
less the aggregate principal amount of revolving debt secured pursuant to
clause (1) above.
"Permitted Mortgage Investment" means an investment in Indebtedness secured
by lodging property assets provided that (i) the Company is able to
consolidate the operations of the lodging property in its consolidated GAAP
financial statements, or (ii) such Investment is made with a view toward
acquiring ownership of the lodging properties securing such Indebtedness;
provided, however, that the aggregate investments (the value of each such
investment to be determined at the time of such investment) made in reliance
on this clause (ii) with respect to lodging properties as to which the Company
has not consolidated the operations in its consolidated GAAP financial
statements, as set forth in clause (i), shall not at any time exceed 10% of
the Company's aggregate assets.
"Permitted Sharing Arrangements" means any contracts, agreements or other
arrangements between the Company or one or more Subsidiaries of the Company
and a Parent of the Company or one or more Subsidiaries of such Parent,
pursuant to which such Persons share centralized services, establish joint
payroll arrangements, procure goods or services jointly or otherwise make
payments with respect to goods or services on a joint basis, or allocate
corporate expenses (other than taxes based on income) (provided that (i) such
Permitted Sharing Arrangements are, in the determination of management of the
Company, in the best interests of the Company and its Subsidiaries and (ii)
the liabilities of the Company and its Subsidiaries under such Permitted
Sharing Arrangements are determined in good faith and on a reasonable basis).
"Permitted Sharing Arrangements Payments" means payments under Permitted
Sharing Arrangements.
"Permitted Tax Payments" means (for any taxable year of the Company in which
it joins in filing a consolidated Federal income tax return with a Parent) a
payment (including any estimated tax payment based on any estimated tax
liability for such year) by the Company to the Parent in an amount not in
excess of the lesser of (i) the separate return Federal income tax liability
(if any) of the affiliated group (within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended) of which the Company would be the
ultimate Parent (the "Company Group") if it were not, and never had been, a
member of another affiliated group for that or any other taxable year and (ii)
the actual Federal income tax liability (if any) of the affiliated group of
which the Company is actually a member (the "Parent Group") for such year that
is allocable to the Company Group. In the event that a Parent of the Company
and any member of the Company Group join in filing any combined or
consolidated (or similar) state or local income or franchise tax returns, then
the term Permitted Tax Payment shall also include payments with respect to
such state or local income or franchise taxes determined in a manner as
similar as possible to that provided in the preceding sentence for Federal
income tax.
"Pledged Shares" means the Capital Stock of the Subsidiary Guarantors
pledged to secure the Senior Notes.
"Procurement Contracts" means contracts for the procurement of goods and
services entered into in the ordinary course of business and consistent with
industry practices.
"Qualified Capital Stock" means any Capital Stock of the Company that is not
Disqualified Capital Stock.
"Qualified Exchange" means (i) any legal defeasance, redemption, retirement,
repurchase or other acquisition of then outstanding Capital Stock or
Indebtedness of the Company issued on or after the Issue Date
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with the Net Cash Proceeds received by the Company from the substantially
concurrent sale of Qualified Capital Stock or (ii) any exchange of Qualified
Capital Stock for any then outstanding Capital Stock or Indebtedness issued on
or after the Issue Date.
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's
or both shall not make a rating of the Senior Notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may
be, selected by the Company, which shall be substituted for S&P or Moody's or
both, as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C
and D (or equivalent successor categories); and (iii) the equivalent of any
such category of S&P or Moody's used in another Rating Agency. In determining
whether the rating of the Senior Notes has decreased by one or more
gradations, gradations within Rating Categories (+ and-for S&P, 1, 2 and 3 for
Moody's; or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g., with respect to S&P, a decline in a rating from BB+
to BB, as well as from BB-to B +, will constitute a decrease of one
gradation).
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) the first public notice of the occurrence of a
Change of Control or of the intention by the Company to effect a Change of
Control.
"Rating Decline" means the occurrence, on or within 90 days after the
earliest to "occur of (i) a Change of Control and (ii) the date of the first
public notice of the occurrence of a Change of Control or of the intention by
the Company to effect a Change of Control (which period shall be extended so
long as the rating of the Senior Notes is under publicly announced
consideration for possible downgrade by any of the Rating Agencies), of: (a)
in the event the Senior Notes are rated by either Moody's or S&P on the Rating
Date as Investment Grade, a decrease in the rating of the Senior Notes by
either of such Rating Agencies to a rating that is below Investment Grade, or
(b) in the event the Senior Notes are rated below Investment Grade by both
Rating Agencies on the Rating Date, a decrease in the rating of the Senior
Notes by either Rating Agency by one or more gradations (including gradations
within Rating Categories as well as between Rating Categories).
"Reference Period" with regard to any person means the four full fiscal
quarters ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the Senior Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed the
sum of (x) the reasonable and customary fees and expenses incurred in
connection with the Refinancing plus (y) the lesser of (i) the principal
amount or, in the case of Disqualified Capital Stock, liquidation preference,
of the Indebtedness or Disqualified Capital Stock so refinanced and (ii) if
such Indebtedness being refinanced was issued with an original issue discount,
the accreted value thereof (as determined in accordance with GAAP) at the time
of such Refinancing; provided, that (A) such Refinancing Indebtedness of any
Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Subsidiary, and (B)
Refinancing Indebtedness shall (x) not have an Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such Refinancing and (y) in all respects, be no less subordinated or junior,
if applicable, to the rights of Holders of the Senior Notes than was the
Indebtedness or Disqualified Capital Stock to be refinanced.
"Related Business" means the businesses conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any
and all businesses that in the good faith judgment of the Board of
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Directors of the Company are materially related businesses. Without limiting
the generality of the foregoing, Related Business shall include the ownership
and operation of lodging properties and senior living facilities.
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than a Permitted Investment.
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Capital Stock
of such person or the Parent or any Subsidiary of such person, (b) any payment
on account of the purchase, redemption or other acquisition or retirement for
value of Capital Stock of such person or the Parent or any Subsidiary of such
person, (c) other than with the proceeds from the substantially concurrent
sale of, or in exchange for, Refinancing Indebtedness any purchase,
redemption, or other acquisition or retirement for value of, any payment in
respect of any amendment of the terms of or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such person or the
Parent or a Subsidiary of such person prior to the scheduled maturity, any
scheduled repayment of principal, or scheduled sinking fund payment, as the
case may be, of such Indebtedness, (d) any Restricted Investment by such
person, (e) the payment to any affiliate in respect of taxes owed by any
consolidated group of which both such person or a Subsidiary of such person
and such affiliate are members, and (f) any loan or advance to, or guarantee
of any indebtedness of, any affiliate of such person or any Subsidiary of such
person; provided, however, that the term "Restricted Payment" does not include
(i) any dividend, distribution or other payment on or with respect to Capital
Stock of the Company to the extent payable solely in shares of Qualified
Capital Stock of the Company; (ii) any dividend, distribution or other payment
to the Company, or to any of the Subsidiary Guarantors, by the Company or any
of its Subsidiaries; (iii) Permitted Tax Payments; or (iv) the declaration or
payment of dividends or other distributions by any Subsidiary of the Company
provided such distributions are made to the Company (or a Subsidiary of the
Company, as applicable) on a pro rata basis (and in like form) to all
distribution's so made.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(v) of Regulation S-
X promulgated by the SEC as in effect as of the date of the Indenture.
"Special Purpose Subsidiary" means any Subsidiary of the Company, (x) the
assets of which do not include Existing Assets and were not acquired with
Existing Assets or proceeds from the sale, transfer or other disposition of
Existing Assets, (y) which has no Indebtedness other than Non-recourse
Purchase Money Indebtedness and/or Permitted Indebtedness of the type
described in clauses (a), (c), (d) and (e) of the definition of Permitted
Indebtedness.
"Stated Maturity" when used with respect to any Senior Note, means July 15,
2007.
"Subordinated Indebtedness" means (i) Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Senior
Notes or a Guarantee, as applicable, or (ii) Indebtedness of the Company or a
Subsidiary Guarantor (other than secured Indebtedness or Indebtedness ranking
pari passu with the Senior Notes or a Guarantee, as applicable) that has a
stated maturity on or after the Stated Maturity.
"Subsidiary" with respect to any Person, means (i) a corporation a majority
of whose Capital Stock with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person, or which is controlled by such Person in a manner
sufficient to permit its financial statements to be consolidated with the
financial statements of such Person in conformance with GAAP, and the
financial statements of which are so consolidated (ii) any other Person (other
than a corporation or a partnership) in which such person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
at least majority ownership interest or which is controlled by such Person in
a manner sufficient to permit its financial statements to be consolidated with
the financial statements of such Person in conformance with GAAP and the
financial statements of which
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are so consolidated, or (iii) a partnership (x) in which such Person or one or
more Subsidiaries of such Person is, at the time, a general partner and owns
alone or together with the Company a majority of the partnership interests or
(y) in which such Person or one or more Subsidiaries of such Person is, at the
time, a general partner and which is controlled by such person in a manner
sufficient to permit its financial statements to be consolidated with the
financial statements of such Person in conformance with GAAP and the financial
statements of which are so consolidated. Notwithstanding the foregoing, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the Company
or of any Subsidiary of the Company for purposes of the Indenture.
"Subsidiary Guarantors" means (i) the Initial Subsidiary Guarantors
identified in the following sentence and (ii) any Future Subsidiary Guarantors
that become Subsidiary Guarantors pursuant to the terms of the Indenture, but
excluding any Persons whose guarantees have been released pursuant to the
terms of the Indenture. The Initial Subsidiary Guarantors consist of HMC
Retirement Properties, Inc., Marriott Financial Services, Inc., Marriott SBM
Two Corporation, Host Airport Hotels, Inc., Host of Houston, Ltd., Host of
Boston, Ltd., HMH Marina, Inc., HMH Rivers Inc., HMH Pentagon Corporation, HMC
SFO, Inc. and HMC AP Canada, Inc. and Host of Houston 1979.
"Unrestricted Subsidiary" means any Subsidiary of the Company that does not
own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) such Subsidiary is
principally engaged in a Related Business, (ii) neither immediately prior
thereto nor after giving pro forma effect to such designation would there
exist a Default or Event of Default and (iii) immediately after giving pro
forma effect thereto, the Company could incur at least $1.00 of Indebtedness
pursuant to the Debt Incurrence Ratio in paragraph (a) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock." The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Subsidiary, provided, that (i) no Default or Event of
Default is existing or will occur as a consequence thereof and (ii)
immediately after giving effect to such designation, on a pro forma basis, the
Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio in paragraph (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock." Each such designation
shall be evidenced by filing with the Trustee a certified copy of the
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Voting Stock" means, with respect to any specified person, capital stock
with voting power, under ordinary circumstances, to elect directors of such
Person.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes (and related guarantees)
initially will be represented by one or more global notes in registered global
form without interest coupons (collectively, the "Global Note"). The Global
Note will be deposited upon issuance with the Trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct
or indirect participant in DTC as described below.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
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Participants or the Indirect Participants. The ownership interests and
transfer of ownership interests of each actual purchaser of each security held
by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereon will be effected
only through, records maintained by DTC (with respect to the Participants) or
by the Participants and the Indirect Participants (with respect to other
owners of beneficial interests in the Global Notes).
Investors in the Global Note may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are Participants in such
system. Investors in the Regulation S Global Note must initially hold their
interests therein through Euroclear or CEDEL, if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. Euroclear and CEDEL will hold interests in the Regulation S Global
Note on behalf of their participants through customers' securities accounts in
their respective names on the books of their respective depositaries, which
are Morgan Guaranty Trust Company of New York, Brussels office, as operator of
Euroclear, and Citibank, N.A., as operator of CEDEL. The depositaries, in
turn, will hold such interests in the Regulation S Global Note in customers'
securities accounts in the depositaries' names on the books of DTC. All
interests in a Global Note, including those held through Euroclear or CEDEL,
may be subject to the procedures and requirements of DTC. Those interests held
through Euroclear or CEDEL may also be subject to the procedures and
requirements of such systems. The laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note to
such persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect Participants
and certain banks, the ability of a person having beneficial interests in a
Global Note to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
Senior Notes, see "--Exchange of Book-Entry Senior Notes for Certificated
Senior Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE SENIOR NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF SENIOR NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium, if any, and interest on
a Global Note registered in the name of DTC or its nominee will be payable by
the Trustee to DTC in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the persons in whose names the Senior Notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Note or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the Senior Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interests in
the relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Senior
Notes will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants
82
<PAGE>
and will not be the responsibility of DTC, the Trustee or the Company. Neither
the Company nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Senior Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and CEDEL participants, interests
in the Global Note are expected to be eligible to trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants. Transfers
between participants in Euroclear and CEDEL will be effected in the ordinary
way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Senior Notes described herein, cross-market transfers between the Participants
in DTC, on the one hand, and Euroclear or CEDEL participants, on the other
hand, will be effected through DTC in accordance with DTC's rules on behalf of
Euroclear of CEDEL, as the case may be, by its respective depositaries;
however such cross-market transactions will require delivery of instructions
to Euroclear or CEDEL, as the case may be, by the counterparty in such system
in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or CEDEL, as the case may
be, will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositaries to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
Global Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and CEDEL participants may not deliver instructions directly to
the depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. DTC has advised the Company
that cash received in Euroclear or CEDEL as a result of sales of interests in
a Global Note by or through a Euroclear or CEDEL participant to a Participant
in DTC will be received with value on the settlement date of DTC but will be
available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Senior Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Senior Notes as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default under the
Senior Notes, DTC reserves the right to exchange the Global Note for legended
Senior Notes in certificated form, and to distribute such Senior Notes to its
Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Regulation S Global Note among
participants in DTC, Euroclear and CEDEL, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
83
<PAGE>
EXCHANGE OF BOOK-ENTRY SENIOR NOTES FOR CERTIFICATED SENIOR NOTES
A Global Note is exchangeable for definitive Senior Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Senior Notes in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default with respect to the Senior Notes. In
all cases, certificated Senior Notes delivered in exchange for any Global Note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
ORIGINAL NOTES REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Initial Purchasers and the Subsidiary Guarantors named
therein entered into the Registration Rights Agreement on July 15, 1997 (the
"Closing Date"). Pursuant to the Registration Rights Agreement, the Company
agreed to file with the Commission as soon as practicable but in no event
later than the 60th day after the Closing Date, the Registration Statement on
the appropriate form under the Securities Act with respect to the Exchange
Notes. Upon the effectiveness of the Exchange Offer Registration Statement,
pursuant to the Exchange Offer, the Company will offer to the Holders of
Transfer Restricted Securities (as defined below), who are able to make
certain representations, the opportunity to exchange their Transfer Restricted
Securities for Exchange Notes. If (1) prior to the consummation of the
Exchange Offer, applicable interpretations of the Staff do not permit the
Company to effect the Exchange Offer as contemplated in the Registration
Rights Agreement, or (2) the Exchange Offer is commenced and not consummated
within 180 days of the Closing Date for any reason, then the Company shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") and the Company shall file a Shelf Registration Statement.
Following the delivery of a Shelf Notice to the Holders of Transfer Restricted
Securities (as defined below), the Company shall not have any further
obligation to conduct the Exchange Offer, provided that the Company shall have
the right, nonetheless, to proceed to consummate the Exchange Offer
notwithstanding their obligations under the Registration Rights Agreement
(and, upon such consummation, their obligation to consummate a Shelf
Registration shall terminate). If a Shelf Notice is delivered, then: (a) the
Company shall use its reasonable best efforts to prepare and file with the
SEC, as promptly as practicable following the delivery of the Shelf Notice, a
Shelf Registration Statement for an offering covering all of the Transfer
Restricted Securities (the "Shelf Registration"). Transfer Restricted
Securities means the Original Notes, until in the case of any such Original
Notes (i) a Registration Statement covering such Original Notes has been
declared effective by the SEC and such Original Notes have been disposed of in
accordance with such effective Registration Statement, (ii) such Original
Notes have been transferred in compliance with Rule 144 under the Securities
Act (or any successor provision thereto), or are transferable pursuant to
paragraph (k) of such Rule 144 (or any successor provision thereto),
(iii) such Original Notes have been sold in compliance with Regulation S under
the Securities Act (or any successor provision thereto) and do not constitute
the unsold allotment of a distribution within the meaning of Regulation S
under the Securities Act, (iv) such Original Notes have otherwise been
transferred and a new Security not subject to transfer restrictions under the
Securities Act have been delivered by or on behalf of the Company in
accordance with the terms of the Indenture, or (v) such Original Notes cease
to be outstanding.
The Registration Rights Agreement provides that (i) the Company will file
Registration Statement with the Commission as soon as practicable after the
Closing Date, but in no event later than the 60th date after the Closing Date;
(ii) the Company will cause the Exchange Offer Registration Statement to
become effective pursuant to the Securities Act on or before the 150th day
following the Closing Date; (iii) the Company will keep the Exchange Offer
open for not less than 30 days (or such longer period required by applicable
law) after the date that the notice of the Exchange Offer (as set forth in the
Registration Rights Agreement) is mailed to Holders; (iv) the Company will
consummate the Exchange Offer within 180 days after the Closing Date; and
(v) if obligated to file the Shelf Registration Statement, the Company will
use its reasonable best efforts to prepare and file such Shelf Registration
Statement as promptly as practicable following the delivery of the Shelf
84
<PAGE>
Notice. If (a) the Company fails to file either of the Registration Statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) either of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 180 days of the Closing Date with respect
to the Registration Statement, or (d) the Shelf Registration Statement is
declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company will
pay Liquidated Damages to each Holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of
such Registration Default, in an amount equal to $0.05 per week per $1,000 in
principal amount of notes constituting Transfer Restricted Securities held by
such Holder. The amount of the Liquidated Damages will increase by an
additional $0.05 per week per $1,000 in principal amount of notes constituting
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.30 per week per $1,000 in principal amount of notes
constituting Transfer Restricted Securities. All accrued Liquidated Damages
will be paid by the Company to the Holders by wire transfer of immediately
available funds or by mailing checks to their registered addresses. Following
the cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of Original Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement in order to
have their Original Notes included in the Shelf Registration Statement and
benefit from the provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request to the Company.
85
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
Latham & Watkins, counsel to the Company, has advised the Company that the
following discussion represents its opinion as to the material federal income
tax consequences expected to result to Holders whose Original Notes are
exchanged for the Exchange Notes in the Exchange Offer. The signed opinion of
Latham & Watkins is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Such opinion is based upon current provisions of
the Internal Revenue Code of 1986, as amended, applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conclusions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders. Certain Holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and person who are not
citizens or residents of the United States) may be subject to special rules
not discussed below. EACH HOLDER OF THE ORIGINAL NOTES SHOULD CONSULT HIS OR
HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING THE
ORIGINAL NOTES FOR THE EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of the Original Notes for the Exchange Notes should be treated
as a "non-event" for federal income tax purposes because the Exchange Notes
should not be considered to differ materially in kind or extent from the
Original Notes. As a result, no material federal income tax consequences
should result to holders exchanging Original Notes for Exchange Notes.
86
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that participates in the Exchange Offer ("Participating
Broker-Dealer") and receives the Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with the resale of the Exchange Notes received in
exchange for the Original Notes where such Original Notes were acquired as a
result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available for any
Participating Broker-Dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of the Exchange
Notes by Participating Broker-Dealers. The Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any Participating Broker-Dealer
and/or the purchasers of any such Exchange Notes. Any Participating Broker-
Dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each Participating Broker-Dealer reselling the Exchange Notes pursuant to this
Prospectus, and their officers, directors and controlling persons, against
certain liabilities in connection with the offer and sale of the Exchange
Notes, including liabilities under the Securities Act, or to contribute to
payments that such Participating Broker-Dealers may be required to make in
respect thereof.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Exchange Notes
offered hereby will be passed upon for the Company by Christopher G. Townsend,
Executive Vice President and Director of the Company and Senior Vice President
and General Counsel of Host Marriott.
EXPERTS
The combined consolidated financial statements and schedule of the Company
included in this Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto and have been included herein in reliance upon the authority of said
firm as experts in giving said reports.
87
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Combined Consolidated Balance Sheets at January 3, 1997 and December 29,
1995..................................................................... F-3
Combined Consolidated Statements of Operations for the Fiscal Years Ended
January 3, 1997,
December 29, 1995 and December 30, 1994.................................. F-4
Combined Consolidated Statements of Shareholder's Equity for the Fiscal
Years Ended January 3, 1997, December 29, 1995 and December 30, 1994..... F-5
Combined Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 3, 1997,
December 29, 1995 and December 30, 1994.................................. F-6
Notes to Combined Consolidated Financial Statements....................... F-7
Condensed Combined Consolidated Balance Sheet at June 20, 1997 (Unau-
dited)................................................................... F-23
Condensed Combined Consolidated Statements of Operations for the Twenty-
Four Weeks Ended June 20, 1997 and June 14, 1996 (Unaudited)............. F-24
Condensed Combined Consolidated Statements of Cash Flows for the Twenty-
Four Weeks Ended June 20, 1997 and June 14, 1996 (Unaudited)............. F-26
Notes to Condensed Combined Consolidated Financial Statements (Unau-
dited)................................................................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HMH Properties, Inc.:
We have audited the accompanying combined consolidated balance sheets of HMH
Properties, Inc. and subsidiaries and HMC Acquisition Properties, Inc. and
subsidiaries as of January 3, 1997 and December 29, 1995, and the related
combined consolidated statements of operations, shareholder's equity and cash
flows for each of the three fiscal years in the period ended January 3, 1997.
These financial statements and schedule referred to below were prepared in
connection with the consent solicitation discussed in Note 1 and are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the combined consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the combined
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined consolidated financial statements referred to
above present fairly, in all material respects, the combined financial
position of HMH Properties, Inc. and subsidiaries and HMC Acquisition
Properties, Inc. and subsidiaries as of January 3, 1997 and December 29, 1995
and the combined results of their operations and cash flows for each of the
three fiscal years in the period ended January 3, 1997, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
combined consolidated financial statements taken as a whole. The schedule
listed in the index at Item 21(b) is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
combined consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic combined
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic combined consolidated financial statements taken as a
whole.
Arthur Andersen LLP
Washington, D.C.
May 21, 1997
F-2
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
COMBINED CONSOLIDATED BALANCE SHEETS
JANUARY 3, 1997 AND DECEMBER 29, 1995
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
ASSETS
Property and equipment, net..................................... $1,473 $1,454
Note receivable from affiliate.................................. 140 145
Due from hotel managers......................................... 35 36
Investment in affiliate......................................... 17 16
Other assets.................................................... 66 36
Cash and cash equivalents....................................... 141 123
------ ------
$1,872 $1,810
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Senior Notes.................................................... $ 950 $ 950
Notes secured by real estate assets............................. 98 100
Other notes..................................................... 34 34
------ ------
Total debt.................................................... 1,082 1,084
Deferred income taxes........................................... 87 88
Other liabilities............................................... 77 31
------ ------
Total liabilities............................................. 1,246 1,203
------ ------
Shareholder's equity
Common stock, 100 shares issued and outstanding, no par value... -- --
Additional paid-in capital...................................... 626 611
Accumulated earnings (deficit).................................. -- (4)
------ ------
Total shareholder's equity.................................. 626 607
------ ------
$1,872 $1,810
====== ======
</TABLE>
See Notes to Combined Consolidated Financial Statements.
F-3
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED JANUARY 3, 1997, DECEMBER 29, 1995
AND DECEMBER 30, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
REVENUES
Hotels.................................................... $313 $261 $214
Senior living communities (received from Marriott
International)........................................... -- -- 14
Net gains (losses) on property transactions............... 1 (10) 1
Equity in earnings of affiliate........................... 5 4 3
----- ---- ----
319 255 232
----- ---- ----
OPERATING COSTS AND EXPENSES
Hotels (including Marriott International management fees
of $45 million, $38 million and $25 million in 1996, 1995
and 1994, respectively).................................. 175 137 114
Senior living communities................................. -- -- 5
Other..................................................... -- 1 4
----- ---- ----
175 138 123
----- ---- ----
OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST..... 144 117 109
Corporate expenses.......................................... (15) (14) (9)
Interest expense............................................ (101) (77) (65)
Interest income............................................. 26 17 15
----- ---- ----
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS.......... 54 43 50
Provision for income taxes.................................. (22) (17) (19)
----- ---- ----
INCOME BEFORE EXTRAORDINARY ITEMS........................... 32 26 31
Extraordinary items--loss on extinguishment of debt (net of
income taxes of $9 million)................................ -- (17) --
----- ---- ----
NET INCOME.................................................. $ 32 $ 9 $ 31
===== ==== ====
</TABLE>
See Notes to Combined Consolidated Financial Statements.
F-4
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
FISCAL YEARS ENDED JANUARY 3, 1997, DECEMBER 29, 1995
AND DECEMBER 30, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED
COMMON PAID-IN EARNINGS DISTRIBUTIONS TO
STOCK CAPITAL (LOSS) HOSPITALITY, NET
------ ---------- ----------- ----------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994........ $ -- $ 929 $ (6) $ (7)
Net income.................... -- -- 29 --
Capital contribution (Note
1)........................... -- 210 -- --
Purchase of partnership
investment (Note 4).......... -- (6) -- --
Net advances and distributions
to Hospitality............... -- -- -- (297)
----- ------ ----- -----
Balance, December 30, 1994...... -- 1,133 23 (304)
Net income.................... -- -- 9 --
Cash transfers to
Hospitality.................. -- -- -- (151)
Non-cash transfers to
Hospitality.................. -- -- -- (71)
Capital contribution (Note
1)........................... -- 4 -- --
Capitalized distributions
pursuant to the Hospitality
Offering (Note 1)............ -- (526) -- 526
Dividends to Host Marriott and
affiliates................... -- -- (36) --
----- ------ ----- -----
Balance, December 29, 1995...... -- 611 (4) --
Net income.................... -- -- 32
Dividends to Host Marriott and
affiliates................... -- -- (28) --
Sale of residual lease
interest in 16 Courtyard
properties (Note 8).......... -- 24 -- --
Purchase of general partner
interest in a full-service
property (Note 8)............ -- (9) -- --
----- ------ ----- -----
Balance, January 3, 1997........ $ -- $ 626 $ -- $ --
===== ====== ===== =====
</TABLE>
See Notes to Combined Consolidated Financial Statements.
F-5
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED JANUARY 3, 1997, DECEMBER 29, 1995
AND DECEMBER 30, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 32 $ 9 $ 31
Extraordinary losses on extinguishment of debt, net of
taxes.................................................. -- 17 --
Adjustments to reconcile to cash from operations:
Depreciation and amortization.......................... 64 62 64
Income taxes........................................... 21 16 15
Net realizable value writedown......................... -- 10 --
Other.................................................. 7 3 1
Changes in operating accounts:
Other assets.......................................... (1) (4) 4
Other liabilities..................................... 5 (1) 3
----- ----- -----
Cash provided by operations............................ 128 112 118
----- ----- -----
INVESTING ACTIVITIES
Proceeds from sales of assets........................... 369 340 473
Less non-cash proceeds................................. (34) (33) (54)
----- ----- -----
Cash received from sales of assets...................... 335 307 419
Capital expenditures.................................... (85) (72) (29)
Acquisitions............................................ (307) (331) (506)
Other................................................... (19) 20 9
----- ----- -----
Cash used in investing activities....................... (76) (76) (107)
----- ----- -----
FINANCING ACTIVITIES
Repayment of debt....................................... (4) (815) (24)
Issuances of debt....................................... -- 1,076 164
Contributed capital, including advances from affili-
ates................................................... -- 3 210
Transfers to Hospitality, net........................... -- (151) (345)
Transfers to Host Marriott and affiliates............... -- -- (6)
Dividends to Host Marriott and affiliates............... (28) (36) --
Other................................................... (2) -- --
----- ----- -----
Cash provided by (used in) financing activities......... (34) 77 (1)
----- ----- -----
INCREASE IN CASH AND CASH EQUIVALENTS..................... 18 113 10
CASH AND CASH EQUIVALENTS, beginning of year.............. 123 10 --
----- ----- -----
CASH AND CASH EQUIVALENTS, end of year.................... $ 141 $ 123 $ 10
===== ===== =====
</TABLE>
See Notes to Combined Consolidated Financial Statements.
F-6
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
HMH Properties, Inc. (the "Company" or "Properties"), a wholly-owned direct
subsidiary of Host Marriott Hospitality, Inc. ("Hospitality"), was formed in
1993 to own many of Host Marriott Corporation's ("Host Marriott") lodging
properties. Hospitality is a wholly-owned subsidiary of Host Marriott. During
May 1997, the Company commenced a consent solicitation (the "Consent
Solicitation") for the amendment of certain provisions of its senior notes
indentures. The Consent Solicitation, if successful, would facilitate, among
other things, the merger of HMC Acquisition Properties, Inc. ("Acquisitions"),
an indirect wholly-owned subsidiary of Host Marriott, with and into the
Company (the "Merger") and the ability of the Company after the Merger to
acquire through certain subsidiaries, additional properties subject to non-
recourse indebtedness and less than majority controlling interest in
corporations, partnerships and other entities holding attractive properties.
The Consent Solicitation is conditioned upon the approval by at least 66 2/3%
of the Company's holders of the $600 million of 9 1/2% senior notes
("Properties Notes") and the completion of a similar consent solicitation
being currently conducted by Acquisitions. These financial statements of the
Company present the combined consolidated financial position, results of
operations, and cash flows of Properties and Acquisitions for all periods
presented. Hereafter, the "Company" refers to the merged entity. As of January
3, 1997, the Company owned, or controlled, 48 lodging properties generally
located throughout the United States and operated primarily under the Marriott
or Ritz-Carlton brands and managed by Marriott International, Inc. ("Marriott
International"). The Company's hotel properties represent quality assets in
the luxury and upscale full-service lodging segments.
Acquisitions was formed as a Delaware corporation on September 10, 1994 to
acquire and own full-service hotels. Affiliates of Acquisitions acquired four
hotels prior to September 1994. These hotels, with a total net book value of
$162 million on September 10, 1994, were contributed to Acquisitions. The
combined consolidated financial statements of the Company present the accounts
of each of the hotels for the period from the date of acquisition of each such
property by another affiliate of the Company, through January 3, 1997.
Affiliates made an additional capital contribution to Acquisitions on
September 10, 1994 in the form of a receivable totaling $48 million, which was
subsequently collected by Acquisitions and the proceeds utilized to acquire
additional full-service hotel properties. During December 1995, Acquisitions
received an additional capital contribution of approximately $4 million,
including $3 million in cash.
Host Marriott's historical basis in the assets and liabilities of the
Company have been carried over. All material intercompany transactions and
balances between the Company and its subsidiaries have been eliminated. The
Company has no employees. Certain operating expenses, capital expenditures and
other cash requirements of the Company are paid by Host Marriott and
Hospitality and charged directly or allocated to the Company. Certain general
and administrative costs of Host Marriott are allocated to the Company,
principally based on Host Marriott's specific identification of individual
cost items and otherwise based upon estimated levels of effort devoted by its
general and administrative departments to individual entities or relative
measures of size of the entities based on assets. In the opinion of
management, the methods for allocating corporate, general and administrative
expenses and other direct costs are reasonable. It is not practicable to
estimate the costs that would have been incurred by the Company if it had been
operated on a stand-alone basis, however, management believes that these
expenses are comparable to the expected expense levels on a forward-looking
basis.
On October 8, 1993 (the "Distribution Date"), Marriott Corporation
distributed, through a special tax-free dividend (the "Distribution"), to
holders of Marriott Corporation's common stock (on a share-for-share basis)
approximately 116.4 million shares of common stock of an existing wholly-owned
subsidiary, Marriott International, resulting in the division of Marriott
Corporation's operations into two separate companies. The distributed
operations included the former Marriott Corporation's lodging management,
franchising and senior living service operations. Host Marriott retained the
former Marriott Corporation's airport and tollroad food, beverage and
merchandise concession operations, as well as most of its real estate
properties. Effective at the Distribution Date, Marriott Corporation changed
its name to Host Marriott Corporation. Concurrent with the
F-7
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Distribution, Host Marriott completed an exchange offer ("Exchange Offer")
pursuant to which holders of notes in the aggregate principal amount of
approximately $1.2 billion ("Old Notes") exchanged such Old Notes for a
combination of (i) cash, (ii) common stock of Host Marriott and (iii) senior
notes ("Hospitality Notes") issued by Hospitality.
In connection with the Distribution, the majority of Host Marriott's real
estate properties were transferred to the Company and its subsidiaries, while
most of the assets relating to the airport and tollroad operations remained in
Host Marriott Travel Plazas, Inc. ("HMTP"), a wholly-owned subsidiary of
Hospitality, and its subsidiaries. In May 1995, the Company and HMTP
consummated concurrent debt offerings totaling $1 billion of senior notes (the
"Properties Offering"), the net proceeds of which were used to repay the
Hospitality Notes and a portion of Host Marriott's $630 million revolving line
of credit with Marriott International ("Line of Credit"). Prior to the
Properties Offering, the accompanying combined consolidated financial
statements present the pushed-down effects of the debt that was repaid with
the proceeds of the Properties Offering.
Net transfers subsequent to the Distribution Date between the Company and
Hospitality, including the transfer of asset sales proceeds to Hospitality for
bond redemptions of $292 million in 1994, are included in the statement of
shareholder's equity. Such amounts are reflected as a component of equity of
the Company because the balance accumulated through the date of consummation
of the Properties Offering was not required to be paid, but rather was a
permanent adjustment to capital on May 25, 1995.
An analysis of the activity in the "Distributions to Hospitality, net" for
the fiscal year ended December 29, 1995 is as follows (in millions):
<TABLE>
<S> <C>
Balance, Distributions to Hospitality, net, January 1, 1994.......... $ (7)
Increase in taxes payable............................................ 48
Cash transfers to Hospitality........................................ (345)
-----
Balance, Distributions to Hospitality, net, December 30, 1994........ (304)
Increase in taxes payable............................................ 8
Non-cash transfers to Hospitality.................................... (79)
Cash transfers to Hospitality........................................ (151)
Amount reclassified as additional paid-in capital.................... 526
-----
Balance, Distributions to Hospitality, net, May 25, 1995............. $ --
=====
</TABLE>
The average balance of Distributions to Hospitality, net, for fiscal year
1994 and the period from December 31, 1994 through May 25, 1995 was $132
million and $461 million, respectively.
Principles of Consolidation
The combined consolidated financial statements include the accounts of the
Company and its subsidiaries and controlled affiliates. Investments in 50% or
less owned affiliates over which the Company has the ability to exercise
significant influence are accounted for using the equity method.
Fiscal Year
The Company's fiscal year ends on the Friday nearest to December 31. Fiscal
year results for 1996 include 53 weeks versus 52 weeks for fiscal years 1995
and 1994.
F-8
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenues and Expenses
Revenues include house profit from the Company's hotel properties because
the Company has delegated substantially all of the operating decisions related
to the generation of house profit from its hotels to Marriott International
and other hotel managers (together, the "Managers"). Revenues also include
lease rentals from the Company's senior living communities (in 1994), net
gains (losses) on property transactions and equity in the earnings of an
affiliate. House profit reflects the net revenues flowing to the Company as
property owner and represents hotel operating results, less property-level
expenses, excluding depreciation, management fees, real and personal property
taxes, ground and equipment rent, lease payments, insurance and certain other
costs, which are classified as operating costs and expenses.
Property and Equipment
Property and equipment is recorded at cost. For newly developed properties,
cost includes interest, rent and real estate taxes incurred during development
and construction. Replacements and improvements are capitalized.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 40 years for buildings and three to ten
years for furniture and equipment. Leasehold improvements are amortized over
the shorter of the lease term or the useful lives of the related improvements.
Gains on sales of properties are recognized at the time of sale or deferred
to the extent required by generally accepted accounting principles. Deferred
gains are recognized as income in subsequent periods as conditions requiring
deferral are satisfied or expire.
In cases where management is holding for sale particular lodging properties,
the Company assesses impairment based on whether the net realizable value
(estimated sales price less costs of disposal) of each individual property to
be sold is less than its net book value. A lodging property is considered to
be held for sale when the Company has made the decision to dispose of the
property. Otherwise, the Company assesses impairment of its real estate
properties based on whether it is probable that undiscounted future cash flows
from each individual property will be less than its net book value. If a
property is impaired, its basis is adjusted to its fair market value.
Deferred Charges
Deferred financing costs related to long-term debt are deferred and
amortized over the remaining life of the debt.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
New Statements of Financial Accounting Standards
The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of
a Loan" and SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" in 1995. The adoption of these
statements did not have a material effect on the Company's combined
consolidated financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at January 3, 1997 and
December 29, 1995 (in millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Land and land improvements...................................... $ 171 $ 206
Building and leasehold improvements............................. 1,315 1,250
Furniture and equipment......................................... 180 182
Construction in progress........................................ 47 65
------ ------
1,713 1,703
Less accumulated depreciation and amortization.................. (240) (249)
------ ------
$1,473 $1,454
====== ======
</TABLE>
Interest cost capitalized in connection with the Company's development and
construction activities totaled $1 million in 1996, $2 million in 1995 and $1
million in 1994.
In the second quarter of 1995, the Company made a determination that its
owned Courtyard and Residence Inn properties were held for sale and recorded a
$10 million charge to write down the carrying value of five individual
Courtyard and Residence Inn properties to their estimated net realizable
value.
3. NOTES RECEIVABLE DUE FROM AFFILIATE
In connection with the sale of several hotels to an affiliated limited
partnership in 1984, a subsidiary of the Company received as proceeds $168
million in notes receivable that are secured by nonrecourse mortgages on the
underlying properties. The notes mature on December 31, 2003 and bear interest
at 9%. These notes require principal paydown of approximately 44% of the
original principal amount prior to maturity. The principal balances as of
January 3, 1997 and December 29, 1995 were $140 million and $145 million,
respectively.
4. EQUITY INVESTMENT IN AFFILIATE
On February 26, 1994, Host Marriott transferred to the Company a 49% limited
partner interest in an affiliate that owns a hotel in Santa Clara, California,
in exchange for $30 million in cash. The difference between the cash
transferred to Host Marriott and the carried-over cost basis of the 49%
interest, net of the related tax effects, has been charged to additional paid-
in capital.
The investment is accounted for using the equity method. The Company has a
49% interest in the operating profits (income before interest costs) in the
partnership which is included in equity in the earnings of an affiliate. The
Company's equity in income of the partnership was $5 million, $4 million and
$3 million for 1996, 1995 and 1994, respectively.
5. INCOME TAXES
The Company and Host Marriott record income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the
recognition of deferred tax assets and liabilities equal to the expected
future tax consequences of temporary differences.
F-10
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total deferred tax assets and liabilities at January 3, 1997 and December
29, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
Gross deferred tax assets...................................... $ 18 $ 17
Gross deferred tax liabilities................................. (105) (105)
------ ------
Net deferred income tax liability.............................. $ (87) $ (88)
====== ======
</TABLE>
The tax effect of each type of temporary difference and carryforward that
gives rise to a significant portion of deferred tax assets and liabilities as
of January 3, 1997 and December 29, 1995:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
Tax credit carryforwards....................................... $ 9 $ 9
Reserves....................................................... 6 2
Affiliate notes receivable..................................... (43) (44)
Property and equipment......................................... (62) (61)
Investment in affiliate........................................ 3 6
------ ------
$ (87) $ (88)
====== ======
</TABLE>
Deferred tax liabilities have been adjusted by $20 million in 1995 as a
result of the transfer of certain assets and liabilities pursuant to the
Properties Offering. At January 3, 1997, the Company had approximately $9
million of alternative minimum tax credit carryforwards which do not expire.
The provision (benefit) for income taxes consists of (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current-Federal............................................... $ 19 $ 15 $ 40
- -State........................................................ 4 3 9
---- ---- ----
23 18 49
---- ---- ----
Deferred-Federal.............................................. (1) (1) (23)
- -State........................................................ -- -- (7)
---- ---- ----
(1) (1) (30)
---- ---- ----
$ 22 $ 17 $ 19
==== ==== ====
A reconciliation of the statutory Federal tax rate to the Company's
effective income tax rate follows:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate.................................... 35.0% 35.0% 35.0%
State income tax, net of Federal tax benefit.................. 4.7 4.5 3.0%
Other......................................................... 1.0 -- --
---- ---- ----
40.7% 39.5% 38.0%
==== ==== ====
</TABLE>
The Company is included in the consolidated Federal income tax return of
Host Marriott and its affiliates (the "Group"). Tax expense allocated to the
Company, as a member of the Group, is based upon the Company's relative
contribution to the Group's consolidated taxable income/loss and changes in
temporary differences. This allocation method results in Federal tax expense
allocated to the Company for all periods presented substantially
F-11
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
equal to the expense that would be recognized if the Company and its
subsidiaries filed a separate return. On a separate return basis, net state
income tax expense would have been substantially equal to the expense reported
for the fiscal year ended January 3, 1997 and would have been approximately $1
million higher for each of the fiscal years ended December 29, 1995 and
December 30, 1994.
Prior to the Properties Offering and consistent with the existing Host
Marriott tax sharing policy, all current tax provision or benefit amounts were
treated as paid to, or received from, Host Marriott, and as such, there was no
current tax provision related balances due to Host Marriott at December 30,
1994. Subsequent to the Properties Offering, the Company reimburses Host
Marriott for its allocable share of current taxes payable. For Federal income
tax purposes, the Company is a member of the affiliated group of Host Marriott
and its subsidiaries. The Company's share of the affiliated group's tax
liability is limited to the lesser of the liability computed as if the Company
was in a separate affiliated group, or its allocable portion of the affiliated
group's tax liability. At January 3, 1997, $29 million was payable to Host
Marriott and included in other liabilities. Cash paid to Host Marriott for
income taxes was $1 million, $1 million and $4 million in 1996, 1995 and 1994,
respectively.
6. LEASES
The Company sold and leased back 18 Residence Inn properties from a real
estate investment trust (the "REIT") in 1996. The initial term of the lease
expires in 2010 and can be renewed for a total of 40 years at the Company's
option. The minimum rent payments are $17 million annually with additional
contingent rent equal to 7.5% of the excess of total hotels sales on the
leased properties over 1996 total hotel sales on the leased properties. The
Residence Inn leases also require the Company to escrow an amount equal to 5%
of the annual hotel sales into a furniture, fixture and equipment reserve
which is available for renewals and replacements.
The Company leases certain other property and equipment under non-cancelable
leases. Leases include long-term ground leases for certain hotels, generally
with multiple renewal options. Certain leases contain provisions for the
payment of contingent rentals based on a percentage of sales in excess of
stipulated amounts.
Future minimum annual rental commitments for all non-cancelable operating
leases are as follows (in millions):
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
1997................................................................... $ 26
1998................................................................... 25
1999................................................................... 24
2000................................................................... 24
2001................................................................... 24
Thereafter............................................................. 269
----
Total minimum lease payments........................................... $392
====
</TABLE>
Rent expense consists of (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Minimum rentals on operating leases.............................. $20 $ 8 $ 8
Additional rentals based on sales................................ 7 4 4
--- --- ---
$27 $12 $12
=== === ===
</TABLE>
F-12
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT
Debt consists of the following at January 3, 1997 and December 29, 1995 (in
millions):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Properties Notes, 9.5%, maturing May 2005........................ $ 600 $ 600
Acquisitions Notes, 9.0%, maturing December 2007................. 350 350
Notes secured by $276 million of real estate assets, with an
average rate of 7.5% at January 3, 1997, maturing through 2002.. 98 100
Other notes with an average rate of 7.1% at January 3, 1997,
maturing through 2014........................................... 34 34
------ ------
$1,082 $1,084
====== ======
</TABLE>
In May 1995, the Company issued the Properties Notes. Concurrently, HMTP,
the operator/manager of HM Services' food, beverage and merchandise
concessions business, issued $400 million of senior notes. The bonds were
issued at par and have a final maturity of May 2005. The net proceeds were
used to defease, and subsequently redeem, all of Hospitality's Notes and to
repay borrowings under the line of credit with Marriott International. In
connection with the redemptions and defeasance, the Company recognized an
extraordinary loss in 1995 of $14 million, net of taxes, primarily
representing premiums paid on the redemptions and the write-off of deferred
financing fees and discounts on the Hospitality Notes. The Properties Notes
are secured by a pledge of the stock of certain of the Company's subsidiaries
and are guaranteed, jointly and severally, by certain subsidiaries. The net
assets of Properties at January 3, 1997 were approximately $410 million,
substantially all of which were restricted.
In December 1995, Acquisitions issued $350 million of 9% senior notes (the
"Acquisitions Notes"). The Acquisitions Notes were issued at par and have a
final maturity of December 2007. A portion of the net proceeds were utilized
to repay in full the outstanding borrowings under the $230 million revolving
line of credit (the "Acquisitions Revolver"), which was then terminated. In
connection with the termination of the Acquisitions Revolver, the Company
recognized an extraordinary loss in 1995 of $3 million, net of taxes,
representing the write-off of deferred financing fees on the Acquisitions
Revolver. The Acquisitions Notes are fully and unconditionally guaranteed on a
joint and several basis by all but one of Acquisitions' subsidiaries. The net
assets of Acquisitions at January 3, 1997 were approximately $216 million,
substantially all of which were restricted.
The indentures governing the Properties Notes and Acquisitions Notes contain
covenants that, among other things, limit the ability to incur additional
indebtedness and issue preferred stock, pay dividends or make other
distributions, repurchase capital stock or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell certain
assets, issue or sell stock of subsidiaries, and enter into certain mergers
and consolidations. In addition, under certain circumstances, the Company will
be required to offer to purchase the Properties Notes and Acquisitions Notes
at par value with the proceeds of certain assets sales. Certain of these
covenants will be amended pending successful completion of the Consent
Solicitation (see Note 1).
Distributions of the Company's equity are restricted but are available
through the payment of dividends only to the extent that the cumulative amount
of such dividends from the date of the indentures does not exceed $25 million
for Properties and $15 million for Acquisitions plus an amount equal to the
excess of earnings before interest expense, taxes, depreciation, amortization
and other non-cash items ("EBITDA"), as defined by the indentures over 200% of
cash interest expense (defined as interest expense under generally accepted
accounting principles less amortization of deferred financing costs) plus the
amount of capital contributions to Properties subsequent to May 25, 1995 and
Acquisitions subsequent to December 20, 1995. Properties paid dividends of
approximately $9 million and $36 million in 1996 and 1995, respectively, and
Acquisitions paid dividends of approximately $20 million in 1996 as permitted
under the indentures.
F-13
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Aggregate debt maturities at January 3, 1997 are as follows (in millions):
<TABLE>
<S> <C>
1997.................................................................. $ 2
1998.................................................................. 2
1999.................................................................. 2
2000.................................................................. 1
2001.................................................................. 1
Thereafter............................................................ 1,074
------
$1,082
======
</TABLE>
Cash paid for interest, net of amounts capitalized, was $99 million in 1996,
$77 million in 1995 and $62 million in 1994. Deferred financing costs, which
are included in other assets, amounted to $26 million and $27 million, net of
accumulated amortization of $4 million and $1 million as of January 3, 1997
and December 29, 1995, respectively.
8. ACQUISITIONS AND DISPOSITIONS
During 1996, the Company added nine full-service properties totaling 3,124
rooms for approximately $292 million. The acquisition of the Salt Lake City
Marriott for $67 million included the purchase of a 20% general partner
interest from Host Marriott for $10 million. The difference between the cash
transferred to Host Marriott and the carried-over cost basis of the 20%
interest, net of the related tax effect, has been charged to additional paid-
in capital. The 1996 acquisitions included the acquisition of a controlling
interest in a venture that owns the Pittsburgh City Center Marriott for $18
million in the first quarter of 1996 and the acquisition, through foreclosure,
of a controlling interest in the 250-room Newport Beach Marriott Suites. The
Company had purchased an 83% interest in the mortgage loans secured by the
hotel for $18 million in the first quarter of 1996. The Company also completed
construction and opened the Pentagon City Residence Inn in April 1996.
Subsequent to year end, the Company acquired the 306-room Ritz-Carlton, Marina
del Rey for approximately $57 million and a controlling interest in the 404-
room Norfolk Waterside Marriott for approximately $33 million.
During the first and second quarters of 1996, the Company sold and leased
back to the REIT 16 of its Courtyard properties and 18 of its Residence Inn
properties for $349 million (10% of which was deferred). Host Marriott
purchased the Company's rights to the deferred proceeds and obligations under
the lease for the 16 Courtyard properties at their fair market value. The
Company's rights to the deferred proceeds and obligations under the lease for
the 18 Residence Inns remain with the Company. The Company recorded a $14
million deferred gain in 1996 and is amortizing the gain over the initial term
of the lease.
The Company added seven full-service hotels in 1995 totaling 3,133 rooms in
separate transactions for approximately $329 million. During 1994, the Company
added 15 full-service hotels totaling 6,044 rooms in separate transactions
aggregating approximately $441 million. The Company also provided 100% non-
recourse financing totaling approximately $35 million to an affiliated
partnership, in which Host Marriott owns the sole general partner interest,
for the acquisition of two full-service hotels (totaling another 684 rooms).
The Company consolidates those properties in the accompanying combined
consolidated financial statements.
During the first and third quarters of 1995, the Company sold and leased
back to the REIT 37 of its Courtyard properties for $330 million. Ten percent
of the sales amount of these transactions was deferred. The Company
transferred its rights to the deferred proceeds and obligations under the
lease to a designated subsidiary of Hospitality in connection with the
Properties Offering.
F-14
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1994, the Company sold its 14 senior living communities to an
unrelated party for $320 million, which approximated the communities' carrying
value.
In the third quarter of 1994, the Company sold 26 of its Fairfield Inns to
an unrelated third party. The net proceeds from the sale of such hotels were
approximately $114 million, which exceeded the carrying value of the hotels by
approximately $12 million. Approximately $27 million of the proceeds was
payable in the form of a note from the purchaser due in 2001. The gain on the
sale of these hotels has been deferred. The note receivable and deferred gain
were transferred to Hospitality in connection with the Properties Offering.
In connection with the Properties Offering, HMTP transferred certain hotel
assets to the Company and the Company transferred certain undeveloped land
parcels, a note receivable and the leases and related assets of the 37
Courtyard properties to Hospitality or a designated subsidiary of Hospitality.
Summarized unaudited pro forma results of operations, assuming the above
transactions and the Properties Offering, Acquisitions Offering and debt
activity discussed in Note 7 occurred on December 31, 1994, are as follows (in
millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenue........................................................... $358 $283
Operating profit before corporate expenses and interest........... 164 118
Net income (loss) before extraordinary item....................... 12 (6)
</TABLE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of certain financial instruments are shown below (in
millions):
<TABLE>
<CAPTION>
JANUARY 3, 1997 DECEMBER 29, 1995
----------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- ---------- --------
<S> <C> <C> <C> <C>
Financial assets
Note receivable from affiliates... $ 140 $ 150 $ 145 $ 145
Financial liabilities
Properties Notes.................. 600 627 600 612
Acquisitions Notes................ 350 354 350 350
Notes secured by real estate
assets........................... 98 95 100 100
Other notes....................... 34 34 34 34
</TABLE>
Receivables from affiliates, and other financial assets are valued based on
the expected future cash flows discounted at risk-adjusted rates. The
Properties Notes and Acquisitions Notes are valued based on quoted market
prices. Valuations for secured and other unsecured debt are determined based
on the expected future payments discounted at risk-adjusted rates. The fair
values of other assets and other liabilities are estimated to be equal to
their carrying value.
10. RELATIONSHIP WITH MARRIOTT INTERNATIONAL
In connection with the Distribution, Host Marriott and Marriott
International entered into agreements which provide, among other things, that
(i) 38 of the Company's lodging properties are managed by Marriott
International under agreements with initial terms of 15 to 20 years and which
are subject to renewal at the option of Marriott International for up to 16 to
30 years (see Note 11), (ii) the Company and its subsidiaries leased senior
living communities to Marriott International prior to their disposal (see Note
8), (iii) Marriott International will guarantee Host Marriott's performance in
connection with certain loans and other obligations and (iv) six of the
Company's full-service properties are operated under a franchise agreement
with Marriott International.
F-15
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For fiscal years 1996, 1995 and 1994, the Company paid to Marriott
International $45 million, $38 million and $25 million, respectively, in hotel
management fees and the Company earned $14 million in 1994 under the senior
living community leases.
In connection with the purchase of the Marriott World Trade Center, the
Company received a mortgage loan of $10 million from Marriott International.
Marriott International also provided an additional $10 million to the Company.
Repayment of this amount is contingent on the future earnings of the hotel and
has been included in other liabilities in the accompanying combined
consolidated financial statements.
In addition, Marriott International has the right to purchase up to 20% of
the voting stock of Host Marriott if certain events involving a change in
control of Host Marriott occur.
11. MANAGEMENT AGREEMENTS
The Company is party to management agreements (the "Agreements") which
provide for Marriott International to manage the hotels generally for an
initial term of 15 to 30 years with renewal terms of up to an additional 16 to
30 years. The Agreements generally provide for payment of base management fees
equal to two to four percent of sales and incentive management fees generally
equal to 40% to 50% of hotel operating profits (as defined in the Agreements)
over a priority return (as defined) to the Company, with total incentive
management fees not to exceed 20% of operating profits. For certain full-
service hotels acquired after September 8, 1995, the incentive management fee
is equal to 20% of operating profits. The Company may terminate certain
agreements if specified performance thresholds are not met, subject to the
right of Marriott International to cure. In the event of early termination of
the Agreements, Marriott International will receive additional fees based on
the unexpired term and expected future base and incentive management fees. No
agreement with respect to a single lodging facility is cross-collateralized or
cross-defaulted to any other agreement and a single agreement may be cancelled
under certain conditions, although such cancellation will not trigger the
cancellation of any other Agreement.
Pursuant to the terms of the Agreements, Marriott International is required
to furnish the hotels with certain services ("Chain Services") which are
generally provided on a central or regional basis to all hotels in the
Marriott International hotel system. Chain Services include central training,
advertising and promotion, a national reservation system, computerized payroll
and accounting services, and such additional services as needed which may be
more efficiently performed on a centralized basis. Costs and expenses incurred
in providing such services are allocated among all domestic hotels managed,
owned or leased by Marriott International or its subsidiaries. In addition,
certain hotels also participate in the Marriott Rewards program. The cost of
this program is charged to all hotels in the respective hotel system.
The Company is obligated to provide the manager with sufficient funds to
cover the cost of (a) certain non-routine repairs and maintenance to the
hotels which are normally capitalized; and (b) replacements and renewals to
the hotels' property and improvements. Under certain circumstances, the
Company will be required to establish escrow accounts for such purposes under
terms outlined in the Agreements.
Pursuant to the terms of the Agreements, the Company is required to provide
Marriott International with funding for working capital to meet the operating
needs of the hotels. Marriott International converts cash advanced by the
Company into other forms of working capital consisting primarily of operating
cash, inventories and trade receivables. Under the terms of the Agreements,
Marriott International maintains possession of and sole control over the
components of working capital and accordingly, the Company reports the total
amounts so advanced to Marriott International as a component of other assets.
Upon termination of the Agreements, the working capital will be returned to
the Company.
F-16
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Agreements with managers other than Marriott International exist for nine of
the Company's hotels. Such agreements generally contain similar terms as the
agreements with Marriott International, however, incentive management fees are
only earned on five of the nine properties and the duration ranges from month-
to-month to ten years.
At January 3, 1997 and December 29, 1995, $35 million and $31 million,
respectively, have been advanced to the hotel managers for working capital and
are included in due from hotel managers in the accompanying combined
consolidated balance sheet.
Franchise Agreements
The Company has entered into franchise agreements with Marriott
International for six hotels. Pursuant to these franchise agreements, the
Company generally pays a franchise fee based on a percentage of room sales and
food and beverage sales as well as certain other fees for advertising and
reservations. Franchise fees for room sales vary from four to six percent of
room sales, while fees for food and beverage sales vary from two to three
percent of sales. The initial terms of the franchise agreements are from 20 to
25 years. Franchise fees paid to Marriott International were $2 million and $1
million for 1996 and 1995, respectively. Franchise fees were not material in
prior periods.
Two other hotels are subject to franchise agreements with brands other
Marriott. The terms of the franchise agreements range from three to ten years.
Franchise fees paid range from 1.5% to 5% of room sales and certain other fees
are paid for reservations and advertising. Franchise fees paid for these
properties, including franchise fees related to the hotel sold in December
1995, were $300,000 and $430,000 for 1996 and 1995, respectively.
12. LITIGATION
The Company is from time to time the subject of, or involved in, judicial
proceedings. Management believes that any liability or loss resulting from
such matters will not have a material adverse effect on the financial position
or results of operations of the Company.
F-17
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. HOTEL OPERATIONS
Hotel revenues reflect house profit from the Company's hotel properties.
House profit reflects the net revenues flowing to the Company as property
owner and represents all gross hotel operating revenues, less all gross
property-level expenses, excluding depreciation, management fees, real and
personal property taxes, ground and equipment rent, lease payments, insurance
and certain other costs, which are classified as operating costs and expenses.
Accordingly, the following table presents the Company's house profit for 1996,
1995 and 1994 (in millions).
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales
Rooms.......................................................... $581 $491 $411
Food and beverage.............................................. 227 177 114
Other.......................................................... 57 41 29
---- ---- ----
Total hotel sales............................................ 865 709 554
---- ---- ----
Department costs
Rooms.......................................................... 139 116 99
Food and beverage.............................................. 180 137 87
Other.......................................................... 29 21 14
---- ---- ----
Total department costs....................................... 348 274 200
---- ---- ----
Department profit................................................ 517 435 354
Other deductions................................................. 204 174 140
---- ---- ----
House profit................................................. $313 $261 $214
==== ==== ====
</TABLE>
14. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION
All but one of the subsidiaries of Acquisitions guarantee the Acquisitions
Notes and all but two of the subsidiaries of Properties guarantee the
Properties Notes. The separate financial statements of each guaranteeing
subsidiary (each, a "Guarantor Subsidiary") are not presented because the
Company's management has concluded that such financial statements are not
material to investors. The guarantee of each Guarantor Subsidiary is full and
unconditional and joint and several and each Guarantor Subsidiary is a wholly-
owned subsidiary of the Company. The non-guarantor subsidiaries (the "Non-
Guarantor Subsidiaries") are the owners of the Marriott World Trade Center,
the owners of the Pittsburgh Marriott City Center and HMH HPT Residence Inn,
Inc., the lessee of the Residence Inn properties. At May 21, 1997, there is no
subsidiary of the Company the capital stock of which comprises a substantial
portion of the collateral for the Acquisitions or Properties Notes within the
meaning of Rule 3-10 of Regulation S-X.
The following condensed, combining financial information sets forth the
combined financial position as of January 3, 1997 and December 29, 1995 and
results of operations and cash flows for the three fiscal years in the period
ended January 3, 1997 of the parent, Guarantor Subsidiaries and the Non-
Guarantor Subsidiaries:
F-18
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
JANUARY 3, 1997
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Property and equipment, net.. $ 895 $410 $168 $1,473
Investment in affiliate...... 17 -- -- 17
Notes receivable from
affiliate................... -- 140 -- 140
Other assets................. 49 28 24 101
Cash and cash equivalents.... 141 -- -- 141
------ ---- ---- ------
Total assets............... $1,102 $578 $192 $1,872
====== ==== ==== ======
Debt......................... $ 927 $ 80 $ 75 $1,082
Deferred income taxes........ 39 47 1 87
Other liabilities............ 30 23 24 77
------ ---- ---- ------
Total liabilities.......... 996 150 100 1,246
Owner's equity............... 106 428 92 626
------ ---- ---- ------
Total liabilities and
owner's equity............ $1,102 $578 $192 $1,872
====== ==== ==== ======
<CAPTION>
DECEMBER 29, 1995
<S> <C> <C> <C> <C>
Property and equipment....... $ 949 $361 $144 $1,454
Investment in affiliate...... 16 -- -- 16
Notes receivable from
affiliate................... -- 145 -- 145
Other assets................. 45 23 4 72
Cash and cash equivalents.... 123 -- -- 123
------ ---- ---- ------
Total assets............... $1,133 $529 $148 $1,810
====== ==== ==== ======
Debt......................... $ 949 $ 60 $ 75 $1,084
Deferred income taxes........ 31 57 -- 88
Other liabilities............ 20 1 10 31
------ ---- ---- ------
Total liabilities.......... 1,000 118 85 1,203
Owner's equity............... 133 411 63 607
------ ---- ---- ------
Total liabilities and
owner's equity............ $1,133 $529 $148 $1,810
====== ==== ==== ======
</TABLE>
F-19
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 3, 1997
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES.................... $ 189 $ 85 $ 45 $ 319
OPERATING COSTS AND
EXPENSES................... 98 41 36 175
----- ---- ----- -----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST................... 91 44 9 144
Corporate expenses.......... (8) (5) (2) (15)
Interest expense............ (89) (7) (5) (101)
Interest income............. 23 3 -- 26
----- ---- ----- -----
INCOME BEFORE INCOME TAXES.. 17 35 2 54
Provision for income taxes.. (7) (14) (1) (22)
----- ---- ----- -----
NET INCOME.................. $ 10 $ 21 $ 1 $ 32
===== ==== ===== =====
<CAPTION>
YEAR ENDED DECEMBER 29, 1995
<S> <C> <C> <C> <C>
REVENUES.................... $ 198 $ 57 $ -- $ 255
OPERATING COSTS AND
EXPENSES................... 90 48 -- 138
----- ---- ----- -----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST................... 108 9 -- 117
Corporate expenses.......... (10) (4) -- (14)
Interest expense............ (74) (3) -- (77)
Interest income............. 4 13 -- 17
----- ---- ----- -----
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM..... 28 15 -- 43
Provision for income taxes.. (11) (6) -- (17)
----- ---- ----- -----
INCOME BEFORE EXTRAORDINARY
ITEM....................... 17 9 -- 26
Extraordinary item--Loss on
extinguishment of debt..... (17) -- -- (17)
----- ---- ----- -----
NET INCOME.................. $ -- $ 9 $ -- $ 9
===== ==== ===== =====
<CAPTION>
YEAR ENDED DECEMBER 30, 1994
<S> <C> <C> <C> <C>
REVENUES.................... $ 197 $ 35 $ -- $ 232
OPERATING COSTS AND
EXPENSES................... 106 17 -- 123
----- ---- ----- -----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST................... 91 18 -- 109
Corporate expenses.......... (7) (2) -- (9)
Interest expense............ (62) (3) -- (65)
Interest income............. 1 14 -- 15
----- ---- ----- -----
INCOME BEFORE INCOME TAXES.. 23 27 -- 50
Provision for income taxes.. (9) (10) -- (19)
----- ---- ----- -----
NET INCOME.................. $ 14 $ 17 $ -- $ 31
===== ==== ===== =====
</TABLE>
F-20
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 3, 1997
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
CASH PROVIDED BY
OPERATIONS................ $ 76 $ 40 $ 12 $ 128
------ ----- ------ ------
INVESTING ACTIVITIES
Cash received from sales
of assets............... 335 -- -- 335
Capital expenditures..... (42) (34) (9) (85)
Acquisitions............. (264) (25) (18) (307)
Other.................... (23) 4 -- (19)
------ ----- ------ ------
Cash provided by (used
in) investing
activities.............. 6 (55) (27) (76)
------ ----- ------ ------
FINANCING ACTIVITIES
Repayment of debt........ (4) -- -- (4)
Dividends to Parent...... (28) -- -- (28)
Transfers to/from
Parent.................. (30) 15 15 --
Other.................... (2) -- -- (2)
------ ----- ------ ------
Cash provided by (used in)
financing activities...... (64) 15 15 (34)
------ ----- ------ ------
INCREASE IN CASH AND CASH
EQUIVALENTS............... 18 -- -- 18
CASH AND CASH EQUIVALENTS,
beginning of year......... 123 -- -- 123
------ ----- ------ ------
CASH AND CASH EQUIVALENTS,
end of year............... $ 141 $ -- $ -- $ 141
====== ===== ====== ======
<CAPTION>
YEAR ENDED DECEMBER 29, 1995
<S> <C> <C> <C> <C>
CASH PROVIDED BY
OPERATIONS................ $ 87 $ 25 $ -- $ 112
------ ----- ------ ------
INVESTING ACTIVITIES
Cash received from sales
of assets............... 307 -- -- 307
Capital expenditures..... (67) (5) -- (72)
Acquisitions............. (88) (96) (147) (331)
Other.................... 10 -- 10 20
------ ----- ------ ------
Cash provided by (used
in) investing
activities.............. 162 (101) (137) (76)
------ ----- ------ ------
FINANCING ACTIVITIES
Repayment of debt........ (815) -- -- (815)
Issuance of debt......... 985 16 75 1,076
Contributed Capital...... 3 -- -- 3
Transfers to Hospitality,
net..................... (151) -- -- (151)
Transfers to/from
Parent.................. (122) 60 62 --
Dividends to Parent...... (36) -- -- (36)
------ ----- ------ ------
Cash provided by (used
in) financing
activities.............. (136) 76 137 77
------ ----- ------ ------
INCREASE IN CASH AND CASH
EQUIVALENTS............... 113 -- -- 113
CASH AND CASH EQUIVALENTS,
beginning of year......... 10 -- -- 10
------ ----- ------ ------
CASH AND CASH EQUIVALENTS,
end of year............... $ 123 $ -- $ -- $ 123
====== ===== ====== ======
</TABLE>
F-21
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 30, 1994
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
CASH PROVIDED BY
OPERATIONS................ $ 109 $ 9 $ -- $ 118
----- ----- ----- ------
INVESTING ACTIVITIES
Cash received from sales
of assets............... 419 -- -- 419
Capital expenditures..... (20) (9) -- (29)
Acquisitions............. (390) (116) -- (506)
Other.................... 9 -- -- 9
----- ----- ----- ------
Cash provided by (used
in) investing
activities.............. 18 (125) -- (107)
----- ----- ----- ------
FINANCING ACTIVITIES
Repayment of debt........ (24) -- -- (24)
Issuance of debt......... 164 -- -- 164
Contributed Capital...... 210 -- -- 210
Transfers to
Hospitality............. (345) -- -- (345)
Transfers to Host
Marriott................ (6) -- -- (6)
Transfers to/from
Parent.................. (116) 116 -- --
----- ----- ----- ------
Cash used in financing
activities................ (117) 116 -- (1)
----- ----- ----- ------
INCREASE IN CASH AND CASH
EQUIVALENTS............... 10 -- -- 10
CASH AND CASH EQUIVALENTS,
beginning of year......... -- -- -- --
----- ----- ----- ------
CASH AND CASH EQUIVALENTS,
end of year............... $ 10 $ -- $ -- $ 10
===== ===== ===== ======
</TABLE>
F-22
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 20,
1997
--------
<S> <C>
ASSETS
Property and equipment, net............................................ $1,555
Note receivable from affiliate......................................... 139
Due from hotel managers................................................ 40
Investments in affiliate............................................... 18
Other assets........................................................... 53
Cash and cash equivalents.............................................. 86
------
$1,891
======
LIABILITIES AND SHAREHOLDER'S EQUITY
Senior notes........................................................... $ 950
Notes secured by real estate assets.................................... 97
Other notes............................................................ 33
------
Total debt........................................................... 1,080
Deferred income taxes.................................................. 89
Other liabilities...................................................... 98
------
Total liabilities.................................................... 1,267
------
Shareholder's equity
Common stock, 100 shares issued and outstanding, no par value........ --
Additional paid-in capital........................................... 626
Retained deficit..................................................... (2)
------
Total shareholder's equity......................................... 624
------
$1,891
======
</TABLE>
See Notes to Condensed Combined Consolidated Financial Statements.
F-23
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE WEEKS ENDED JUNE 20, 1997 AND JUNE 14, 1996
(UNAUDITED, IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REVENUES
Hotels........................................................... $ 97 $ 73
Equity in earnings of affiliate.................................. 1 1
---- ----
Total revenues................................................. 98 74
---- ----
OPERATING COSTS AND EXPENSES
Depreciation and amortization.................................... 17 14
Base and incentive management fees (including Marriott
International management fees of $15 million and $11 million in
1997 and 1996, respectively).................................... 16 11
Property taxes................................................... 7 5
Ground rent, insurance and other................................. 9 9
---- ----
Total operating costs and expenses............................. 49 39
---- ----
OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST............ 49 35
Corporate expenses................................................. (3) (3)
Interest expense................................................... (23) (23)
Interest income.................................................... 5 6
---- ----
INCOME BEFORE INCOME TAXES......................................... 28 15
Provision for income taxes......................................... (12) (6)
---- ----
NET INCOME......................................................... $ 16 $ 9
==== ====
</TABLE>
See Notes to Condensed Combined Consolidated Financial Statements.
F-24
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
TWENTY-FOUR WEEKS ENDED JUNE 20, 1997 AND JUNE 14, 1996
(UNAUDITED, IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REVENUES
Hotels........................................................... $192 $142
Equity in earnings of affiliate.................................. 3 2
---- ----
Total revenues..................................................... 195 144
---- ----
OPERATING COSTS AND EXPENSES
Depreciation and amortization.................................... 35 29
Base and incentive management fees (including Marriott Interna-
tional management fees of $29 million and $21 million in 1997
and 1996, respectively)......................................... 32 22
Property taxes................................................... 13 11
Ground rent, insurance and other................................. 21 13
---- ----
Total operating costs and expenses............................. 101 75
---- ----
OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST............ 94 69
Corporate expenses................................................. (6) (6)
Interest expense................................................... (46) (46)
Interest income.................................................... 9 11
---- ----
INCOME BEFORE INCOME TAXES......................................... 51 28
Provision for income taxes......................................... (21) (12)
---- ----
NET INCOME......................................................... $ 30 $ 16
==== ====
</TABLE>
See Notes to Condensed Combined Consolidated Financial Statements.
F-25
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWENTY-FOUR WEEKS ENDED JUNE 20, 1997 AND JUNE 14, 1996
(UNAUDITED, IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 30 $ 16
Adjustments to reconcile to cash from operations:
Depreciation and amortization..................................... 35 29
Income taxes...................................................... 21 12
Changes in operating accounts..................................... (6) 1
Other............................................................. 1 (1)
---- ----
Cash provided by operations..................................... 81 57
---- ----
INVESTING ACTIVITIES
Proceeds from sales of assets....................................... -- 342
Less noncash proceeds............................................... -- (33)
---- ----
Cash received from sales of assets................................ -- 309
Acquisitions........................................................ (89) (132)
Capital expenditures................................................ (25) (46)
Other............................................................... 12 (61)
---- ----
Cash provided by (used in) investing activities................. (102) 70
---- ----
FINANCING ACTIVITIES
Dividends to Host Marriott Corporation and affiliates............... (32) (15)
Repayment of debt................................................... (2) (1)
Other............................................................... -- (2)
---- ----
Cash used in financing activities............................... (34) (18)
---- ----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... $(55) $109
==== ====
</TABLE>
See Notes to Condensed Combined Consolidated Financial Statements.
F-26
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed combined consolidated financial statements of
HMH Properties, Inc. and subsidiaries (the "Company" or "Properties"), a
wholly-owned direct subsidiary of Host Marriott Hospitality, Inc.
("Hospitality"), have been prepared by the Company without audit.
Hospitality is a wholly-owned subsidiary of Host Marriott Corporation
("Host Marriott"). During the third quarter of 1997, the Company completed
a consent solicitation with holders of its senior notes to amend certain
provisions of the senior notes indenture. A similar consent solicitation
was conducted by HMC Acquisition Properties, Inc. ("Acquisitions")
(together, the "Consent Solicitations"). The Consent Solicitations
facilitated the merger of Acquisitions, a wholly-owned indirect subsidiary
of Host Marriott, which owns 17 full-service hotel properties, with and
into the Company (the "Merger"). The financial statements of the Company
present the combined consolidated financial position, results of operations
and cash flows of Properties and Acquisitions for all periods presented.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes the
disclosures made are adequate to make the information presented not
misleading. However, the condensed combined consolidated financial
statements should be read in conjunction with the Company's annual report
on Form 10-K for the fiscal year ended January 3, 1997.
In the opinion of the Company, the accompanying unaudited condensed
combined consolidated financial statements reflect all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position of the Company as of June 20, 1997 and January 3, 1997
and the results of operations for the twelve and twenty-four weeks ended
June 20, 1997 and June 14, 1996 and cash flows for the twenty-four weeks
ended June 20, 1997 and June 14, 1996. Interim results are not necessarily
indicative of fiscal year performance because of the impact of seasonal and
short-term variations.
2. Revenues represent house profit from the Company's hotel properties and
equity in earnings of an affiliate. House profit reflects the net revenues
flowing to the Company as property owner and represents hotel operating
results less property-level expenses excluding depreciation and
amortization, real and personal property taxes, ground rent, insurance,
lease payments and management fees which are classified as operating costs
and expenses.
House profit generated by the Company's hotels for 1997 and 1996 consists
of:
<TABLE>
<CAPTION>
TWENTY-FOUR
TWELVE WEEKS ENDED WEEKS ENDED
--------------------- -----------------
JUNE 20, JUNE 14, JUNE 20, JUNE 14,
1997 1996 1997 1996
--------- --------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Sales
Rooms........................... $ 166 $ 129 $328 $258
Food & Beverage................. 64 50 128 98
Other........................... 12 12 28 25
--------- --------- ---- ----
Total Hotel Sales............. 242 191 484 381
--------- --------- ---- ----
Department Costs
Rooms........................... 39 30 75 61
Food & Beverage................. 48 37 97 75
Other........................... 6 8 14 14
--------- --------- ---- ----
Total Department Costs........ 93 75 186 150
--------- --------- ---- ----
Department Profit................. 149 116 298 231
Other Deductions.................. 52 43 106 89
--------- --------- ---- ----
House Profit.................. $ 97 $ 73 $192 $142
========= ========= ==== ====
</TABLE>
F-27
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
3. The Company's 49% limited partner interest in an affiliate that owns a
Marriott hotel in Santa Clara, California is accounted for using the equity
method. The Company's 49% interest in the operating profits (income before
interest costs) of the partnership is included in equity in earnings of
affiliate and was $1 million for each of the twelve weeks ended June 20,
1997 and June 14, 1996, respectively, and $3 million and $2 million for the
twenty-four weeks ended June 20, 1997 and June 14, 1996, respectively.
4. The Company acquired the 306-room Ritz-Carlton Hotel Marina del Rey for $57
million in the first quarter of 1997. In the second quarter of 1997, the
Company acquired a controlling interest in the 404-room Norfolk Waterside
Marriott for $33 million.
5. The Company paid dividends to Host Marriott of $19 million during the
second quarter of 1997 and $32 million year-to-date as permitted under the
senior notes indentures.
6. In addition to the Merger, the Consent Solicitations increased the ability
of the Company to acquire, through certain subsidiaries, additional
properties subject to non-recourse indebtedness and controlling interests
in corporations, partnerships and other entities holding attractive
properties and increased the threshold for distributions to affiliates to
the excess of the Company's earnings before interest expense, income taxes,
depreciation and amortization and other non-cash items ("EBITDA")
subsequent to the Consent Solicitations over 220% of the Company's interest
expense. Fees totalling approximately $12 million were paid to certain
holders of the senior notes for the Consent Solicitations.
Concurrent with the Consent Solicitations and the Merger, the Company issued
$600 million of 8 7/8% senior notes (the "New Senior Notes") at par maturing
in 2007 (the "Offering"). The Company received net proceeds from the
Offering of approximately $570 million, which will be used to fund future
acquisitions of, or the purchase of interests in, full-service hotels and
other lodging-related properties, which may include senior living
communities, as well as for general corporate purposes. The New Senior Notes
are guaranteed on a joint and several basis by certain of the Company's
subsidiaries and rank pari passu in right of payment with all other existing
and future senior indebtedness of the Company.
7. The Company is required to adopt Statement Financial Accounting Standards
("SFAS") No. 130 "Reporting Comprehensive Income," and SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information" in
fiscal year 1998. The adoption of these statements is not expected to have
a material impact on the Company's combined consolidated financial
statements.
8. All but four of the subsidiaries of the Company guarantee the senior notes.
The separate financial statements of each guaranteeing subsidiary (each, a
"Guarantor Subsidiary") are not presented because the Company's management
has concluded that such financial statements are not material to investors.
The guarantee of each Guarantor Subsidiary is full and unconditional and
joint and several and each Guarantor Subsidiary is a wholly-owned
subsidiary of the Company. The non-guarantor subsidiaries (the "Non-
Guarantor Subsidiaries") are the owners of the Marriott World Trade Center,
the Pittsburgh Marriott City Center, the Norfolk Waterside Marriott and HMH
HPT Residence Inn, Inc., the lessee of the Residence Inn properties. At
June 20, 1997, there is no subsidiary of the Company the capital stock of
which comprises a substantial portion of the collateral for the senior
notes within the meaning of Rule 3-10 of Regulation S-X.
The following condensed, consolidating financial information sets forth the
combined financial position as of June 20, 1997 and January 3, 1997 and the
results of operations for the twelve and twenty-four weeks ended June 20,
1997 and June 14, 1996 and cash flows for the twenty-four weeks ended June
20, 1997 and June 14, 1996 of the parent, the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries.
F-28
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
(IN MILLIONS)
JUNE 20, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Property and equipment,
net........................ $ 940 $415 $200 $1,555
Note receivable from
affiliate.................. -- 139 -- 139
Investment in affiliate..... 18 -- -- 18
Other assets................ 44 23 26 93
Cash and cash equivalents... 86 -- -- 86
------ ---- ---- ------
Total assets.............. $1,088 $577 $226 $1,891
====== ==== ==== ======
Debt........................ $ 926 $ 79 $ 75 $1,080
Deferred income taxes....... 29 57 3 89
Other liabilities........... 16 24 58 98
------ ---- ---- ------
Total liabilities......... 971 160 136 1,267
Owner's equity.............. 117 417 90 624
------ ---- ---- ------
Total liabilities and
owner's equity........... $1,088 $577 $226 $1,891
====== ==== ==== ======
</TABLE>
F-29
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED JUNE 20, 1997
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES..................... $ 58 $24 $ 16 $ 98
OPERATING COSTS AND
EXPENSES.................... 26 10 13 49
---- --- ---- ----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST.................... 32 14 3 49
Corporate expenses........... (2) (1) -- (3)
Interest expense............. (21) (1) (1) (23)
Interest income.............. 2 3 -- 5
---- --- ---- ----
INCOME BEFORE INCOME TAXES... 11 15 2 28
Provision for income taxes... (5) (6) (1) (12)
---- --- ---- ----
NET INCOME................... $ 6 $ 9 $ 1 $ 16
==== === ==== ====
<CAPTION>
TWELVE WEEKS ENDED JUNE 14, 1997
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES..................... $ 42 $21 $ 11 $ 74
OPERATING COSTS AND
EXPENSES.................... 21 10 8 39
---- --- ---- ----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST.................... 21 11 3 35
Corporate expenses........... (1) (1) (1) (3)
Interest expense............. (21) (1) (1) (23)
Interest income.............. 3 3 -- 6
---- --- ---- ----
INCOME BEFORE INCOME TAXES... 2 12 1 15
Provision for income taxes... -- (6) -- (6)
---- --- ---- ----
NET INCOME................... $ 2 $ 6 $ 1 $ 9
==== === ==== ====
</TABLE>
F-30
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED JUNE 20, 1997
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES..................... $117 $ 50 $ 28 $195
OPERATING COSTS AND
EXPENSES.................... 56 22 23 101
---- ---- ----- ----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST.................... 61 28 5 94
Corporate expenses........... (3) (2) (1) (6)
Interest expense............. (41) (3) (2) (46)
Interest income.............. 3 6 -- 9
---- ---- ----- ----
INCOME BEFORE INCOME TAXES... 20 29 2 51
Provision for income taxes... (9) (11) (1) (21)
---- ---- ----- ----
NET INCOME................... $ 11 $ 18 $ 1 $ 30
==== ==== ===== ====
<CAPTION>
TWENTY-FOUR WEEKS ENDED JUNE 14, 1996
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES..................... $ 91 $ 40 $ 13 $144
OPERATING COSTS AND
EXPENSES.................... 47 18 10 75
---- ---- ----- ----
OPERATING PROFIT BEFORE
CORPORATE EXPENSES AND
INTEREST.................... 44 22 3 69
Corporate expenses........... (3) (2) (1) (6)
Interest expense............. (42) (2) (2) (46)
Interest income.............. 5 6 -- 11
---- ---- ----- ----
INCOME BEFORE INCOME TAXES... 4 24 -- 28
Provision for income taxes... (2) (10) -- (12)
---- ---- ----- ----
NET INCOME................... $ 2 $ 14 $ -- $ 16
==== ==== ===== ====
</TABLE>
F-31
<PAGE>
HMH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED JUNE 20, 1997
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
CASH PROVIDED BY
OPERATIONS................. $ 37 $ 38 $ 6 $ 81
---- ----- ----- ----
INVESTING ACTIVITIES
Acquisitions.............. (56) -- (33) (89)
Capital expenditures...... (13) (11) (1) (25)
Other..................... 12 -- -- 12
---- ----- ----- ----
Cash used in investing
activities.............. (57) (11) (34) (102)
---- ----- ----- ----
FINANCING ACTIVITIES
Repayment of debt......... (2) -- -- (2)
Transfers to/from Parent.. (1) (27) 28 --
Dividends to Host Marriott
Corporation and
affiliates............... (32) -- -- (32)
---- ----- ----- ----
Cash provided by (used
in) financing
activities.............. (35) (27) 28 (34)
---- ----- ----- ----
DECREASE IN CASH AND CASH
EQUIVALENTS................ $(55) $ -- $ -- $(55)
==== ===== ===== ====
<CAPTION>
TWENTY-FOUR WEEKS ENDED JUNE 14, 1996
<S> <C> <C> <C> <C>
CASH PROVIDED BY
OPERATIONS................. $ 15 $ 36 $ 6 $ 57
---- ----- ----- ----
INVESTING ACTIVITIES
Cash received from sales
of assets, net........... 309 -- -- 309
Acquisitions.............. (91) (25) (16) (132)
Capital expenditures...... (32) (12) (2) (46)
Other..................... (60) -- (1) (61)
---- ----- ----- ----
Cash provided by (used
in) investing
activities.............. 126 (37) (19) 70
---- ----- ----- ----
FINANCING ACTIVITIES
Repayment of debt......... (1) -- -- (1)
Transfers to/from Parent.. (14) 1 13 --
Dividends to Host Marriott
Corporation and
affiliates............... (15) -- -- (15)
Other..................... (2) -- -- (2)
---- ----- ----- ----
Cash provided by (used
in) financing
activities.............. (32) 1 13 (18)
---- ----- ----- ----
INCREASE IN CASH AND CASH
EQUIVALENTS................ $109 $ -- $ -- $109
==== ===== ===== ====
</TABLE>
F-32
<PAGE>
HMH PROPERTIES, INC.
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
MARINE MIDLAND BANK
by Facsimile:
(212) 658-2292
Attention: Marcia A. Markowski
Confirm by telephone
(212) 658-5931
By Registered or Certified Mail:
Marine Midland Bank
140 Broadway
A Level
New York, New York 10005-1180
Att: Corporate Trust Services
By Hand
Marine Midland Bank
140 Broadway
A Level
New York, New York 10005-1180
Att: Corporate Trust Services
By Overnight Courier:
Marine Midland Bank
140 Broadway
A Level
New York, New York 10005-1180
Att: Corporate Trust Services
(212) 658-5931
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation and its Certificate of Incorporation
and Bylaws provide for indemnification of its officers and directors to the
fullest extent permitted by law. Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL") permits a corporation in its certificate of
incorporation to eliminate the liability of a corporation's directors to a
corporation or its stockholders, except for liabilities related to breach of
duty of loyalty, actions not in good faith and certain other liabilities.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful. A similar
standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred
in connection with the defense or settlement of such actions, and the status
requires court approval before there can be any indemnification where the
person seeking indemnification has been found liable to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*4.1 Indenture dated as of July 15, 1997, by and among the Company, HMC
Retirement Properties, Inc., Marriott Financial Services, Inc., HMH
Pentagon Corporation, Marriott SBM Two Corporation, Host Airport
Hotels, Inc., HMH Rivers, Inc., HMH Marina, Inc., HMC SFO, Inc., HMC
AP Canada, Inc., Host of Houston, Ltd., Host of Boston, Ltd. and Host
of Houston 1979 as Subsidiary Guarantors, Marine Midland Bank, as
Trustee, Marine Midland Bank, as Paying Agent and Marine Midland Bank
as Collateral Agent, with respect to the 8 7/8% Senior Notes due 2007
of the Company.
**4.2 Indenture dated as of May 25, 1995, as amended from time to time, by
and among the Company, HMC Retirement Properties, Inc., HMH Marina,
Inc., HMH Pentagon Corporation, HMH Rivers, Inc., Host Airport Hotels,
Inc., Marriott Financial Services, Inc., Marriott SBM Two Corporation,
Host of Boston, Ltd., Host of Houston, Ltd., Host of Houston 1979, HMC
AP Canada, Inc., HMC SFO, Inc., Marine Midland Bank, as trustee,
Marine Midland Bank, as Collateral Agent, and The Bankers Trust
Company, as Registrar and Paying Agent.
**4.3 Indenture dated as of December 20, 1995, as amended from time to time,
by and among the Company, as a successor of HMC Acquisition
Properties, Inc., HMC Retirement Properties, Inc., HMH Marina, Inc.,
HMH Pentagon Corporation, HMH Rivers, Inc., Host Airport Hotels, Inc.,
Marriott Financial Services, Inc., Marriott SBM Two Corporation, Host
of Boston, Ltd., Host of Houston, Ltd., Host of Houston 1979, HMC AP
Canada, Inc., HMC SFO, Inc., Marine Midland Bank, as trustee, Marine
Midland Bank, as Collateral Agent, and Marine Midland Bank, as
Registrar and Paying Agent.
*4.4 Specimen Certificate of 8 7/8% Series A Senior Note due 2007 (included
in Exhibit 4.1 hereto).
*4.5 Specimen Certificate of 8 7/8% Series B Senior Note due 2007
(substantially in the form of Exhibit 4.4).
**5.1 Opinion of Christopher G. Townsend, Esq. regarding the validity of the
Exchange Notes, including consent.
**8.1 Opinion of Latham & Watkins regarding certain Federal income tax
matters, including consent.
*10.1 Purchase Agreement, dated as of July 10, 1997 by and among the
Company, HMH, HMC Retirement Properties, Inc., Marriott Financial
Services, Inc., HMH Pentagon Corporation, Marriott SBM Two
Corporation, Host Airport Hotels, Inc., HMH Rivers, Inc., HMH Marina,
Inc., HMC SFO, Inc., HMC AP Canada, Inc., Host of Houston, Ltd., Host
of Boston, Ltd. and Host of Houston 1979, as Subsidiary Guarantors and
Donaldson, Lufkin & Jenrette Securities Corporation, BT Securities
Corporation, Goldman Sachs & Co., Montgomery Securities as the Initial
Purchasers.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.2 Registration Rights Agreement, dated as of July 15, 1997, by and
between the Company, HMC Retirement Properties, Inc., Marriott
Financial Services, Inc., HMH Pentagon Corporation, Marriott SBM Two
Corporation, Host Airport Hotels, Inc., HMH Rivers, Inc., HMH Marina,
Inc., HMC SFO, Inc., HMC AP Canada, Inc., Host of Houston, Ltd., Host
of Boston, Ltd. and Host of Houston 1979, as Subsidiary Guarantors and
Donaldson, Lufkin & Jenrette Securities Corporation, BT Securities
Corporation, Goldman Sachs & Co., Merrill Lynch & Co. and Montgomery
Securities as the Initial Purchasers.
*12.1 Ratio of Earnings to Fixed Charges of HMH Properties, Inc.
**23.1 Consent of Independent Public Accountants.
*25.1 Statement of Eligibility and Qualifications on Form T-1 of Marine
Midland Bank, as Trustee, under the Indenture (No. 22-26838).
*99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Clients.
*99.4 Form of Letter to Nominee.
*99.5 Guidelines for Certification of Taxpayer Indentification Number on
Substitute Form W-9
</TABLE>
- ---------------------
*Previously filed
** Filed herewith
(b) Financial Statement Schedule
III. Real Estate and Accumulated Depreciation
All other schedules have been omitted because they are not applicable or not
required or the required information is included in the combined consolidated
financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) 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.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent
or given, the latest annual report, to security holders that is incorporated
by reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
II-2
<PAGE>
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933, and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes 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.
The undersigned Registrant hereby undertakes that 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 Exchange Act of 1934, 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
its 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 and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA, STATE OF
MARYLAND, ON SEPTEMBER 19, 1997.
HMH Properties, Inc.
By: /s/ Christopher G. Townsend
----------------------------------
CHRISTOPHER G. TOWNSEND EXECUTIVE
VICE PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and
* Director September 19, 1997
- ------------------------------------ (Principal
ROBERT E. PARSONS, JR. Executive Officer)
Executive Vice
* President and September 19, 1997
- ------------------------------------ Director
CHRISTOPHER G. TOWNSEND
Executive Vice
* President September 19, 1997
- ------------------------------------
CHRISTOPHER J. NASSETTA
Senior Vice
* President and September 19, 1997
- ------------------------------------ Treasurer
BRUCE D. WARDINSKI (Principal
Financial Officer)
Vice President and
* Corporate September 19, 1997
- ------------------------------------ Controller
DONALD D. OLINGER (Principal
Accounting
Officer)
*Attorney-in-Fact
/s/ Christopher G. Townsend
- ------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
HMC Retirement Properties, Inc.
By: /s/ Christopher G. Townsend
-----------------------------------
CHRISTOPHER G. TOWNSEND
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President and Director September 19, 1997
- ------------------------------------- (Principal Executive
CHRISTOPHER G. TOWNSEND Officer)
* Vice President, Chief September 19, 1997
- ------------------------------------- Financial Officer and
ROBERT E. PARSONS, JR. Director (Principal
Financial Officer and
Principal Accounting
Officer)
* Vice President and Director September 19, 1997
- -------------------------------------
CHRISTOPHER J. NASSETTA
</TABLE>
*Attorney-in-fact
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
HMH Pentagon Corporation
By: /s/ Christopher G. Townsend
----------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President (Principal September 19, 1997
- ------------------------------------- Executive Officer
CHRISTOPHER J. NASSETTA and Principal
Financial Officer)
* Vice President and September 19, 1997
- ------------------------------------- Director (Principal
ROBERT E. PARSONS, JR. Accounting Officer)
* Vice President and September 19, 1997
- ------------------------------------- Director
CHRISTOPHER G. TOWNSEND
* Vice President and September 19, 1997
- ------------------------------------- Director
RICHARD A. BURTON
</TABLE>
*Attorney-in-Fact
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANTS HAVE EACH DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
BETHESDA, STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
Marriott SBM Two Corporation
By: /s/ Christopher G. Townsend
-----------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President and September 19, 1997
- ------------------------------------- Director (Principal
ROBERT E. PARSONS, JR. Executive Officer)
* Vice President and September 19, 1997
- ------------------------------------- Director (Principal
CHRISTOPHER J. NASSETTA Accounting Officer
and Principal
Financial Officer)
* Vice President and September 19, 1997
- ------------------------------------- Director
CHRISTOPHER G. TOWNSEND
</TABLE>
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
Host Airport Hotels, Inc.
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President and Director September 19, 1997
- ------------------------------------- (Principal Executive
CHRISTOPHER J. NASSETTA Officer)
* Vice President and Director September 19, 1997
- ------------------------------------- (Principal Financial
ROBERT E. PARSONS, JR. Officer and Principal
Accounting Officer)
* Vice President and Director September 19, 1997
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
HMH Marina, Inc.
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Principal
* Executive Officer) September 19, 1997
- -------------------------------------
ROBERT E. PARSONS, JR.
Vice President and
* Director September 19, 1997
- -------------------------------------
CHRISTOPHER G. TOWNSEND
Vice President and
* Director (Principal September 19, 1997
- ------------------------------------- Accounting Officer
CHRISTOPHER J. NASSETTA and Principal
Financial Officer)
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
HMH Rivers, Inc.
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and
* Director (Principal September 19, 1997
- ------------------------------------- Executive Officer)
CHRISTOPHER G. TOWNSEND
Vice President and
* Director (Principal September 19, 1997
- ------------------------------------- Accounting Officer
ROBERT E. PARSONS, JR. and Principal
Financial Officer)
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
HMC SFO, Inc.
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND
VICE PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and
* Director (Principal September 19, 1997
- ------------------------------------- Executive Officer)
CHRISTOPHER J. NASSETTA
Vice President and
* Director (Principal September 19, 1997
- ------------------------------------- Accounting Officer
CHRISTOPHER G. TOWNSEND and Principal
Financial Officer)
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
HMC AP Canada, Inc.
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Principal
* Executive Officer) September 19,
- ------------------------------------- 1997
ROBERT E. PARSONS, JR.
Vice President and
* Director September 19,
- ------------------------------------- 1997
CHRISTOPHER G. TOWNSEND
Vice President and
* Treasurer September 19,
- ------------------------------------- (Principal 1997
BRUCE D. WARDINSKI Financial and
Accounting Officer)
Director
* September 19,
- ------------------------------------- 1997
JOAN C. G. KENNEDY
Director
* September 19,
- ------------------------------------- 1997
ERNEST D. MCNEE
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
Host of Houston 1979
Host of Boston, Ltd.
Host of Houston, Ltd.
By: Host Airport Hotels, Inc. as
General Partner
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and
* Director (Principal September 19,
- ------------------------------------- Executive Officer) 1997
CHRISTOPHER J. NASSETTA
Vice President and
* Director (Principal September 19,
- ------------------------------------- Financial Officer 1997
ROBERT E. PARSONS, JR. and Principal
Accounting Officer)
Vice President and
* Director September 19,
- ------------------------------------- 1997
CHRISTOPHER G. TOWNSEND
Attorney-in-Fact:
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA,
STATE OF MARYLAND, ON SEPTEMBER 19, 1997.
Marriott Financial Services, Inc.
By: /s/ Christopher G. Townsend
---------------------------------
CHRISTOPHER G. TOWNSEND VICE
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and
* Director (Principal September 19,
- ------------------------------------- Executive Officer) 1997
ROBERT E. PARSONS, JR.
Vice President
* (Principal September 19,
- ------------------------------------- Financial Officer 1997
CHRISTOPHER J. NASSETTA and Principal
Accounting Officer)
Vice President and
* Director September 19,
- ------------------------------------- 1997
Attorney-in-Fact:
CHRISTOPHER G. TOWNSEND
/s/ Christopher G. Townsend
- -------------------------------------
CHRISTOPHER G. TOWNSEND
</TABLE>
II-14
<PAGE>
SCHEDULE III
PAGE 1 OF 2
HMH PROPERTIES, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
JANUARY 3, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT
INITIAL COSTS JANUARY 3, 1997
------------------ SUBSEQUENT ------------------------- DATE OF
BUILDING AND COSTS BUILDING AND ACCUMULATED COMPLETION OF DATE DEPRECIATION
DESCRIPTION DEBT LAND IMPROVEMENTS CAPITALIZED LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED LIFE
----------- ---- ----- ------------ ----------- ----- ------------ ------ ------------ ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Full-service
Hotels:
Marriott World
Trade Center
New York, NY... $75 $ -- $ 135 $ 1 $ -- $ 136 $ 136 $ (3) 1981 1995 40
Other full-
service
properties,
each less than
5% of total.... 23 166 986 198 171 1,179 1,350 (163) Various Various 40
--- ----- ------ ---- ----- ------ ------ -----
TOTAL........... $98 $ 166 $1,121 $199 $ 171 $1,315 $1,486 $(166)
=== ===== ====== ==== ===== ====== ====== =====
</TABLE>
S-1
<PAGE>
SCHEDULE III
PAGE 2 OF 2
HMH PROPERTIES, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
JANUARY 3, 1997
(IN MILLIONS)
NOTES:
(A) The change in total cost of properties for the fiscal years ended January
3, 1997, December 29, 1995 and December 30, 1994 is as follows:
<TABLE>
<S> <C>
Balance at December 31, 1993......................................... $1,466
Additions:
Acquisitions..................................................... 437
Capital expenditures............................................. 35
Deductions:
Dispositions and other........................................... (435)
------
Balance at December 30, 1994......................................... 1,503
Additions:
Acquisitions..................................................... 304
Capital expenditures............................................. 15
Deductions:
Dispositions and other........................................... (366)
------
Balance at December 29, 1995......................................... 1,456
Additions:
Acquisitions..................................................... 259
Capital expenditures............................................. 55
Transfers from construction in progress.......................... 28
Deductions:
Dispositions and other........................................... (312)
------
Balance at January 3, 1997........................................... $1,486
======
</TABLE>
(B) The change in accumulated depreciation and amortization for the fiscal
years ended January 3, 1997, December 29, 1995 and December 30, 1994 is as
follows:
<TABLE>
<S> <C>
Balance at December 31, 1993........................................... $146
Depreciation and amortization........................................ 34
Dispositions and other............................................... (27)
----
Balance at December 30, 1994........................................... 153
Depreciation and amortization........................................ 34
Dispositions and other............................................... (27)
----
Balance at December 29, 1995........................................... 160
Depreciation and amortization........................................ 37
Dispositions and other............................................... (31)
----
Balance at January 3, 1997............................................. $166
====
</TABLE>
(C) The aggregate cost of properties for Federal income tax purposes is
approximately $1,349 million at January 3, 1997.
(D) The total cost of properties excludes construction-in-progress properties.
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
*4.1 Indenture dated as of July 15, 1997, by and among the Company,
HMC Retirement Properties, Inc., Marriott Financial Services,
Inc., HMH Pentagon Corporation, Marriott SBM Two Corporation,
Host Airport Hotels, Inc., HMH Rivers, Inc., HMH Marina, Inc.,
HMC SFO, Inc., HMC AP Canada, Inc., Host of Houston, Ltd., Host
of Boston, Ltd. and Host of Houston 1979 as Subsidiary
Guarantors, Marine Midland Bank, as Trustee, Marine Midland
Bank, as Paying Agent and Marine Midland Bank, as Collateral
Agent, with respect to the 8 7/8% Senior Notes due 2007 of the
Company
**4.2 Indenture dated as of May 25, 1995, as amended from time to
time, by and among the Company, HMC Retirement Properties, Inc.,
HMH Marina, Inc., HMH Pentagon Corporation, HMH Rivers, Inc.,
Host Airport Hotels, Inc., Marriott Financial Services, Inc.,
Marriott SBM Two Corporation, Host of Boston, Ltd., Host of
Houston, Ltd., Host of Houston 1979, HMC AP Canada, Inc., HMC
SFO, Inc., Marine Midland Bank, as trustee, Marine Midland Bank,
as Collateral Agent, and The Bankers Trust Company, as Registrar
and Paying Agent.
**4.3 Indenture dated as of December 20, 1995, as amended from time to
time, by and among the Company, as a successor of HMC
Acquisition Properties, Inc., HMC Retirement Properties, Inc.,
HMH Marina, Inc., HMH Pentagon Corporation, HMH Rivers, Inc.,
Host Airport Hotels, Inc., Marriott Financial Services, Inc.,
Marriott SBM Two Corporation, Host of Boston, Ltd., Host of
Houston, Ltd., Host of Houston 1979, HMC AP Canada, Inc., HMC
SFO, Inc., Marine Midland Bank, as trustee, Marine Midland Bank,
as Collateral Agent, and Marine Midland Bank, as Registrar and
Paying Agent.
*4.4 Specimen Certificate of 8 7/8% Series A Senior Note due 2007
(included in Exhibit 4.1 hereto)
*4.5 Specimen Certificate of 8 7/8% Series B Senior Note due 2007
(substantially in the form of Exhibit 4.4).
**5.1 Opinion of Christopher G. Townsend, Esq. regarding the validity
of the Exchange Notes, including consent
**8.1 Opinion of Latham & Watkins regarding certain Federal income tax
matters, including consent
*10.1 Purchase Agreement, dated as of July 10, 1997 by and among the
Company, HMH, HMC Retirement Properties, Inc., Marriott
Financial Services, Inc., HMH Pentagon Corporation, Marriott SBM
Two Corporation, Host Airport Hotels, Inc., HMH Rivers, Inc.,
HMH Marina, Inc., HMC SFO, Inc., HMC AP Canada, Inc., Host of
Houston, Ltd., Host of Boston, Ltd. and Host of Houston 1979, as
Subsidiary Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation, BT Securities Corporation, Goldman Sachs
& Co., Montgomery Securities as the Initial Purchasers
*10.2 Registration Rights Agreement, dated as of July 15, 1997, by and
between the Company, HMC Retirement Properties, Inc., Marriott
Financial Services, Inc., HMH Pentagon Corporation, Marriott SBM
Two Corporation, Host Airport Hotels, Inc., HMH Rivers, Inc.,
HMH Marina, Inc., HMC SFO, Inc., HMC AP Canada, Inc., Host of
Houston, Ltd., Host of Boston, Ltd. and Host of Houston 1979, as
Subsidiary Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation, BT Securities Corporation, Goldman Sachs
& Co., Merrill Lynch & Co. and Montgomery Securities as the
Initial Purchasers
*12.1 Ratio of Earnings to Fixed Charges of HMH Properties, Inc.
**23.1 Consent of Independent Public Accountants
*25.1 Statement of Eligibility and Qualifications on Form T-1 of
Marine Midland Bank, as Trustee, under the Indenture (No. 22-
26838)
*99.1 Form of Letter of Transmittal with respect to the Exchange Offer
*99.2 Form of Notice of Guaranteed Delivery
*99.3 Form of Letter to Clients
*99.4 Form of Letter to Nominee
*99.5 Form for Certificate of Taxpayer Identification Number on
Substitute Form W-9
</TABLE>
- ---------------------
*Previously filed
** Filed herewith
<PAGE>
Exhibit 4.2
HMH PROPERTIES, INC.,
Issuer,
and
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
MARINE MIDLAND BANK,
Trustee
AMENDED AND RESTATED INDENTURE
Dated as of July 10, 1997
$600,000,000
9 1/2% Senior Secured Notes due 2005
<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. Incorporation By Reference of TIA...................................................19
SECTION 1.3. Rules of Construction...............................................................19
ARTICLE II. THE SECURITIES...............................................................................20
SECTION 2.1. Form and Dating.....................................................................20
SECTION 2.2. Execution and Authentication........................................................20
SECTION 2.3. Registrar and Paying Agent..........................................................21
SECTION 2.4. Paying Agent to Hold Assets in Trust................................................21
SECTION 2.5. Securityholder Lists................................................................21
SECTION 2.6. Transfer and Exchange...............................................................22
SECTION 2.7. Replacement Securities..............................................................26
SECTION 2.8. Outstanding Securities..............................................................27
SECTION 2.9. Treasury Securities.................................................................27
SECTION 2.10. Temporary Securities................................................................27
SECTION 2.11. Cancellation........................................................................27
SECTION 2.12. Defaulted Interest..................................................................27
ARTICLE III. REDEMPTION...................................................................................28
SECTION 3.1. Optional Redemption.................................................................28
SECTION 3.2. Notices to Trustee and Paying Agent.................................................28
SECTION 3.3. Selection of Securities to Be Redeemed..............................................29
SECTION 3.4. Notice of Redemption................................................................29
SECTION 3.5. Effect of Notice of Redemption......................................................30
SECTION 3.6. Deposit of Redemption Price.........................................................30
SECTION 3.7. Securities Redeemed in Part.........................................................30
ARTICLE IV. COVENANTS....................................................................................31
SECTION 4.1. Payment of Securities...............................................................31
SECTION 4.2. Maintenance of Office or Agency.....................................................31
SECTION 4.3. Limitation on Restricted Payments...................................................31
SECTION 4.4. Corporate Existence.................................................................32
SECTION 4.5. Payment of Taxes and Other Claims...................................................32
SECTION 4.6. Maintenance of Properties and Insurance.............................................32
SECTION 4.7. Compliance Certificate; Notice of Default...........................................33
SECTION 4.8. Reports.............................................................................33
SECTION 4.9. Limitation on Status as Investment Company..........................................33
SECTION 4.10. Limitation on Transactions with Affiliates..........................................33
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock..34
SECTION 4.12. Limitations on Dividends and other Payment Restrictions Affecting Subsidiaries......35
SECTION 4.13. Limitations on Liens................................................................35
SECTION 4.14. Limitation on Sale of Assets and Subsidiary Stock...................................35
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.............................................38
SECTION 4.16. Limitation on Investments in Non-Guarantor Subsidiaries.............................38
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE V. SUCCESSOR CORPORATION........................................................................39
SECTION 5.1. Limitation on Merger, Sale or Consolidation.........................................39
SECTION 5.2. Successor Corporation Substituted...................................................39
ARTICLE VI. EVENTS OF DEFAULT AND REMEDIES...............................................................39
SECTION 6.1. Events of Default...................................................................39
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.............................41
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee.....................42
SECTION 6.4. Trustee May File Proofs of Claim....................................................42
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.........................43
SECTION 6.6. Priorities..........................................................................43
SECTION 6.7. Limitation on Suits.................................................................43
SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium and Interest...........44
SECTION 6.9. Rights and Remedies Cumulative......................................................44
SECTION 6.10. Delay or Omission Not Waiver........................................................44
SECTION 6.11. Control by Holders..................................................................44
SECTION 6.12. Waiver of Past Default..............................................................45
SECTION 6.13. Undertaking for Costs...............................................................45
SECTION 6.14. Restoration of Rights and Remedies..................................................45
ARTICLE VII. TRUSTEE......................................................................................45
SECTION 7.1. Duties of Trustee...................................................................46
SECTION 7.2. Rights of Trustee...................................................................46
SECTION 7.3. Individual Rights of Trustee........................................................47
SECTION 7.4. Trustee's Disclaimer................................................................47
SECTION 7.5. Notice of Default...................................................................48
SECTION 7.6. Reports by Trustee to Holders.......................................................48
SECTION 7.7. Compensation and Indemnity..........................................................48
SECTION 7.8. Replacement of Trustee..............................................................49
SECTION 7.9. Successor Trustee by Merger, Etc....................................................49
SECTION 7.10. Eligibility; Disqualification.......................................................50
SECTION 7.11. Preferential Collection of Claims Against Company...................................50
ARTICLE VIII. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.....................................................50
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance............................50
SECTION 8.2. Legal Defeasance and Discharge......................................................50
SECTION 8.3. Covenant Defeasance.................................................................50
SECTION 8.4. Conditions to Legal or Covenant Defeasance..........................................51
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust; Other
Miscellaneous Provisions..........................................................52
SECTION 8.6. Repayment to the Company............................................................52
SECTION 8.7. Reinstatement.......................................................................52
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS..........................................................53
SECTION 9.1. Supplemental Indentures Without Consent of Holders..................................53
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with Consent of Holders.............53
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 9.3. Compliance with TIA.................................................................54
SECTION 9.4. Revocation and Effect of Consents...................................................55
SECTION 9.5. Notation on or Exchange of Securities...............................................55
SECTION 9.6. Trustee to Sign Amendments, Etc.....................................................55
ARTICLE X. RESERVED.....................................................................................56
ARTICLE XI. RIGHT TO REQUIRE REPURCHASE..................................................................56
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a Change of Control...........56
ARTICLE XII. SECURITY.....................................................................................58
SECTION 12.1. Pledge of the Pledged Shares........................................................58
SECTION 12.2. Delivery of Pledged Shares and Subsequent Changes Affecting the Pledged Shares......59
SECTION 12.3. Supplements, Further Assurances.....................................................60
SECTION 12.4. Voting Rights; Dividends; Etc.......................................................60
SECTION 12.5. Collateral Agent Appointed Attorney-In-Fact.........................................61
SECTION 12.6. Collateral Agent May Perform........................................................62
SECTION 12.7. Reasonable Care.....................................................................62
SECTION 12.8. Remedies Upon Default; Decisions Relating to Exercise of Remedies; Limitations on
Exercise of Remedies..............................................................62
SECTION 12.9. Application of Proceeds.............................................................64
SECTION 12.10. Recording, Etc......................................................................64
SECTION 12.11. Termination.........................................................................65
SECTION 12.12. Continuing Security Interest........................................................65
SECTION 12.13. The Collateral Agent................................................................65
SECTION 12.14. Agreement With Collateral Agent.....................................................68
SECTION 12.15. Modifications at Such Time as any Permitted Lien Indebtedness Ceases to be
Outstanding.......................................................................68
ARTICLE XIII. GUARANTY.....................................................................................68
SECTION 13.1. Guaranty............................................................................68
SECTION 13.2. Execution and Delivery of Guaranty..................................................70
SECTION 13.3. Future Subsidiary Guarantors........................................................70
SECTION 13.4. Subsidiary Guarantor May Consolidate, Etc., on Certain Terms........................70
SECTION 13.5. Release of Subsidiary Guarantors and Collateral.....................................71
SECTION 13.6. Certain Bankruptcy Events...........................................................72
ARTICLE XIV. MISCELLANEOUS................................................................................72
SECTION 14.1. TIA Controls........................................................................72
SECTION 14.2. Notices.............................................................................72
SECTION 14.3. Communications by Holders with Other Holders........................................73
SECTION 14.4. Certificate and Opinion as to Conditions Precedent..................................73
SECTION 14.5. Statements Required in Certificate or Opinion.......................................74
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar...........................................74
SECTION 14.7. Non-Business Days...................................................................74
SECTION 14.8. Governing Law.......................................................................74
SECTION 14.9. No Adverse Interpretation of Other Agreements.......................................75
SECTION 14.10. No Recourse against Others..........................................................75
SECTION 14.11. Successors..........................................................................75
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 14.12. Duplicate Originals.................................................................75
SECTION 14.13. Severability........................................................................75
SECTION 14.14. Table of Contents, Headings, Etc....................................................75
SECTION 14.15. Qualification of Indenture..........................................................75
SECTION 14.16. Registration Rights.................................................................75
SIGNATURES .............................................................................................76
EXHIBIT A ............................................................................................A-1
</TABLE>
iv
<PAGE>
This AMENDED AND RESTATED INDENTURE, dated as of July 10, 1997, by and
among HMH Properties, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors referred to below and Marine Midland Bank, as Trustee.
WHEREAS, the Company, such Subsidiary Guarantors and the Trustee entered
into that certain Indenture dated as of May 25, 1995, as amended by that certain
First Supplemental Indenture dated as of October 20, 1995 and that certain
Second Supplemental Indenture dated as of June 6, 1997 and wish further to amend
and restate such Indenture to the extent set forth herein.
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Company's 9 1/2% Series
A Senior Secured Notes due 2005 and the Company's 9 1/2% Series B Senior Secured
Notes due 2005 exchanged for the 9 1/2% Series A Senior Secured Notes due 2005:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acceleration Notice" shall have the meaning specified in Section 6.2.
-------------------
"Acceptance Amount" shall have the meaning specified in Section 4.14.
-----------------
"Acquired Indebtedness" means Indebtedness of any person existing at the
---------------------
time such person becomes a Subsidiary of the Company or is merged or
consolidated into or with the Company or one of its Subsidiaries or the assets
of such person shall have been acquired by the Company or a Subsidiary of the
Company, and not incurred in connection with or in anticipation of, such merger
or consolidation or of such person becoming a Subsidiary of the Company, or such
assets being acquired by the Company or a Subsidiary of the Company.
"Acquisition" means the purchase or other acquisition of any
-----------
person or substantially all the assets of any person by any other person,
whether by purchase, merger, consolidation, or other transfer, and whether or
not for consideration.
"Acquisitions" means HMC Acquisition Properties, Inc., a Delaware
------------
corporation and an indirect subsidiary of Host Marriott Corporation.
"Acquisitions Issue Date" means the date of first issuance of the
-----------------------
Acquisitions Notes under the Acquisitions Indenture.
"Acquisitions Indenture" means the Indenture dated as of December 20, 1995
----------------------
among Acquisitions, the Initial Guarantor named therein and Marine Midland Bank,
as trustee, pursuant to which Acquisitions issued the Acquisitions Notes, as
amended and restated.
"Acquisitions Notes" means the 9% Senior Notes due 2007 of Acquisitions,
------------------
which will become the principal obligation of the Company upon consummation of
the Merger.
"Affiliate" means any person directly or indirectly controlling or
---------
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise; provided, that a beneficial owner of 10% or more of the total
voting power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"Affiliate Transaction" shall have the meaning specified in Section 4.10.
---------------------
1
<PAGE>
"Agent" means any authenticating agent, Registrar, Paying
-----
Agent or transfer agent.
"Agreement With Collateral Agent" shall have the meaning
-------------------------------
specified in Section 12.14.
"Amendment Date" means the date upon which the amendments
--------------
effected by that certain Supplemental Indenture dated July 10, 1997 by and among
the Company, the Subsidiary Guarantors and the Trustee modifying the terms of
the Indenture became operative.
"Applicable Percentage" means (i) 15% for the 12 month period
---------------------
commencing on the Amendment Date, and (ii) 20% thereafter.
"Asset Sale" shall have the meaning specified in Section 4.14.
----------
"Asset Sale Offer" shall have the meaning specified in Section
----------------
4.14.
"Average Life" means, as of the date of determination, with
------------
respect to any security or instrument, the quotient obtained by dividing (i) the
sum of the products obtained by multiplying (a) the number of years from the
date of determination to the date of each successive scheduled principal (or
redemption) payment of such security or instrument times (b) the amount of such
respective principal (or redemption) payment, by (ii) the sum of all such
principal (or redemption) payments.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar
--------------
Federal, state or foreign law for the relief of debtors.
"Beneficial Owner" or "beneficial ownership" for purposes of
---------------- --------------------
the definition of Change of Control has the meaning attributed to it in Rules
13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether
or not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any Person, the
------------------
Board of Directors of such Person or any committee of the Board of Directors of
such Person authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
----------------
adopted resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
------------
and Friday which is not a day on which banking institutions in New York, New
York are authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means rental obligations under
----------------------------
a lease that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any
-------------
and all shares, interests, rights to purchase (other than convertible or
exchangeable Indebtedness), warrants, options, participations or other
equivalents of or interests (however designated) in stock issued by that
corporation.
"Cash" or "cash" means such coin or currency of the United
----
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Cash Equivalents" means (i) securities issued or directly and
----------------
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America are pledged in support thereof), or (ii) time deposits and
certificates of deposit and
2
<PAGE>
commercial paper issued by the parent corporation of any domestic commercial
bank of recognized standing having capital and surplus in excess of $500 million
and commercial paper issued by others rated at the time of purchase at least A-2
or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by
Moody's and in each case maturing within one year after the date of acquisition.
"Change of Control" means (i) any sale, transfer or other
-----------------
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Company or Host Marriott (for so long as Host Marriott is a Parent
of the Company), on a consolidated basis, in one transaction or a series of
related transactions, if, immediately after giving effect to such transaction,
any "person" or "group" (as such terms are used for purposes of Sections 13 (d)
and 14 (d) of the Exchange Act, whether or not applicable) other than an
Excluded Person is or becomes the "beneficial owner," directly or indirectly, of
more than 50% of the total voting power in the aggregate normally entitled to
vote in the election of directors, managers, or trustees, as applicable, of the
transferee, (ii) any "Person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) other
than an Excluded Person is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate of all
classes of Capital Stock of the Company or Host Marriott (for so long as Host
Marriott is a Parent of the Company) then outstanding normally entitled to vote
in elections of directors, (iii) during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of such 12-month period
constituted the Board of Directors of the Company or Host Marriott (for so long
as Host Marriott is a Parent of the Company) (together with any new directors
whose election by such Board or whose nomination for election by the
shareholders of the Company or Host Marriott, as applicable, was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or Host Marriott, as
applicable, then in office, (iv) a "change of control" or similar event shall
occur under any other issue of Indebtedness of the Company, Host Marriott (for
so long as Host Marriott is a Parent of the Company) or their respective
Subsidiaries with an aggregate principal amount in excess of $20 million, or (v)
in the case of the Company only, Host Marriott ceases to own directly or
indirectly a majority of the equity interests of the Company; provided, however,
a sale by the Company of all of the Courtyards or Residence Inns, or the pro
rata distribution by Host Marriott to its shareholders of shares of the Company
or shares of any of Host Marriott's other Subsidiaries, including without
limitation HMTP, or a sale of all or substantially all of the assets of HMTP by
Host Marriott shall not, in and of itself, constitute a Change of Control for
purposes of this paragraph.
"Change of Control Offer" shall have the meaning specified in
-----------------------
Section 11.1.
"Change of Control Offer Period" shall have the meaning
------------------------------
specified in Section 11.1.
"Change of Control Payment" shall have the meaning specified
-------------------------
in Section 11.1.
"Change of Control Payment Date" shall have the meaning
------------------------------
specified in Section 11.1.
"Change of Control Put Date" shall have the meaning specified
--------------------------
in Section 11.1.
"Change of Control Triggering Event" means the occurrence of
----------------------------------
both a Change of Control and a Rating Decline.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" means the Pledged Collateral.
----------
"Collateral Agent" means the person named as the "Collateral
----------------
Agent" in Section 12.13 (a), until a successor Collateral Agent shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Collateral Agent" shall mean or include any person who is then
Collateral Agent hereunder.
"Commission" means the SEC.
----------
3
<PAGE>
"Company" means the party named as such in this Indenture
-------
until a successor replaces it pursuant to the Indenture, and thereafter means
such successor.
"Computation Period" shall have the meaning specified in
------------------
Section 4.3.
"Consolidated Coverage Ratio" of any person on any date of
---------------------------
determination (the "Transaction Date") means the ratio, on a pro forma basis, of
(a) the aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Interest Expense of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense would no longer be
obligations contributing to such person's Consolidated Interest Expense
subsequent to the Transaction Date) during the Reference Period; provided, that
for purposes of such calculation, (i) acquisitions of operations, businesses or
other income-producing assets (including any reinvestment of disposition
proceeds in income producing assets held as of and not disposed on the
Transaction Date) which occurred during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of the Reference Period, (ii) transactions giving
rise to the need to calculate the Consolidated Coverage Ratio shall be assumed
to have occurred on the first day of the Reference Period, (iii) the incurrence
of any Indebtedness or issuance of any Disqualified Capital Stock during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date (and the application of the proceeds therefrom to the extent
used to refinance or retire other Indebtedness or invested in income-producing
assets held as of and not disposed on the Transaction Date) shall be assumed to
have occurred on the first day of such Reference Period, and (iv) the
Consolidated Interest Expense of such person attributable to interest on any
Indebtedness or dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be computed on a pro forma basis as if the
average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless such
Person or any of its Subsidiaries is a party to an Interest Swap and Hedging
Obligation (which shall remain in effect for the 12-month period immediately
following the Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether higher or lower)
shall be used.
"Consolidated EBITDA" means, for any Person and period, the
-------------------
Consolidated Net Income of such Person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of (A)(i) Consolidated Interest Expense,
(ii) provisions for taxes based on income, (iii) depreciation and amortization
expense (provided, that the depreciation and amortization expense of a
Consolidated Subsidiary that is not wholly owned shall be included only to the
extent of the interest of the referent person in such Subsidiary), (iv) any
other noncash items reducing the Consolidated Net Income of such Person for such
period, (v) any dividends or distributions during such period to such Person or
a Consolidated Subsidiary of such Person from any other Person which is not a
Subsidiary of such Person or which is accounted for by such Person by the equity
method of accounting, to the extent that (a) such dividends or distributions are
not included in the Consolidated Net Income of such Person for such period and
(b) (x) the sum of such dividends and distributions, plus the aggregate amount
of dividends or distributions from such other Person since the date of this
Indenture that have been included in Consolidated EBITDA pursuant to this clause
(v), do not exceed (y) the cumulative net income of such other Person
attributable to the equity interests of the Person (or Subsidiary of the Person)
whose Consolidated EBITDA is being determined, and (vi) any cash receipts of
such Person or a Consolidated Subsidiary of such Person during such period that
represent items included in Consolidated Net Income of such Person for a prior
period which were excluded from Consolidated EBITDA of such Person for such
prior period by virtue of clause (B) of this definition, minus (B) the sum of
(i) all noncash items increasing the Consolidated Net Income of such Person for
such period and (ii) any cash expenditures of such Person during such period to
the extent such cash expenditures (x) did not reduce the Consolidated Net Income
of such Person for such period and (y) were applied against reserves or accruals
that constituted noncash items reducing the Consolidated Net Income of such
Person when reserved or accrued; all as determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
4
<PAGE>
"Consolidated Interest Expense" of any person means, for any
-----------------------------
period, the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations but excluding
the amortization of fees or expenses incurred in order to consummate the sale of
the Securities as described herein) of such person and its Consolidated
Subsidiaries during such period, including (i) original issue discount and
noncash interest payments or accruals on any Indebtedness, (ii) the interest
portion of all deferred payment obligations, and (iii) all commissions,
discounts and other fees and charges owed with respect to bankers' acceptances
and letters of credit financings and Interest Swap and Hedging Obligations, in
each case to the extent attributable to such period, and (b) the amount of
dividends accrued or payable by such person or any of its Consolidated
Subsidiaries in respect of Disqualified Capital Stock (other than by
Subsidiaries of such person to such person or such person' s Subsidiary
Guarantors); provided, however, that interest, dividends or other payments or
accruals of a Consolidated Subsidiary that is not wholly owned shall be included
only to the extent of the interest of the referent Person in such Subsidiary.
For purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by the
Company to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP and (y) interest expense attributable to any
Indebtedness represented by the guaranty by such person or a Subsidiary of such
person of an obligation of another person shall be deemed to be the interest
expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person
-----------------------
for any period, the net income (or loss) of such Person and its Consolidated
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, that (i) net income (or loss) of any other Person which is
not a Subsidiary of the Person or is accounted for by such specified Person by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid to the specified Person or a
Subsidiary of such Person, (ii) the net income (or loss) of any other Person
acquired by such specified Person or a Subsidiary of such Person in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iii) all gains and losses which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any capital stock),
shall be excluded, and (iv) the net income, if positive, of any of such Person's
Consolidated Subsidiaries (other than Non-Guarantor Subsidiaries) to the extent
that the declaration or payment of dividends or similar distributions is not at
the time permitted by operation of the terms of its charter or bylaws or any
other agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary shall be
excluded; provided, however, in the case of exclusions from Consolidated Net
Income set forth in clauses (ii) , (iii) and (iv), such amounts shall be
excluded only to the extent included in computing such net income (or loss) in
accordance with GAAP and without duplication.
"Consolidated Net Worth" of any person at any date means the
----------------------
aggregate consolidated stockholders' equity of such person (plus amounts of
equity attributable to preferred stock) and its Consolidated Subsidiaries, as
would be shown on the consolidated balance sheet of such person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity) (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such person and its Consolidated
Subsidiaries, (b) all upward revaluations and other write-ups in the book value
of any asset of such person or a Consolidated Subsidiary of such person
subsequent to the Issue Date, and (c) all investments in Subsidiaries that are
not Consolidated Subsidiaries and in persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any person, each
-----------------------
Subsidiary of such person (whether now existing or hereafter created or
acquired) the financial statements of which are consolidated for financial
statement reporting purposes with the financial statements of such person in
accordance with GAAP.
"Courtyards" means the 33 Courtyard properties owned by the
----------
Company or its Subsidiaries at the Issue Date.
"Covenant Defeasance" shall have the meaning specified in
-------------------
Section 8.3.
5
<PAGE>
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Debt Incurrence Ratio" shall have the meaning specified in
---------------------
Section 4.11.
"Default" means any event or condition that is, or after
-------
notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in
------------------
Section 2.12.
"Definitive Securities" means Securities that are in the form
---------------------
of Security attached hereto as Exhibit A that do not include the information
called for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or
----------
issued in whole or in part in global form, the person specified in Section 2.3
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Capital Stock" means (a) except as set forth in
--------------------------
clause (b), with respect to any person, Capital Stock of such person that, by
its terms or by the terms of any security into which it is convertible,
exercisable or exchangeable, is, or upon the happening of an event or the
passage of time would be, required to be redeemed or repurchased (including at
the option of the holder thereof) by such person or any of its Subsidiaries, in
whole or in part, on or prior to the Stated Maturity of the Securities and (b)
with respect to any Subsidiary of such person (including with respect to any
Subsidiary of the Company), any Capital Stock other than any common stock with
no preference or redemption or repayment provisions.
"DTC" shall have the meaning specified in Section 2.3.
---
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section
----------------
6.1.
"Excess Proceeds" shall have the meaning specified in Section
---------------
4.14.
"Excess Proceeds Date" shall have the meaning specified in
--------------------
Section 4.14.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 9 1/2% Series B Senior Secured
-------------------
Notes due 2005, issued pursuant to this Indenture in connection with the offer
to exchange the Initial Securities made by the Company and the Subsidiary
Guarantors pursuant to the Registration Rights Agreement.
"Excluded Guaranty Subsidiary" shall have the meaning
----------------------------
specified in Section 13.3.
"Excluded Person" means, in the case of the Company, Host
---------------
Marriott or any wholly owned subsidiary of Host Marriott.
"Excluded Share Subsidiary" shall have the meaning specified
-------------------------
in Section 12.1.
"Excluded Shares" shall have the meaning specified in Section
---------------
12.1.
6
<PAGE>
"Exempted Affiliate Transactions" means (a) employee
-------------------------------
compensation arrangements approved by a majority of independent (as to such
transactions) members of the Board of Directors of the Company, (b) payments of
reasonable directors' fees and expenses, (c) transactions solely between the
Company and any of its Subsidiaries or solely among Subsidiaries of the Company,
(d) Permitted Tax Payments, (e) Permitted Sharing Arrangements, (f) Procurement
Contracts, (g) Management Agreements and (h) Restricted Payments permitted under
Section 4.3.
"Existing Assets" means assets of the Company and its
---------------
Subsidiaries existing at the Amendment Date (other than cash, Cash Equivalents
or inventory held for resale in the ordinary course of business) and including
proceeds of any sale, transfer or other disposition of such assets and assets
acquired in whole or in part with proceeds from the sale, transfer or other
disposition of any such assets.
"Existing Indebtedness" means, with respect to the Company and
---------------------
its Subsidiaries, Indebtedness existing or outstanding at the Issue Date.
"Fair Market Value" or "fair market value" means, with respect
----------------- -----------------
to any assets or properties, the amount at which such assets or properties would
change hands between a willing buyer and a willing seller, within a commercially
reasonable time, each having reasonable knowledge of the relevant facts, neither
being under a compulsion to sell or buy, as such amount is determined by (i) the
Board of Directors of the Company acting in good faith or (ii) an appraisal or
valuation firm of national or regional standing selected by the Company, with
experience in the appraisal or valuation of properties or assets of the type for
which Fair Market Value is being determined.
"Final Put Date" shall have the meaning specified in Section
--------------
4.14.
"Future Subsidiary Guarantor" shall have the meaning specified
---------------------------
in Section 13.3.
"Future Subsidiary Guarantor Shares" shall have the meaning
----------------------------------
specified in Section 12.1.
"GAAP" means United States generally accepted accounting
----
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession as in effect from time to time.
"Global Security" means a Security that contains the paragraph
---------------
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of Security attached hereto as Exhibit A.
"Guaranty" shall have the meaning provided in Section 13.1.
--------
"HMTP" means Host Marriott Travel Plazas, Inc., a Delaware
----
corporation.
"Holder" or "Securityholder" means the Person in whose name a
------
Security is registered on the Registrar's books.
"Host Marriott" means Host Marriott Corporation, a Delaware
-------------
corporation and the ultimate Parent of the Company.
"Incur" or "incur" shall have the meaning specified in Section
----- -----
4.11.
"Incurrence Date" shall have the meaning specified in Section
---------------
4.11.
"Indebtedness" of any person means, without duplication, (a)
------------
all liabilities and obligations, contingent or otherwise, of such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures
7
<PAGE>
or similar instruments, (iii) representing the balance deferred and unpaid of
the purchase price of any property or services, except those incurred in the
ordinary course of its business that would constitute ordinarily a trade payable
to trade creditors, (iv) evidenced by bankers' acceptances, (v) for the payment
of money relating to a Capitalized Lease Obligation, or (vi) evidenced by a
letter of credit or a reimbursement obligation of such person with respect to
any letter of credit; (b) all net obligations of such person under Interest Swap
and Hedging Obligations; (c) all liabilities and obligations of others of the
kind described in the preceding clause (a) or (b) that such person has
guaranteed or that is otherwise its legal liability or which are secured by any
assets or property of such person; and (d) all obligations to purchase, redeem
or acquire any Capital Stock.
"Indenture" means this Indenture, as amended or supplemented
---------
from time to time in accordance with the terms hereof.
"Initial Distributions" means (i) the distribution to the
---------------------
Company's Parent of all the net proceeds of the sale of the Initial Securities
and (ii) the consummation of the Transfers, whether occurring prior to, on or
after the Issue Date.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette
------------------
Securities Corporation, Goldman, Sachs & Co., BT Securities Corporation,
Citicorp Securities, Inc., Montgomery Securities, Salomon Brothers Inc. and
Smith Barney Inc.
"Initial Securities" means the 9 1/2 % Series A Senior Secured
------------------
Notes due 2005 issued under this Indenture.
"Interest Payment Date" means the stated due date of an
---------------------
installment of interest on the Securities.
"Interest Swap and Hedging Obligation" means any obligation of
------------------------------------
any Person pursuant to any interest rate swaps, caps, collars and similar
arrangements providing protection against fluctuations in interest rates. For
purposes of this Indenture, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such obligation provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligations shall be the net amount so determined, plus
any premium due upon default by such Person.
"Investment" by any person in any other person means (without
----------
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other person or any agreement to make any such acquisition; (b) the making
by such person of any deposit with, or advance, loan or other extension of
credit to, such other person (including the purchase of property from another
person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) other than the guarantees of
Indebtedness of the Company or any Subsidiary to the extent permitted by Section
4.11, the entering into by such person of any guarantee of, or other credit
support or contingent obligation with respect to, Indebtedness or other
liability of such other person; (d) the making of any capital contribution by
such person to such other person; and (e) the designation by the Board of
Directors of the Company of any person to be an Unrestricted Subsidiary. The
Company shall be deemed to make an Investment in an amount equal to the Fair
Market Value of the net assets of any Subsidiary (or, if neither the Company nor
any of its Subsidiaries has theretofore made an Investment in such Subsidiary,
in an amount equal to the Investments being made) at the time that such
Subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a Subsidiary shall
be deemed an Investment valued at its Fair Market Value at the time of such
transfer.
8
<PAGE>
"Investment Grade" means a currently effective rating by S&P
----------------
of BBB- (or subsequent equivalent rating) or higher, and Moody's of Baa3 (or
subsequent equivalent rating) or higher (or if S&P or Moody's or both shall not
make a rating of the Securities publicly available, a nationally recognized
securities rating agency or agencies, as the case may be, reasonably selected by
the Company in good faith, which shall be substituted for S&P or Moody's or
both, as the case may be).
"Issue Date" means the date of first issuance of the
----------
Securities under this Indenture.
"Leaseback Subsidiary" means a Subsidiary of the Company which
--------------------
has no assets other than (i) leases, management agreements, rights to deferred
sales proceeds, and other rights pertaining to Residence Inns sold to an
unaffiliated person by the Company or its Subsidiaries and leased back by such
Subsidiary, (ii) working capital and other assets associated with the Residence
Inns leased by such Subsidiary and (iii) a de minimis amount of other assets
related to the foregoing.
"Legal Defeasance" shall have the meaning specified in Section
----------------
8.2.
"Lien" means any mortgage, lien, pledge, charge, security
----
interest, or other encumbrance of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Management Agreements" means the management agreements and
---------------------
franchise agreements between the Company and Marriott International or another
person relating to the operation of the Company's lodging properties.
"Marriott International" means Marriott International, Inc., a
----------------------
Delaware corporation, and its Subsidiaries.
"Maturity Date" means, when used with respect to any Security,
-------------
the date specified on such Security as the fixed date on which the final
installment of principal of such Security is due and payable (in the absence of
any acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Offer to
Purchase).
"Merger" means the merger of Acquisitions with and into the
------
Company.
"Moody's" means Moody's Investors Service, Inc. and its
-------
successors.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash
-----------------
Equivalents received by the Company, in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for cash on or
after the Issue Date, the amount of cash originally received by the Company upon
the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, (i) the sum of all
payments, fees, commissions and (in the case of Asset Sales, reasonable and
customary) expenses (including, without limitation, the fees and expenses of
legal counsel and investment banking fees and expenses) incurred in connection
with such Asset Sale or sale of Qualified Capital Stock, and (ii) (in the case
of an Asset Sale only) less the amount (estimated reasonably and in good faith
by the Company) of income, franchise, sales and other applicable taxes required
to be paid by the Company or any of its respective Subsidiaries in connection
with such Asset Sale; provided, however, that in the case of Cash or Cash
Equivalents received, or expenses paid or payable, by a Subsidiary that is not a
wholly owned Subsidiary of the Company, only that portion of the receipts and
expenses which are equal to the Company's proportionate ownership of such
Subsidiary shall be included in calculating Net Cash Proceeds.
9
<PAGE>
"Net Non-Guarantor Investment" means the amount equal to the
----------------------------
aggregate Investments made by the Company and the Subsidiary Guarantors in
Non-Guarantor Subsidiaries from and after the Amendment Date, minus the
aggregate amount of any dividends, distributions or other payments received from
and after the Amendment Date by the Company and/or any Subsidiary Guarantor(s)
in respect of Investments in Non-Guarantor Subsidiaries.
"New Notes" means senior notes of the Company ranking pari
---------
passu as to payment of principal and interest with the Securities in an
aggregate principal amount not to exceed $600 million which New Notes the
Company currently intends to issue on or before September 30, 1997.
"New Notes Issuance Date" means the date on which the New
-----------------------
Notes are issued.
"Non-Guarantor Subsidiary" means any Subsidiary that is not a
------------------------
Subsidiary Guarantor.
"Non-recourse Purchase Money Indebtedness" means Indebtedness
----------------------------------------
of the Company or its Subsidiaries to the extent that, (i) under the terms
thereof or pursuant to law, no personal recourse may be had against the Company
or its Subsidiaries (other than Special Purpose Subsidiaries) for the payment of
the principal of or interest or premium on such Indebtedness, and enforcement of
obligations on such Indebtedness (except with respect to fraud, willful
misconduct, misrepresentation, misapplication of funds, reckless damage to
assets and undertakings with respect to environmental matters or construction
defects) is limited only to recourse against interests in specified assets and
property (the "Subject Assets"), accounts and proceeds arising therefrom, and
rights under purchase agreements or other agreements with respect to such
Subject Assets; (ii) such Indebtedness (x) is incurred concurrently with the
acquisition by the Company or its Subsidiaries of such Subject Assets or a
Person (or interests in a Person) holding such Subject Assets, or (y)
constitutes Refinancing Indebtedness with respect to Indebtedness so incurred;
and (iii) the Subject Assets are not Existing Assets and no Existing Assets or
proceeds from the sale, transfer or other disposition of Existing Assets were
used to acquire such Subject Assets.
"Notice of Default" shall have the meaning specified in
-----------------
Section 6.1(3).
"Obligations" shall have the meaning specified in section
-----------
12.1.
"Offer Amount" shall have the meaning specified in Section
------------
4.14.
"Offer Price" shall have the meaning specified in Section
-----------
4.14.
"Offer to Purchase" shall have the meaning specified in
-----------------
Section 4.14.
"Offering Memorandum" means the confidential Offering
-------------------
Memorandum dated May 18, 1995 distributed to prospective purchasers of
Securities in connection with the sale of Securities by the Company.
"Officer" means, with respect to the Company or a Subsidiary
-------
Guarantor, the Chief Executive Officer, the President, any Senior Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of the Company or such Subsidiary Guarantor.
"Officers' Certificate" means, with respect to the Company or
---------------------
a Subsidiary Guarantor, a certificate signed by two Officers or by an Officer
and an Assistant Secretary of the Company or such Subsidiary Guarantor (as
applicable) and otherwise complying with the requirements of Sections 14.4 and
14.5, and delivered to the Trustee or an Agent, as applicable.
"Opinion of Counsel" means a written opinion from legal
------------------
counsel who is reasonably acceptable to the Trustee (which may include counsel
to the Trustee, the Company or its Parent (including an employee of the Company
or its Parent)) or an Agent, as applicable, complying with the requirements of
Sections 14.4 and 14.5, and delivered to the Trustee or an Agent, as applicable.
10
<PAGE>
"Outstanding" as used with reference to the Securities shall have the
-----------
meaning specified in Section 2.8 hereof.
"Parent" of any person means a corporation which at the date of
------
determination owns, directly or indirectly, a majority of the Voting Stock of
such person or of a Parent of such person.
"Paying Agent" has the meaning specified in Section 2.3.
------------
"Permitted Indebtedness" means any of the following:
----------------------
(a) The Company and its Subsidiaries may Incur Indebtedness solely in
respect of surety and appeal bonds, performance bonds and other obligations of a
like nature (to the extent that such incurrence does not result in the
incurrence of any obligation to repay any obligation relating to borrowed money
of others), all in the ordinary course of business in accordance with customary
industry practices;
(b) The Company and its Subsidiary Guarantors may Incur Indebtedness under
revolving credit loans for funded Indebtedness from time to time in the ordinary
course of business up to an aggregate amount outstanding of $60 million;
(c) The Company and its Subsidiaries may Incur Indebtedness under Interest
Swap and Hedging Obligations that do not increase the Indebtedness of the
Company other than as a result of fluctuations in interest or foreign currency
exchange rates provided that such Interest Swap and Hedging Obligations are
incurred for the purpose of providing interest rate protection with respect to
Indebtedness permitted under this Indenture or to provide currency exchange
protection in connection with revenues generated in currencies other than U.S.
dollars;
(d) The Company may Incur Indebtedness to any Subsidiary Guarantor, and any
Subsidiary Guarantor may incur Indebtedness to any other Subsidiary Guarantor or
to the Company and any Subsidiary may incur Indebtedness to the Company or a
Subsidiary Guarantor (subject to the requirements of Section 4.3); provided,
that, in the case of Indebtedness of the Company, such obligations shall be
unsecured and subordinated in all respects to the Company's obligations pursuant
to the Securities;
(e) The Company and its Subsidiary Guarantors may guarantee Indebtedness of
the Company, the Subsidiary Guarantors or the Subsidiaries, as applicable, to
the extent such guaranteed Indebtedness was permitted to be incurred under this
Indenture; and
(f) The Company and its Subsidiaries may incur Indebtedness solely in
respect of bankers' acceptances and letters of credit all in the ordinary course
of business in accordance with customary industry practices in an aggregate
amount outstanding at any time not to exceed $100 million less the aggregate
principal amount of revolving Indebtedness incurred pursuant to clause (b)
above.
"Permitted Investment" means any of the following:
--------------------
(a) an Investment in Cash Equivalents;
(b) Investments in a Person substantially all of whose assets are of a type
generally used in a Related Business (an "Acquired Person") if, as a result of
such Investments, (i) the Acquired Person immediately thereupon is or becomes a
Subsidiary of the Company, or (ii) the Acquired Person immediately thereupon
either (1) is merged or consolidated with or into the Company or any of its
Subsidiaries and the surviving Person is the Company or a Subsidiary of the
Company or (2) transfers or conveys all or substantially all of its assets to,
or is liquidated into, the Company or any of its Subsidiaries;
(c) an Investment in a Person, provided that (i) such Person is principally
engaged in a Related Business, (ii) the Company or one or more of its
Subsidiaries participates in the management of such Person, as a general
partner, member of such Person's governing board or otherwise and (iii) the
aggregate amount
11
<PAGE>
of (x) Investments made in reliance on this clause (c) subsequent to the Issue
Date plus (y) investments made by Acquisitions and its Subsidiaries from and
after the Acquisitions Issue Date to the date of the Merger in reliance on
clause (c) of the definition of Permitted Investments under the Acquisitions
Indenture, shall not exceed in the aggregate $50.0 million;
(d) Permitted Sharing Arrangement Payments;
(e) securities received in connection with an Asset Sale so long as such
Asset Sale complied with this Indenture including Section 4.14 (but only to the
extent the Fair Market Value of such securities and all other noncash and
noncash equivalent consideration received complies with clause (iii) of Section
4.14); and
(f) Permitted Mortgage Investments.
"Permitted Lien" means any of the following:
--------------
(a) Liens existing on the Issue Date;
(b) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect thereto
are maintained on the books of the Company in accordance with GAAP;
(c) statutory liens of carriers, warehousemen, mechanics, materialmen,
landlords, repairmen or other like Liens arising by operation of law in the
ordinary course of business provided that (i) the underlying obligations are not
overdue for a period of more than 30 days, or (ii) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of the Company in accordance
with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other
similar encumbrances or title defects which, singly or in the aggregate, do not
in any case materially detract from the value of the property subject thereto
(as such property is used by the Company or any of its Subsidiaries) or
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries;
(f) Liens arising by operation of law in connection with judgments, only to
the extent, for an amount and for a period not resulting in an Event of Default
with respect thereto;
(g) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security legislation;
(h) Liens securing on an equal and ratable basis the Securities and any
other Indebtedness, including, without limitation, the New Notes and the
Acquisitions Notes.
(i) Liens securing Indebtedness of a Person existing at the time such
Person becomes a Subsidiary or is merged with or into the Company or a
Subsidiary or Liens securing Indebtedness incurred in connection with an
Acquisition, provided that (i) such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets and (ii) no Existing Assets or
proceeds from the sale, transfer or other disposition of Existing Assets were
used to acquire such Person;
12
<PAGE>
(j) Liens arising from Non-recourse Purchase Money Indebtedness permitted
to be incurred under this Indenture provided such Liens relate only to the
property which is subject to such Non-recourse Purchase Money Indebtedness;
(k) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
Holders of the Securities than the terms of the Liens securing such refinanced
Indebtedness (provided, however, that cross-collateralization, creation of
"collateral pools" or similar arrangements in and of themselves shall not be
considered more adverse to the Holders of the Securities for the purposes of the
foregoing);
(l) Liens securing revolving debt incurred under clause (b) of the
definition of Permitted Indebtedness which revolving debt shall not exceed an
aggregate principal amount outstanding at any time of $60 million;
(m) Liens securing any other Indebtedness permitted to be incurred under
Section 4.11 not to exceed an aggregate principal amount outstanding at any time
of $100 million; and
(n) Liens securing bankers' acceptances and letters of credit incurred
under clause (f) of the definition of Permitted Indebtedness which do not exceed
an aggregate principal amount outstanding at any time of $115 million less the
aggregate principal amount of revolving debt secured pursuant to clause (l)
above.
"Permitted Lien Indebtedness" shall have the meaning specified in Section
---------------------------
12.1.
"Permitted Lien Indebtedness Obligations" shall have the meaning specified
---------------------------------------
in Section 12.1.
"Permitted Mortgage Investment" means an Investment in Indebtedness secured
-----------------------------
by lodging property assets provided that (i) the Company is able to consolidate
the operations of the lodging property in its consolidated GAAP financial
statements, or (ii) such Investment is made with a view toward acquiring
ownership of the lodging properties securing such Indebtedness; provided,
however, that the aggregate Investments (the value of each such Investment to be
determined at the time of such Investment) made in reliance on this clause (ii)
with respect to lodging properties as to which the Company has not consolidated
the operations in its consolidated GAAP financial statements, as set forth in
clause (i), shall not at any time exceed 10% of the Company's aggregate assets.
"Permitted Sharing Arrangements" means any contracts, agreements or other
------------------------------
arrangements between the Company or one or more Subsidiaries of the Company and
a Parent of the Company or one or more Subsidiaries of such Parent, pursuant to
which such Persons share centralized services, establish joint payroll
arrangements, procure goods or services jointly or otherwise make payments with
respect to goods or services on a joint basis, or allocate corporate expenses
(other than taxes based on income); provided that (i) such Permitted Sharing
Arrangements are, in the determination of management of the Company, in the best
interests of the Company and its Subsidiaries and (ii) the liabilities of the
Company and its Subsidiaries under such Permitted Sharing Arrangements are
determined in good faith and on a reasonable basis.
"Permitted Sharing Arrangements Payments" means payments under Permitted
---------------------------------------
Sharing Arrangements.
"Permitted Tax Payments" means (for any taxable year of the Company in
----------------------
which it joins in filing a consolidated Federal income tax return with a Parent)
a payment (including any estimated tax payment based on any estimated tax
liability for such year) by the Company to the Parent in an amount not in excess
of the lesser of (i) the separate return Federal income tax liability (if any)
of the affiliated group (within the meaning of Section 1504 of the Code) of
which the Company would be the ultimate Parent (the "Company Group") if it were
not, and never had been, a member of another affiliated group for that or any
other taxable year and (ii) the actual Federal income tax liability (if any) of
the affiliated group of which the Company is actually a member (the "Parent
Group") for such year that is allocable to the Company Group. In the event that
a Parent of the Company and any member of the Company Group join in filing any
combined or consolidated (or similar) state or local income or franchise tax
13
<PAGE>
returns, then the term Permitted Tax Payment shall also include payments with
respect to such state or local income or franchise taxes determined in a manner
as similar as possible to that provided in the preceding sentence for Federal
income tax.
"Person" or "person" means any corporation, individual, limited liability
------ ------
company, joint stock company, joint venture, partnership, unincorporated
association, governmental regulatory entity, country, state or political
subdivision thereof, trust, municipality or other entity.
"Pledged Collateral" means (i) the Pledged Shares, (ii) any interest of the
------------------
Pledgors in the entries on the books of any financial intermediary pertaining to
the Pledged Shares, (iii) all dividends, cash or other proceeds, distributions
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares,
(iv) all instruments, certificates, documents and writings representing or
evidencing any or all of the foregoing and (v) all proceeds of any and all of
the foregoing.
"Pledged Shares" means the Subsidiary Guarantor Shares, other than any such
--------------
shares or other securities that have been released from the Lien created by
Article XII pursuant to the provisions of Article XII or Article XIII of this
Indenture.
"Pledgors" means the Company and any Subsidiary Guarantors holding an
--------
interest in the Pledged Shares.
"Pro Rata Portion" shall have the meaning specified in Section 13.1.
----------------
"Proceeds" shall have the meaning specified in Section 12.9.
--------
"Procurement Contracts" means contracts for the procurement of goods and
---------------------
services entered into in the ordinary course of business and consistent with
industry practices.
"Property" means any right or interest in or to property or assets of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Agreement" means that certain Purchase Agreement dated May 18,
------------------
1995 by and among the Company, the Subsidiary Guarantors and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time in accordance with the terms thereof.
"Purchase Date" shall have the meaning specified in Section 4.14.
-------------
"Qualified Capital Stock" means any Capital Stock of the Company that is
-----------------------
not Disqualified Capital Stock.
"Qualified Exchange" means (i) any legal defeasance, redemption,
------------------
retirement, repurchase or other acquisition of then outstanding Capital Stock or
Indebtedness of the Company issued on or after the Issue Date with the Net Cash
Proceeds received by the Company from the substantially concurrent sale of
Qualified Capital Stock or (ii) any exchange of Qualified Capital Stock for any
then outstanding Capital Stock or Indebtedness issued on or after the Issue
Date.
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's
---------------
or both shall not make a rating of the Securities publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P or Moody's or both,
as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
---------------
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories); and (iii) the equivalent of any such
category of S&P or Moody's used in another Rating Agency. In determining whether
the rating of the Securities has decreased by one
14
<PAGE>
or more gradations, gradations within Rating Categories (+ and - for S&P, 1, 2
and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall
be taken into account (e.g., with respect to S&P, a decline in a rating from BB+
to BB, as well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
-----------
Change of Control and (ii) the first public notice of the occurrence of a Change
of Control or of the intention by the Company to effect a Change of Control.
"Rating Decline" means the occurrence, on or within 90 days after the
--------------
earliest to occur of (i) a Change of Control and (ii) the date of the first
public notice of the occurrence of a Change of Control or of the intention by
the Company to effect a Change of Control (which period shall be extended so
long as the rating of the Securities is under publicly announced consideration
for possible downgrade by any of the Rating Agencies), of: (a) in the event the
Securities are rated by either Moody's or S&P on the Rating Date as Investment
Grade, a decrease in the rating of the Securities by either of such Rating
Agencies to a rating that is below Investment Grade, or (b) in the event the
Securities are rated below Investment Grade by both Rating Agencies on the
Rating Date, a decrease in the rating of the Securities by either Rating Agency
by one or more gradations (including gradations within Rating Categories as well
as between Rating Categories).
"Record Date" means a Record Date specified in the Securities whether or
-----------
not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be redeemed,
---------------
means the date fixed for such redemption pursuant to Article III of this
Indenture and Paragraph 5 in the form of Security.
"Redemption Price," when used with respect to any Security to be redeemed,
----------------
means the redemption price for such redemption pursuant to Paragraph 5 in the
form of Security, which shall include, without duplication, in each case,
accrued and unpaid interest to the Redemption Date (subject to the provisions of
Section 3.5).
"Reference Period" with regard to any Person means the four full fiscal
----------------
quarters ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Securities or this Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
------------------------
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed the sum of
(x) the reasonable and customary fees and expenses incurred in connection with
the Refinancing plus (y) the lesser of (i) the principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so refinanced and (ii) if such Indebtedness being
refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided, that (A) such Refinancing Indebtedness of any Subsidiary of the
Company shall be used only to refinance outstanding Indebtedness or Disqualified
Capital Stock of such Subsidiary, and (B) Refinancing Indebtedness shall (x) not
have an Average Life shorter than the Indebtedness or Disqualified Capital Stock
to be so refinanced at the time of such Refinancing and (y) in all respects, be
no less subordinated or junior, if applicable, to the rights of Holders of the
Securities than was the Indebtedness or Disqualified Capital Stock to be
refinanced.
"Registrar" shall have the meaning specified in Section 2.3.
---------
"Registration Rights Agreement" means the Registration Rights Agreement,
-----------------------------
dated the date hereof by and among the Initial Purchasers, the Company and the
Subsidiary Guarantors, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
15
<PAGE>
"Related Business" means the businesses conducted (or proposed to be
----------------
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses. Without limiting the generality of
the foregoing, Related Business shall include the ownership or operation of
lodging properties and senior living facilities.
"Released Subsidiary Guarantor Shares" shall have the meaning specified in
------------------------------------
Section 12.1.
"Residence Inns" means the 19 Residence Inns owned by the Company or its
--------------
Subsidiaries at the Issue Date.
"Requisite Obligees" shall have the meaning specified in Section 12.8.
------------------
"Restricted Investment" means, in one or a series of related transactions,
---------------------
any Investment, other than a Permitted Investment.
"Restricted Payment" means, with respect to any person, (a) the declaration
------------------
or payment of any dividend or other distribution in respect of Capital Stock of
such person or the Parent or any Subsidiary of such Person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for value
of Capital Stock of such Person or the Parent or any Subsidiary of such Person,
(c) other than with the proceeds from the substantially concurrent sale of, or
in exchange for, Refinancing Indebtedness, any purchase, redemption, or other
acquisition or retirement for value of, any payment in respect of any amendment
of the terms of or any defeasance of, any Subordinated Indebtedness, directly or
indirectly, by such person or the Parent or a Subsidiary of such person prior to
the scheduled maturity, any scheduled repayment of principal, or scheduled
sinking fund payment, as the case may be, of such Indebtedness, (d) any
Restricted Investment by such Person, (e) the payment to any affiliate in
respect of taxes owed by any consolidated group of which both such person or a
Subsidiary of such person and such affiliate are members, and (f) any loan or
advance to, or guarantee of any indebtedness of, any affiliate of such person or
any Subsidiary of such person; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other payment on or
with respect to Capital Stock of the Company to the extent payable solely in
shares of Qualified Capital Stock of the Company; (ii) any dividend,
distribution or other payment to the Company, or to any of the Subsidiary
Guarantors, by the Company or any of its Subsidiaries; (iii) Permitted Tax
Payments; (iv) the declaration or payment of dividends or other distributions by
any Subsidiary of the Company provided such distributions are made to the
Company (or a Subsidiary of the Company, as applicable) on a pro rata basis (and
in like form) to all distributions so made; or (v) the Initial Distributions.
"Restricted Security" means a Security, unless or until it has been (i)
-------------------
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering it or (ii) sold pursuant to Rule 144
(as such rule may be amended from time to time or any similar provision then in
force) under the Securities Act; provided, that in no case shall an Exchange
Security issued in accordance with this Indenture and the terms and provisions
of the Registration Rights Agreement be a Restricted Security.
"S&P" means Standard & Poor's Ratings Services and its successors.
---
"SEC" means the Securities and Exchange Commission.
---
"Secured Obligations" shall have the meaning specified in Section 12.1.
-------------------
"Securities" means, collectively, the Initial Securities and, when and if
----------
issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
16
<PAGE>
"Securities Custodian" means the Registrar, as custodian with respect to
--------------------
the Securities in global form, or any successor entity thereto.
"Securityholder" or "Holder" means any Person in whose name a Security is
-------------- ------
registered on the Registrar's books.
"Significant Subsidiary" means any Subsidiary which is a "significant
----------------------
subsidiary" of the Company within the meaning of Rule 1.02(v) of Regulation S-X
promulgated by the SEC as in effect as of the date of this Indenture.
"Special Purpose Subsidiary" means any Subsidiary of the Company (x) the
--------------------------
assets of which do not include Existing Assets and were not acquired with
Existing Assets or proceeds from the sale, transfer or other disposition of
Existing Assets, and (y) which has no Indebtedness other than Non-recourse
Purchase Money Indebtedness and/or Permitted Indebtedness of the type described
in clauses (a), (c), (d) and (e) of the definition of Permitted Indebtedness.
"Special Record Date" for payment of any Defaulted Interest means a date
-------------------
fixed by the Paying Agent pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security, means May 15,
---------------
2005.
"Subject Assets" means specified assets and property of the Company or its
--------------
Subsidiaries securing Non-recourse Purchase Money Indebtedness.
"Subordinated Indebtedness" means (i) Indebtedness of the Company or a
-------------------------
Subsidiary Guarantor that is subordinated in right of payment to the Securities
or a Guaranty, as applicable, or (ii) Indebtedness of the Company or a
Subsidiary Guarantor (other than secured Indebtedness or Indebtedness ranking
pari passu with the Securities or a Guaranty, as applicable) that has a stated
maturity on or after the Stated Maturity.
"Subsidiary" with respect to any Person, means (i) a corporation a majority
----------
of whose Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such Person, by such
Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, or which is controlled by such Person in a manner
sufficient to permit its financial statements to be consolidated with the
financial statements of such Person in conformance with generally accepted
accounting principles ("GAAP") and which financial statements are so
consolidated, (ii) any other Person (other than a corporation or a partnership)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has at least majority ownership interest, or which is
controlled by such Person in a manner sufficient to permit its financial
statements to be consolidated with the financial statements of such Person in
conformance with GAAP and which financial statements are so consolidated, or
(iii) a partnership (x) in which such Person or one or more Subsidiaries of such
Person is, at the time, a general partner and owns alone or together with the
Company a majority of the partnership interests or (y) in which such Person or
one or more Subsidiaries of such Person is, at the time, a general partner, and
which is controlled by such Person in a manner sufficient to permit its
financial statements to be consolidated with the financial statements of such
Person in conformance with GAAP and which financial statements are so
consolidated. Notwithstanding the foregoing, an Unrestricted Subsidiary shall
not be deemed to be a Subsidiary of the Company or of any Subsidiary of the
Company for purposes of this Indenture.
"Subsidiary Guarantors" means (i) the Initial Subsidiary Guarantors
---------------------
identified in the following sentence and (ii) any Future Subsidiary Guarantors
that become Subsidiary Guarantors pursuant to the terms of this Indenture, but
excluding any Persons whose guarantees have been released pursuant to the terms
of this Indenture. The Initial Subsidiary Guarantors consist of HMH Courtyard
Properties, Inc., HMC Retirement Properties, Inc., Marriott Financial Services,
Inc., Marriott SBM Two Corporation, HMH Pentagon Corporation and Host Airport,
Inc., each a direct wholly owned subsidiary of the Company or any successor
entity, whether by merger, consolidation, change of name or otherwise.
17
<PAGE>
"Subsidiary Guarantor Shares" means all of the Capital Stock of each
---------------------------
Subsidiary Guarantor (other than Marriott Financial Services, Inc.) owned by the
Company or another Subsidiary Guarantor, any additional shares of Capital Stock
of any Subsidiary Guarantor (other than Marriott Financial Services, Inc.) in
any manner acquired from time to time by any Pledgor and any shares or other
securities of the Subsidiary Guarantors (other than Marriott Financial Services,
Inc.) issued to any Pledgor in exchange or substitution therefor, provided that
shares or other securities of any Person shall not constitute Subsidiary
Guarantor Shares after such Person ceases to be a Subsidiary Guarantor under
this Indenture.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S. Code
---
77aaa-77bbbb), as in effect on the date of the execution 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 such amendment, the
Trust Indenture Act of 1939 as so amended.
"Transfer Instruments" shall have the meaning specified in Section 12.2.
--------------------
"Transfer Restricted Securities" means Securities that bear or are required
------------------------------
to bear the legend set forth in Section 2.6 hereof.
"Transfers" means (i) the transfer to the Parent of the Company of proceeds
---------
in the approximate amount of $118 million from the March 1995 sale of 21
Courtyard properties to a real estate investment trust; (ii) the transfer to the
Parent of the Company of two notes receivable from MFI Partners, and having
aggregate net book value at December 30, 1994 of $14 million dollars, which
notes were received in connection with the 1994 sale of 26 Fairfield Inns L.P.
in the aggregate principal amount of $26.5 million; (iii) the transfer to the
Parent of the Company of the capital stock of HMH HPT Courtyard Properties,
Inc., a Subsidiary of the Company holding only (x) a lessee's interest in the 21
Courtyard properties referenced in clause (i) above, (y) the right to receive
deferred purchase price from the sale of such 21 properties at the end of the
lease term, and (z) certain other assets related to such sale/leaseback; (iv)
the transfer to the Parent of the Company of (x) the rights and obligations with
respect to the leaseback of 17 additional Courtyard properties sold in 1995, (y)
the right to receive deferred purchase price from the sale of such 17 properties
at the end of the lease term and (z) certain other assets related to such
sale/leaseback; and (v) the transfer to the Parent of the Company of all of the
Company's underdeveloped land parcels, with an aggregate book value of
approximately $64 million, together with deferred taxes related thereto, all as
further described in the Offering Memorandum.
"Trustee" means the party named as such in this Indenture until a successor
-------
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.
"Trust Officer" means any officer within the corporate trust division (or
-------------
any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the Persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
"UCC" means the New York Uniform Commercial Code as in effect from time to
---
time.
"Unrestricted Subsidiary" means any Subsidiary of the Company that does not
-----------------------
own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) such Subsidiary is principally
engaged in a Related Business, (ii) neither immediately prior thereto nor after
giving pro forma effect to such designation would there exist a Default or Event
of Default and (iii) immediately after giving pro forma effect thereto, the
Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio in Section 4.11(a). The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided, that (i) no
Default or Event of Default is existing or will occur as a consequence thereof
and (ii) immediately after giving effect to such designation, on a pro forma
basis, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio in Section 4.11(a). Each
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such designation shall be evidenced by filing with the Trustee a certified copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. Government Obligations" means direct noncallable obligations
---------------------------
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Voting Stock" means, with respect to any specified person, capital
------------
stock with voting power, under ordinary circumstances, to elect directors of
such Person.
"Wholly Owned" or "wholly owned" with respect to a Subsidiary of
------------ ------------
any person means (i) with respect to a Subsidiary that is a partnership or a
limited liability company or similar entity, a Subsidiary whose equity interests
are 99% or greater beneficially owned by such person and (ii) with respect to a
Subsidiary that is other than a partnership or a limited liability company or
similar entity, a Subsidiary whose capital stock or other equity interest is
100% beneficially owned by such person.
SECTION 1.2. Incorporation By Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
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 securityholder" means a Holder or a Securityholder.
------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
"obligor" on the indenture securities means the Company, each
-------
Subsidiary Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
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<PAGE>
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
ARTICLE II.
THE SECURITIES
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Security attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign, or one officer shall sign and one Officer
shall attest to, the Security for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless and
the Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate or cause to be authenticated Initial
Securities for original issue in the aggregate principal amount of up to
$600,000,000 and shall authenticate Exchange Securities for original issue in
the aggregate principal amount of up to $600,000,000, in each case upon a
written order of the Company in the form of an Officers' Certificate; provided
that such Exchange Securities shall be issuable only upon the valid surrender
for cancellation of Initial Securities of a like aggregate principal amount in
accordance with the Registration Rights Agreement. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $600,000,000, except as
provided in Section 2.7. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in substitution
of Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, 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, any Affiliate of the Company,
or any of their respective Subsidiaries. The Trustee hereby appoints Bankers
Trust Company as its initial authenticating agent, and by its acknowledgment and
acceptance on the signature page hereto, Bankers Trust Company hereby agrees to
so act.
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Securities shall be issuable only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or exchange ("Registrar") and an office or agency of
the Company where Securities may be presented for payment ("Paying Agent") and
where notices and demands to or upon the Company in respect of the Securities
may be served. The Company may act as Registrar or Paying Agent, except that,
for the purposes of Articles III, VIII, XI, and Section 4.14 and as otherwise
specified in this Indenture, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
Paying Agent. The Company hereby initially appoints the Bankers Trust Company as
Registrar and Paying Agent, and by its acknowledgment and acceptance on the
signature page hereto, Bankers Trust Company hereby agrees so to act.
The Company shall enter into an appropriate written agency
agreement with any Agent (including the Paying Agent) not a party to this
Indenture, which agreement shall implement the provisions of this Indenture that
relate to such Agent, and shall furnish a copy of each such agreement to the
Trustee. The Company shall promptly notify the Trustee in writing of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Securities.
The Company initially appoints the Registrar to act as Securities
Custodian with respect to the Global Securities.
Upon the occurrence of an Event of Default described in Section
6.1(4) or (6), the Trustee shall, or upon the occurrence of any other Event of
Default by notice to the Company, the Registrar and the Paying Agent, the
Trustee may, assume the duties and obligations of the Registrar and the Paying
Agent hereunder. For as long as the Trustee acts as the Registrar and the Paying
Agent, the Trustee shall have the rights and immunities of the Trustee as set
forth in Article VII and shall receive appropriate compensation therefor.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee in writing of any Default in making
any such payment. If either of the Company or a Subsidiary of the Company acts
as Paying Agent, it shall segregate such assets and hold them as a separate
trust fund for the benefit of the Holders or the Trustee. The Company at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default or any Event of Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent (if other than the Company) shall
have no further liability for such assets.
SECTION 2.5. Securityholder Lists.
--------------------
The Registrar shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S)312(a). If the
21
<PAGE>
Trustee or any Paying Agent is not the Registrar, the Company shall furnish to
the Trustee on or before the third Business Day preceding each Interest Payment
Date and at such other times as the Trustee or any such Paying Agent may request
in writing a list in such form and as of such date as the Trustee or any such
Paying Agent reasonably may require of the names and addresses of Holders and
the Company shall otherwise comply with TIA (S)312 (a).
SECTION 2.6. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for registration of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Company and the Registrar duly executed by the Holder thereof or
his attorney duly authorized in writing; and
(ii) in the case of Definitive Securities that are Transfer
Restricted Securities, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being
delivered to the Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification from such Holder
to that effect (in substantially the form set forth on the reverse
of the Security); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule 144A
under the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security);
or
(C) if such Transfer Restricted Security is being
transferred (i) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act
or (ii) pursuant to an effective registration statement under the
Securities Act, or (iii) to an "institutional accredited investor"
within the meaning of Rule 501(A)(1), (2), (3) or (7) under the
Securities Act that is acquiring the security for its own account,
or for the account of such an institutional accredited investor, in
each case in a minimum principal amount of the Securities of
$100,000, not with a view to or for offer or sale in connection
with any distribution in violation of the Securities Act, or (iv)
in reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security)
and in the case of (i), (iii) and (iv) above, if the Company or the
Registrar so request, an Opinion of Counsel reasonably acceptable
to the Company and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
22
<PAGE>
satisfaction of the requirements set forth below. Upon receipt by the Registrar
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, a certification (in substantially the form set forth on
the reverse of the Security) that such Definitive Security is being
transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions of the Holder directing
the Registrar to make, or to direct the Securities Custodian to
make, an endorsement on the Global Security to reflect an increase
in the aggregate principal amount of the Securities represented by
the Global Security,
then the Registrar shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall, upon receipt of an authentication
order in the form of an Officers' Certificate, authenticate a new Global
Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Registrar of written
instructions or such other form of instructions as is customary for
the Depositary from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global Security and upon
receipt by the Registrar of a written order or such other form of
instructions as is customary for the Depositary or the Person
designated by the Depositary as having such a beneficial interest
in a Transfer Restricted Security only, the following additional
information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner,
a certification from such person to that effect (in substantially
the form set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act a certification to that effect from the transferor (in
substantially the form set forth on the reverse of the Security);
or
(C) if such beneficial interest is being transferred (i)
pursuant to an exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act or (ii) pursuant to an
effective registration statement under the Securities Act, or (iii)
to an "institutional accredited investor" within the meaning of
Rule 501(A)(1), (2), (3) or (7) under the Securities Act that is
acquiring the security for its
23
<PAGE>
own account, or for the account of such an institutional accredited
investor, in each case in a minimum principal amount of the
Securities of $100,000, not with any distribution in violation of
the Securities Act, or (iv) in reliance on another exemption from
the registration requirements of the Securities Act, a
certification to that effect from the transferee or transferor (in
substantially the form set forth on the reverse of the Security)
and in the case of (i), (iii) and (iv) above, if the Company or the
Registrar so requests, an Opinion of Counsel from the transferee or
transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance with
the Securities Act;
then the Registrar or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate, the Trustee or the Trustee's authenticating agent will
authenticate and deliver to the transferee a Definitive Security in the
appropriate principal amount.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall
be registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Registrar.
The Registrar shall deliver such Definitive Securities to the
persons in whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Securities in Absence of
Depositary. If at any time:
(i) the Depositary for the Securities notifies the Company
that the Depositary is unwilling or unable to continue as
Depositary for the Global Securities and a successor Depositary for
the Global Securities is not appointed by the Company within 90
days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Trustee
and the Registrar in writing that they elect to cause the issuance
of Definitive Securities under this Indenture, then the Company
will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of
Definitive Securities, will, or its authenticating agent will,
authenticate and deliver Definitive Securities, in an aggregate
principal amount equal to the principal amount of the Global
Securities, in exchange for such Global Securities.
(g) Legends.
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange
therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
24
<PAGE>
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1), (2), (3)
or (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
THE SECURITIES OF $100,000 FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE REGISTRAR'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D),
(E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
REGISTRAR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by
a Global Security) pursuant to Rule 144 under the Securities Act or
an effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth in (i)
above and rescind any restriction on the transfer of such Transfer
Restricted Security; and
(B) any such Transfer Restricted Security represented by a
Global Security shall not be subject to the provisions set forth in
(i) above (such sales
25
<PAGE>
or transfers being subject only to the provisions of Section 2.6(c)
hereof); provided, however, that with respect to any request for an
exchange of a Transfer Restricted Security that is represented by a
Global Security for a Definitive Security that does not bear the
legend set forth in (i) above, which request is made in reliance
upon Rule 144, the Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to Rule 144
(such certification to be substantially in the form set forth on
the reverse of the Security).
(h) Cancellation and/or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or cancelled, such Global
Security shall be returned to or retained and cancelled by the Registrar in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for Definitive
Securities, redeemed, repurchased or cancelled, the principal amount of
Securities represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security, by the Registrar or the
Securities Custodian, at the direction of the Registrar, to reflect such
reduction.
(i) Obligations with respect to Transfers and Exchanges of
Definitive Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee or any authenticating agent
of the Trustee shall authenticate Definitive Securities and Global
Securities at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax, assessments,
or similar governmental charge payable in connection therewith
(other than any such transfer taxes, assessments, or similar
governmental charge payable upon exchanges or transfers pursuant to
Section 2.2 (fourth paragraph), 2.10, 3.7, 4.14(8), 9.5, or 11.1
(final paragraph)).
(iii) The Registrar shall not be required to register the
transfer of or exchange (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Security being redeemed in
part, or (b) any Security for a period beginning 15 Business Days
before the mailing of a notice of an offer to repurchase pursuant
to Article XI or Section 4.14 hereof or redeem Securities pursuant
to Article III hereof and ending at the close of business on the
day of such mailing.
SECTION 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Registrar or if the
Holder of a Security claims and submits an affidavit or other evidence,
satisfactory to the Registrar, to the Registrar to the effect that the Security
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee or any authenticating agent of the Trustee shall authenticate a
replacement Security if the Registrar's requirements are met. If required by the
Trustee, the Registrar or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Registrar, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Securities duly issued hereunder.
26
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SECTION 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by the Registrar, those delivered to the
Registrar for cancellation, those reductions in the interest in a Global
Security effected by the Registrar hereunder and those described in this Section
2.8 as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security, except as provided in
Section 2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Registrar receives proof satisfactory to it that the replaced
Security is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company or an Affiliate of the Company) holds Cash or U.S.
Government Obligations sufficient to pay all of the principal and interest and
premium, if any, due on the Securities payable on that date and payment of the
Securities called for redemption is not otherwise prohibited, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or Affiliates of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that a Trust Officer of the Trustee knows are
so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until Definitive Securities are ready for delivery, the Company may
prepare, the Subsidiary Guarantors shall endorse and the Trustee shall
authenticate temporary Securities upon receipt of an authentication order in the
form of an Officers' Certificate. Temporary Securities shall be substantially in
the form of Definitive Securities but may have variations that the Company
reasonably and in good faith consider appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare, the Subsidiary Guarantors
shall endorse and the Trustee shall authenticate Definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Registrar for
cancellation. The Trustee and the Paying Agent shall forward to the Registrar
any Securities surrendered to them for registration of transfer, exchange or
payment. The Registrar, or at the direction of the Registrar, the Trustee or the
Paying Agent (other than the Company or an Affiliate of the Company), and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Securities surrendered for registration of transfer, exchange, payment or
cancellation. Subject to Section 2.7, the Company may not issue new Securities
to replace Securities that have been paid or delivered to the Registrar for
cancellation. No Securities shall be authenticated in lieu of or in exchange for
any Securities cancelled as provided in this Section 2.11, except as expressly
permitted in the form of Securities and as permitted by this Indenture.
SECTION 2.12. Defaulted Interest.
------------------
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (herein called
27
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"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Record Date, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee and the Paying Agent
in writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the Company
shall deposit with the Paying Agent an amount of Cash equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Paying Agent for such deposit prior to the date
of the proposed payment, such Cash when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as provided in this
clause (1). Thereupon the Paying Agent shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Paying Agent of the notice of the proposed
payment. The Paying Agent shall promptly notify the Company and the Trustee of
such Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security register not less than 10
days prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the persons in whose names
the Securities (or their respective predecessor Securities) are registered on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
and the Paying Agent of the proposed payment pursuant to this clause, such
manner shall be deemed practicable by the Trustee and the Paying Agent.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE III.
REDEMPTION
SECTION 3.1. Optional Redemption.
-------------------
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with such provision and this Article III.
The Company will not have the right to redeem any Securities prior to May 15,
2000. On or after May 15, 2000, the Company will have the right to redeem all or
any part of the Securities at the Redemption Prices specified in the form of
Security attached as Exhibit A set forth therein under the caption "Redemption,"
in each case (subject to the right of Holders of record on a Record Date that is
on or prior to such Redemption Date to receive interest due on the corresponding
Interest Payment Date, and subject to the provisions set forth in Section 3.5),
including accrued and unpaid interest to the Redemption Date.
SECTION 3.2. Notices to Trustee and Paying Agent.
-----------------------------------
If the Company elects to redeem Securities pursuant to Paragraph 5
of the Securities, it shall notify the Trustee and the Paying Agent in writing
of the Redemption Date and the principal amount of Securities to be redeemed and
whether it wants the Paying Agent to give notice of redemption to the Holders.
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If the Company elects to reduce the principal amount of Securities
to be redeemed pursuant to Paragraph 5 of the Securities by crediting against
any such redemption Securities it has not previously delivered to the Trustee
and the Paying Agent for cancellation, it shall so notify the Trustee and the
Paying Agent of the amount of the reduction and deliver such Securities with
such notice.
The Company shall give each notice to the Trustee and the Paying
Agent provided for in this Section 3.2 at least 45 days before the Redemption
Date (unless a shorter notice shall be satisfactory to the Trustee and the
Paying Agent). Any such notice may be cancelled at any time prior to notice of
such redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.3. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed on a
pro rata basis, by lot or in such other method as the Trustee shall determine to
be fair and appropriate.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company and the Paying Agent in writing of the Securities selected for
redemption and, in the case of any Security selected for partial redemption, the
principal amount thereof to be redeemed. Securities in denominations of $1,000
may be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.4. Notice of Redemption.
--------------------
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, postage
prepaid, to the Trustee, Paying Agent and each Holder whose Securities are to be
redeemed. At the Company's request, the Paying Agent shall give the notice of
redemption in the Company's name and at the Company's expense. Each notice for
redemption shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued and
unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to collect the
Redemption Price;
(5) that, unless the Company defaults in their obligation to
deposit with the Paying Agent Cash, or U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, Cash in an amount to fund the Redemption Price, in accordance with
Section 3.6 hereof or such redemption payment is otherwise prohibited, interest
on Securities called for redemption ceases to accrue on and after the Redemption
Date and the only remaining right of the Holders of such Securities is to
receive payment of the Redemption Price, including accrued and unpaid interest
to the Redemption Date, upon surrender to the Paying Agent of the Securities
called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral multiple thereof, of such
Security to be redeemed and that, after the Redemption Date, and
29
<PAGE>
upon surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be redeemed,
as well as the aggregate principal amount of such Securities to be redeemed and
the aggregate principal amount of Securities to be outstanding after such
partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.4
and pursuant to the optional redemption provisions of Paragraph 5 of the
Securities.
SECTION 3.5. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Paying Agent, such Securities called for
redemption shall be paid at the Redemption Price, including interest, if any,
accrued and unpaid to the Redemption Date; provided that if the Redemption Date
is after a regular Record Date and on or prior to the Interest Payment Date to
which such Record Date relates, the accrued interest shall be payable to the
Holder of the redeemed Securities registered on the relevant Record Date; and
provided, further, that if a Redemption Date is a non-Business Day, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
---------------------------
On or prior to the Redemption Date, the Company shall deposit with
the Paying Agent (other than the Company or an Affiliate of the Company) Cash or
U.S. Government Obligations sufficient to pay the Redemption Price of, including
accrued and unpaid interest on, all Securities to be redeemed on such Redemption
Date (other than Securities or portions thereof called for redemption on that
date that have been delivered by the Company to the Registrar for cancellation).
The Paying Agent shall promptly return to the Company any Cash or U.S.
Government Obligations so deposited which is not required for that purpose.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not otherwise prohibited, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.1 hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part, the
Company shall issue, the Subsidiary Guarantors shall endorse and the Trustee
shall authenticate and deliver to the Holder, without service charge to the
Holder, a new Security or Securities equal in principal amount to the unredeemed
portion of the Security surrendered.
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ARTICLE IV.
COVENANTS
SECTION 4.1. Payment of Securities.
---------------------
The Company shall pay the principal of and interest and premium, if
applicable, on the Securities on the dates and in the manner provided herein and
in the Securities. An installment of principal of or interest and premium, if
applicable, on the Securities shall be considered paid on the date it is due if
the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company
or an Affiliate of the Company) holds for the benefit of the Holders, on or
before 10:00 a.m. New York City time on that date, Cash deposited and designated
for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company and the Subsidiary
Guarantors shall give prompt written notice to the Trustee and the Paying Agent
of the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee and the Paying Agent, if different, with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 14.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company shall
give prompt written notice to the Trustee and the Paying Agent, if different, of
any such designation or rescission and of any change in the location of any such
other office or agency. The Company hereby initially designates the corporate
trust office of the Paying Agent as such office.
SECTION 4.3. Limitation on Restricted Payments.
---------------------------------
On and after the Amendment Date the Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment, if (a) on the date of such Restricted Payment, a Default or
an Event of Default would exist and be continuing or would occur as a
consequence of (after giving effect, on a pro forma basis, to) such Restricted
Payment or (b) immediately prior to such Restricted Payment or after giving
effect thereto, the aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including such proposed Restricted Payment (if not
made in Cash, then the Fair Market Value on the date of such Restricted Payment
of any property used therefor as evidenced by a Board Resolution set forth in an
Officers' Certificate delivered to the Trustee) from and after the Amendment
Date, and on or prior to the date of such Restricted Payment, shall exceed the
sum of (i) the amount determined by subtracting (x) 2.2 times the aggregate
Consolidated Interest Expense of the Company for the period (taken as one
accounting period) from the first day of the fiscal quarter in which the
Amendment Date occurs to the last day of the last full fiscal quarter prior to
the date of the proposed Restricted Payment (the "Computation Period") from (y)
Consolidated EBITDA of the Company for the Computation Period, plus (ii) the
aggregate Net Cash Proceeds received by the Company from the sale (other than to
a Subsidiary of the Company and other than in connection with a Qualified
Exchange) of its Qualified Capital Stock or as a capital contribution from its
Parent, in either case, which Net Cash Proceeds are received by the Company
after the Amendment Date and on or prior to the date of such Restricted Payment.
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Notwithstanding the foregoing, the provisions set forth in clause
(b) of the immediately preceding paragraph will not prohibit (i) the payment of
any dividend within 60 days after the date of its declaration if such dividend
could have been made on the date of its declaration in compliance with the
foregoing provisions, (ii) a Qualified Exchange, or (iii) a Permitted Sharing
Arrangements Payment; provided, however, that any amounts expended pursuant to
clause (i) of this paragraph shall be included as Restricted Payments made for
purposes of clause (b) of the immediately preceding paragraph, whereas amounts
received and expended in connection with a Qualified Exchange or a Permitted
Sharing Arrangements Payment shall neither be counted as Restricted Payments
made nor be credited as Net Cash Proceeds received for purposes of clause
(b)(ii) of the immediately preceding paragraph.
SECTION 4.4. Corporate Existence.
-------------------
Subject to Article V, the Company and the Subsidiary Guarantors
shall do or cause to be done all things necessary to preserve and keep in full
force and effect their respective corporate existence in accordance with the
respective organizational documents of each of them (as the same may be amended
from time to time) and the rights (charter and statutory) and corporate
franchises of the Company and the Subsidiary Guarantors; provided, however,
nothing in this Section will prohibit the Company or any Subsidiary Guarantor
from engaging in any transaction permitted under Section 13.4 or Section 13.5
hereof and provided further that neither the Company nor any Subsidiary
Guarantor shall be required to preserve any right or franchise if (a) the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such entity and (b) the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 4.5. Payment of Taxes and Other Claims.
---------------------------------
Except with respect to immaterial items, the Company and the
Subsidiary Guarantors shall, and shall cause each of their Subsidiaries to, pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to taxes) levied or
imposed upon the Company, any Subsidiary Guarantor or any of their Subsidiaries
or any of their respective properties and assets; and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
property and assets of the Company, any Subsidiary Guarantor or any of their
Subsidiaries; provided, however, that neither the Company nor any Subsidiary
Guarantor shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which disputed amounts adequate reserves have been established in accordance
with GAAP.
SECTION 4.6. Maintenance of Properties and Insurance.
---------------------------------------
The Company and the Subsidiary Guarantors shall cause all material
properties used or useful to the conduct of their business and the business of
each of their Subsidiaries to be maintained and kept in good condition, repair
and working order (reasonable wear and tear excepted) and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in their reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.6 shall prevent the Company or any Subsidiary
Guarantor from discontinuing any operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
(a) in the judgment of the Board of Directors of the Company, desirable in the
conduct of the business of such entity and (b) not disadvantageous in any
material respect to the Holders.
The Company and the Subsidiary Guarantors shall provide, or cause
to be provided, for themselves and each of their Subsidiaries, insurance
(including appropriate self insurance) against loss or damage of the kinds that,
in the reasonable, good faith opinion of the Company is adequate and appropriate
for the conduct of the business of the Company, the Subsidiary Guarantors and
such Subsidiaries.
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SECTION 4.7. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company and each Subsidiary Guarantor shall deliver to
the Trustee within 120 days after the end of its fiscal year an Officers'
Certificate complying with TIA (S) 314(a)(4) stating that a review of its
activities and the activities of 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 or such Subsidiary Guarantor, as the case may
be, has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
Guarantor to comply with any conditions or covenants in this Indenture and, if
such signer does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate shall also
notify the Trustee should the relevant fiscal year end on any date other than
the current fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have knowledge of any
Default or any Event of Default unless one of its Trust Officers receives
written notice thereof from the Company or any of the Holders.
SECTION 4.8. Reports.
-------
Whether or not the Company is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder and to prospective purchasers of Securities
identified to the Company by an Initial Purchaser, within 15 days after it files
or would have been required to file such with the Commission, annual and
quarterly financial statements substantially equivalent to financial statements
that would have been included in reports filed with the Commission if the
Company were subject to the requirements of Section 13 or 15(d) of the Exchange
Act, including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the Commission, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required. Whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and reports
with the Commission for public availability and will make such information
available to securities analysts and prospective investors upon request. The
Company shall at all times comply with TIA (S) 314(a). In addition, for so long
as the Transfer Restricted Securities are outstanding, the Company will continue
to provide to Holders of Transfer Restricted Securities and to prospective
purchasers of the Securities the information required by Rule 144A(d)(4) under
the Securities Act.
SECTION 4.9. Limitation on Status as Investment Company.
------------------------------------------
Neither the Company nor any Subsidiary shall become an "investment
company" (as that term is defined in the Investment Company Act of 1940, as
amended), or otherwise become subject to regulation under the Investment Company
Act.
SECTION 4.10. Limitation on Transactions with Affiliates.
------------------------------------------
After the Issue Date, the Company shall not, and shall not permit
any of its Subsidiaries to, enter into any contract, agreement, arrangement or
transaction with any Affiliate (an "Affiliate Transaction") or any series of
related Affiliate Transactions (other than Exempted Affiliate Transactions),
except for such Affiliate Transactions made in good faith, the terms of which
are fair and reasonable to the Company or such Subsidiary, as the case may be,
and are at least as favorable as the terms which could be obtained by the
Company or such Subsidiary, as the case may be, in a comparable transaction made
on an arm's-length basis with persons who are not Affiliates.
Without limiting the foregoing, (a) any Affiliate Transaction or
series of related Affiliate Transactions (other than Exempted Affiliate
Transactions) with an aggregate value in excess of $5.0 million must first be
approved pursuant to a Board Resolution by a majority of the Board of Directors
of the Company who are
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disinterested in the subject matter of the transaction, and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions (other
than Exempted Affiliate Transactions) with an aggregate value in excess of $20.0
million the Company must first obtain (i) a favorable written opinion from an
independent financial advisor of national reputation as to the fairness from a
financial point of view of such transaction to the Company or such Subsidiary or
(ii) in the case of a real estate transaction or related real estate
transactions with an aggregate value in excess of $20.0 million but not in
excess of $50.0 million an opinion from an independent, qualified appraiser that
the consideration received in connection with such transaction was comparable to
the Fair Market Value of the subject assets; provided, however, in the case of
an individual who serves on the Board of Directors or as an officer of Host
Marriott or any of its Subsidiaries on the one hand, and of the Company or any
of its Subsidiaries on the other hand, such service, in and of itself, shall not
affect such person's status as a disinterested member of the Board of Directors
of the Company for purposes of clause (a) of this paragraph.
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and
-------------------------------------------------------
Disqualified Capital Stock.
- --------------------------
Except as set forth below, neither the Company nor any of the
Company's Subsidiaries shall, directly or indirectly, issue, assume, guaranty,
incur, become directly or indirectly liable with respect to (including as a
result of an Acquisition), or otherwise become responsible for, contingently or
otherwise (individually and collectively, to "incur" or "Incur" or, as
appropriate, an "incurrence" or "Incurrence"), any Indebtedness or any
Disqualified Capital Stock (including Acquired Indebtedness). Notwithstanding
the foregoing:
(a) if on the date of such Incurrence (the "Incurrence Date"),
the Consolidated Coverage Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro forma
basis to such incurrence of such Indebtedness or Disqualified Capital Stock and,
to the extent set forth in the definition of Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least (w) 1.8 to 1 if such incurrence
occurs on or before June 1, 1996, (x) 1.9 to 1 if such incurrence occurs after
June 1, 1996, but before the Amendment Date, (y) 1.8 to 1 if such incurrence
occurs at any time on or after the Amendment Date but on or prior to the earlier
of the New Notes Issuance Date or September 30, 1997, or (z) 2.2 to 1 if such
incurrence occurs at any time thereafter (the "Debt Incurrence Ratio"), then the
Company and its Subsidiaries may Incur Indebtedness or Disqualified Capital
Stock; provided, however, any Indebtedness incurred by the Non-Guarantor
Subsidiaries in reliance on this clause (a) shall be limited to an aggregate
amount outstanding at any time of up to $100 million of Indebtedness which
Indebtedness shall be secured by liens permitted under clause (m) of the
definition of "Permitted Liens";
(b) the Company and the Subsidiary Guarantors may Incur
Indebtedness evidenced by the Securities and represented by this Indenture up to
the amounts specified herein as of the date hereof;
(c) the Company and its Subsidiaries or Subsidiary Guarantors, as
applicable, may Incur Refinancing Indebtedness with respect to any Indebtedness
or Disqualified Capital Stock, as applicable, described in this clause or
clauses (a), (b) or (e) of this Section 4.11 or which was outstanding at the
Company or its Subsidiaries on the Issue Date or that was outstanding at
Acquisitions or its Subsidiaries as of the Acquisitions Issue Date;
(d) the Company and its Subsidiaries or its Subsidiary
Guarantors, as applicable, may Incur Permitted Indebtedness;
(e) the Company and its Subsidiaries may Incur Non-recourse
Purchase Money Indebtedness; and
(f) the Company and its Subsidiary Guarantors may Incur
Indebtedness (in addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate amount outstanding at any time (including any
Indebtedness issued to refinance, replace, or refund such Indebtedness) of up to
$65.0 million.
Notwithstanding the foregoing, no Non-Guarantor Subsidiary may
Incur any Indebtedness or Disqualified Capital Stock unless on the Incurrence
Date the Consolidated Coverage Ratio for all Non-Guarantor Subsidiaries, on a
combined basis, for the Reference Period immediately preceding the Incurrence
Date, after giving
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effect on a pro-forma basis to such incurrence of such Indebtedness or
Disqualified Capital Stock and, to the extent set forth in the definition of
Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.0
to 1.
Indebtedness of any Person that is not a Subsidiary of the Company,
which Indebtedness is outstanding at the time such Person becomes a Subsidiary
of the Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, shall be deemed to have been incurred at the time
such Person becomes a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company and Indebtedness
which is assumed at the time of the acquisition of any asset shall be deemed to
have been Incurred at the time of such acquisition.
SECTION 4.12. Limitations on Dividends and other Payment Restrictions
-------------------------------------------------------
Affecting Subsidiaries.
- ----------------------
Neither the Company nor the Subsidiary Guarantors shall, directly
or indirectly, create, assume or suffer to exist any consensual restriction on
the ability of any Subsidiary Guarantors to pay dividends or make other
distributions to or on behalf of, or to pay any obligation to or on behalf of,
or otherwise to transfer assets or property to or on behalf of, or make or pay
loans or advances to or on behalf of, the Company or any other Subsidiary
Guarantor except (a) restrictions imposed by the Securities or this Indenture,
(b) restrictions imposed by applicable law, (c) existing restrictions under
Existing Indebtedness or under any Acquired Indebtedness not incurred in
violation of this Indenture or any agreement relating to any property, asset, or
business acquired by the Company or any of the Subsidiary Guarantors, which
restrictions existed at the time of acquisition, were not put in place in
connection with or in anticipation of such acquisition and are not applicable to
any person, other than the person acquired, or to any property, asset or
business, other than the property, assets and business so acquired, (d) any such
restriction or requirement imposed by Indebtedness incurred under paragraph (e)
of Section 4.11, provided such restriction or requirement relates only to the
transfer of the property subject to such Non-recourse Purchase Money
Indebtedness, (e) restrictions with respect to a Subsidiary Guarantor imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary Guarantor, provided such restrictions apply solely to the Capital
Stock or assets of such Subsidiary Guarantor which are being sold, and (f) in
connection with and pursuant to permitted refinancings thereof, replacements of
restrictions imposed pursuant to clause (c) or (d) of this paragraph that are
not more restrictive than those being replaced and do not apply to any other
person or assets other than those that would have been covered by the
restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing,
customary provisions restricting subletting or assignment of any lease entered
into in the ordinary course of business, consistent with industry practice,
shall not in and of themselves be deemed to be a restriction on the ability of
the Company or any of its Subsidiary Guarantors to transfer such property.
SECTION 4.13. Limitations on Liens.
--------------------
The Company and the Subsidiary Guarantors shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, Incur, or suffer to
exist any Lien on any assets or properties of the Company or any of its
Subsidiaries, now owned or hereafter acquired, or any income or profits
therefrom, except Permitted Liens, unless all payments due under this Indenture
and the Securities are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by such Lien.
SECTION 4.14. Limitation on Sale of Assets and Subsidiary Stock.
-------------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, in one or a series of related transactions, convey, sell, transfer, assign
or otherwise dispose of, directly or indirectly, any of its property, business
or assets, including by merger or consolidation (in the case of a Subsidiary
Guarantor or a Subsidiary of the Company), and including any sale or other
transfer or issuance of any Capital Stock of any Subsidiary of the Company,
whether by the Company or a Subsidiary of either or through the issuance, sale
or transfer of Capital Stock by a Subsidiary of the Company (an "Asset Sale"),
unless (i) the Board of Directors of the Company determines in good faith that
the Company or such Subsidiary, as applicable, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the assets or
Capital Stock issued or sold or otherwise disposed of, (ii) no Default or Event
of Default would occur as a consequence of (after giving effect, on a pro forma
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basis, to) such Asset Sale, and (iii) at least 75% of the consideration therefor
received by the Company or such Subsidiary is in the form of Cash or Cash
Equivalents; provided that for purposes of this provision the amount of (A) any
Indebtedness (other than Securities) that is required to be repaid or assumed
(and is either repaid or assumed by the transferee of the related assets) by
virtue of such Asset Sale and which is secured by a Lien on the property or
assets sold and (B) any securities or other obligations received by the Company
or any such Subsidiary from such transferee that are immediately converted by
the Company or such Subsidiary into Cash (or as to which the Company or such
Subsidiary has received at or prior to the consummation of the Asset Sale a
commitment (which may be subject to customary conditions) from a nationally
recognized investment, merchant or commercial bank to convert into Cash within
90 days of the consummation of such Asset Sale and which are thereafter actually
converted into Cash within such 90-day period) will be deemed to be Cash.
Within 365 days after the receipt of any Net Cash Proceeds from an
Asset Sale, the Company may invest or commit such Net Cash Proceeds, pursuant to
a binding commitment subject only to reasonable, customary closing conditions,
to be invested (and providing such Net Cash Proceeds are, in fact, so invested,
within an additional 180 days) in (x) fixed assets and property (other than
notes, bonds, obligations and securities) which in the good faith reasonable
judgment of the Board of Directors of the Company will immediately constitute or
be part of a Related Business of the Company or such Subsidiary (if it continues
to be a Subsidiary) immediately following such transaction, (y) Permitted
Mortgage Investments or (z) a controlling interest in the Capital Stock of an
entity engaged in a Related Business; provided, that concurrently with an
Investment specified in clause (z), such entity becomes a Subsidiary Guarantor.
Pending the application of any such Net Cash Proceeds as described above, the
Company may invest such Net Cash Proceeds in any manner that is not prohibited
by this Indenture. Any Net Cash Proceeds from Asset Sales that are not applied
or invested as provided in the first sentence of this paragraph (including any
Net Cash Proceeds which were committed to be invested as provided in such
sentence but which are not in fact invested within the time period provided)
will be deemed to constitute "Excess Proceeds."
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or
otherwise dispose of inventory acquired and held for resale in the
ordinary course of business;
(ii) the Company and its Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to
and in accordance with the provisions of Article V;
(iii) the Company and its Subsidiaries may sell or dispose
of damaged, worn out or other obsolete property in the ordinary
course of business so long as such property is no longer necessary
for the proper conduct of the business of the Company or such
Subsidiary, as applicable;
(iv) the Company and its Subsidiaries may consummate any
sale or series of related sales (including, without limitation,
sale and leaseback transactions) of assets or properties of the
Company and its Subsidiaries having a Fair Market Value of less
than $2.0 million; and
(v) the Company and its Subsidiaries may exchange assets
held by the Company or a Subsidiary for one or more hotels and/or
one or more Related Businesses of any person or entity owning one
or more hotels and/or one or more Related Businesses; provided,
that the Board of Directors of the Company has determined that the
terms of any exchange are fair and reasonable and the Fair Market
Value of the assets received by the Company are approximately equal
to the Fair Market Value of the assets exchanged by the Company.
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For purposes of this Section 4.14, "Excess Proceeds Date" means
each date on which the aggregate amount of Excess Proceeds exceeds $15.0
million. Within 30 days after each Excess Proceeds Date, the Company will make a
cash offer (an "Offer to Purchase") to all Holders of Securities and holders of
any other Indebtedness of the Company ranking on a parity with the Securities
from time to time outstanding with similar provisions requiring the Company to
make an offer to purchase or to redeem such Indebtedness with the proceeds from
such Asset Sale, pro rata in proportion to the respective principal amounts
pursuant to an irrevocable, unconditional offer (an "Asset Sale Offer") to
purchase the maximum principal amount of Securities and such other senior
Indebtedness then outstanding that may be purchased out of the Excess Proceeds
(the "Offer Amount"), at an offer price in cash (the "Offer Price") in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon to the date of purchase (the "Purchase Date") in accordance with the
procedures set forth in this Section 4.14.
Notice of an Offer to Purchase will be sent 20 Business Days prior
to the close of business on the earlier of (a) the third Business Day prior to
the Purchase Date and (b) the third Business Day following the expiration of the
Offer to Purchase (such earlier date being the "Final Put Date"), by first-class
mail, by the Company (or by the Registrar at the request and expense of the
Company) to each Holder at its registered address, with a copy to the Trustee
and the Paying Agent. The notice to the Holders will contain all information,
instructions and materials required by applicable law or otherwise material to
such Holders' decision to tender Securities pursuant to the Offer to Purchase.
The notice, which (to the extent consistent with this Indenture) shall govern
the terms of the offer to Purchase, shall state:
(1) that the Offer to Purchase is being made pursuant to such
notice and this Section 4.14;
(2) the Offer Amount, the Offer Price (including the amount of
accrued and unpaid interest), the Final Put Date, and the Purchase Date, which
Purchase Date shall be on or prior to 60 Business Days following the Excess
Proceeds Date;
(3) that any Security or portion thereof not tendered or accepted
for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing Cash with the
Paying Agent in accordance with the penultimate paragraph of this Section 4.14
or such payment is otherwise prevented, any Security, or portion thereof,
accepted for payment pursuant to the Offer to Purchase shall cease to accrue
interest after the Purchase Date;
(5) that Holders electing to have a Security, or portion thereof,
purchased pursuant to an Offer to Purchase will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent (which may not for
purposes of this Section 4.14, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the address
specified in the notice prior to the close of business on the Final Put Date;
(6) that Holders will be entitled to withdraw their elections, in
whole or in part, if the Paying Agent (which may not for purposes of this
Section 4.14, notwithstanding any other provision of this Indenture, be the
Company or any Affiliate of the Company) receives, up to the close of business
on the Final Put Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Securities the
Holder is withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased;
(7) that if Securities and other senior Indebtedness in a
principal amount in excess of the principal amount of Securities and other
senior Indebtedness to be acquired pursuant to the Offer to Purchase are
tendered and not withdrawn, the Trustee shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
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(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) a brief description of the circumstances and relevant facts
regarding such Asset Sales.
Any such Offer to Purchase shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before a Purchase Date, the Company shall, to the extent
lawful, (i) accept for payment Securities or portions thereof properly tendered
pursuant to the Offer to Purchase on or before the Final Put Date (on a pro rata
basis if required pursuant to paragraph (7) hereof), (ii) deposit with the
Paying Agent Cash sufficient to pay the Offer Price for all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Paying Agent
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof being purchased by the Company. The Paying Agent
shall on each Purchase Date mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Offer Price for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered; provided that if the Purchase Date is after a regular Record Date
and on or prior to the Interest Payment Date to which such Record Date relates,
the accrued interest shall be payable to the Holder of the purchased Securities
registered on the relevant Record Date. Any Security not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof.
If the amount required to acquire all Securities and other senior
Indebtedness tendered pursuant to the Offer to Purchase (the "Acceptance
Amount") made pursuant to the third paragraph of this Section 4.14 is less than
the Offer Amount, the excess of the Offer Amount over the Acceptance Amount may
be used by the Company for general corporate purposes without restriction,
unless otherwise restricted by the other provisions of this Indenture. Upon
commencement of any Offer to Purchase made in accordance with the terms of this
Indenture, the amount of Excess Proceeds existing at the time of the
commencement will be reduced to zero irrespective of the amount of Securities
tendered pursuant to the Offer to Purchase.
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and the Subsidiary Guarantors 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 or extension law or any usury law or other law which would prohibit or
forgive the Company or any Subsidiary Guarantor from paying all or any portion
of the principal of, premium of, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) each of the Company and the Subsidiary Guarantors
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee or any Paying Agent, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 4.16. Limitation on Investments in Non-Guarantor Subsidiaries.
-------------------------------------------------------
From and after the Amendment Date, the Company shall not, and shall
not permit any Subsidiary Guarantor to, directly or indirectly, make any
Investment in a Non-Guarantor Subsidiary if, after giving effect thereto, the
Net Non-Guarantor Investment would exceed an amount equal to (a) the aggregate
of all capital contributions made to the Company on or after the Amendment Date
plus (b) the Applicable Percentage of the sum of (i) the combined total assets
of the Company and the Subsidiary Guarantors, excluding the assets of the Non-
Guarantor Subsidiaries (determined by the Company in accordance with GAAP), plus
(ii) the Net Non-Guarantor Investment.
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ARTICLE V.
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
-------------------------------------------
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into another Person or sell, lease, convey or transfer all
or substantially all of its assets (computed on a consolidated basis), whether
in a single transaction or a series of related transactions, to another Person
or group of affiliated Persons, unless (i) either (a) the Company is the
continuing entity or (b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Securities and this
Indenture; (ii) no Default or Event of Default would occur as a consequence of
(after giving effect, on a pro forma basis, to) such transaction; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
Consolidated Net Worth of the consolidated resulting, surviving or transferee
entity is equal to at least 90% of the Consolidated Net Worth of the Company
immediately prior to such transaction; (iv) immediately after giving effect to
such transaction on a pro forma basis, the consolidated resulting, surviving or
transferee entity would immediately thereafter be permitted to Incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in Section 4.11(a) hereof; and (v) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and, if a supplemental indenture is required,
such supplemental indenture complies with this Indenture and that all conditions
precedent herein relating to such transaction have been satisfied.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
SECTION 5.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1
hereof, the successor corporation formed by such consolidation or into which the
Company is merged or to which such transfer 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 corporation had been
named herein as the Company, and when a successor corporation duly assumes all
of the obligations of the Company pursuant hereto and pursuant to the
Securities, the Company shall be released from such obligations under the
Securities and this Indenture except with respect to any obligations that arise
from, or are related to, such transaction.
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest upon the
Securities as and when the same becomes due and payable and the continuance of
such default for a period of 30 days;
(2) failure to pay all or any part of the principal of or
premium, if any, on the Securities when and as the same becomes due and payable
at maturity, upon redemption, by acceleration or otherwise,
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including, without limitation, default in the payment of the Change of Control
Payment in accordance with Article XI or the Offer Price in accordance with
Section 4.14;
(3) failure by the Company or any Subsidiary to observe or
perform any covenant or agreement contained in the Securities or this Indenture
(other than a default in the performance of any covenant or agreement which is
specifically dealt with elsewhere in this Section 6.1), and continuance of such
failure 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 Holders of at least 25% in aggregate principal amount of the outstanding
Securities, a written notice specifying such default or breach, requiring it to
be remedied and stating that such notice is a "Notice of Default" hereunder;
(4) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Company or any of its
Significant Subsidiaries as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization of the Company or any of its Significant
Subsidiaries under any bankruptcy or similar law, and such decree or order shall
have continued undischarged and unstayed for a period of 60 consecutive days; or
a decree, judgment or order of a court of competent jurisdiction appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency for the
Company, any of its Significant Subsidiaries, or any substantial part of the
property of any such Person, or for the winding up or liquidation of the affairs
of any such Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of 60 days;
(5) a default in (i) Non-recourse Purchase Money Indebtedness of
the Company or any of its Subsidiaries with an aggregate principal amount in
excess of 10% of the aggregate assets of the Company and its Subsidiaries, or
(ii) other Indebtedness of the Company or any of its Subsidiaries with an
aggregate principal amount in excess of $20.0 million, in either case (a)
resulting from the failure to pay principal or interest or premium, if any, when
due or (b) as a result of which the maturity of such Indebtedness has been
accelerated prior to its stated maturity;
(6) the Company or any of its Significant Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any such petition, or shall
consent to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any substantial part of its assets
or property, or shall make a general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they become
due, or shall, within the meaning of any Bankruptcy Law, become insolvent, fail
generally to pay its debts as they become due, or take any corporate action in
furtherance of or to facilitate, conditionally or otherwise, any of the
foregoing; or
(7) final unsatisfied judgments not covered by insurance for the
payment of money, or the issuance of any warrant of attachment against any
portion of the property or assets of the Company or any of its Subsidiaries,
aggregating in excess of $10.0 million at any one time shall be rendered against
the Company or any of its Subsidiaries and not be stayed, bonded or discharged
for a period (during which execution shall not be effectively stayed) of 60 days
(or, in the case of any such final judgment which provides for payment over
time, which shall so remain unstayed, unbonded or undischarged beyond any
applicable payment date provided therein).
Notwithstanding the 30-day period and notice requirement contained
in Section 6.1(3) above, (i) with respect to a default under Article XI, the 30-
day period referred to in Section 6.1(3) shall be deemed to have begun as of the
date notice of a Change of Control Offer is required to be sent to the Holders
in the event that the Company has not complied with the provisions of Section
11.1, and the Trustee or Holders of at least 25% in principal amount of the
outstanding Securities thereafter give the Notice of Default referred to in
Section 6.1(3) to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Change of Control Payment on the Change of Control Payment Date,
such default shall be deemed, for purposes of this Section 6.1, to arise no
later than on the Change of Control Payment Date; and (ii) with respect to a
default under Section 4.14 requiring the giving of such notice, the 30-day
period referred to in
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Section 6.1(3) shall be deemed to have begun as of the date the notice of an
Offer to Purchase is required to be sent in the event that the Company has not
complied with the provisions of Section 4.14, and the Trustee or Holders of at
least 25% in principal amount of the outstanding Securities thereafter give the
Notice of Default referred to in Section 6.1(3) to the Company and, if
applicable, the Trustee; provided, however, that if the breach or default is a
result of a default in the payment when due of the Offer Price on the Purchase
Date, such default shall be deemed, for purposes of this Section 6.1, to arise
no later than on the Purchase Date.
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.
-------------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 6.1(4) or (6) relating to the Company or any of its Significant
Subsidiaries) occurs and is continuing, then, in every such case, unless the
principal of all of the Securities shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of then outstanding Securities, by a notice in writing to the Company
(and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare
all of the principal of the Securities (or the Change of Control Payment if the
Event of Default includes failure to pay the Change of Control Payment),
determined as set forth below, including in each case accrued interest thereon,
to be due and payable immediately. If an Event of Default specified in Section
6.1(4) or (6) relating to the Company or any Significant Subsidiary occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Securities without any declaration or other act on the part of
the Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any,
applicable to) any Securities which would become due other
than by reason of such declaration of acceleration, and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the Securities,
(D) all sums paid or advanced by the Trustee
hereunder and the compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 7.7, and
(2) all Events of Default, other than the nonpayment of the
principal of, premium, if any, and interest on Securities which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 6.12, including, if applicable, any Event of Default
relating to the covenants contained in Section 11.1.
Notwithstanding the previous sentence of this Section 6.2, no
waiver shall be effective against any Holder for any Event of Default or event
which with notice or lapse of time or both would be an Event of Default with
respect to (i) any covenant or provision which cannot be modified or amended
without the consent of the Holder of each outstanding Security affected thereby,
unless all such affected Holders agree, in writing, to waive such Event of
Default or other event and (ii) any provision requiring supermajority approval
to amend, unless such default has been waived by such a supermajority. No such
waiver shall cure or waive any subsequent default or impair any right consequent
thereon.
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SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
-------
The Company covenants that if an Event of Default in payment
of principal, premium, or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, 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, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee and its agents and counsel and all other amounts due the Trustee
under Section 7.7.
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 in favor
of the Holders, 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
the Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effective 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.
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 and premium, if any, or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) 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
and its agent and counsel and all other amounts due the Trustee under Section
7.7) and of the Holders allowed in such judicial proceeding, and
(2) 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 and 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.
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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 in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel
and all other amounts due the Trustee under Section 7.7, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
SECTION 6.6. Priorities.
----------
Any money collected by the Trustee pursuant to this Article VI
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,
premium (if any) 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 Trustee in payment of all amounts due pursuant
to Section 7.7;
SECOND: To the Holders in payment of the amounts then due and
unpaid for principal of, premium (if any) 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, premium (if any) and
interest, respectively; and
THIRD: To the Company or such other Person as may be lawfully
entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record
date and payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or
direct the Trustee 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;
(B) the Holders of not less than 25% in
aggregate principal amount of then outstanding Securities
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 security or indemnity against the
costs, expenses and liabilities to be incurred or reasonably
probable 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
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(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 aggregate
principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
---------------------------------------------------
Premium and Interest.
--------------------
Notwithstanding any other provision of this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
interest on, such Security on the Maturity Dates of such payments as expressed
in such Security (in the case of redemption, the Redemption Price on the
applicable Redemption Date, in the case of the Change of Control Payment, on the
applicable Change of Control Payment Date, and in the case of the Offer Price,
on the Purchase Date) and to institute suit for the enforcement of any such
payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, 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 6.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any
Security to exercise any right or remedy arising upon any Event of Default shall
impair the exercise of any such right or remedy or constitute a waiver of any
such Event of Default. Every right and remedy given by this Article VI 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 6.11. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal
amount of then outstanding Securities 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 upon the Trustee, provided,
that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture or involve the Trustee in personal liability,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not taking part in such
direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
44
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SECTION 6.12. Waiver of Past Default.
----------------------
Subject to Section 6.8, the Holder or Holders of not less than
a majority in aggregate principal amount of the outstanding Securities may, on
behalf of all Holders, waive any past default hereunder and its consequences,
except a default
(A) in the payment of the principal of,
premium, if any, or interest on, any Security as specified in
clauses (1) and (2) of Section 6.1 and not yet cured, or
(B) in respect of a covenant or provision
hereof which, under Article IX, cannot be modified or amended
without the consent of the Holder of each outstanding Security
affected.
(C) in respect of any provision hereof
which, under Article IX, cannot be modified, amended or waived
without the consent of the Holders of 66-2/3% of the aggregate
principal amount of the Securities at the time outstanding;
provided, that any such waiver may be effected with the
consent of the Holders of 66-2/3% of the aggregate principal
amount of the Securities then outstanding.
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 the exercise of any right arising
therefrom.
SECTION 6.13. 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 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 to be taken
by it as Trustee, any court may in its discretion require 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 6.13 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 aggregate principal amount of the outstanding Securities, or to any
suit instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the respective
Maturity Date expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
SECTION 6.14. 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 case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, 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.
ARTICLE VII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed,
subject to the terms hereof.
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SECTION 7.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent Person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are adverse to
the Trustee, and
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, in the
case of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall examine
the certificates and opinions 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:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.1,
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts, and
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or at the request, order or direction of the Holders
or in the exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) , (c), (d) and (f) of this
Section 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1:
(a) The Trustee may rely on 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
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 14.4 and 14.5. The
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Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(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 conferred upon it by this Indenture, nor for any action
permitted to be taken or omitted hereunder by any Agent.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(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, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company or any
Subsidiary Guarantor shall be sufficient if signed by an Officer of the Company
or such Subsidiary Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's or any Subsidiary Guarantor's covenants in Article
IV hereof or as to the performance by any Agent of its duties hereunder. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except any Default or Event of Default of which the Trustee
shall have received written notification or with respect to which a Trustee
Officer shall have actual knowledge.
(i) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate.
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, any
Subsidiary Guarantor, any of their Subsidiaries, or their respective Affiliates
with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the
Trustee must comply with 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 and 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 the Trustee's
certificate of authentication (if executed by the Trustee), or the use or
application of any funds received by a Paying Agent other than the Trustee.
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SECTION 7.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the uncured Default or Event of Default within 90 days after such
Default or Event of Default occurs. Except in the case of a Default or an Event
of Default in payment of principal (or premium, if any) of, or interest on, any
Security (including the payment of the Change of Control Payment on the Change
of Control Payment Date, the payment of the Redemption Price on the Redemption
Date and the payment of the Offer Price on the Purchase Date), the Trustee may
withhold the notice if and so long as a Trust Officer in good faith determines
that withholding the notice is in the interest of the Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Securityholder a brief report dated as of such May 15 that complies
with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b). The
Trustee also shall transmit by mail all reports as required by TIA (S) 313(c).
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or automated quotation
system.
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Securities are listed in accordance with
TIA (S) 313(d).
SECTION 7.7. Compensation and Indemnity.
--------------------------
The Company and the Subsidiary Guarantors jointly and
severally agree to 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 and the Subsidiary
Guarantors shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it in accordance with
this Indenture. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel.
The Company and the Subsidiary Guarantors jointly and
severally agree to indemnify the Trustee (in its capacity as Trustee) and each
of its officers and each of them, directors, attorneys-in-fact and agents for,
and hold it harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel), loss or liability incurred by it without negligence or bad
faith on the part of the Trustee, arising out of or in connection with the
administration of this trust and its rights or duties hereunder including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company and the
Subsidiary Guarantors shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's and the Subsidiary Guarantors' expense
in the defense. The Trustee may have separate counsel and the Company and the
Subsidiary Guarantors shall pay the reasonable fees and expenses of such
counsel. The Company and the Subsidiary Guarantors need not pay for any
settlement made without their written consent. The Company and the Subsidiary
Guarantors need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
To secure the Company's and the Subsidiary Guarantors' payment
obligations in this Section 7.7, the Trustee shall have a Lien prior to the
Securities on all assets held or collected by the Trustee, in its capacity as
Trustee, except assets held in trust to pay principal and premium, if any, of or
interest on particular Securities.
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When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(4) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's and the Subsidiary Guarantors' obligations under
this Section 7.7 and any lien arising hereunder shall survive the resignation or
removal of the Trustee, the discharge of the Company's and the Subsidiary
Guarantors' obligations pursuant to Article VIII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing.
The Holder or Holders of a majority in aggregate principal amount of the
outstanding Securities may remove the Trustee by so notifying the Company and
the Trustee in writing and may appoint a successor trustee with the Company's
consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a receiver, Custodian, or other 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
Holder or Holders of a majority in aggregate principal amount of the outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the Lien provided 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 under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holder or Holders of at least 10% in aggregate principal amount
of the outstanding Securities may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company and the Subsidiary Guarantors' obligations under
Section 7.7 shall continue for the benefit of the retiring Trustee.
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 resulting, surviving or transferee corporation without any
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further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA
(S) 310(a)(1), (2) and (5). The Trustee shall have a combined capital and
surplus of at least $25.0 million 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 shall comply with 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
--------------------------------------------------------
The Company may, at its option at any time within one year of
the Stated Maturity of the Securities, elect to have Section 8.2 or may, at any
time, elect to have Section 8.3 applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
------------------------------
Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.2, the Company and the Subsidiary Guarantors shall
be deemed to have been discharged from their respective obligations with respect
to all outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.5
and the other Sections of this Indenture referred to in (a) and (b) below, and
to have satisfied all its other obligations under such Securities and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Securities to receive solely
from the trust fund described in Section 8.4, and as more fully set forth in
such section, payments in respect of the principal of, premium, if any, and
interest on such Securities when such payments are due, (b) the Company's
obligations with respect to such Securities under Sections 2.4, 2.6, 2.7, 2.10
and 4.2, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's and the Subsidiary Guarantors' obligations in
connection therewith and (d) this Article VIII. Upon Legal Defeasance as
provided herein, the Guaranty of each Subsidiary Guarantor and the pledge of the
Pledged Collateral shall be fully released and discharged and the Trustee shall
promptly execute and deliver to the Company any documents reasonably requested
by the Company to evidence or effect the foregoing. Subject to compliance with
this Article VIII, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 with respect
to the Securities.
SECTION 8.3. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.3, the Company and the Subsidiary Guarantors shall
be released from their respective obligations under the covenants contained in
Sections 4.3, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.16,
Article V, Article XI, Article XII and Article XIII with respect to the
outstanding Securities on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes
50
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hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company need not comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document (and Section
6.1(3) shall not apply to any such covenant), but, except as specified above,
the remainder of this Indenture and such Securities shall be unaffected thereby.
In addition, upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.3, Sections 6.1(3) through 6.1(7) shall not
constitute Events of Default. Upon Covenant Defeasance, as provided herein, the
Guaranty of each Subsidiary Guarantor and the pledge of the Pledged Collateral
shall be fully released and discharged and the Trustee shall promptly execute
and deliver to the Company any documents reasonably requested by the Company to
evidence or effect the foregoing.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of
either Section 8.2 or Section 8.3 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfactory to the Trustee
satisfying the requirements of Section 7.10 who shall agree to comply with the
provisions of this Article VIII applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such Securities, (a)
Cash in an amount, or (b) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, Cash in an amount, or (c) a combination thereof, in such amounts, as in
each case will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be applied by the
Paying Agent (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on the outstanding Securities on the stated
maturity or on the applicable redemption date, as the case may be, of such
principal or installment of principal, premium, if any, or interest; provided
that the Paying Agent shall have been irrevocably instructed to apply such Cash
and the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities. The Paying Agent shall promptly advise the Trustee in
writing of any Cash or Securities deposited pursuant to this Section 8.4.
(b) In the case of an election under Section 8.2, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) In the case of an election under Section 8.3, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
to the effect that the Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit or,
in so far as Section 6.1(4) or Section 6.1(6) is concerned, at any time in the
period ending on the 91st day after the date of such deposit (it being
understood that this condition is a condition subsequent which shall not be
deemed satisfied until the expiration of such period, but in the case of
Covenant Defeasance, the covenants which are defeased under Section 8.3 will
cease to be in effect unless an Event of Default under Section 6.1(4) or Section
6.1(6) occurs during such period);
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(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the Company,
the Subsidiary Guarantors, or any of their Subsidiaries is a party or by which
any of them is bound;
(f) In the case of an election under either Section 8.2 or
8.3, the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election under
Section 8.2 or 8.3 was not made by the Company with the intent of preferring the
Holders over other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(g) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the conditions precedent provided for have
been complied with.
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held
---------------------------------------------------------
in Trust; Other Miscellaneous Provisions.
----------------------------------------
Subject to Section 8.6, all Cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Paying Agent (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Paying Agent") pursuant to Section 8.4 in respect of the outstanding Securities
shall be held in trust and applied by the Paying Agent, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any other Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
------------------------
Anything in this Article VIII to the contrary notwithstanding,
the Trustee or the Paying Agent shall deliver or pay to the Company from time to
time upon the request of the Company any Cash or U.S. Government Obligations
held by it as provided in Section 8.4 hereof which in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof), are in excess of the amount thereof that
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
Any Cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee, or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Security shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any Cash or
U.S. Government obligations in accordance with Section 8.2 or 8.3, as the case
may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's and the Subsidiary Guarantors' obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.2 or 8.3 until such time as the Trustee or Paying
Agent is permitted to apply such money in accordance with Section 8.2 and 8.3,
as the case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Security following the
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reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the Cash and U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company or any
Subsidiary Guarantor, when authorized by Board Resolutions, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided such action pursuant to this clause shall not adversely affect the
interests of any Holder in any respect;
(2) to add to the covenants of the Company or the Subsidiary
Guarantors for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or the Subsidiary Guarantors;
(3) to provide for additional collateral for or additional
guarantors of the Securities;
(4) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the obligations of the
Company, herein and in the Securities in accordance with Article V;
(5) to comply with the TIA;
(6) to provide for the issuance and authorization of the
Exchange Securities;
(7) to evidence the succession of another corporation to any
Subsidiary Guarantor and assumption by any such successor of the Guaranty of
such Subsidiary Guarantor (as set forth in Section 13.4) in accordance with
Article XIII;
(8) to evidence the release of any Pledged Collateral or the
release of any Subsidiary Guarantor in accordance with Article XII or Article
XIII, respectively;
(9) in any other case where a supplemental indenture is
required or permitted to be entered into pursuant to the provisions of Article
XII or Article XIII, respectively, without the consent of any Holder;
(10) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities; or
(11) to enter into any agreements consistent with Article XII
hereof, to further implement the provisions of Article XII in connection with
the incurrence of any Permitted Lien Indebtedness.
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
----------------------------------------------------
Consent of Holders.
------------------
Subject to Section 6.8, with the consent of the Holders of not
less than a majority in aggregate principal amount of then outstanding
Securities, by written act of said Holders delivered to the Company and the
Trustee, the Company or any Subsidiary Guarantor, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Securities or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or the Securities or of modifying in any
manner the rights of the Holders under this Indenture or the Securities. Subject
to Section 6.8, the Holder or Holders of not less than a majority in aggregate
principal amount
53
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of then outstanding Securities may waive compliance by the Company or any
Subsidiary Guarantor with any provision of this Indenture or the Securities.
Notwithstanding any of the above, however, no such amendment, supplemental
indenture or waiver shall without the consent of the Holders of not less than
66-2/3% of the aggregate principal amounts of Securities at the time outstanding
alter the terms or provisions of Article XII or Section 13.3; and no such
amendment, supplemental indenture or waiver shall, without the consent of the
Holder of each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest
on any Security;
(3) reduce the principal or premium amount of any Security, or
reduce the Change of Control Payment, the Offer Price or the Redemption Price;
(4) change the Stated Maturity;
(5) alter the redemption provisions of Article III or the
Offer Price or Change of Control Payment, in any case, in a manner adverse to
any Holder;
(6) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or the rights of
Holders to recover the principal or premium of, interest on, or redemption
payment with respect to, any Security, including without limitation any changes
in Section 6.8, 6.12 or this third sentence of this Section 9.2;
(7) make the principal of, or the interest and premium on, any
Security payable with anything or in any manner other than as provided for in
this Indenture (including changing the place of payment where, or the coin or
currency in which, any Security or any premium or the interest thereon is
payable) and the Securities as in effect on the date hereof; or
(8) make the Securities subordinated in right of payment to
any extent or under any circumstances to any other Indebtedness.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section
9.2 or Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under
this Article IX, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
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SECTION 9.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder 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 his Security by written notice to
the Company or the Person designated by the Company as the Person to whom
consents should be sent if such revocation is received by the Company or such
Person before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be the date so fixed by
the Company notwithstanding the provisions of the TIA. If a record date is
fixed, then notwithstanding the last sentence of the immediately preceding
paragraph, those Persons who were Holders at such record date, and only those
Persons (or their duly designated proxies), shall be entitled to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (9) of Section 9.2, in which case, the amendment, supplement
or waiver shall bind only 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; provided, that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest on a Security, on or after the respective
dates set for such amounts to become due and payable expressed in such Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Registrar or require the Holder to put an appropriate notation on the
Security. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Security
shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
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ARTICLE X.
RESERVED
ARTICLE XI.
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a Change of
-----------------------------------------------------------------
Control.
-------
(a) In the event that a Change of Control Triggering Event
occurs, each Holder shall have the right, at such Holder's option, subject to
the terms and conditions of this Indenture, to require the Company to repurchase
all or any part of such Holder's Securities (provided, that the principal amount
of such Securities at maturity must be $1,000 or an integral multiple thereof)
on a date selected by the Company that is no later than 45 Business Days after
the occurrence of such Change of Control Triggering Event (the "Change of
Control Payment Date"), at a cash price (the "Change of Control Payment") equal
to 101% of the aggregate principal amount thereof, plus (subject to the right of
Holders of record on a Record Date that is on or prior to such repurchase date
to receive interest due on the corresponding Interest Payment Date and subject
to clause (b)(4) below) accrued and unpaid interest, if any, to and including
the Change of Control Payment Date.
(b) In the event of a Change of Control Triggering Event, the
Company shall be required to commence an offer to purchase Securities (a "Change
of Control Offer") as follows:
(1) the Change of Control Offer shall commence within 10
Business Days following the occurrence of the Change of Control Triggering
Event;
(2) the Change of Control Offer shall remain open for 20
Business Days, except to the extent that a longer period is required by
applicable law, but in any case not more than 35 Business Days following
commencement (the "Change of Control Offer Period");
(3) upon the expiration of a Change of Control Offer,
the Company shall purchase all of the properly tendered Securities at the Change
of Control Payment, plus accrued interest;
(4) if the Change of Control Payment Date is on or after
a Record Date and on or before the related interest payment date, any accrued
interest will be paid to the Person in whose name a Security is registered at
the close of business on such Record Date, and no additional interest will be
payable to Securityholders who tender Securities pursuant to the Change of
Control Offer;
(5) the Company shall provide the Trustee and the Paying
Agent with notice of the Change of Control Offer at least three Business Days
before the commencement of any Change of Control Offer; and
(6) on or before the commencement of any Change of
Control Offer, the Company or the Registrar (upon the request and at the expense
of the Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture) shall
govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made
pursuant to such notice and this Section 11.1 and that all
Securities, or portions thereof, tendered will be accepted for
payment;
(ii) the Change of Control Payment (including the amount
of accrued and unpaid interest, subject to clause (b)(4) above), the
Change of Control Payment Date and the Change of Control Put Date
(as defined below);
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(iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of this
Article XI or such payment is prevented, any Security, or portion
thereof, accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control
Payment Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent (which may not for purposes of this
Section 11.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the
address specified in the notice prior to the close of business on
the earlier of (a) the third Business Day prior to the Change of
Control Payment Date and (b) the third Business Day following the
expiration of the Change of Control Offer (such earlier date being
the "Change of Control Put Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not
for purposes of this Section 11.1, notwithstanding anything in this
Indenture to the contrary, be the Company or any Affiliate of the
Company) receives, up to the close of business on the Change of
Control Put Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Securities the Holder is withdrawing and a statement that such
Holder is withdrawing his election to have such principal amount of
Securities purchased; and
(vii) a brief description of the events resulting in
such Change of Control Triggering Event.
Any such Change of Control Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Securities or portions thereof properly tendered pursuant
to the Change of Control Offer on or before the Change of Control Put Date, (ii)
deposit with the Paying Agent Cash sufficient to pay the Change of Control
Payment (including accrued and unpaid interest, subject to clause (b)(4) above)
for all Securities or portions thereof so tendered and (iii) deliver to the
Registrar Securities so accepted together with an Officers' Certificate listing
the aggregate principal amount of the Securities or portions thereof being
purchased by the Company. The Paying Agent shall on the Change of Control
Payment Date or promptly thereafter mail to Holders of Securities so accepted
payment in an amount equal to the Change of Control Payment (together with
accrued and unpaid interest) for such Securities (subject to clause (b)(4)
above), and the Trustee or its authenticating agent shall promptly authenticate
and the Registrar shall mail or deliver (or cause to be transferred by book
entry) to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered; provided, however, that each
such new Security will be in a principal amount of $1,000 or an integral
multiple thereof. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the consummation thereof.
57
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ARTICLE XII.
SECURITY
SECTION 12.1. Pledge of the Pledged Shares.
----------------------------
(a) In order to secure the prompt and complete payment of the
principal of, premium, if any, and interest (including, without limitation, all
interest, whether or not allowed under Section 502 of the Bankruptcy Law, 11
U.S.C. (S) 502, or otherwise, at the applicable rate specified in the
Securities, accrued or accruing after the commencement of any proceeding under
the Bankruptcy Law by or against any of the Pledgors) on the Securities when and
as the same shall be due and payable, whether at the Maturity Date or Interest
Payment Date thereof, by acceleration, call for redemption, upon a Change of
Control Offer, Offer to Purchase or otherwise (including amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Law, 11 U.S.C. (S) 362(a)), and the payment and performance of
all other obligations and indemnities of the Company and the Subsidiary
Guarantors to the Holders or the Trustee under this Indenture and the Securities
(the "Obligations"), the Pledgors hereby pledge and grant a security interest in
their respective rights, title and interest in and to the Pledged Collateral to
the Collateral Agent for the benefit of the Holders.
In the event that any Pledgor incurs (x) Indebtedness contemplated
in paragraph (b) or (f) of the definition of Permitted Indebtedness contained in
Section 1.1 or (y) any other Indebtedness ranking pari passu with the
Securities, including, without limitation, the New Notes and the Acquisitions
Notes ("Permitted Lien Indebtedness"), then such Pledgor shall be permitted to
secure the prompt and complete payment of the principal of, premium, if any, and
interest (including, without limitation, all interest, whether or not allowed
under Section 502 of the Bankruptcy Law, 11 U.S.C. (S) 502, or otherwise, at
the applicable rates specified, accrued or accruing after the commencement of
any proceeding under the Bankruptcy Law by or against any of the Pledgors) on
such Permitted Lien Indebtedness that may be incurred by the Pledgor, when and
as the same shall be due and payable, whether at the maturity date or interest
payment date thereof, by acceleration, call for redemption, upon a Change of
Control Offer, Offer to Purchase or otherwise (including amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Law, 11 U.S.C. (S) 362(a)), and the payment and performance of
all other obligations and indemnities of such Pledgor with respect to the
Permitted Lien Indebtedness (the "Permitted Lien Indebtedness Obligations") (the
Obligations and any Permitted Lien Indebtedness Obligations, the "Secured
Obligations"), by a pledge and grant of a security interest in its right, title
and interest in and to the Pledged Collateral to the Collateral Agent for the
benefit of the holders of such Permitted Lien Indebtedness, which pledge and
security interest shall be on an equal and ratable basis with the pledge and
security interest granted to secure the Obligations hereunder.
(b) If, subsequent to the date hereof, any Person shall become
a Future Subsidiary Guarantor (as defined in Section 13.3), the applicable
Pledgors will promptly execute and deliver an indenture supplement to the
Trustee and the Collateral Agent (as parties to such indenture supplement, with
a copy to be provided to the appropriate agent or other representative of the
holders of any Permitted Lien Indebtedness) and take such other action
reasonably necessary to evidence the pledge and grant of a security interest in
the Pledgors' respective rights, title and interest in and to the shares of
Capital Stock of such Future Subsidiary Guarantor held by any of the Pledgors,
which shares (the "Future Subsidiary Guarantor Shares") shall constitute
Subsidiary Guarantor Shares, Pledged Shares and Pledged Collateral subject to
the provisions of this Article XII as of the date such Person becomes a Future
Subsidiary Guarantor; provided, however, that the foregoing provisions shall not
apply with respect to (and the term "Future Subsidiary Guarantor Shares" shall
not include) the shares ("Excluded Shares") of any Future Subsidiary Guarantor
(an "Excluded Share Subsidiary") if, at the time such Person becomes a Future
Subsidiary Guarantor pursuant to Section 13.3, the pledge of or grant of a
security interest in the shares of such Future Subsidiary Guarantor is
prohibited by law or the terms of any agreement (other than an agreement entered
into in connection with the transaction resulting in such Person becoming a
Future Subsidiary Guarantor) binding on such Future Subsidiary Guarantor or the
Pledgor(s) owning the shares of such Future Subsidiary Guarantor (provided that
any such Excluded Shares shall cease to be Excluded Shares when all such
prohibitions cease to apply to such Excluded Shares and provided that the assets
of all Excluded Share Subsidiaries (determined by the Company in accordance with
GAAP) shall in no event exceed 15% of the aggregate assets of the Company and
its
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Subsidiaries (other than Leaseback Subsidiaries) on a consolidated basis
(determined by the Company in accordance with GAAP)).
(c) In the event that, subsequent to the date hereof, any
Person previously constituting a Subsidiary Guarantor ceases to be a Subsidiary
Guarantor (pursuant to the provisions of Section 13.4 or Section 13.5, or
otherwise), upon the request of the Company, the Trustee and the Collateral
Agent will promptly execute and deliver an indenture supplement to the Pledgors
(as parties to such indenture supplement, with a copy to be provided to the
appropriate agent or other representative of the holders of any Permitted Lien
Indebtedness), furnish any certificate or opinion required by TIA (S) 314(d),
in connection therewith and take such other action reasonably necessary to
evidence the release of the shares and any other securities of such Person, and
of each Subsidiary of such Person, from the pledge and grant of security
interest set forth in this Section 12.1, and such shares and other securities
("Released Subsidiary Guarantor Shares") shall cease to constitute Subsidiary
Guarantor Shares, Pledged Shares and Pledged Collateral subject to the
provisions of this Article XII as of the date such Person ceases to be a
Subsidiary Guarantor, provided that, in the event any Subsidiary Guarantor
ceases to be a Subsidiary Guarantor by reason of the sale of less than one
hundred percent of the Capital Stock of such Subsidiary Guarantor, the pledge
and grant of the security interest set forth in this Section 12.1 shall not be
released with respect to (and the Released Subsidiary Guarantor Shares shall not
include) the shares of Capital Stock of such Subsidiary Guarantor that continue
to be held by any Pledgor after such sale and that are not otherwise released in
accordance with the provisions of Article XII or Article XIII.
(d) Notwithstanding anything to the contrary in this Article
XII, unless an Event of Default or an event of default under any Permitted Lien
Indebtedness has occurred and is continuing, the Pledgors shall have the right,
power and authority to sell any of the Subsidiary Guarantor Shares (and
concurrent with such sale, any such Pledged Shares sold shall be released from
the Lien created by this Article), subject to the provisions of Section 4.14.
SECTION 12.2. Delivery of Pledged Shares and Subsequent Changes Affecting the
---------------------------------------------------------------
Pledged Shares.
--------------
(a) All certificates, instruments, documents and writings
representing or evidencing the Pledged Shares (including, without limitation,
Future Subsidiary Guarantor Shares) shall be delivered to and held by or on
behalf of the Collateral Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed stock powers or
other instruments of transfer or assignment in blank (the "Transfer
Instruments"), all in form and substance reasonably satisfactory to the
Collateral Agent. The Collateral Agent shall establish a separate account for
the purpose of holding the Pledged Shares. The Collateral Agent shall have the
right, after the occurrence of an Event of Default or an event of default under
any Permitted Lien Indebtedness and ten Business Days after notice to the
applicable Pledgor(s) in accordance with Section 12.5 hereof, to transfer to or
to register in the name of the Collateral Agent or any of its nominees (which
shall not be the Company or an affiliate of the Company) any or all of the
Pledged Shares. In addition, the Collateral Agent shall have the right at any
time thereafter to exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of smaller or larger
denominations.
(b) All certificates, instruments, documents and writings
representing or evidencing Pledged Shares that have been released from the Lien
created by this Article pursuant to Section 12.1 or Article XIII of this
Indenture, and all Transfer Instruments pertaining thereto, shall be delivered
by the Collateral Agent to the applicable Pledgor entitled thereto promptly upon
written request therefor delivered to the Collateral Agent.
(c) Each of the Pledgors represents and warrants that it has
made its own arrangements for keeping itself informed of changes and potential
changes affecting the Pledged Shares (including, but not limited to, rights to
convert, rights to subscribe, payment of dividends, reorganization and other
exchanges, tender offers and voting rights), and each of the Pledgors agrees
that the Collateral Agent shall not have any obligation to inform any of the
Pledgors of any such changes or potential changes or to take any action or omit
to take any action with respect thereto.
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SECTION 12.3. Supplements, Further Assurances.
-------------------------------
(a) Each of the Pledgors agrees that at any time and from time
to time, at the expense of such Pledgor, such Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or that the Collateral Agent may reasonably request, in order
to create, perfect and protect and maintain the creation, perfection and
priority of any security interest granted or purported to be granted hereby or
to enable the Collateral Agent to exercise and enforce its rights hereunder with
respect to the Pledged Collateral.
(b) Each of the Pledgors further agrees that it will, upon
obtaining any Pledged Shares required to be pledged pursuant to Section 12.1,
promptly deliver the certificates, instruments, documents and writings
representing or evidencing such shares to the Collateral Agent.
SECTION 12.4. Voting Rights; Dividends; Etc.
-----------------------------
(a) As long as no Event of Default or event of default under
any Permitted Lien Indebtedness shall have occurred and be continuing and, in
the case of paragraph (i) below, until ten Business Days after the Collateral
Agent has given written notice to the applicable Pledgor(s) in accordance with
Section 12.4(b):
(i) Each Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged
Shares owned by such Pledgor or any part of any of them for any
purpose not inconsistent with the terms this Indenture or any
instrument governing any Permitted Lien Indebtedness and which would
not impair the Pledged Shares.
(ii) Each Pledgor shall be entitled to receive and
retain, and utilize free and clear of the Lien created by this
Indenture, any and all dividends, distributions and other payments
in respect of the Pledged Shares owned by such Pledgor; provided,
however, that any and all dividends and other distributions received
in the form of additional Pledged Shares shall be forthwith
delivered to the Collateral Agent to hold as Pledged Collateral and
shall, if received by such Pledgor, be received in trust for the
benefit of the Collateral Agent, be segregated from the other
property of such Pledgor and be forthwith delivered to the
Collateral Agent as part of the Pledged Collateral in the same form
as so received (with any necessary endorsement).
(iii) In order to permit the Pledgors to exercise the
voting and other rights which they are entitled to exercise pursuant
to Section 12.4(a)(i) above and to receive the dividends,
distributions, and other payments which each is authorized to
receive and retain pursuant to Section 12.4(a)(ii) above, the
Collateral Agent shall, if necessary, upon written request of a
Pledgor, from time to time execute and deliver (or cause to be
executed and delivered) to such Pledgor, all such proxies, dividend
payment orders and other instruments as such Pledgor may reasonably
request.
(b) Upon the occurrence and during the continuance of an Event
of Default or event of default under any Permitted Lien Indebtedness and, in the
case of Section 12.4(b)(i), after the passage of ten Business Days following the
Collateral Agent's written notice to the applicable Pledgor of cessation of such
Pledgor's voting and other consensual rights hereunder:
(i) All rights of any of the Pledgors to exercise the
voting and other consensual rights which each such Pledgor would
otherwise be entitled to exercise pursuant to Section 12.4(a)(i)
above shall cease, and all such rights shall thereupon become vested
in the Collateral Agent, which, at the direction of the Trustee or
the appropriate agent(s) or other representative(s) of the holders
of any Permitted Lien Indebtedness as specified in Section 12.8(b),
shall thereupon have the sole right to
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exercise such voting and other consensual rights during the
continuance of such Event of Default or event of default under any
Permitted Lien Indebtedness.
(ii) All rights of the Pledgors to the dividends,
distributions and other payments which such Pledgors would otherwise
be authorized to receive and retain pursuant to Section 12.4(a)(ii)
shall cease, and all such rights shall thereupon become vested in
the Collateral Agent, who shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends,
distributions, principal, premium and interest payments during the
continuance of such Event of Default or event of default under any
Permitted Lien Indebtedness.
(c) In order to permit the Collateral Agent to receive all
dividends and other distributions to which it may be entitled under Section
12.4(b)(ii) above, and to exercise the voting and other consensual rights which
it may be entitled to exercise pursuant to Section 12.4(b)(i) above, each of the
Pledgors shall, if necessary, upon written notice from the Collateral Agent,
from time to time execute and deliver to the Collateral Agent all such proxies,
dividend payment orders and other instruments as the Collateral Agent may
reasonably request.
(d) All dividends, distributions and other payments which are
received by a Pledgor contrary to the provisions of Section 12.4(b)(ii) above
shall be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Pledgor and shall be forthwith paid over to
the Collateral Agent as Pledged Collateral in the same form as so received (with
any necessary endorsement).
SECTION 12.5. Collateral Agent Appointed Attorney-In-Fact.
-------------------------------------------
Each of the Pledgors hereby appoints the Collateral Agent as such
Pledgor's attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor or otherwise, from time to time in the
Collateral Agent's discretion, to take any action and to execute any instrument
which the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes of this Article XII following the occurrence and during
the continuation of an Event of Default or an event of default under any
Permitted Lien Indebtedness (but not prior thereto, or after the cessation
thereof), including, without limitation, in any respect neither contrary to the
provisions of this Indenture nor any instrument governing any Permitted Lien
Indebtedness, the right to notify and direct the issuer of or any party
obligated with respect to any Pledged Collateral to make payments with respect
to such Pledged Collateral directly to the Collateral Agent or may, in any
respect not contrary to the provisions of this Indenture or any instrument
governing any Permitted Lien Indebtedness, permit such rights to be exercised by
any Pledgor; and, without limiting the generality of the foregoing, in its
discretion following the occurrence and during the continuation of an Event of
Default or an event of default under any Permitted Lien Indebtedness (but not
prior thereto, or after the cessation thereof):
(a) The Collateral Agent may at any time vote or give
consents, or authorize the Pledged Shares to be voted or such consents to be
given in accordance with, and subject to the notice provisions set forth in,
Section 12.4(b) hereof.
(b) The Collateral Agent may join in and become a party to any
plan of reorganization and readjustment, whether voluntary or involuntary, may
deposit any of the Pledged Collateral under such plan or make any exchange or
surrender or permit any substitution for or cancellation of the Pledged
Collateral as required by such plan and may take all such action as may be
required by such plan; provided, however, that all securities issued or created
under such plan and exchanged for the Pledged Collateral and all securities,
moneys or property received pursuant to such plan shall thereafter be subject to
the terms of this Article XII and become part of the Pledged Collateral.
(c) The Collateral Agent may receive, endorse and collect all
checks, whether or not made payable to the order of the applicable Pledgor,
representing any dividend, distribution or other payments at any time paid or
made on or with respect to the Pledged Collateral all of which shall be applied
to the Secured Obligations as provided herein, and may give full discharge for
the same in accordance with Section 12.4(b) hereof.
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SECTION 12.6. Collateral Agent May Perform.
----------------------------
If any of the Pledgors fails to perform any agreement contained in
this Article XII within a reasonable period of time after receipt of a written
request to do so from the Collateral Agent, the Collateral Agent may, but shall
have no obligation to itself perform, or cause performance of, such agreement,
and the reasonable expenses of the Collateral Agent, including the reasonable
fees and expenses of its counsel, incurred in connection therewith shall be
payable under Section 12.13(h) hereof.
SECTION 12.7. Reasonable Care.
---------------
The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Pledged Collateral in its possession
if the Pledged Collateral is accorded treatment substantially equivalent to that
which the Collateral Agent, in its individual capacity, accords its own property
consisting of negotiable securities, it being understood that, in the absence of
instructions from the Trustee or the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien Indebtedness as specified
in Section 12.8(b), except as provided for herein and in any Agreement With
Collateral Agent entered into in connection with the incurrence of any Permitted
Lien Indebtedness pursuant to Section 12.14, the Collateral Agent shall not have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, tenders or other matters relative to any Pledged
Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any Person with
respect to any Pledged Collateral.
SECTION 12.8. Remedies Upon Default; Decisions Relating to Exercise of Remedies;
------------------------------------------------------------------
Limitations on Exercise of Remedies.
-----------------------------------
(a) Remedies Upon Default. Subject to Section 12.8(b), if an
Event of Default or an event of default under any Permitted Lien Indebtedness
shall have occurred and be continuing and as a consequence thereof Secured
Obligations equal to at least a majority of the aggregate principal amount of
the Secured Obligations then outstanding shall have become immediately due and
payable:
(i) The Collateral Agent may exercise in respect of the
Pledged Collateral, in addition to other rights provided for herein
or otherwise available to it, all the rights of a secured party on
default under the UCC; and in furtherance thereof, the Collateral
Agent may, at the direction of the Trustee or the appropriate
agent(s) or other representative(s) of the holders of any Permitted
Lien Indebtedness as specified in Section 12.8(b), without providing
notice to the Pledgors except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such other
terms as the Collateral Agent may deem commercially reasonable. Each
purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of any of the Pledgors, and
each of the Pledgors hereby waives (to the extent permitted by law)
all rights of redemption, stay and/or appraisal which it now has or
may at any time in the future have under any rule of law or statute
now existing or hereafter enacted. Each of the Pledgors agrees that
to the extent notice of sale shall be required by law, at least 30
days' notice to such Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not
be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
Each of the Pledgors hereby waives any claims against the Collateral
Agent arising hereunder by reason of the fact that the price at
which any Pledged Collateral may
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have been sold at such a private sale was less than the price which
might have been obtained at a public sale.
(ii) Each of the Pledgors recognizes that, by reason of
certain prohibitions contained in the Securities Act and applicable
state securities laws, the Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to
limit purchasers to those who will agree, among other things, to
acquire the Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. Each of
the Pledgors acknowledges that any such private sale may be at
prices and on terms less favorable to the Collateral Agent than
those which may be obtained through a public sale without such
restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner and that the Collateral Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any
Pledged Collateral for the period of time necessary to permit the
issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state
securities laws, even if the applicable Pledgor would agree to do
so.
(iii) If the Collateral Agent, at the direction of the
Trustee or the appropriate agent(s) or other representative(s) of
the holders of any Permitted Lien Indebtedness as specified in
Section 12.8(b), exercises its right to sell any or all of the
Pledged Collateral, upon written request, the applicable Pledgor(s)
shall and shall cause each issuer of any Pledged Shares to be sold
hereunder from time to time to furnish to the Collateral Agent all
such information as the Collateral Agent may request in order to
determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by the Collateral Agent as
exempt transactions under the Securities Act and the rules of the
SEC thereunder, as the same are from time to time in effect.
(b) Decisions Relating to Exercise of Remedies.
Notwithstanding anything in this Indenture or any instrument
governing any Permitted Lien Indebtedness to the contrary, the Collateral Agent
shall exercise or shall refrain from exercising any remedy provided for in this
Article XII, or otherwise pertaining to the Pledged Collateral, in accordance
with the instructions of the Trustee or the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien Indebtedness as follows:
the Collateral Agent shall at all times follow the instructions delivered by the
Trustee or the appropriate agent(s) or other representative(s) of the holders of
any Permitted Lien Indebtedness on behalf of the holders of a majority in
aggregate principal amount of the Secured Obligations then outstanding
("Requisite Obligees"). The Collateral Agent may at any time request directions
from the Trustee and the appropriate agent(s) or other representative(s) of the
holders of any Permitted Lien Indebtedness in accordance with the foregoing
(through delivery of such request to the Trustee and such agent(s) or other
representative(s)) with respect to any course of action or other matter relating
to the Pledged Collateral or the provisions of this Article XII. Directions
given by the Trustee and/or such agent(s) or other representative(s) to the
Collateral Agent in accordance with the foregoing shall be in writing and shall
be binding on all Holders of the Securities and holders of any Permitted Lien
Indebtedness for all purposes, and the Collateral Agent shall have no liability
for acting in accordance with such directions; provided, however, that (i) the
Collateral Agent shall not be required to follow any such direction that is in
conflict with any rule of law or with the terms of this Indenture or, except
with respect to determining who may direct the Collateral Agent to act or
refrain from taking action, any instrument governing any Permitted Lien
Indebtedness, and (ii) the Collateral Agent may take any other action it deems
proper which is not inconsistent with such direction.
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SECTION 12.9. Application of Proceeds.
-----------------------
After and during the continuance of an Event of Default or an event
of default under any Permitted Lien Indebtedness, any cash held by the
Collateral Agent as Pledged Collateral and all cash proceeds received by the
Collateral Agent (all such cash being "Proceeds") in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral pursuant to the exercise by the Collateral Agent of its remedies
under this Article XII or otherwise, shall be applied promptly from time to time
by the Collateral Agent:
First, to the payment of the costs and expenses of such sale,
collection or other realization, including reasonable compensation
to the Collateral Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by the
Collateral Agent in connection therewith;
Second, to the Trustee for the benefit of the Holders, for payment
until paid in full of the obligations in accordance with Section
6.6, and to the appropriate agent(s) or other representative(s) of
the holders of all Permitted Lien Indebtedness for payment until
paid in full of the Permitted Lien Indebtedness Obligations (all
such payments to be made ratably with respect to all outstanding
Secured Obligations); and
Third, after payment in full in cash of all Secured Obligations, to
the applicable Pledgor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds.
At the time of any application of Proceeds by the Collateral Agent
pursuant to this Section 12.9, the Collateral Agent shall provide each of the
Pledgors, the Trustee (if the Collateral Agent is not then the Trustee) and the
appropriate agent(s) or other representative(s) of the holders of any Permitted
Lien Indebtedness with a certificate setting forth the total amount paid to the
Trustee and such agent(s) or other representative(s) and a calculation of the
amounts, if any, deducted from Proceeds otherwise payable to the Trustee and
such agent(s) or other representative(s) or the Pledgors as contemplated by this
Indenture.
For purposes of this Section 12.9, payments shall be deemed to have
been made "ratably" with respect to all outstanding Secured Obligations if such
payments are made to or for the benefit of each holder of outstanding Secured
Obligations in the proportion that the Secured Obligations held by such holder
bears to the total amount of the Secured Obligations, as of such date (it being
understood that all payments by the Collateral Agent to or for the benefit of
the holders of the Outstanding Securities shall be made by the Collateral Agent
to the Trustee and all payments by the Collateral Agent to or for the benefit of
the holders of Permitted Lien Indebtedness shall be made by the Collateral Agent
to the appropriate agent(s) or other representative(s) of the holders of such
Permitted Lien Indebtedness, as applicable).
SECTION 12.10. Recording, Etc.
--------------
The Pledgors will cause, at their own expense, this Indenture and
all amendments or supplements hereto to be registered, recorded and filed or re-
registered, re-recorded, refiled and renewed in such manner and in such place or
places, if any, as may be required by law in order fully to preserve and protect
the security interests created under this Article XII in the Pledged Collateral
and to effectuate and preserve the security therein of the Collateral Agent for
the benefit of the Holders and the holders of any Permitted Lien Indebtedness
and all rights of the Collateral Agent.
The Company shall furnish to the Collateral Agent, the Trustee (if
the Collateral Agent is not then the Trustee) and to the appropriate agent(s) or
other representative(s) of the holders of any Permitted Lien Indebtedness
outstanding as of the applicable date specified below:
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(i) promptly after execution of this Indenture an
Opinion of Counsel either stating that in the opinion of such
counsel the Indenture has been properly recorded and filed so as to
make effective the Liens intended to be created by this Article XII,
and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to make such
Liens effective; and
(ii) within thirty (30) days of July 31 of each year,
commencing July 31, 1996, an Opinion of Counsel either stating that
in the opinion of such counsel such action has been taken with
respect to recording, filing, re-recording and refiling of this
Indenture as is necessary to maintain the Liens intended to be
created by this Article XII, and reciting the details of such
action, or stating that in the opinion of such counsel no such
action is necessary to maintain such Liens.
The release of any Pledged Collateral from the terms hereof will not
be deemed to impair the security under this Indenture or any instrument
governing any Permitted Lien Indebtedness in contravention of the provisions
hereof or thereof if and to the extent the Pledged Collateral is released
pursuant to the provisions of this Article XII or Article XIII of this
Indenture. The Collateral Agent, the Trustee and each of the Holders acknowledge
that a release of Pledged Collateral in accordance with the terms of this
Article XII or Article XIII of this Indenture will not be deemed for any purpose
to be an impairment of the security under this Indenture. To the extent
applicable, the Pledgors shall cause TIA (S) 314(d) relating to the release of
property or securities from the Lien created by this Article XII to be complied
with. Any certificate or opinion required by TIA (S) 314(d) may be made by any
Officer of the applicable Pledgor to the extent permitted by TIA (S) 314(d).
SECTION 12.11. Termination.
-----------
When all Secured Obligations have been paid in full in cash, the
provisions of this Article XII shall terminate, and the Collateral Agent shall,
upon the request and at the expense of the applicable Pledgor(s), forthwith
assign, transfer and deliver, against receipt and without recourse to the
Collateral Agent, such of the Pledged Collateral owned by each of the Pledgors
as shall not have been sold or otherwise applied pursuant to the terms hereof to
or on the order of such Pledgor. Upon the release of any Pledged Collateral
pursuant to Section 12.1 or Article XIII of this Indenture, (i) the provisions
of this Article XII shall terminate with respect to the Pledged Collateral so
released and (ii) the Collateral Agent shall, upon the request and at the
expense of the applicable Pledgor, forthwith assign, transfer and deliver,
against receipt and without recourse to the Collateral Agent, such of the
Pledged Collateral so released as shall have not been sold or otherwise applied
pursuant to the terms hereof to or on the order of such Pledgor.
SECTION 12.12. Continuing Security Interest.
----------------------------
This Article XII shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect (a) until the
payment in full in cash of all Secured Obligations or (b) with respect to any
Pledged Collateral released pursuant to Section 12.1 or Article XIII of this
Indenture, until such Pledged Collateral is so released and (ii) be binding upon
each of the Pledgors, its successors and assigns and (iii) inure to the benefit
of the Collateral Agent and each of its successors.
SECTION 12.13. The Collateral Agent.
--------------------
(a) Marine Midland Bank is hereby appointed as the "Collateral
Agent," to serve in such capacity until its successor is duly appointed pursuant
to Section 12.13(e) below. The Collateral Agent hereby accepts such appointment
and acknowledges that it is acting in such capacity for the benefit of the
holders of Secured Obligations. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in this Article XII of this
Indenture or any Agreement With Collateral Agent entered into pursuant to
Section 12.14, and the Collateral Agent, in such capacity, shall not be a
trustee for any Person or have any other fiduciary obligation to any Person
(including, without limitation, any obligation under the Trust Indenture Act of
1939, as amended) by reason of the provisions of this Article XII. The
Collateral Agent may employ agents and attorneys-
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in-fact and shall not be responsible, except as to cash or securities received
by it or its authorized agents, for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. Neither the
Collateral Agent nor any of its directors, officers, employees or agents shall
be liable or responsible for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own negligence
or willful misconduct. For as long as the Trustee acts as the Collateral Agent,
the Collateral Agent shall have the rights and immunities, including
indemnification, of the Trustee as set forth in Article VII.
(b) The Collateral Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by telex,
telecopy, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (including counsel to the Company or
the Pledgors), independent accountants and other experts selected by the
Collateral Agent. As to any matters not expressly provided for in this
Indenture, the Collateral Agent shall in all cases be fully protected in acting,
or in refraining from acting, in accordance with instructions given by the
Trustee and/or the appropriate agent(s) or other representative(s) of the
holders of any Permitted Lien Indebtedness as specified in Section 12.8(b), and
any action taken or failure to act pursuant thereto shall be binding on all
Pledgors and holders of Secured Obligations. Notwithstanding anything to the
contrary herein, the Collateral Agent shall in all cases be permitted to rely on
notice from the Trustee as to whether there has occurred and is continuing an
Event of Default under this Indenture and on notice from the appropriate
agent(s) or other representative(s) of the holders of any Permitted Lien
Indebtedness as to whether there has occurred and is continuing an event of
default under the instruments governing such Permitted Lien Indebtedness.
(c) Except for action expressly required of the Collateral
Agent hereunder, the Collateral Agent shall, notwithstanding anything to the
contrary herein, in all cases be fully justified in failing or refusing to act
hereunder unless and until it shall be further indemnified to its satisfaction
by the holders of the Secured Obligations against any and all loss, cost,
expense or liability which may be incurred by it by reason of taking or refusing
to take any such action. The Collateral Agent shall not be required to take any
action that is in its opinion contrary to law or to the terms of this Indenture
or, except with respect to determining who may direct the Collateral Agent to
act or refrain from taking action, any instrument governing any Permitted Lien
Indebtedness, or which would in its opinion subject it or any of its officers,
employees or directors to liability.
(d) Except as expressly provided herein, the Collateral Agent
shall have no duty to take any affirmative steps with respect to the collection
of amounts payable in respect to the Pledged Collateral.
(e)(i) Until such time as the Secured Obligations shall have been
paid in full, the Collateral Agent may at any time, by giving
written notice to the Company and the Trustee (if the Collateral
Agent is not then the Trustee) and the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien Indebtedness
resign and be discharged of the responsibilities hereby created,
such resignation to become effective upon (x) the appointment of a
successor Collateral Agent and (y) the acceptance of such
appointment by such successor Collateral Agent. As promptly as
practicable after the giving of any such notice, the Company shall
appoint a successor Collateral Agent, which successor Collateral
Agent shall be approved by the Trustee and the appropriate agent(s)
or other representative(s) of the holders of any Permitted Lien
Indebtedness (which approval shall not be unreasonably withheld). If
no successor Collateral Agent shall be appointed and shall have
accepted such appointment within 90 days after the Collateral Agent
gives the aforesaid notice of resignation, the Collateral Agent or
the Trustee or the appropriate agent(s) or other representative(s)
of the holders of any Permitted Lien Indebtedness may apply to any
court of competent jurisdiction to appoint a successor Collateral
Agent to act until such time, if any, as a successor shall have been
appointed as provided in this clause (e)(i). Any successor so
appointed by such court shall immediately and without further act be
superseded by any successor Collateral Agent appointed by the
Company, with the approval of the Trustee and the appropriate
agent(s) or other representative(s) of the holders of any Permitted
Lien Indebtedness (which approval shall not be unreasonably
withheld), as provided above in this clause
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(e)(i). The Collateral Agent may be removed at any time at the
written direction of the Requisite Obligees, with notice delivered
to the Trustee, the appropriate agent(s) or other representative(s)
of the holders of Permitted Lien Indebtedness and the Company.
(ii) If at any time the Collateral Agent shall be removed
or otherwise become incapable of acting, or if at any time a vacancy
shall occur in the office of the Collateral Agent for any other
cause (other than a resignation governed by the preceding clause
(e)(i)), a successor Collateral Agent shall be appointed by the
Company, with the approval of the Trustee and the appropriate
agent(s) or other representative(s) of the holders of any Permitted
Lien Indebtedness (such approval not to be unreasonably withheld).
If no successor Collateral Agent has been appointed by the Company
within 90 days after such vacancy is created, the Trustee and/or
such agent(s) or other representative(s) may apply to any court of
competent jurisdiction to appoint a successor Collateral Agent to
act until such time, if any, as a successor shall have been
appointed as provided in this clause (e)(ii). The powers, duties,
authority and title of the predecessor Collateral Agent shall be
terminated and cancelled without procuring the resignation of such
predecessor and without any other formality (except as may be
required by applicable law) other than appointment and designation
of a successor by the Company in the manner set forth above, in
writing duly acknowledged and delivered to the predecessor, the
appropriate agent(s) or other representative(s) of the holders of
Permitted Lien Indebtedness and the Trustee. Such appointment and
designation shall be full evidence of the right and authority to
make the same and of all the facts therein recited, and this
Indenture, the instruments governing any Permitted Lien Indebtedness
and any Agreement With Collateral Agent entered into pursuant to
Section 12.14 shall vest in such successor, without any further act,
deed or conveyance, all the estates, properties, rights, powers,
trusts, duties, authority and title of its predecessor; but such
predecessor shall, nevertheless, on the written request of the
Trustee, the appropriate agent(s) or other representative(s) of the
holders of Permitted Lien Indebtedness, the Company or the
successor, execute and deliver an instrument transferring to such
successor all the estates, properties, rights, powers, trusts,
duties, authority and title of such predecessor hereunder by it or
its agents to such successor.
(iii) The Collateral Agent who has resigned or been
removed shall be entitled to fees, costs and expenses to the extent
incurred or arising, or relating to events occurring, before its
resignation or removal.
(f) Every successor Collateral Agent appointed pursuant to
clause (e), above, shall be a bank or trust company in good standing and having
power to act as Collateral Agent hereunder, incorporated under the laws of the
United States of America or any State thereof or the District of Columbia and
having its principal office within the 48 contiguous States and shall also have
capital, surplus and undivided profits of not less than $50,000,000, if there be
such an institution with such capital, surplus and undivided profits willing,
qualified and able to accept the agency hereunder upon reasonable or customary
terms.
(g) Any corporation into which the Collateral Agent may be
merged, or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Collateral Agent, shall be a party, or
any person succeeding to all or substantially all of the corporate trust
business of the Collateral Agent, shall be Collateral Agent under this Indenture
without the execution or filing of any paper or any further act on the part of
any party hereto.
(h) The Pledgors (jointly and severally) will upon demand pay
to the Collateral Agent the amount of any and all reasonable expenses (including
the reasonable fees and expenses of its counsel) which the Collateral Agent may
incur in connection with (i) the administration of the provisions of this
Article XII, (ii) the custody or preservation of, or the sale of, collection
from or other realization upon, any of the Pledged Collateral or (iii) the
exercise or enforcement of any of the rights of the Collateral Agent hereunder.
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SECTION 12.14. Agreement With Collateral Agent.
-------------------------------
The Collateral Agent, the Trustee, the Pledgors and appropriate
agent(s) or other representative(s) of the holders of any Permitted Lien
Indebtedness shall enter into an Agreement With Collateral Agent in form and
substance reasonably acceptable to them (an "Agreement With Collateral Agent")
to provide for the orderly implementation of their respective rights and
responsibilities pursuant to this Article XII, including provision for the
exchange of such information as may be reasonably required to enable the
Collateral Agent to fulfill its responsibilities pursuant to this Article XII.
SECTION 12.15. Modifications at Such Time as any Permitted Lien Indebtedness
-------------------------------------------------------------
Ceases to be Outstanding.
------------------------
At such time as any Permitted Lien Indebtedness has been fully
satisfied in accordance with the instruments governing such Permitted Lien
Indebtedness, the provisions of this Article XII shall cease to apply with
respect to such Permitted Lien Indebtedness, and from and after such date,
notwithstanding any contrary provisions contained in this Article XII, (i) no
notices, requests or other materials or information will be required to be
provided to the agent(s) or representative(s) of the holders of such Permitted
Lien Indebtedness pursuant to the terms of this Article XII, (ii) any approvals
or directions from such agent(s) or other representative(s) otherwise required
under this Article XII will cease to be so required, (iii) the Collateral Agent
will no longer be entitled or required to take any actions by virtue of an event
of default under such Permitted Lien Indebtedness and all references to such
Permitted Lien Indebtedness (including Permitted Lien Indebtedness Obligations
in respect of such Permitted Lien Indebtedness), the instruments governing such
Permitted Lien Indebtedness, the Agreement With Collateral Agent with respect to
such Permitted Lien Indebtedness and the agent(s) or representative(s) of the
holders thereof shall be deemed to have been deleted.
ARTICLE XIII.
GUARANTY
SECTION 13.1. Guaranty.
--------
(a) In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of the Subsidiary
Guarantors hereby irrevocably and unconditionally guarantees (the "Guaranty"),
jointly and severally, to each Holder of a Security authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, irrespective
of the validity and enforceability of this Indenture, the Securities or the
obligations of the Company under this Indenture or the Securities, that: (w) the
principal and premium (if any) of and interest on the Securities will be paid in
full when due, whether at the Maturity Date or Interest Payment Date, by
acceleration, call for redemption, upon a Change of Control Offer, Offer to
Purchase, or otherwise; (x) all other obligations of the Company to the Holders
or the Trustee under this Indenture or the Securities will be promptly paid in
full or performed, all in accordance with the terms of this Indenture and the
Securities; and (y) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, they will be paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at maturity, by acceleration, call for redemption, upon a Change of
Control Offer, upon an Offer to Purchase or otherwise. Failing payment when due
of any amount so guaranteed for whatever reason, each Subsidiary Guarantor shall
be jointly and severally obligated to pay the same before failure so to pay
becomes an Event of Default. If the Company or a Subsidiary Guarantor defaults
in the payment of the principal of, premium, if any, or interest on, the
Securities when and as the same shall become due, whether upon maturity,
acceleration, call for redemption, upon a Change of Control Offer, Offer to
Purchase or otherwise, without the necessity of action by the Trustee or any
Holder, each Subsidiary Guarantor shall be required, jointly and severally, to
promptly make such payment in full.
(b) Each Subsidiary Guarantor hereby agrees that its
obligations with regard to this Guaranty shall be full and unconditional,
irrespective of the validity, regularity or enforceability of the Securities or
this Indenture, the absence of any action to enforce the same, any delays in
obtaining or realizing upon or failures to obtain or realize upon collateral,
the recovery of any judgment against the Company, any action to enforce the same
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or any other circumstances that might otherwise constitute a legal or equitable
discharge or defense of a guarantor (except as provided in Sections 13.4 and
13.5). Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company or
right to require the prior disposition of the assets of the Company to meet its
obligations, protest, notice and all demands whatsoever and covenants that this
Guaranty will not be discharged (except to the extent released pursuant to
Section 13.4 or 13.5) except by complete performance of the obligations
contained in the Securities and this Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Subsidiary Guarantor, or any
Custodian, trustee, or similar official acting in relation to either the Company
or such Subsidiary Guarantor, any amount paid by either the Company or such
Subsidiary Guarantor to the Trustee or such Holder, this Guaranty, to the extent
theretofore discharged, shall be reinstated in full force and effect (except to
the extent released pursuant to Section 13.4 or 13.5). Each Subsidiary Guarantor
agrees that it will not be entitled to any right of subrogation in relation to
the Holders in respect of any obligations guaranteed hereby until payment in
full of all obligations guaranteed hereby. Each Subsidiary Guarantor further
agrees that, as between such Subsidiary Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Section 6.2 for the purposes
of this Guaranty, notwithstanding any stay, injunction or other prohibition
preventing such acceleration as to the Company of the obligations guaranteed
hereby, and (ii) in the event of any declaration of acceleration of those
obligations as provided in Section 6.2, those obligations (whether or not due
and payable) will forthwith become due and payable by each of the Subsidiary
Guarantors for the purpose of this Guaranty.
(d) Each Subsidiary Guarantor and by its acceptance of a
Security issued hereunder each Holder hereby confirms that it is the intention
of all such parties that the guarantee by such Subsidiary Guarantor set forth in
Section 13.1(a) not constitute a fraudulent transfer or conveyance for purpose
of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar Federal or state law. To effectuate the
foregoing intention, the Holders and such Subsidiary Guarantor hereby
irrevocably agree that the obligations of such Subsidiary Guarantor under its
guarantee set forth in Section 13.1(a) shall be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Subsidiary Guarantor in respect of the
obligations of such other Subsidiary Guarantor under its guarantee or pursuant
to the following paragraph of this Section 13.1(d), result in the obligations of
such Subsidiary Guarantor under such guarantee not constituting such a
fraudulent transfer or conveyance.
Each Subsidiary Guarantor that makes any payment or distribution
under Section 13.1(a) shall be entitled to a contribution from each other
Subsidiary Guarantor equal to its Pro Rata Portion of such payment or
distribution. For purposes of the foregoing, the "Pro Rata Portion" of any
Subsidiary Guarantor means the percentage of the net assets of all Subsidiary
Guarantors held by such Subsidiary Guarantor, determined in accordance with
GAAP.
(e) It is the intention of each Subsidiary Guarantor and the
Company that the obligations of each Subsidiary Guarantor hereunder shall be
joint and several and in, but not in excess of, the maximum amount permitted by
applicable law. Accordingly, if the obligations in respect of the Guaranty would
be annulled, avoided or subordinated to the creditors of any Subsidiary
Guarantor by a court of competent jurisdiction in a proceeding actually pending
before such court as a result of a determination both that such Guaranty was
made without fair consideration and, immediately after giving effect thereto,
such Subsidiary Guarantor was insolvent or unable to pay its debts as they
mature or left with an unreasonably small capital, then the obligations of such
Subsidiary Guarantor under such Guaranty shall be reduced by such court if and
to the extent such reduction would result in the avoidance of such annulment,
avoidance or subordination; provided, however, that any reduction pursuant to
this paragraph shall be made in the smallest amount as is strictly necessary to
reach such result. For purposes of this paragraph, "fair consideration",
"insolvency", "unable to pay its debts as they mature", "unreasonably small
capital" and the effective times of reductions, if any, required by this
paragraph shall be determined in accordance with applicable law.
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SECTION 13.2. Execution and Delivery of Guaranty.
----------------------------------
Each Subsidiary Guarantor shall, by virtue of such Subsidiary
Guarantor's execution and delivery of this Indenture or such Subsidiary
Guarantor's execution and delivery of an indenture supplement pursuant to
Section 13.3 hereof, be deemed to have signed on each Security issued hereunder
the notation of guarantee set forth on the form of the Securities attached
hereto as Exhibit A to the same extent as if the signature of such Subsidiary
Guarantor appeared on such Security. The delivery of any Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of the guaranty set forth in Section 13.1 on behalf of each Subsidiary
Guarantor. The notation of a guaranty set forth on any Security shall be null
and void and of no further effect with respect to the guaranty of any Subsidiary
Guarantor which, pursuant to Section 13.4 or Section 13.5, is released from such
guaranty.
SECTION 13.3. Future Subsidiary Guarantors.
----------------------------
Upon (i) the acquisition by the Company or any Subsidiary Guarantor
of the Capital Stock of any Person, if, as a result of such acquisition, such
Person becomes a Subsidiary (other than a Leaseback Subsidiary) or (ii) the last
day of any fiscal quarter during which any Subsidiary of the Company that is not
a Subsidiary Guarantor as of such date and has not previously been released as a
Subsidiary Guarantor pursuant to Section 13.4 or Section 13.5 of this Indenture
becomes a Subsidiary (other than a Leaseback Subsidiary), such Subsidiary
(hereinafter any such Subsidiary, except any Excluded Guaranty Subsidiary or any
Special Purpose Subsidiary, being called a "Future Subsidiary Guarantor") shall
fully and unconditionally guarantee the obligations of the Company with respect
to payment and performance of the Securities and the other obligations of the
Company under this Indenture to the same extent that such obligations are
guaranteed by the other Subsidiary Guarantors pursuant to Section 13.1; and,
within 60 days of the date of such occurrence, such Future Subsidiary Guarantor
shall execute and deliver to the Trustee a supplemental indenture making such
Future Subsidiary Guarantor a party to this Indenture; provided, however, that
the foregoing provisions shall not apply to (A) any Subsidiary referenced in
clause (i) or clause (ii) above that is prohibited by law or by the terms of any
agreement from making the guarantee set forth in Section 13.1 (an "Excluded
Guaranty Subsidiary") (provided that such Subsidiary will become a Future
Subsidiary Guarantor as of the date such prohibition is removed or lapses and
provided that the assets of all Excluded Guaranty Subsidiaries (determined by
the Company in accordance with GAAP) shall in no event exceed 15% of the
aggregate assets of the Company and its Subsidiaries (other than Leaseback
Subsidiaries) on a consolidated basis (determined by the Company in accordance
with GAAP)), or (B) a Subsidiary which would have been released from its
guarantee, by virtue of events set forth in Section 13.5, had such Subsidiary
been a Subsidiary Guarantor at the time such events occurred, or (C) a
Subsidiary of any Person which has been released as a Subsidiary Guarantor
pursuant to Section 13.5 or (D) any Subsidiary referenced in clause (i) or
clause (ii) above that is a Special Purpose Subsidiary.
SECTION 13.4. Subsidiary Guarantor May Consolidate, Etc., on Certain Terms.
------------------------------------------------------------
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into the Company or any other Subsidiary Guarantor. Upon any such
consolidation or merger, the guarantees (as set forth in Section 13.1) of the
Subsidiary Guarantor which is not the survivor of the merger or consolidation,
and of any Subsidiary of such Subsidiary Guarantor that is also a Subsidiary
Guarantor, shall be released and shall no longer have any force or effect, and
any and all assets and Capital Stock (and all rights associated with such
Capital Stock) of such Subsidiary Guarantor, and of any Subsidiary of such
Subsidiary Guarantor that is also a Subsidiary Guarantor, that constitute part
of the Pledged Collateral shall be fully and unconditionally released from the
Lien created by Article XII and shall no longer constitute Pledged Collateral.
In the event that a Subsidiary Guarantor is the survivor of a merger or
consolidation with the Company, such Subsidiary Guarantor shall assume the
obligations of the Company pursuant to Section 5.2 and the Guaranty of such
Subsidiary Guarantor shall be released and shall no longer have any force or
effect and all assets and Capital Stock (and all rights associated with such
Capital Stock) of such Subsidiary Guarantor, that constitute part of the Pledged
Collateral shall be unconditionally released from the Lien created by Article
XII and shall no longer constitute Pledged Collateral.
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(b) Nothing contained in this Indenture shall prevent any sale
or conveyance of assets of any Subsidiary Guarantor (whether or not constituting
all or substantially all of the assets of such Subsidiary Guarantor) to any
Person, provided that the Company shall comply with the provisions of Section
4.14, and provided further that, in the event that all or substantially all of
the assets of a Subsidiary Guarantor are sold or conveyed, the guarantees of
such Subsidiary Guarantor (as set forth in Section 13.1) shall be released and
shall no longer have any force or effect, and all assets and Capital Stock (and
all rights associated with such Capital Stock) of such Subsidiary Guarantor, and
of each Subsidiary of such Subsidiary Guarantor that is also a Subsidiary
Guarantor, that constitute part of the Pledged Collateral shall be
unconditionally released from the Lien created by Article XII and shall no
longer constitute Pledged Collateral.
(c) Except as provided in Section 13.4(a) or Section 13.5,
each Subsidiary Guarantor shall not, directly or indirectly, consolidate with or
merge with or into another Person, unless (i) either (a) the Subsidiary
Guarantor is the continuing entity or (b) the resulting or surviving entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Subsidiary Guarantor in connection with the Securities
and this Indenture; (ii) no Default or Event of Default would occur as a
consequence of (after giving effect, on a pro forma basis, to) such transaction;
and (iii) the Subsidiary Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation or
merger and, if a supplemental indenture is required, such supplemental indenture
complies with this Indenture and that all conditions precedent herein relating
to such transaction have been satisfied.
(d) Upon any consolidation or merger of the Subsidiary
Guarantor in accordance with Section 13.4(c) hereof, the successor corporation
formed by such consolidation or into which the Subsidiary Guarantor is merged
shall succeed to, and be substituted for, and may exercise every right and power
of, the Subsidiary Guarantor under this Indenture with the same effect as if
such successor corporation had been named herein as the Subsidiary Guarantor,
and when a successor corporation duly assumes all of the obligations of the
Subsidiary Guarantor pursuant hereto and pursuant to the Securities, the
Subsidiary Guarantor shall be released from such obligations.
SECTION 13.5. Release of Subsidiary Guarantors and Collateral.
-----------------------------------------------
(a) Without any further notice or action being required by any
Person, any Subsidiary Guarantor, and each Subsidiary of such Subsidiary
Guarantor that is also a Subsidiary Guarantor, shall be fully and conditionally
released and discharged from all obligations under its guarantee and this
Indenture, and any and all assets and Capital Stock (and all rights associated
with such Capital Stock) of such Subsidiary Guarantor, and of each Subsidiary of
such Subsidiary Guarantor that is also a Subsidiary Guarantor, constituting
Pledged Collateral shall be fully and unconditionally released, upon (i) the
sale or other disposition of all or substantially all of the assets or
properties of such Subsidiary Guarantor, or 50% or more of the Capital Stock of
any such Subsidiary Guarantor to Persons other than the Company and its
Subsidiaries or (ii) the consolidation or merger of any such Subsidiary
Guarantor with any Person other than the Company or a Subsidiary of the Company,
if, as a result of such consolidation or merger, Persons other than the Company
and its Subsidiaries beneficially own more than 50% of the capital stock of such
Subsidiary Guarantor, provided that, in either such case, the Net Cash Proceeds
of such sale, disposition, merger or consolidation are applied in accordance
with Section 4.14 of this Indenture or (iii) a Legal Defeasance or Covenant
Defeasance, as set forth in Article VIII or (iv) such Subsidiary Guarantor
becoming a Special Purpose Subsidiary. Notwithstanding the foregoing provisions
of this Section 13.5(a), the pledge and grant of a security interest set forth
in Section 12.1 shall not be released pursuant to clause (i) or (ii) above with
respect to any Pledged Shares that continue to be held by any Pledgor after the
consummation of any transaction described in clause (i) or (ii) above, unless
such pledge and security interest are otherwise released in accordance with the
provisions of section 13.5.
(b) The releases and discharges set forth in Section 13.5(a)
shall be effective (i) in the case of releases and discharges effected pursuant
to clause (i) or (ii) of Section 13.5(a) by virtue of a sale, disposition,
consolidation or merger, on the date of consummation thereof, (ii) in the case
of releases and discharges effected pursuant to clause (iii) of Section 13.5(a),
upon the date of Covenant Defeasance or Legal Defeasance, as applicable
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and (iii) in the case of a Subsidiary becoming a Special Purpose Subsidiary, on
the date such Subsidiary becomes a Special Purpose Subsidiary. At the written
request of the Company, the Trustee shall promptly execute and deliver
appropriate instruments in forms reasonably acceptable to the Company evidencing
and further implementing any releases and discharges pursuant to the foregoing
provisions. If the Company desires the instruments evidencing or implementing
any releases or discharges to be executed prior to the effectiveness of such
releases and discharges as set forth above, such instruments may be made
conditional upon the occurrence of the events necessary to cause the
effectiveness of such releases and discharges, as specified in the first
sentence of this Section 13.5.
(c) Notwithstanding the foregoing provisions of this Article
XIII, (i) any Subsidiary Guarantor whose guarantee would otherwise be released
pursuant to the provisions of this Section 13.5 may elect, by written notice to
the Trustee, to maintain such guarantee in effect notwithstanding the event or
events that otherwise would cause the release of such guarantee (which election
to maintain such guarantee in effect may be conditional or for a limited period
of time), and (ii) any Subsidiary of the Company which is not a Subsidiary
Guarantor may elect, by written notice to the Trustee, to become a Subsidiary
Guarantor (which election may be conditional or for a limited period of time).
SECTION 13.6. Certain Bankruptcy Events.
Each Subsidiary Guarantor hereby covenants and agrees, to the
fullest extent that it may do so under applicable law, that in the event of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, such Subsidiary Guarantor shall not file (or join in any filing of), or
otherwise seek to participate in the filing of, any motion or request seeking to
stay or to prohibit (even temporarily) execution on the Guaranty and hereby
waives and agrees not to take the benefit of any such stay of execution, whether
under Section 362 or 105 of the Bankruptcy Law or otherwise.
ARTICLE XIV.
MISCELLANEOUS
SECTION 14.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the imposed duties,
upon qualification of this Indenture under the TIA, shall control.
SECTION 14.2. Notices.
-------
Any notices or other communications to the Company or any
Subsidiary Guarantor, Paying Agent, Registrar, Securities Custodian, transfer
agent or the Trustee required or permitted hereunder shall be in writing, and
shall be sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Subsidiary Guarantor:
HMH Properties, Inc.
10400 Fernwood Road
Bethesda, MD 20817
Attention: General Counsel
Telephone: (301) 580-6000
Telecopy: (301) 580-6338
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if to the Trustee:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Division
Telephone: (212)658-6084
Telecopy: (212)658-6425
if to Paying Agent or the Registrar:
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street
New York, New York 10006
Attention: Corporate Market Services
Telephone: (212) 250-4523
Telecopy: (212) 250-6961
Any party by notice to each other party may designate
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party shall be deemed to have been
given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
Business Days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall
be mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed. Any notice or
communication shall also be mailed to any Person described in TIA (S) 313(c) to
the extent required by the TIA.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 14.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA (S) 312(c).
SECTION 14.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company or any
Subsidiary Guarantor to the Trustee to take any action under this Indenture,
such Person shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) 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 met; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee), stating that, in the opinion of such counsel, all
such conditions precedent have been met; provided, however, that in the case of
any such request or application as to which the furnishing of particular
documents is specifically
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required by any provision of this Indenture, no additional certificate or
opinion need be furnished under this Section 14.4.
SECTION 14.5. 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:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of 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
met; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been met; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. Any Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 14.7. Non-Business Days.
-----------------
If a payment date is not a Business Day at such place, payment
may be made at such place on the next succeeding day that is a Business Day, and
no interest shall accrue for the intervening period.
SECTION 14.8. Governing Law.
-------------
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. EACH OF
THE COMPANY AND THE SUBSIDIARY GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND THE SUBSIDIARY
GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY AND THE SUBSIDIARY GUARANTORS IN ANY OTHER JURISDICTION.
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SECTION 14.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Subsidiary Guarantor or any of
their respective Subsidiaries. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 14.10. No Recourse against Others.
--------------------------
No direct or indirect stockholder, partner, employee, officer
or director, past, present or future, of the Company, the Subsidiary Guarantors
or any successor entity, shall have any personal liability in respect of the
obligations of the Company or the Subsidiary Guarantors under the Securities or
this Indenture by reason of his or its status as such stockholder, partner,
employee, officer or director. Each Securityholder by accepting a Security
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 14.11. Successors.
----------
All agreements of the Company and the Subsidiary Guarantors in
this Indenture and the Securities shall bind its successor. All agreements of
the Trustee in this Indenture shall bind its successor.
SECTION 14.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of
this Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 14.13. Severability.
------------
In case any one or more of the provisions in this Indenture or
in the Securities shall be held invalid, illegal or unenforceable, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 14.14. Table of Contents, Headings, Etc.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of
the Articles and the 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 14.15. Qualification of Indenture.
--------------------------
The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all costs and expenses (including attorneys, fees for the Company
and the Trustee) incurred in connection therewith, including, but not limited
to, costs and expenses of qualification of the Indenture and the Securities and
printing this Indenture and the Securities. The Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 14.16. Registration Rights.
-------------------
Certain Holders of the Securities are entitled to certain
registration rights with respect to such Securities pursuant to, and subject to
the terms of, the Registration Rights Agreement.
75
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
HMH PROPERTIES, INC.
By:
-------------------------------
Name:
Title:
HMC RETIREMENT PROPERTIES, INC.
By:
-------------------------------
Name:
Title:
HMH MARINA, INC.
By:
-------------------------------
Name:
Title:
HMH PENTAGON CORPORATION
By:
-------------------------------
Name:
Title:
HMH RIVERS, INC.
By:
-------------------------------
Name:
Title:
HOST AIRPORT HOTELS, INC.
By:
-------------------------------
Name:
Title:
76
<PAGE>
MARRIOTT FINANCIAL SERVICES, INC.
By:
-------------------------------
Name:
Title:
MARRIOTT SBM TWO CORPORATION
By:
-------------------------------
Name:
Title:
HOST OF BOSTON, LTD.
BY: Host Airport, Ltd., its
General Partner
By:
-------------------------------
Name:
Title:
HOST OF HOUSTON, LTD.
BY: Host Airport, Ltd., its
General Partner
By:
-------------------------------
Name:
Title:
77
<PAGE>
HOST OF HOUSTON 1979
BY: HMH Properties, Inc.
By:
-------------------------------
Name:
Title:
MARINE MIDLAND BANK
as Trustee
By:
-------------------------------
Name:
Title:
78
<PAGE>
Exhibit A
FORM OF SECURITY
[HMH PROPERTIES, INC.]
9 1/2% SERIES A SENIOR SECURED NOTE
DUE 2005
No. $___________
HMH Properties, Inc., a Delaware corporation (hereinafter called the
"Company," which term includes any successors under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ____________, or
registered assigns, the principal sum of ____________ Dollars, on May 15, 2005.
Interest Payment Dates: May 15 and November 15 commencing November 15,
1995.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated: May 25, 1995
HMH PROPERTIES, INC., a
Delaware corporation
[Seal]
By:
-----------------------------------
Name:
Title:
Attest:
----------------------------
Secretary
A-1
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
MARINE MIDLAND BANK OR MARINE MIDLAND BANK
as Trustee as Trustee
By: By: BANKERS TRUST COMPANY
-------------------------------- --------------------------------
Authorized Signatory as Authenticating Agent
By:
--------------------------------
Authorized Signatory
A-2
<PAGE>
HMH PROPERTIES, INC.
9 1/2% Series A Senior Secured Note
due 2005
Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein./1/
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS
THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $100,000 FOR
- -------------------
/1/ This paragraph should only be added if the Security is issued in global
form.
A-3
<PAGE>
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE
CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
REGISTRAR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE."/2/
1. Interest.
--------
HMH Properties, Inc., a Delaware corporation (hereinafter
called the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate of 9 1/2% per annum from May 25, 1995 until maturity.
To the extent it is lawful, the Company promises to pay interest on any interest
payment due but unpaid on such principal amount at a rate of 9 1/2% per annum
compounded semi-annually.
The Company will pay interest semi-annually on May 15 and
November 15 of each year or, if any such day is not a Business Day, on the next
succeeding Business Day (each, an "Interest Payment Date"), commencing November
15, 1995. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid on the Securities,
from the date of issuance. Interest will be computed on the basis of a 360-day
year consisting of twelve 30-day months.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the May 1 or November 1 immediately preceding the Interest
Payment Date. Holders must surrender Securities to a Paying Agent to collect
principal payments. Except as provided below, the Company shall pay principal
and interest in such coin or currency of the United States of America as at the
time of payment shall be legal tender for payment of public and private debts
("Cash"). The Securities will be payable as to principal, premium and interest
at the office or agency of the Company maintained for such purpose within or
without the City and State of New York or, at the option of the Company, payment
of principal, premium and interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal of and interest and premium on all Global Securities and all other
Securities the Holders of which shall have provided wire transfer instructions
to the Company or the Paying Agent.
3. Paying Agent and Registrar.
--------------------------
Initially, Bankers Trust Company will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. The Company or any of its Subsidiaries may,
subject to certain exceptions, act as Paying Agent, Registrar or co-Registrar.
- --------------------
/2/ This paragraph should be included only for the Initial Securities.
A-4
<PAGE>
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as
of May 25, 1995 (the "Indenture"), among the Company, the Subsidiary Guarantors
named therein and Marine Midland Bank (the "Trustee" which term includes any
successor Trustee under the Indenture). Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act, as in effect on the date of
the Indenture. The Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and said Act for a statement of them.
The Securities are senior secured obligations of the Company limited in
aggregate principal amount to $600,000,000. The Securities are secured by a
pledge of the Pledged Shares.
5. Redemption.
----------
The Securities may be redeemed, in whole or in part, at any
time on or after May 15, 2000, at the option of the Company, at the Redemption
Price (expressed as a percentage of principal amount) set forth below with
respect to the indicated Redemption Date, in each case (subject to the right of
Holders of record on a Record Date that is on or prior to such Redemption Date
to receive interest due on the Interest Payment Date to which such Record Date
relates), plus any accrued but unpaid interest to the Redemption Date. The
Securities may not be so redeemed prior to May 15, 2000.
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
commencing May 15 Redemption Price
----------------- ----------------
<S> <C>
2000.......................................... 103.563%
2001.......................................... 102.375%
2002.......................................... 101.188%
2003 and thereafter........................... 100.000%
</TABLE>
Any such redemption will comply with Article III of the
Indenture.
6. Notice of Redemption.
--------------------
Notice of redemption will be sent by first class mail, at
least 30 days and not more than 60 days prior to the Redemption Date to the
Holder of each Security to be redeemed at such Holder's last address as then
shown upon the registry books of the Registrar. Securities may be redeemed in
part in multiples of $1,000 only.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Securities called for
redemption shall have been deposited with the Paying Agent on such Redemption
Date and payment of the Securities called for redemption is not otherwise
prohibited, the Securities called for redemption will cease to bear interest and
the only right of the Holders of such Securities will be to receive payment of
the Redemption Price.
7. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption.
8. Persons Deemed Owners.
---------------------
The registered Holder of a Security may be treated as the
owner of it for all purposes.
A-5
<PAGE>
9. Unclaimed Money.
---------------
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agent(s) will pay the money
back to the Company at its written request. After that, all liability of the
Trustee and such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
Except as set forth in the Indenture, if the Company
irrevocably deposits with the Trustee, in trust, for the benefit of the Holders,
Cash, U.S. Government Obligations or a combination thereof, in such amounts as
will be sufficient in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Securities to redemption or maturity and comply with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including the restrictive
covenants described in paragraph 12 below, but excluding their obligation to pay
the principal of and interest on the Securities). Upon satisfaction of certain
additional conditions set forth in the Indenture, the Company may, within one
year of the Stated Maturity of the Securities, elect to have its obligations
discharged with respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
-------------------------------
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice to
or consent of any Holder, the parties thereto may under certain circumstances
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency, or make any other change that does not
adversely affect the rights of any Holder of a Security.
12. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of
the Company and the Subsidiary Guarantors to, among other things, incur
additional Indebtedness and Disqualified Capital Stock, pay dividends or make
certain other restricted payments, enter into certain transactions with
Affiliates, incur Liens, sell assets, merge or consolidate with any other Person
or transfer (by lease, assignment or otherwise) substantially all of the
properties and assets of the Company. The limitations are subject to a number of
important qualifications and exceptions. The Company must periodically report to
the Trustee on compliance with such limitations.
13. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control Triggering Event, the Company
shall be required to offer to purchase on the Change of Control Payment Date all
outstanding Securities at a purchase price equal to 101% of the principal amount
thereof, plus (subject to the right of Holders of Record on a Record Date that
is on or prior to such Purchase Date to receive interest due on the Interest
Payment Date to which such Record Date relates) accrued and unpaid interest, if
any, to the Change of Control Payment Date. Holders of Securities will receive a
Change of Control Offer from the Company prior to any related Change of Control
Payment Date and may elect to have such Securities purchased by completing the
form entitled "Option of Holder to Elect Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of
the Company, the Subsidiary Guarantors or any of their respective Subsidiaries
to sell assets. In the event the proceeds from a permitted Asset Sale exceed
certain amounts, as specified in the Indenture, the Company will be required
either to reinvest the proceeds of such Asset Sale in its business or to make an
offer to purchase a certain amount of each Holder's Securities at 100% of the
principal amount thereof, plus accrued interest, if any, to the purchase date.
A-6
<PAGE>
14. Notation of Guaranty.
--------------------
As set forth more fully in the Indenture, the Persons
constituting Subsidiary Guarantors from time to time, in accordance with the
provisions of the Indenture, unconditionally and jointly and severally
guarantee, in accordance with Section 13.1 of the Indenture, to the Holder and
to the Trustee and its successors and assigns, that (i) the principal of and
interest on the Security will be paid, whether at the Maturity Date or Interest
Payment Dates, by acceleration, call for redemption or otherwise, and all other
obligations of the Company to the Holder or the Trustee under the Indenture or
this Security will be promptly paid in full or performed, all in accordance with
the terms of the Indenture and this Security, and (ii) in the case of any
extension of payment or renewal of this Security or any of such other
obligations, they will be paid in full when due or performed in accordance with
the terms of such extension or renewal, whether at the Maturity Date, as so
extended, by acceleration or otherwise. Such guarantees shall cease to apply,
and shall be null and void, with respect to any Subsidiary Guarantor who,
pursuant to Article Thirteen of the Indenture, is released from its guarantees,
or whose guarantees otherwise cease to be applicable pursuant to the terms of
the Indenture.
15. Successors.
----------
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing (other than an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest), if it determines that withholding
notice is in their interest.
17. Trustee or Agent Dealings with Company.
--------------------------------------
The Trustee and each Agent under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates as if it were not the Trustee and such Agent.
18. No Recourse Against Others.
--------------------------
No direct or indirect stockholder, partner, employee, officer
or director, as such, past, present or future, of the Company, the Subsidiary
Guarantors or any successor entity shall have any personal liability in respect
of the obligations of the Company or the Subsidiary Guarantors under the
Securities or the Indenture by reason of his or its status as such stockholder,
partner, employee, officer or director. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Securities.
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Security.
A-7
<PAGE>
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM ( = tenants in common), TEN ENT
( = tenants by the entireties), JT TEN ( = joint tenants with right of
survivorship and not as tenants in common), CUST ( = Custodian), and U/G/M/A
( = Uniform Gifts to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Additional Rights of Holders of Transfer Restricted Securities.
--------------------------------------------------------------
In addition to the rights provided to Holders of Securities
under the Indenture, Holders of Initial Securities shall have all the rights set
forth in the Registration Rights Agreement.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
HMH Properties, Inc.
10400 Fernwood Road
Bethesda, MD 20817
Attn: Corporate Secretary
A-8
<PAGE>
[FORM OF] ASSIGNMENT
--------------------
I or we assign this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
----------------------------
and irrevocably appoint _______________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Dated: _____________________ Signed: _____________________________
- --------------------------------------------------------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee*
- ---------------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(I) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP) or (iv) in such other guarantee
program acceptable to be Trustee.
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
----------------------------------
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or Article XI of the Indenture, check the appropriate
box: [___] Section 4.14 [___] Article XI
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.14 or Article XI of the Indenture, as the case may
be, state the amount you want to be purchased: $________________
Date: Signature:
--------------------- --------------------------
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee**
- ----------------
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP) or (iv) in such other guarantee
program acceptable to be Trustee.
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES***
----------------------------------------------
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer
Principal Amount Principal Amount Security following of Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Security increase) Custodian
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------
*** This schedule should only be added if the Security is issued in global form.
A-11
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
-----------------------------------------
Re: 9 1/2% SERIES A SENIOR SECURED NOTES DUE 2005 OF HMH PROPERTIES,
INC.
This Certificate relates to $_________ principal amount of Securities held
in (check applicable box) ________ book-entry or _________ definitive form by
________ (the "Transferor").
The Transferor (check applicable box):
[_] has requested the Registrar by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
[_] has requested the Registrar by written order to exchange or register
the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Securities and as provided in
Section 2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because (check
applicable box):
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[_] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the Indenture) or pursuant to an
effective registration statement under the Securities Act (in satisfaction of
Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture.
[_] Such Security is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an exemption from registration in accordance
with Regulation Sunder the Securities Act or to an "institutional accredited
investor" within the meaning of Rule 501(A)(1), (2), (3) or (7) under the
Securities Act that is acquiring the Security for its own account, or for the
account of such an institutional accredited investor, in each case in a minimum
principal amount of $100,000, not with a view to or for distribution in
violation of the Securities Act (in satisfaction of Section 2.6(a)(ii)(C) or
Section 2.6(d)(i)(C) of the Indenture).
A-12
<PAGE>
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A, in accordance with Rule 144 under the Securities Act, or
to an "institutional accredited investor" within the meaning of Rule 501(A)(1),
(2), (3) or (7) under the Securities Act that is acquiring the Security for its
own account, or for the account of such an institutional accredited investor, in
each case in a minimum principal amount of $100,000, not with a view to or for
distribution in violation of the Securities Act, and an opinion of Counsel to
the effect that such transfer does not require registration under the Securities
Act accompanies this Certificate (in satisfaction of Section 2.6(a)(ii)(C) or
Section 2.6(d)(i)(C) of the Indenture).
-------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------
Date:
------------------------
A-13
<PAGE>
Exhibit 4.3
HMC ACQUISITION PROPERTIES, INC.,
Issuer,
and
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
MARINE MIDLAND BANK,
Trustee
AMENDED AND RESTATED INDENTURE
Dated as of July 10, 1997
$350,000,000
9% Senior Notes due 2007
<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. Incorporation by Reference of TIA...................................................18
SECTION 1.3. Rules of Construction...............................................................19
ARTICLE II. THE SECURITIES................................................................................19
SECTION 2.1. Form and Dating.....................................................................19
SECTION 2.2. Execution and Authentication........................................................19
SECTION 2.3. Registrar and Paying Agent..........................................................20
SECTION 2.4. Paying Agent to Hold Assets in Trust................................................21
SECTION 2.5. Securityholder Lists................................................................21
SECTION 2.6. Transfer and Exchange...............................................................21
SECTION 2.7. Replacement Securities..............................................................26
SECTION 2.8. Outstanding Securities..............................................................26
SECTION 2.9. Treasury Securities.................................................................26
SECTION 2.10. Temporary Securities................................................................26
SECTION 2.11. Cancellation........................................................................27
SECTION 2.12. Defaulted Interest..................................................................27
ARTICLE III. REDEMPTION....................................................................................28
SECTION 3.1 Optional Redemption.................................................................28
SECTION 3.2. Notices to Trustee and Paying Agent.................................................28
SECTION 3.3. Selection of Securities to Be Redeemed..............................................28
SECTION 3.4. Notice of Redemption................................................................28
SECTION 3.5. Effect of Notice of Redemption......................................................29
SECTION 3.6. Deposit of Redemption Price.........................................................29
SECTION 3.7. Securities Redeemed in Part.........................................................30
ARTICLE IV. COVENANTS.....................................................................................30
SECTION 4.1. Payment of Securities...............................................................30
SECTION 4.2. Maintenance of Office or Agency.....................................................30
SECTION 4.3. Limitation on Restricted Payments...................................................31
SECTION 4.4. Corporate Existence.................................................................31
SECTION 4.5. Payment of Taxes and Other Claims...................................................31
SECTION 4.6. Maintenance of Properties and Insurance.............................................32
SECTION 4.7. Compliance Certificate; Notice of Default...........................................32
SECTION 4.8. Reports.............................................................................32
SECTION 4.9. Limitation on Status as Investment Company..........................................33
SECTION 4.10. Limitation on Transactions with Affiliates..........................................33
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock..33
SECTION 4.12. Limitations on Dividends and other Payment Restrictions Affecting Subsidiaries......34
SECTION 4.13. Limitations on Liens................................................................35
SECTION 4.14. Limitation on Sale of Assets and Subsidiary Stock...................................35
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.............................................37
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SECTION 4.16. Limitation on Investments in Non-Guarantor Subsidiaries.............................38
ARTICLE V. SUCCESSOR CORPORATION.........................................................................38
SECTION 5.1. Limitation on Merger, Sale or Consolidation.........................................38
SECTION 5.2. Successor Corporation Substituted...................................................38
ARTICLE VI. EVENTS OF DEFAULT AND REMEDIES................................................................39
SECTION 6.1. Events of Default...................................................................39
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.............................40
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee.....................41
SECTION 6.4. Trustee May File Proofs of Claim....................................................41
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.........................42
SECTION 6.6. Priorities..........................................................................42
SECTION 6.7. Limitation on Suits.................................................................42
SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium and Interest...........43
SECTION 6.9. Rights and Remedies Cumulative......................................................43
SECTION 6.10. Delay or Omission Not Waiver........................................................43
SECTION 6.11. Control by Holders..................................................................43
SECTION 6.12. Waiver of Past Default..............................................................44
SECTION 6.13. Undertaking for Costs...............................................................44
SECTION 6.14. Restoration of Rights and Remedies..................................................44
ARTICLE VII. TRUSTEE.......................................................................................45
SECTION 7.1. Duties of Trustee...................................................................45
SECTION 7.2. Rights of Trustee...................................................................46
SECTION 7.3. Individual Rights of Trustee........................................................46
SECTION 7.4. Trustee's Disclaimer................................................................47
SECTION 7.5. Notice of Default...................................................................47
SECTION 7.6. Reports by Trustee to Holders.......................................................47
SECTION 7.7. Compensation and Indemnity..........................................................47
SECTION 7.8. Replacement of Trustee..............................................................48
SECTION 7.9. Successor Trustee by Merger, Etc....................................................49
SECTION 7.10. Eligibility; Disqualification.......................................................49
SECTION 7.11. Preferential Collection of Claims Against Company...................................49
ARTICLE VIII. LEGAL DEFEASANCE AND COVENANT DEFEASANCE......................................................49
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance............................49
SECTION 8.2. Legal Defeasance and Discharge......................................................49
SECTION 8.3. Covenant Defeasance.................................................................49
SECTION 8.4. Conditions to Legal or Covenant Defeasance..........................................50
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust; Other
Miscellaneous Provisions..........................................................51
SECTION 8.6. Repayment to the Company............................................................51
SECTION 8.7. Reinstatement.......................................................................51
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS...........................................................52
SECTION 9.1. Supplemental Indentures Without Consent of Holders..................................52
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with Consent of Holders.............52
SECTION 9.3. Compliance with TIA.................................................................54
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SECTION 9.4. Revocation and Effect of Consents...................................................54
SECTION 9.5. Notation on or Exchange of Securities...............................................54
SECTION 9.6. Trustee to Sign Amendments, Etc.....................................................54
ARTICLE X. RESERVED......................................................................................55
ARTICLE XI. RIGHT TO REQUIRE REPURCHASE...................................................................55
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a Change of Control...........55
ARTICLE XII. SECURITY......................................................................................57
SECTION 12.1. Pledge of the Pledged Shares........................................................57
SECTION 12.2. Delivery of Pledged Shares and Subsequent Changes Affecting the Pledged Shares......58
SECTION 12.3. Supplements, Further Assurances.....................................................59
SECTION 12.4. Voting Rights; Dividends; Etc.......................................................59
SECTION 12.5. Collateral Agent Appointed Attorney-In-Fact.........................................60
SECTION 12.6. Collateral Agent May Perform........................................................61
SECTION 12.7. Reasonable Care.....................................................................61
SECTION 12.8. Remedies Upon Default; Decisions Relating to Exercise of Remedies; Limitations on
Exercise of Remedies..............................................................61
SECTION 12.9. Application of Proceeds.............................................................63
SECTION 12.10. Recording, Etc......................................................................63
SECTION 12.11. Termination.........................................................................64
SECTION 12.12. Continuing Security Interest........................................................64
SECTION 12.13. The Collateral Agent................................................................64
SECTION 12.14. Agreement With Collateral Agent.....................................................67
SECTION 12.15. Modifications at Such Time as any Permitted Lien Indebtedness Ceases to be
Outstanding.......................................................................67
ARTICLE XIII. GUARANTY......................................................................................67
SECTION 13.1. Guaranty............................................................................67
SECTION 13.2. Execution and Delivery of Guaranty..................................................69
SECTION 13.3. Future Subsidiary Guarantors........................................................69
SECTION 13.4. Subsidiary Guarantor May Consolidate, Etc., on Certain Terms........................69
SECTION 13.5. Release of Subsidiary Guarantors and Collateral.....................................70
SECTION 13.6. Certain Bankruptcy Events...........................................................71
ARTICLE XIV. MISCELLANEOUS.................................................................................71
SECTION 14.1. TIA Controls........................................................................71
SECTION 14.2. Notices.............................................................................71
SECTION 14.3. Communications by Holders with Other Holders........................................72
SECTION 14.4. Certificate and Opinion as to Conditions Precedent..................................72
SECTION 14.5. Statements Required in Certificate or Opinion.......................................72
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar...........................................73
SECTION 14.7. Non-Business Days...................................................................73
SECTION 14.8. Governing Law.......................................................................73
SECTION 14.9. No Adverse Interpretation of Other Agreements.......................................73
SECTION 14.10. No Recourse against Others..........................................................73
SECTION 14.11. Successors..........................................................................74
SECTION 14.12. Duplicate Originals.................................................................74
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SECTION 14.13. Severability........................................................................74
SECTION 14.14. Table of Contents, Headings, Etc....................................................74
SECTION 14.15. Qualification of Indenture..........................................................74
SECTION 14.16. Registration Rights.................................................................74
EXHIBIT A .............................................................................................A-1
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This AMENDED AND RESTATED INDENTURE, dated as of July 10,
1997, by and among HMC Acquisition Properties, Inc., a Delaware corporation (the
"Company"), the Initial Guarantor referred to below and Marine Midland Bank, as
Trustee.
WHEREAS, the Company, such Initial Guarantor and the Trustee
entered into that certain Indenture dated as of December 20, 1995 as amended by
that certain First Supplemental Indenture dated as of June 6, 1997 and wish
further to amend and restate such Indenture to the extent set forth herein.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Company's 9% Series A Senior Notes due 2007 and the Company's 9% Series B Senior
Notes due 2007 exchanged for the 9% Series A Senior Notes due 2007:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
-----------
"Acceleration Notice" shall have the meaning specified in
-------------------
Section 6.2.
"Acceptance Amount" shall have the meaning specified in
-----------------
Section 4.14.
"Acquired Indebtedness" means Indebtedness of any Person
---------------------
existing at the time such Person becomes a Subsidiary of the Company or is
merged or consolidated into or with the Company or one of its Subsidiaries or
the assets of such Person shall have been acquired by the Company or a
Subsidiary of the Company, and not incurred in connection with or in
anticipation of, such merger or consolidation or of such Person becoming a
Subsidiary of the Company, or such assets being acquired by the Company or a
Subsidiary of the Company.
"Acquisition" means the purchase or other acquisition of any
-----------
Person or substantially all the assets of any Person by any other Person,
whether by purchase, merger, consolidation, or other transfer, and whether or
not for consideration.
"Affiliate" means any Person directly or indirectly
---------
controlling or controlled by or under direct or indirect common control with the
Company. For purposes of this definition, the term "control" means the power to
direct the management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise; provided, that a beneficial owner of 10% or more of the total
voting power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"Affiliate Transaction" shall have the meaning specified in
---------------------
Section 4.10.
"Agent" means any authenticating agent, Registrar, Paying
-----
Agent or transfer agent.
"Agreement With Collateral Agent" shall have the meaning
-------------------------------
specified in Section 12.14.
"Amendment Date" means the date upon which the amendments
--------------
effected by that certain Supplemental Indenture dated , July 10, 1997 by and
among the Company, the Subsidiary Guarantors and the Trustee modifying the terms
of the Indenture became operative.
"Applicable Percentage" means (i) 15% for the 12 month period
---------------------
commencing on the Amendment Date, and (ii) 20% thereafter.
"Asset Sale" shall have the meaning specified in Section 4.14.
----------
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"Asset Sale Offer" shall have the meaning specified in Section
----------------
4.14.
"Average Life" means, as of the date of determination, with
------------
respect to any security or instrument, the quotient obtained by dividing (i) the
sum of the products obtained by multiplying (a) the number of years from the
date of determination to the date of each successive scheduled principal (or
redemption) payment of such security or instrument times (b) the amount of such
respective principal (or redemption) payment, by (ii) the sum of all such
principal (or redemption) payments.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar
--------------
Federal, state or foreign law for the relief of debtors.
"Beneficial Owner" or "beneficial ownership" for purposes of
---------------- --------------------
the definition of Change of Control has the meaning attributed to it in Rules
13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether
or not applicable, except that a "Person" shall be deemed to have "beneficial
ownership" of all shares that such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any Person, the
------------------
Board of Directors of such Person or any committee of the Board of Directors of
such Person authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
----------------
adopted resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
------------
and Friday which is not a day on which banking institutions in New York, New
York are authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means rental obligations under
----------------------------
a lease that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any
-------------
and all shares, interests, rights to purchase (other than convertible or
exchangeable Indebtedness), warrants, options, participations or other
equivalents of or interests (however designated) in stock issued by that
corporation.
"Cash" or "cash" means such coin or currency of the United
---- ----
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Cash Equivalents" means (i) securities issued or directly and
----------------
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America are pledged in support thereof), or (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million and commercial paper issued by others rated at the
time of purchase at least A-2 or the equivalent thereof by S&P or at least P-2
or the equivalent thereof by Moody's and in each case maturing within one year
after the date of acquisition.
"Change of Control" means (i) any sale, transfer or other
-----------------
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Company or Host Marriott (for so long as Host Marriott is a Parent
of the Company), on a consolidated basis, in one transaction or a series of
related transactions, if, immediately after giving effect to such transaction,
any "person" or "group" (as such terms are used for purposes of Sections 13 (d)
and 14 (d) of the Exchange Act, whether or not applicable) other than an
Excluded Person is or becomes the "beneficial owner," directly or indirectly, of
more than 50% of the total voting power in the aggregate normally entitled to
vote in the election of directors, managers, or trustees, as applicable, of the
transferee, (ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not
2
<PAGE>
applicable) other than an Excluded Person is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting power in the
aggregate of all classes of Capital Stock of the Company or Host Marriott (for
so long as Host Marriott is a Parent of the Company) then outstanding normally
entitled to vote in elections of directors, (iii) during any period of 12
consecutive months after the Issue Date, individuals who at the beginning of
such 12-month period constituted the Board of Directors of the Company or Host
Marriott (for so long as Host Marriott is a Parent of the Company) (together
with any new directors whose election by such Board or whose nomination for
election by the shareholders of the Company or Host Marriott, as applicable, was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or Host Marriott, as
applicable, then in office, (iv) a "change of control" or similar event shall
occur under any other issue of Indebtedness of the Company, Host Marriott (for
so long as Host Marriott is a Parent of the Company) or their respective
Subsidiaries with an aggregate principal amount in excess of $20 million, or (v)
in the case of the Company only, Host Marriott ceases to own directly or
indirectly a majority of the equity interests of the Company; provided, however,
that the pro rata distribution by Host Marriott to its shareholders of shares of
the Company or shares of any of Host Marriott's other Subsidiaries, shall not,
in and of itself, constitute a Change of Control for purposes of this paragraph.
"Change of Control Offer" shall have the meaning specified in
-----------------------
Section 11.1.
"Change of Control Offer Period" shall have the meaning
------------------------------
specified in Section 11.1.
"Change of Control Payment" shall have the meaning specified
-------------------------
in Section 11.1.
"Change of Control Payment Date" shall have the meaning
------------------------------
specified in Section 11.1.
"Change of Control Put Date" shall have the meaning specified
--------------------------
in Section 11.1.
"Change of Control Triggering Event" means the occurrence of
----------------------------------
both a Change of Control and a Rating Decline.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" means the Pledged Collateral.
----------
"Collateral Agent" means the person named as the "Collateral
----------------
Agent" in Section 12.13 (a), until a successor Collateral Agent shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Collateral Agent" shall mean or include any person who is then
Collateral Agent hereunder.
"Commission" means the SEC.
----------
"Company" means the party named as such in this Indenture
-------
until a successor replaces it pursuant to the Indenture, and thereafter means
such successor.
"Computation Period" shall have the meaning specified in
------------------
Section 4.3.
"Consolidated Coverage Ratio" of any Person on any date of
---------------------------
determination (the "Transaction Date") means the ratio, on a pro forma basis, of
(a) the aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Interest Expense of such
Person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense would no longer be
obligations contributing to such Person's Consolidated Interest Expense
subsequent to the Transaction Date) during the Reference Period; provided, that
for purposes of such calculation, (i) acquisitions of operations, businesses or
other income-producing assets (including any reinvestment of disposition
proceeds in income
3
<PAGE>
producing assets held as of and not disposed on the Transaction Date) which
occurred during the Reference Period or subsequent to the Reference Period and
on or prior to the Transaction Date shall be assumed to have occurred on the
first day of the Reference Period, (ii) transactions giving rise to the need to
calculate the Consolidated Coverage Ratio shall be assumed to have occurred on
the first day of the Reference Period, (iii) the incurrence of any Indebtedness
or issuance of any Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date (and
the application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness or invested in income-producing assets held as of and
not disposed on the Transaction Date) shall be assumed to have occurred on the
first day of such Reference Period, and (iv) the Consolidated Interest Expense
of such Person attributable to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or dividend) rate shall
be computed on a pro forma basis as if the average rate in effect from the
beginning of the Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap and Hedging Obligation (which shall
remain in effect for the 12-month period immediately following the Transaction
Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated EBITDA" means, for any Person and period, the
-------------------
Consolidated Net Income of such Person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of (A)(i) Consolidated Interest Expense,
(ii) provisions for taxes based on income, (iii) depreciation and amortization
expense (provided, that the depreciation and amortization expense of a
Consolidated Subsidiary that is not wholly owned shall be included only to the
extent of the interest of the referent Person in such Subsidiary), (iv) any
other noncash items reducing the Consolidated Net Income of such Person for such
period, (v) any dividends or distributions during such period to such Person or
a Consolidated Subsidiary of such Person from any other Person which is not a
Subsidiary of such Person or which is accounted for by such Person by the equity
method of accounting, to the extent that (a) such dividends or distributions are
not included in the Consolidated Net Income of such Person for such period and
(b) (x) the sum of such dividends and distributions, plus the aggregate amount
of dividends or distributions from such other Person since the date of this
Indenture that have been included in Consolidated EBITDA pursuant to this clause
(v), do not exceed (y) the cumulative net income of such other Person
attributable to the equity interests of the Person (or Subsidiary of the Person)
whose Consolidated EBITDA is being determined, and (vi) any cash receipts of
such Person or a Consolidated Subsidiary of such Person during such period that
represent items included in Consolidated Net Income of such Person for a prior
period which were excluded from Consolidated EBITDA of such Person for such
prior period by virtue of clause (B) of this definition, minus (B) the sum of
(i) all noncash items increasing the Consolidated Net Income of such Person for
such period and (ii) any cash expenditures of such Person during such period to
the extent such cash expenditures (x) did not reduce the Consolidated Net Income
of such Person for such period and (y) were applied against reserves or accruals
that constituted noncash items reducing the Consolidated Net Income of such
Person when reserved or accrued; all as determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" of any Person means, for any
-----------------------------
period, the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations but excluding
the amortization of fees or expenses incurred in order to consummate the sale of
the Securities as described herein) of such Person and its Consolidated
Subsidiaries during such period, including (i) original issue discount and
noncash interest payments or accruals on any Indebtedness, (ii) the interest
portion of all deferred payment obligations, and (iii) all commissions,
discounts and other fees and charges owed with respect to bankers' acceptances
and letters of credit financings and Interest Swap and Hedging Obligations, in
each case to the extent attributable to such period, and (b) the amount of
dividends accrued or payable by such Person or any of its Consolidated
Subsidiaries in respect of Disqualified Capital Stock (other than by
Subsidiaries of such Person to such Person or such Person's Subsidiary
Guarantors); provided, however, that interest, dividends or other payments or
accruals of a Consolidated Subsidiary that is not wholly owned shall be included
only to the extent of the interest of the referent Person in such Subsidiary.
For purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by the
Company to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP and
4
<PAGE>
(y) interest expense attributable to any Indebtedness represented by the
guaranty by such Person or a Subsidiary of such Person of an obligation of
another Person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person
-----------------------
for any period, the net income (or loss) of such Person and its Consolidated
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, that (i) net income (or loss) of any other Person which is
not a Subsidiary of the Person or is accounted for by such specified Person by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid to the specified Person or a
Subsidiary of such Person, (ii) the net income (or loss) of any other Person
acquired by such specified Person or a Subsidiary of such Person in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iii) all gains and losses which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any capital stock),
shall be excluded, and (iv) the net income, if positive, of any of such Person's
Consolidated Subsidiaries (other than Non-Guarantor Subsidiaries) to the extent
that the declaration or payment of dividends or similar distributions is not at
the time permitted by operation of the terms of its charter or bylaws or any
other agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary shall be
excluded; provided, however, in the case of exclusions from Consolidated Net
Income set forth in clauses (ii), (iii) and (iv), such amounts shall be excluded
only to the extent included in computing such net income (or loss) in accordance
with GAAP and without duplication.
"Consolidated Net Worth" of any Person at any date means the
----------------------
aggregate consolidated stockholders' equity of such Person (plus amounts of
equity attributable to preferred stock) and its Consolidated Subsidiaries, as
would be shown on the consolidated balance sheet of such Person prepared in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity) (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such Person and its Consolidated
Subsidiaries, (b) all upward revaluations and other write-ups in the book value
of any asset of such Person or a Consolidated Subsidiary of such Person
subsequent to the Issue Date, and (c) all investments in Subsidiaries that are
not Consolidated Subsidiaries and in Persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any Person, each
-----------------------
Subsidiary of such Person (whether now existing or hereafter created or
acquired) the financial statements of which are consolidated for financial
statement reporting purposes with the financial statements of such Person in
accordance with GAAP.
"Covenant Defeasance" shall have the meaning specified in
-------------------
Section 8.3.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Debt Incurrence Ratio" shall have the meaning specified in
---------------------
Section 4.11.
"Default" means any event or condition that is, or after
-------
notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in
------------------
Section 2.12.
"Definitive Securities" means Securities that are in the form
---------------------
of Security attached hereto as Exhibit A that do not include the information
called for by footnote 1 thereof.
"Depositary" means, with respect to the Securities issuable or
----------
issued in whole or in part in global form, the Person specified in Section 2.3
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
5
<PAGE>
"Disqualified Capital Stock" means (a) except as set forth in
--------------------------
clause (b), with respect to any Person, Capital Stock of such Person that, by
its terms or by the terms of any security into which it is convertible,
exercisable or exchangeable, is, or upon the happening of an event or the
passage of time would be, required to be redeemed or repurchased (including at
the option of the holder thereof) by such Person or any of its Subsidiaries, in
whole or in part, on or prior to the Stated Maturity of the Securities and (b)
with respect to any Subsidiary of such Person (including with respect to any
Subsidiary of the Company), any Capital Stock other than any common stock with
no preference, or redemption or repayment provisions.
"DTC" shall have the meaning specified in Section 2.3.
---
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section
----------------
6.1.
"Excess Proceeds" shall have the meaning specified in Section
---------------
4.14.
"Excess Proceeds Date" shall have the meaning specified in
--------------------
Section 4.14.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 9% Series B Senior Notes due
-------------------
2007, issued pursuant to this Indenture in connection with the offer to exchange
the Initial Securities made by the Company and the Subsidiary Guarantors
pursuant to the Registration Rights Agreement.
"Excluded Guaranty Subsidiary" shall have the meaning
----------------------------
specified in Section 13.3.
"Excluded Person" means, in the case of the Company, Host
---------------
Marriott or any wholly owned subsidiary of Host Marriott.
"Excluded Share Subsidiary" shall have the meaning specified
-------------------------
in Section 12.1.
"Excluded Shares" shall have the meaning specified in Section
---------------
12.1.
"Exempted Affiliate Transactions" means (a) employee
-------------------------------
compensation arrangements approved by a majority of independent (as to such
transactions) members of the Board of Directors of the Company, (b) payments of
reasonable directors' fees and expenses, (c) transactions solely between the
Company and any of its Subsidiaries or solely among Subsidiaries of the Company,
(d) Permitted Tax Payments, (e) Permitted Sharing Arrangements, (f) Procurement
Contracts, (g) Management Agreements and (h) Restricted Payments permitted under
Section 4.3.
"Existing Assets" means assets of the Company and its
---------------
Subsidiaries existing at the Amendment Date (other than cash, Cash Equivalents
or inventory held for resale in the ordinary course of business) and including
proceeds of any sale, transfer or other disposition of such assets and assets
acquired in whole or in part with proceeds from the sale, transfer or other
disposition of any such assets.
"Existing Indebtedness" means, with respect to the Company and
---------------------
its Subsidiaries, Indebtedness existing or outstanding at the Issue Date.
"Fair Market Value" or "fair market value" means, with respect
-----------------
to any assets or properties, the amount at which such assets or properties would
change hands between a willing buyer and a willing seller, within a commercially
reasonable time, each having reasonable knowledge of the relevant facts, neither
being under a compulsion to sell or buy, as such amount is determined by (i) the
Board of Directors of the Company acting in
6
<PAGE>
good faith or (ii) an appraisal or valuation firm of national or regional
standing selected by the Company, with experience in the appraisal or valuation
of properties or assets of the type for which Fair Market Value is being
determined.
"Final Put Date" shall have the meaning specified in Section
--------------
4.14.
"Future Subsidiary Guarantor" shall have the meaning specified
---------------------------
in Section 13.3.
"Future Subsidiary Guarantor Shares" shall have the meaning
----------------------------------
specified in Section 12.1.
"GAAP" means United States generally accepted accounting
----
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession as in effect from time to time.
"Global Security" means a Security that contains the paragraph
---------------
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of Security attached hereto as Exhibit A.
"Guaranty" shall have the meaning provided in Section 13.1.
--------
"Holder" or "Securityholder" means the Person in whose name a
------ --------------
Security is registered on the Registrar's books.
"Host Marriott" means Host Marriott Corporation, a Delaware
-------------
corporation and the ultimate Parent of the Company.
"Incur" or "incur" shall have the meaning specified in Section
----- -----
4.11.
"Incurrence Date" shall have the meaning specified in Section
---------------
4.11.
"Indebtedness" of any Person means, without duplication, (a)
------------
all liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances, (v) for the payment of money relating to a Capitalized
Lease Obligation, or (vi) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit; (b) all net
obligations of such Person under Interest Swap and Hedging Obligations; (c) all
liabilities and obligations of others of the kind described in the preceding
clause (a) or (b) that such Person has guaranteed or that is otherwise its legal
liability or which are secured by any assets or property of such Person; and (d)
all obligations to purchase, redeem or acquire any Capital Stock.
"Indenture" means this Indenture, as amended or supplemented
---------
from time to time in accordance with the terms hereof.
"Initial Guarantor" means HMC SFO, Inc., the Company's wholly
-----------------
owned subsidiary.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette
------------------
Securities Corporation, BT Securities Corporation, Goldman, Sachs & Co.,
Citicorp Securities, Inc., Montgomery Securities, Salomon Brothers Inc and Smith
Barney, Inc.
"Initial Securities" means the 9% Series A Senior Notes due
------------------
2007 issued under this Indenture.
"Interest Payment Date" means the stated due date of an
---------------------
installment of interest on the Securities.
7
<PAGE>
"Interest Swap and Hedging Obligation" means any obligation of
------------------------------------
any Person pursuant to any interest rate swaps, caps, collars and similar
arrangements providing protection against fluctuations in interest rates. For
purposes of this Indenture, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such obligation provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligations shall be the net amount so determined, plus
any premium due upon default by such Person.
"Investment" by any Person in any other Person means (without
----------
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other Person or any agreement to make any such acquisition; (b) the making
by such Person of any deposit with, or advance, loan or other extension of
credit to, such other Person (including the purchase of property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other Person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) other than the guarantees of
Indebtedness of the Company or any Subsidiary to the extent permitted by Section
4.11, the entering into by such Person of any guarantee of, or other credit
support or contingent obligation with respect to, Indebtedness or other
liability of such other Person; (d) the making of any capital contribution by
such Person to such other Person; and (e) the designation by the Board of
Directors of the Company of any Person to be an Unrestricted Subsidiary. The
Company shall be deemed to make an Investment in an amount equal to the Fair
Market Value of the net assets of any Subsidiary (or, if neither the Company nor
any of its Subsidiaries has theretofore made an Investment in such Subsidiary,
in an amount equal to the Investments being made) at the time that such
Subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a Subsidiary shall
be deemed an Investment valued at its Fair Market Value at the time of such
transfer.
"Investment Grade" means a currently effective rating by S&P
----------------
of BBB- (or subsequent equivalent rating) or higher, and Moody's of Baa3 (or
subsequent equivalent rating) or higher (or if S&P or Moody's or both shall not
make a rating of the Securities publicly available, a nationally recognized
securities rating agency or agencies, as the case may be, reasonably selected by
the Company in good faith, which shall be substituted for S&P or Moody's or
both, as the case may be).
"Issue Date" means the date of first issuance of the
----------
Securities under this Indenture.
"Leaseback Subsidiary" means a Subsidiary of the Company which
--------------------
has no assets other than (i) leases, management agreements, rights to deferred
sales proceeds, and other rights pertaining to Residence Inns sold to an
unaffiliated person by the Company or its Subsidiaries and leased back by such
Subsidiary, (ii) working capital and other assets associated with the Residence
Inns leased by such Subsidiary and (iii) a de minimis amount of other assets
related to the foregoing.
"Legal Defeasance" shall have the meaning specified in Section
----------------
8.2.
"Lien" means any mortgage, lien, pledge, charge, security
----
interest, or other encumbrance of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Management Agreements" means the management agreements and
---------------------
franchise agreements between the Company and Marriott International or another
person relating to the operation of the Company's lodging properties.
8
<PAGE>
"Marriott International" means Marriott International, Inc., a
----------------------
Delaware corporation, and its Subsidiaries.
"Maturity Date" means, when used with respect to any Security,
-------------
the date specified on such Security as the fixed date on which the final
installment of principal of such Security is due and payable (in the absence of
any acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Offer to
Purchase).
"Merger" means the merger of the Company with and into
------
Properties.
"Moody's" means Moody's Investors Service, Inc. and its
-------
successors.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash
-----------------
Equivalents received by the Company, in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for cash on or
after the Issue Date, the amount of cash originally received by the Company upon
the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, (i) the sum of all
payments, fees, commissions and (in the case of Asset Sales, reasonable and
customary) expenses (including, without limitation, the fees and expenses of
legal counsel and investment banking fees and expenses) incurred in connection
with such Asset Sale or sale of Qualified Capital Stock, and (ii) (in the case
of an Asset Sale only) less the amount (estimated reasonably and in good faith
by the Company) of income, franchise, sales and other applicable taxes required
to be paid by the Company or any of its respective Subsidiaries in connection
with such Asset Sale; provided, however, that in the case of Cash or Cash
Equivalents received, or expenses paid or payable, by a Subsidiary that is not a
wholly owned Subsidiary of the Company, only that portion of the receipts and
expenses which are equal to the Company's proportionate ownership of such
Subsidiary shall be included in calculating Net Cash Proceeds.
"Net Non-Guarantor Investment" means the amount equal to the
----------------------------
aggregate Investments made by the Company and the Subsidiary Guarantors in
Non-Guarantor Subsidiaries from and after the Amendment Date, minus the
aggregate amount of any dividends, distributions or other payments received from
and after the Amendment Date by the Company and/or any Subsidiary Guarantor(s)
in respect of Investments in Non-Guarantor Subsidiaries.
"New Notes" means senior notes of Properties ranking pari
---------
passu as to payment of principal and interest with the Securities in an
aggregate principal amount not to exceed $600 million which New Notes Properties
currently intends to issue on or before September 30, 1997.
"New Notes Issuance Date" means the date on which the New
-----------------------
Notes are issued.
"Non-Guarantor Subsidiary" means any Subsidiary that is not a
------------------------
Subsidiary Guarantor.
"Non-recourse Purchase Money Indebtedness" means Indebtedness
----------------------------------------
of the Company or its Subsidiaries to the extent that, (i) under the terms
thereof or pursuant to law, no personal recourse may be had against the Company
or its Subsidiaries (other than Special Purpose Subsidiaries) for the payment of
the principal of or interest or premium on such Indebtedness, and enforcement of
obligations on such Indebtedness (except with respect to fraud, willful
misconduct, misrepresentation, misapplication of funds, reckless damage to
assets and undertakings with respect to environmental matters or construction
defects) is limited only to recourse against interests in specified assets and
property (the "Subject Assets"), accounts and proceeds arising therefrom, and
rights under purchase agreements or other agreements with respect to such
Subject Assets; (ii) such Indebtedness (x) is incurred concurrently with the
acquisition by the Company or its Subsidiaries of such Subject Assets or a
Person (or interests in a Person) holding such Subject Assets, or (y)
constitutes Refinancing Indebtedness with respect to Indebtedness so incurred;
and (iii) the Subject Assets are not Existing Assets and no Existing Assets or
proceeds from the sale, transfer or other disposition of Existing Assets were
used to acquire such Subject Assets.
9
<PAGE>
"Notice of Default" shall have the meaning specified in
-----------------
Section 6.1(3).
"Obligations" shall have the meaning specified in section
-----------
12.1.
"Offer Amount" shall have the meaning specified in Section
------------
4.14.
"Offer Price" shall have the meaning specified in Section
-----------
4.14.
"Offer to Purchase" shall have the meaning specified in
-----------------
Section 4.14.
"Offering Memorandum" means the confidential Offering
-------------------
Memorandum dated December 15, 1995 distributed to prospective purchasers of
Securities in connection with the sale of Securities by the Company.
"Officer" means, with respect to the Company or a Subsidiary
-------
Guarantor, the Chief Executive Officer, the President, any Senior Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of the Company or such Subsidiary Guarantor.
"Officers' Certificate" means, with respect to the Company or
---------------------
a Subsidiary Guarantor, a certificate signed by two Officers or by an Officer
and an Assistant Secretary of the Company or such Subsidiary Guarantor (as
applicable) and otherwise complying with the requirements of Sections 14.4 and
14.5, and delivered to the Trustee or an Agent, as applicable.
"Opinion of Counsel" means a written opinion from legal
------------------
counsel who is reasonably acceptable to the Trustee (which may include counsel
to the Trustee, the Company or its Parent (including an employee of the Company
or its Parent)) or an Agent, as applicable, complying with the requirements of
Sections 14.4 and 14.5, and delivered to the Trustee or an Agent, as applicable.
"Outstanding" as used with reference to the Securities shall
-----------
have the meaning specified in Section 2.8 hereof.
"Parent" of any Person means a corporation which at the date
------
of determination owns, directly or indirectly, a majority of the Voting Stock of
such Person or of a Parent of such Person.
"Paying Agent" has the meaning specified in Section 2.3.
------------
"Permitted Indebtedness" means any of the following:
----------------------
(a) The Company and its Subsidiaries may Incur Indebtedness
solely in respect of surety and appeal bonds, performance bonds and other
obligations of a like nature (to the extent that such incurrence does not result
in the incurrence of any obligation to repay any obligation relating to borrowed
money of others), all in the ordinary course of business in accordance with
customary industry practices;
(b) The Company and its Subsidiary Guarantors may Incur
Indebtedness under revolving credit loans for funded Indebtedness from time to
time in the ordinary course of business up to an aggregate amount outstanding of
$60 million;
(c) The Company and its Subsidiaries may Incur Indebtedness
under Interest Swap and Hedging Obligations that do not increase the
Indebtedness of the Company other than as a result of fluctuations in interest
or foreign currency exchange rates provided that such Interest Swap and Hedging
Obligations are incurred for the purpose of providing interest rate protection
with respect to Indebtedness permitted under this Indenture or to provide
currency exchange protection in connection with revenues generated in currencies
other than U.S. dollars;
(d) The Company may Incur Indebtedness to any Subsidiary
Guarantor, and any Subsidiary Guarantor may incur Indebtedness to any other
Subsidiary Guarantor or to the Company and any Subsidiary may
10
<PAGE>
incur Indebtedness to the Company or a Subsidiary Guarantor (subject to the
requirements of Section 4.3); provided, that, in the case of Indebtedness of the
Company, such obligations shall be unsecured and subordinated in all respects to
the Company's obligations pursuant to the Securities;
(e) The Company and its Subsidiary Guarantors may guarantee
Indebtedness of the Company, the Subsidiary Guarantors or the Subsidiaries, as
applicable, to the extent such guaranteed Indebtedness was permitted to be
incurred under this Indenture; and
(f) The Company and its Subsidiaries may incur Indebtedness
solely in respect of bankers' acceptances and letters of credit all in the
ordinary course of business in accordance with customary industry practices in
an aggregate amount outstanding at any time, not to exceed $100 million less the
aggregate principal amount of revolving Indebtedness incurred pursuant to clause
(b) above.
"Permitted Investment" means any of the following:
--------------------
(a) an Investment in Cash Equivalents;
(b) Investments in a Person substantially all of whose assets
are of a type generally used in a Related Business (an "Acquired Person") if, as
a result of such Investments, (i) the Acquired Person immediately thereupon is
or becomes a Subsidiary of the Company, or (ii) the Acquired Person immediately
thereupon either (1) is merged or consolidated with or into the Company or any
of its Subsidiaries and the surviving Person is the Company or a Subsidiary of
the Company or (2) transfers or conveys all or substantially all of its assets
to, or is liquidated into, the Company or any of its Subsidiaries;
(c) an Investment in a Person, provided that (i) such Person
is principally engaged in a Related Business, (ii) the Company or one or more of
its Subsidiaries participates in the management of such Person, as a general
partner, member of such Person's governing board or otherwise and (iii) the
aggregate amount of (x) Investments made in reliance on this clause (c)
subsequent to the Issue Date plus (y) investments made by Properties and its
Subsidiaries from and after the Properties Issue Date to the date of the Merger
in reliance on clause (c) of the definition of Permitted Investments under the
Properties Indenture, shall not exceed in the aggregate $50.0 million;
(d) Permitted Sharing Arrangement Payments;
(e) securities received in connection with an Asset Sale so
long as such Asset Sale complied with this Indenture including Section 4.14 (but
only to the extent the Fair Market Value of such securities and all other
noncash and noncash equivalent consideration received complies with clause (iii)
of Section 4.14); and
(f) Permitted Mortgage Investments.
"Permitted Lien" means any of the following:
--------------
(a) Liens existing on the Issue Date;
(b) Liens imposed by governmental authorities for taxes,
assessments or other charges not yet subject to penalty or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of the Company in accordance
with GAAP;
(c) statutory liens of carriers, warehousemen, mechanics,
materialmen, landlords, repairmen or other like Liens arising by operation of
law in the ordinary course of business provided that (i) the underlying
obligations are not overdue for a period of more than 30 days, or (ii) such
Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with GAAP;
11
<PAGE>
(d) Liens securing the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and
other similar encumbrances or title defects which, singly or in the aggregate,
do not in any case materially detract from the value of the property subject
thereto (as such property is used by the Company or any of its Subsidiaries) or
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries;
(f) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto;
(g) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security legislation;
(h) Liens securing on an equal and ratable basis the
Securities and any other Indebtedness, including, without limitation, the New
Notes and the Properties Notes.
(i) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Subsidiary or is merged with or into the Company or a
Subsidiary or Liens securing Indebtedness incurred in connection with an
Acquisition, provided that (i) such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets and (ii) no Existing Assets or
proceeds from the sale, transfer or other disposition of Existing Assets were
used to acquire such Person;
(j) Liens arising from Non-recourse Purchase Money
Indebtedness permitted to be incurred under this Indenture provided such Liens
relate only to the property which is subject to such Non-recourse Purchase Money
Indebtedness;
(k) Liens securing Refinancing Indebtedness incurred to
refinance any Indebtedness that was previously so secured in a manner no more
adverse to the Holders of the Securities than the terms of the Liens securing
such refinanced Indebtedness (provided, however, that cross-collateralization,
creation of "collateral pools" or similar arrangements in and of themselves
shall not be considered more adverse to the Holders of the Securities for the
purposes of the foregoing);
(l) Liens securing revolving debt incurred under clause (b) of
the definition of Permitted Indebtedness which revolving debt shall not exceed
an aggregate principal amount outstanding at any time of $60 million;
(m) Liens securing any other Indebtedness permitted to be
incurred under Section 4.11 not to exceed an aggregate principal amount
outstanding at any time of $100 million; and
(n) Liens securing bankers' acceptances and letters of credit
incurred under clause (f) of the definition of Permitted Indebtedness which do
not exceed an aggregate principal amount outstanding at any time of $115 million
less the aggregate principal amount of revolving debt secured pursuant to clause
(l) above.
"Permitted Lien Indebtedness" shall have the meaning specified
---------------------------
in Section 12.1.
"Permitted Lien Indebtedness Obligations" shall have the
---------------------------------------
meaning specified in Section 12.1.
"Permitted Mortgage Investment" means an Investment in
-----------------------------
Indebtedness secured by lodging property assets provided that (i) the Company is
able to consolidate the operations of the lodging property in its consolidated
GAAP financial statements, or (ii) such Investment is made with a view toward
acquiring ownership of the lodging properties securing such Indebtedness;
provided, however, that the aggregate Investments (the value of
12
<PAGE>
each such Investment to be determined at the time of such Investment) made in
reliance on this clause (ii) with respect to lodging properties as to which the
Company has not consolidated the operations in its consolidated GAAP financial
statements, as set forth in clause (i), shall not at any time exceed 10% of the
Company's aggregate assets.
"Permitted Sharing Arrangements" means any contracts,
------------------------------
agreements or other arrangements between the Company or one or more Subsidiaries
of the Company and a Parent of the Company or one or more Subsidiaries of such
Parent, pursuant to which such Persons share centralized services, establish
joint payroll arrangements, procure goods or services jointly, or otherwise make
payments with respect to goods or services on a joint basis, or allocate
corporate expenses (other than taxes based on income); provided that (i) such
Permitted Sharing Arrangements are, in the determination of management of the
Company, in the best interests of the Company and its Subsidiaries and (ii) the
liabilities of the Company and its Subsidiaries under such Permitted Sharing
Arrangements are determined in good faith and on a reasonable basis.
"Permitted Sharing Arrangements Payments" means payments under
---------------------------------------
Permitted Sharing Arrangements.
"Permitted Tax Payments" means (for any taxable year of the
----------------------
Company in which it joins in filing a consolidated Federal income tax return
with a Parent) a payment (including any estimated tax payment based on any
estimated tax liability for such year) by the Company to the Parent in an amount
not in excess of the lesser of (i) the separate return Federal income tax
liability (if any) of the affiliated group (within the meaning of Section 1504
of the Code) of which the Company would be the ultimate Parent (the "Company
Group") if it were not, and never had been, a member of another affiliated group
for that or any other taxable year and (ii) the actual Federal income tax
liability (if any) of the affiliated group of which the Company is actually a
member (the "Parent Group") for such year that is allocable to the Company
Group. In the event that a Parent of the Company and any member of the Company
Group join in filing any combined or consolidated (or similar) state or local
income or franchise tax returns, then the term Permitted Tax Payment shall also
include payments with respect to such state or local income or franchise taxes
determined in a manner as similar as possible to that provided in the preceding
sentence for Federal income tax.
"Person" or "person" means any corporation, individual,
------ ------
limited liability company, joint stock company, joint venture, partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipality or other entity.
"Pledged Collateral" means (i) the Pledged Shares, (ii) any
------------------
interest of the Pledgors in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, (iii) all dividends, cash or
other proceeds, distributions and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares, (iv) all instruments, certificates, documents and
writings representing or evidencing any or all of the foregoing and (v) all
proceeds of any and all of the foregoing.
"Pledged Shares" means the Subsidiary Guarantor Shares, other
--------------
than any such shares or other securities that have been released from the Lien
created by Article XII pursuant to the provisions of Article XII or Article XIII
of this Indenture.
"Pledgors" means the Company and any Subsidiary Guarantors
--------
holding an interest in the Pledged Shares.
"Pro Rata Portion" shall have the meaning specified in Section
----------------
13.1.
"Proceeds" shall have the meaning specified in Section 12.9.
--------
"Procurement Contracts" means contracts for the procurement of
---------------------
goods and services entered into in the ordinary course of business and
consistent with industry practices.
13
<PAGE>
"Properties" means HMH Properties, Inc., a Delaware
----------
corporation and an indirect subsidiary of Host Marriott Corporation.
"Properties Indenture" means that certain Indenture dated as
--------------------
of May 25, 1995 by and among Properties, the Subsidiary Guarantors named therein
and Marine Midland Bank, as trustee, pursuant to which the Properties Notes were
issued, as amended and restated.
"Properties Issue Date" means the date of first issuance of
---------------------
the Properties Notes under the Properties Indenture.
"Properties Notes" means the 9 1/2% Senior Secured Notes due
----------------
2005 of Properties.
"Property" means any right or interest in or to property or
--------
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
"Purchase Agreement" means that certain Purchase Agreement
------------------
dated December 15, 1995 by and among the Company, the Initial Guarantor and the
Initial Purchasers, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
"Purchase Date" shall have the meaning specified in Section
-------------
4.14.
"Qualified Capital Stock" means any Capital Stock of the
-----------------------
Company that is not Disqualified Capital Stock.
"Qualified Exchange" means (i) any legal defeasance,
------------------
redemption, retirement, repurchase or other acquisition of then outstanding
Capital Stock or Indebtedness of the Company issued on or after the Issue Date
with the Net Cash Proceeds received by the Company from the substantially
concurrent sale of Qualified Capital Stock or (ii) any exchange of Qualified
Capital Stock for any then outstanding Capital Stock or Indebtedness issued on
or after the Issue Date.
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if
---------------
S&P or Moody's or both shall not make a rating of the Securities publicly
available, a nationally recognized securities rating agency or agencies, as the
case may be, selected by the Company, which shall be substituted for S&P or
Moody's or both, as the case may be.
"Rating Category" means (i) with respect to S&P, any of the
---------------
following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories: Ba,
B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the
equivalent of any such category of S&P or Moody's used in another Rating Agency.
In determining whether the rating of the Securities has decreased by one or more
gradations, gradations within Rating Categories (+ and - for S&P, 1, 2 and 3 for
Moody's; or the equivalent gradations for another Rating Agency) shall be taken
into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB,
as well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" means the date which is 90 days prior to the
-----------
earlier of (i) a Change of Control and (ii) the first public notice of the
occurrence of a Change of Control or of the intention by the Company to effect a
Change of Control.
"Rating Decline" means the occurrence, on or within 90 days
--------------
after the earliest to occur of (i) a Change of Control and (ii) the date of the
first public notice of the occurrence of a Change of Control or of the intention
by the Company to effect a Change of Control (which period shall be extended so
long as the rating of the Securities is under publicly announced consideration
for possible downgrade by any of the Rating Agencies), of: (a) in the event the
Securities are rated by either Moody's or S&P on the Rating Date as Investment
Grade, a decrease in the rating of the Securities by either of such Rating
Agencies to a rating that is below Investment Grade, or (b) in the event the
Securities are rated below Investment Grade by both Rating Agencies on the
Rating Date, a decrease in
14
<PAGE>
the rating of the Securities by either Rating Agency by one or more gradations
(including gradations within Rating Categories as well as between Rating
Categories).
"Record Date" means a Record Date specified in the Securities
-----------
whether or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to
---------------
be redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security.
"Redemption Price," when used with respect to any Security to
----------------
be redeemed, means the redemption price for such redemption pursuant to
Paragraph 5 in the form of Security, which shall include, without duplication,
in each case, accrued and unpaid interest to the Redemption Date (subject to the
provisions of Section 3.5).
"Reference Period" with regard to any Person means the four
----------------
full fiscal quarters ended immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Securities or this
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified
------------------------
Capital Stock (a) issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in part,
or (b) constituting an amendment, modification or supplement to, or a deferral
or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed the sum of
(x) the reasonable and customary fees and expenses incurred in connection with
the Refinancing plus (y) the lesser of (i) the principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so refinanced and (ii) if such Indebtedness being
refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided, that (A) such Refinancing Indebtedness of any Subsidiary of the
Company shall be used only to refinance outstanding Indebtedness or Disqualified
Capital Stock of such Subsidiary, and (B) Refinancing Indebtedness shall (x) not
have an Average Life shorter than the Indebtedness or Disqualified Capital Stock
to be so refinanced at the time of such Refinancing and (y) in all respects, be
no less subordinated or junior, if applicable, to the rights of Holders of the
Securities than was the Indebtedness or Disqualified Capital Stock to be
refinanced.
"Registrar" shall have the meaning specified in Section 2.3.
---------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated December 20, 1995, by and among the Initial Purchasers, the
Company and the Initial Guarantor, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms thereof.
"Related Business" means the businesses conducted (or proposed
----------------
to be conducted) by the Company and its Subsidiaries as of the Issue Date and
any and all businesses that in the good faith judgment of the Board of Directors
of the Company are materially related businesses. Without limiting the
generality of the foregoing, Related Business shall include the ownership or
operation of lodging properties and senior living facilities.
"Released Subsidiary Guarantor Shares" shall have the meaning
------------------------------------
specified in Section 12.1.
"Residence Inns" means the 19 Residence Inns owned by the HMH
--------------
Properties Inc. or its Subsidiaries at the Issue Date.
"Requisite Obligees" shall have the meaning specified in
------------------
Section 12.8.
15
<PAGE>
"Restricted Investment" means, in one or a series of related
---------------------
transactions, any Investment, other than a Permitted Investment.
"Restricted Payment" means, with respect to any Person, (a)
------------------
the declaration or payment of any dividend or other distribution in respect of
Capital Stock of such Person or the Parent or any Subsidiary of such Person, (b)
any payment on account of the purchase, redemption or other acquisition or
retirement for value of Capital Stock of such Person or the Parent or any
Subsidiary of such Person, (c) other than with the proceeds from the
substantially concurrent sale of, or in exchange for, Refinancing Indebtedness,
any purchase, redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such Person or the Parent
or a Subsidiary of such Person prior to the scheduled maturity, any scheduled
repayment of principal, or scheduled sinking fund payment, as the case may be,
of such Indebtedness, (d) any Restricted Investment by such Person, (e) the
payment to any affiliate in respect of taxes owed by any consolidated group of
which both such Person or a Subsidiary of such Person and such affiliate are
members, and (f) any loan or advance to, or guarantee of any indebtedness of,
any affiliate of such Person or any Subsidiary of such Person; provided,
however, that the term "Restricted Payment" does not include (i) any dividend,
distribution or other payment on or with respect to Capital Stock of the Company
to the extent payable solely in shares of Qualified Capital Stock of the
Company; (ii) any dividend, distribution or other payment to the Company, or to
any of the Subsidiary Guarantors, by the Company or any of its Subsidiaries;
(iii) Permitted Tax Payments; or (iv) the declaration or payment of dividends or
other distributions by any Subsidiary of the Company provided such distributions
are made to the Company (or a Subsidiary of the Company, as applicable) on a pro
rata basis (and in like form) to all distributions so made.
"Restricted Security" means a Security, unless or until it has
-------------------
been (i) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering it or (ii) sold pursuant to
Rule 144 (as such rule may be amended from time to time or any similar provision
then in force) under the Securities Act; provided, that in no case shall an
Exchange Security issued in accordance with this Indenture and the terms and
provisions of the Registration Rights Agreement be a Restricted Security.
"S&P" means Standard & Poor's Ratings Services and its
---
successors.
"SEC" means the Securities and Exchange Commission.
---
"Secured Obligations" shall have the meaning specified in
-------------------
Section 12.1.
"Securities" means, collectively, the Initial Securities and,
----------
when and if issued as provided in the Registration Rights Agreement, the
Exchange Securities.
"Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Registrar, as custodian with
--------------------
respect to the Securities in global form, or any successor entity thereto.
"Securityholder" or "Holder" means any Person in whose name a
--------------
Security is registered on the Registrar's books.
"Significant Subsidiary" means any Subsidiary which is a
----------------------
"significant subsidiary" of the Company within the meaning of Rule 1.02(v) of
Regulation S-X promulgated by the SEC as in effect as of the date of this
Indenture.
"Special Purpose Subsidiary" means any Subsidiary of the
--------------------------
Company (x) the assets of which do not include Existing Assets and were not
acquired with Existing Assets or proceeds from the sale, transfer or other
disposition of Existing Assets, and (y) which has no Indebtedness other than
Non-recourse Purchase Money
16
<PAGE>
Indebtedness and/or Permitted Indebtedness of the type described in clauses (a),
(c), (d) and (e) of the definition of Permitted Indebtedness.
"Special Record Date" for payment of any Defaulted Interest
-------------------
means a date fixed by the Paying Agent pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security,
---------------
means December 15, 2007.
"Subject Assets" means specified assets and property of the
--------------
Company or its Subsidiaries securing Non-recourse Purchase Money Indebtedness.
"Subordinated Indebtedness" means (i) Indebtedness of the
-------------------------
Company or a Subsidiary Guarantor that is subordinated in right of payment to
the Securities or a Guaranty, as applicable, or (ii) Indebtedness of the Company
or a Subsidiary Guarantor (other than secured Indebtedness or Indebtedness
ranking pari passu with the Securities or a Guaranty, as applicable) that has a
stated maturity on or after the Stated Maturity.
"Subsidiary" with respect to any Person, means (i) a
----------
corporation a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or which is controlled by such Person
in a manner sufficient to permit its financial statements to be consolidated
with the financial statements of such Person in conformance with generally
accepted accounting principles ("GAAP") and which financial statements are so
consolidated, (ii) any other Person (other than a corporation or a partnership)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has at least majority ownership interest, or which is
controlled by such Person in a manner sufficient to permit its financial
statements to be consolidated with the financial statements of such Person in
conformance with GAAP and which financial statements are so consolidated, or
(iii) a partnership (x) in which such Person or one or more Subsidiaries of such
Person is, at the time, a general partner and owns alone or together with the
Company a majority of the partnership interests or (y) in which such Person or
one or more Subsidiaries of such Person is, at the time, a general partner, and
which is controlled by such Person in a manner sufficient to permit its
financial statements to be consolidated with the financial statements of such
Person in conformance with GAAP and which financial statements are so
consolidated. Notwithstanding the foregoing, an Unrestricted Subsidiary shall
not be deemed to be a Subsidiary of the Company or of any Subsidiary of the
Company for purposes of this Indenture.
"Subsidiary Guarantors" means (i) the Initial Guarantor
---------------------
identified in the following sentence and (ii) any Future Subsidiary Guarantors
that become Subsidiary Guarantors pursuant to the terms of this Indenture, but
excluding any Persons whose guarantees have been released pursuant to the terms
of this Indenture. The Initial Guarantor is HMC SFO, Inc., a direct wholly owned
subsidiary of the Company or any successor entity, whether by merger,
consolidation, change of name or otherwise.
"Subsidiary Guarantor Shares" means all of the Capital Stock
---------------------------
of each Subsidiary Guarantor (other than Marriott Financial Services, Inc.)
owned by the Company or another Subsidiary Guarantor, any additional shares of
Capital Stock of any Subsidiary Guarantor (other than Marriott Financial
Services, Inc.) in any manner acquired from time to time by any Pledgor and any
shares or other securities of the Subsidiary Guarantors (other than Marriott
Financial Services, Inc.) issued to any Pledgor in exchange or substitution
therefor, provided that shares or other securities of any Person shall not
constitute Subsidiary Guarantor Shares after such Person ceases to be a
Subsidiary Guarantor under this Indenture.
"TIA" means the Trust Indenture Act of 1939, as amended (15
---
U.S. Code 77aaa-77bbbb), as in effect on the date of the execution 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 such
amendment, the Trust Indenture Act of 1939 as so amended.
"Transfer Instruments" shall have the meaning specified in
--------------------
Section 12.2.
17
<PAGE>
"Transfer Restricted Securities" means Securities that bear or
------------------------------
are required to bear the legend set forth in Section 2.6 hereof.
"Trustee" means the party named as such in this Indenture
-------
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
-------------
division (or any successor group) of the Trustee or any other officer of the
Trustee customarily performing functions similar to those performed by the
Persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer of the Trustee to whom
such trust matter is referred because of his knowledge of and familiarity with
the particular subject.
"UCC" means the New York Uniform Commercial Code as in effect
---
from time to time.
"Unrestricted Subsidiary" means any Subsidiary of the Company
-----------------------
that does not own any Capital Stock of, or own or hold any Lien on any property
of, the Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) such Subsidiary is principally
engaged in a Related Business, (ii) neither immediately prior thereto nor after
giving pro forma effect to such designation would there exist a Default or Event
of Default and (iii) immediately after giving pro forma effect thereto, the
Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio in Section 4.11(a). The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided, that (i) no
Default or Event of Default is existing or will occur as a consequence thereof
and (ii) immediately after giving effect to such designation, on a pro forma
basis, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio in Section 4.11(a). Each such designation shall be
evidenced by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct noncallable
---------------------------
obligations of, or noncallable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged.
"Voting Stock" means, with respect to any specified Person,
------------
capital stock with voting power, under ordinary circumstances, to elect
directors of such Person.
"Wholly Owned" or "wholly owned" with respect to a Subsidiary
------------ ------------
of any Person means (i) with respect to a Subsidiary that is a partnership or a
limited liability company or similar entity, a Subsidiary whose equity interests
are 99% or greater beneficially owned by such Person and (ii) with respect to a
Subsidiary that is other than a partnership or a limited liability company or
similar entity, a Subsidiary whose capital stock or other equity interest is
100% beneficially owned by such Person.
SECTION 1.2. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
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 securityholder" means a Holder or a Securityholder.
------------------------
"indenture to be qualified" means this Indenture.
-------------------------
18
<PAGE>
"indenture trustee" or "institutional trustee" means the
----------------- ---------------------
Trustee.
"obligor" on the indenture securities means the Company, each
-------
Subsidiary Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(7) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
ARTICLE II.
THE SECURITIES
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of
authentication, in respect thereof, shall be substantially in the form of
Exhibit A hereto, which Exhibit is part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement on them. Any such notations, legends or endorsements not
contained in the form of Security attached as Exhibit A hereto shall be
delivered in writing to the Trustee. Each Security shall be dated the date of
its authentication.
The terms and provisions contained in the forms of Securities
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign, or one officer shall sign and one
Officer shall attest to, the Security for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Securities and may be in facsimile form.
19
<PAGE>
If an Officer whose signature is on a Security was an Officer
at the time of such execution but no longer holds that office at the time the
Trustee authenticates the Security, the Security shall be valid nevertheless and
the Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate or cause to be authenticated
Initial Securities for original issue in the aggregate principal amount of up to
$350,000,000 and shall authenticate Exchange Securities for original issue in
the aggregate principal amount of up to $350,000,000, in each case upon a
written order of the Company in the form of an Officers' Certificate; provided
that such Exchange Securities shall be issuable only upon the valid surrender
for cancellation of Initial Securities of a like aggregate principal amount in
accordance with the Registration Rights Agreement. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $350,000,000, except as
provided in Section 2.7. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in substitution
of Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, 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, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in fully registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where Securities may be presented for
registration of transfer or exchange ("Registrar") and an office or agency of
the Company where Securities may be presented for payment ("Paying Agent") and
where notices and demands to or upon the Company in respect of the Securities
may be served. The Company may act as Registrar or Paying Agent, except that,
for the purposes of Articles III, VIII, XI, and Section 4.14 and as otherwise
specified in this Indenture, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
Paying Agent.
The Company shall enter into an appropriate written agency
agreement with any Agent (including the Paying Agent) not a party to this
Indenture, which agreement shall implement the provisions of this Indenture that
relate to such Agent, and shall furnish a copy of each such agreement to the
Trustee. The Company shall promptly notify the Trustee in writing of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Securities Custodian with respect to
the Global Securities.
Upon the occurrence of an Event of Default described in
Section 6.1(4), the Trustee shall, or upon the occurrence of any other Event of
Default by notice to the Company, the Registrar and the Paying Agent, the
20
<PAGE>
Trustee may assume the duties and obligations of the Registrar and the Paying
Agent hereunder. For as long as the Trustee acts as the Registrar and the Paying
Agent, the Trustee shall have the rights and immunities of the Trustee as set
forth in Article VII and shall receive appropriate compensation therefor.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the
Trustee to agree in writing that such Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Securities
(whether such assets have been distributed to it by the Company or any other
obligor on the Securities), and shall notify the Trustee in writing of any
Default in making any such payment. If either of the Company or a Subsidiary of
the Company acts as Paying Agent, it shall segregate such assets and hold them
as a separate trust fund for the benefit of the Holders or the Trustee. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default or any Event of Default,
upon written request to a Paying Agent, require such Paying Agent to distribute
all assets held by it to the Trustee and to account for any assets distributed.
Upon distribution to the Trustee of all assets that shall have been delivered by
the Company to the Paying Agent, the Paying Agent (if other than the Company)
shall have no further liability for such assets.
SECTION 2.5. Securityholder Lists.
--------------------
The Registrar shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA (S) 312(a). If the
Trustee or any Paying Agent is not the Registrar, the Company shall furnish to
the Trustee on or before the third Business Day preceding each Interest Payment
Date and at such other times as the Trustee or any such Paying Agent may request
in writing a list in such form and as of such date as the Trustee or any such
Paying Agent reasonably may require of the names and addresses of Holders and
the Company shall otherwise comply with TIA (S) 312(a).
SECTION 2.6. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met; provided,
however, that the Definitive Securities surrendered for registration of transfer
or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory
to the Company and the Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing; and
(ii) in the case of Definitive Securities that are
Transfer Restricted Securities, such request shall be
accompanied by the following additional information and
documents, as applicable:
(A) if such Transfer Restricted Securities
are being delivered to the Registrar by a Holder for
registration in the name of such Holder, without transfer, a
21
<PAGE>
certification from such Holder to that effect (in
substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Security is
being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act, a certification to
that effect (in substantially the form set forth on the
reverse of the Security); or
(C) if such Transfer Restricted Security is
being transferred (i) pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under
the Securities Act or (ii) pursuant to an effective
registration statement under the Securities Act, or (iii) to
an "institutional accredited investor" within the meaning of
Rule 501(A)(1), (2), (3) or (7) under the Securities Act that
is acquiring the security for its own account, or for the
account of such an institutional accredited investor, in each
case in a minimum principal amount of the Securities of
$100,000, not with a view to or for offer or sale in
connection with any distribution in violation of the
Securities Act, or (iv) in reliance on another exemption from
the registration requirements of the Securities Act, a
certification to that effect (in substantially the form set
forth on the reverse of the Security) and in the case of (i),
(iii) and (iv) above, if the Company or the Registrar so
request, an Opinion of Counsel reasonably acceptable to the
Company and to the Registrar to the effect that such transfer
is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for
a Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar, together with:
(i) if such Definitive Security is a Transfer
Restricted Security, a certification (in substantially the
form set forth on the reverse of the Security) that such
Definitive Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the
Securities Act; and
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions of the
Holder directing the Registrar to make, or to direct the
Securities Custodian to make, an endorsement on the Global
Security to reflect an increase in the aggregate principal
amount of the Securities represented by the Global Security,
then the Registrar shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall, upon receipt of an authentication
order in the form of an Officers' Certificate, authenticate a new Global
Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.
(d) Transfer of a Beneficial Interest in a Global Security
for a Definitive Security.
22
<PAGE>
(i) Any Person having a beneficial interest in a
Global Security may upon request exchange such beneficial
interest for a Definitive Security. Upon receipt by the
Registrar of written instructions or such other form of
instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any Person having a
beneficial interest in a Global Security and upon receipt by
the Registrar of a written order or such other form of
instructions as is customary for the Depositary or the Person
designated by the Depositary as having such a beneficial
interest in a Transfer Restricted Security only, the following
additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as
being the beneficial owner, a certification from such Person
to that effect (in substantially the form set forth on the
reverse of the Security); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act a certification to that effect
from the transferor (in substantially the form set forth on
the reverse of the Security); or
(C) if such beneficial interest is being
transferred (i) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities
Act or (ii) pursuant to an effective registration statement
under the Securities Act, or (iii) to an "institutional
accredited investor" within the meaning of Rule 501(A)(1),
(2), (3) or (7) under the Securities Act that is acquiring the
security for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum
principal amount of the Securities of $100,000, not with any
distribution in violation of the Securities Act, or (iv) in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect from the transferee or transferor (in substantially the
form set forth on the reverse of the Security) and in the case
of (i), (iii) and (iv) above, if the Company or the Registrar
so requests, an Opinion of Counsel from the transferee or
transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance
with the Securities Act;
then the Registrar or the Securities Custodian, at the
direction of the Trustee, will cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Securities Custodian, the aggregate
principal amount of the Global Security to be reduced and,
following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers'
Certificate, the Trustee or the Trustee's authenticating agent
will authenticate and deliver to the transferee a Definitive
Security in the appropriate principal amount.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this
Section 2.6(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar. The Registrar shall
deliver such Definitive Securities to the Persons in whose
names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.6), a Global
Security may not be transferred as a whole except by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
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(f) Authentication of Definitive Securities in Absence of
Depositary. If at any time:
(i) the Depositary for the Securities notifies the
Company that the Depositary is unwilling or unable to continue
as Depositary for the Global Securities and a successor
Depositary for the Global Securities is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies
the Trustee and the Registrar in writing that they elect to
cause the issuance of Definitive Securities under this
Indenture, then the Company will execute, and the Trustee,
upon receipt of an Officers' Certificate requesting the
authentication and delivery of Definitive Securities, will, or
its authenticating agent will, authenticate and deliver
Definitive Securities, in an aggregate principal amount equal
to the principal amount of the Global Securities, in exchange
for such Global Securities.
(g) Legends.
(i) Except as permitted by the following paragraph
(ii), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities
issued in exchange therefor or substitution thereof) shall
bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS
THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(A)(1), (2), (3) or (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN
A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $100,000 FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES
24
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ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY AND THE REGISTRAR. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE."
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Security) pursuant to Rule
144 under the Securities Act or an effective registration
statement under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Security, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Definitive Security that does not bear the
legend set forth in (i) above and rescind any restriction on
the transfer of such Transfer Restricted Security; and
(B) any such Transfer Restricted Security
represented by a Global Security shall not be subject to the
provisions set forth in (i) above (such sales or transfers
being subject only to the provisions of Section 2.6(c)
hereof); provided, however, that with respect to any request
for an exchange of a Transfer Restricted Security that is
represented by a Global Security for a Definitive Security
that does not bear the legend set forth in (i) above, which
request is made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form set forth on the reverse of the
Security).
(h) Cancellation and/or Adjustment of Global Security. At
such time as all beneficial interests in a Global Security have either been
exchanged for Definitive Securities, redeemed, repurchased or cancelled, such
Global Security shall be returned to or retained and cancelled by the Registrar
in accordance with Section 2.11 hereof. At any time prior to such cancellation,
if any beneficial interest in a Global Security is exchanged for Definitive
Securities, redeemed, repurchased or cancelled, the principal amount of
Securities represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security, by the Registrar or the
Securities Custodian, at the direction of the Registrar, to reflect such
reduction.
(i) Obligations with respect to Transfers and Exchanges of
Definitive Securities.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee or any
authenticating agent of the Trustee shall authenticate
Definitive Securities and Global Securities at the Registrar's
request.
(ii) No service charge shall be made to a Holder for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes,
assessments, or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.2 (fourth
paragraph), 2.10, 3.7, 4.14(8), 9.5, or 11.1 (final
paragraph)).
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(iii) The Registrar shall not be required to register
the transfer of or exchange (a) any Definitive Security
selected for redemption in whole or in part pursuant to
Article III, except the unredeemed portion of any Definitive
Security being redeemed in part, or (b) any Security for a
period beginning 15 Business Days before the mailing of a
notice of an offer to repurchase pursuant to Article XI or
Section 4.14 hereof or redeem Securities pursuant to Article
III hereof and ending at the close of business on the day of
such mailing.
SECTION 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Registrar or if
the Holder of a Security claims and submits an affidavit or other evidence,
satisfactory to the Registrar, to the Registrar to the effect that the Security
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee or any authenticating agent of the Trustee shall authenticate a
replacement Security if the Registrar's requirements are met. If required by the
Trustee, the Registrar or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Registrar, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Securities duly issued hereunder.
SECTION 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by the Registrar, those delivered to the
Registrar for cancellation, those reductions in the interest in a Global
Security effected by the Registrar hereunder and those described in this Section
2.8 as not outstanding. A Security does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Security, except as provided in
Section 2.9.
If a Security is replaced pursuant to Section 2.7 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Registrar receives proof satisfactory to it that the replaced
Security is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company or an Affiliate of the Company) holds Cash or U.S.
Government Obligations sufficient to pay all of the principal and interest and
premium, if any, due on the Securities payable on that date and payment of the
Securities called for redemption is not otherwise prohibited, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, amendment, supplement,
waiver or consent, Securities owned by the Company or Affiliates of the Company
shall be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Securities that a Trust Officer of the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until Definitive Securities are ready for delivery, the
Company may prepare, the Subsidiary Guarantors shall endorse and the Trustee
shall authenticate temporary Securities upon receipt of an authentication order
in the form of an Officers' Certificate. Temporary Securities shall be
substantially in the form of Definitive
26
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Securities but may have variations that the Company reasonably and in good faith
consider appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare, the Subsidiary Guarantors shall endorse and the Trustee
shall authenticate Definitive Securities in exchange for temporary Securities.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as permanent Securities authenticated
and delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the
Registrar for cancellation. The Trustee and the Paying Agent shall forward to
the Registrar any Securities surrendered to them for registration of transfer,
exchange or payment. The Registrar, or at the direction of the Registrar, the
Trustee or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for registration of
transfer, exchange, payment or cancellation. Subject to Section 2.7, the Company
may not issue new Securities to replace Securities that have been paid or
delivered to the Registrar for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section 2.11, except as expressly permitted in the form of Securities
and as permitted by this Indenture.
SECTION 2.12. Defaulted Interest.
------------------
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Record Date, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee and the Paying Agent
in writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the Company
shall deposit with the Paying Agent an amount of Cash equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Paying Agent for such deposit prior to the date
of the proposed payment, such Cash when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as provided in this
clause (1). Thereupon the Paying Agent shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Paying Agent of the notice of the proposed
payment. The Paying Agent shall promptly notify the Company and the Trustee of
such Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security register not less than 10
days prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective predecessor Securities) are registered on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company to
the Trustee and the Paying Agent of the proposed payment pursuant to this
clause, such manner shall be deemed practicable by the Trustee and the Paying
Agent.
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Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
ARTICLE III.
REDEMPTION
SECTION 3.1. Optional Redemption.
-------------------
Redemption of Securities, as permitted by any provision of
this Indenture, shall be made in accordance with such provision and this Article
III. The Company will not have the right to redeem any Securities prior to
December 15, 2000. On or after December 15, 2000, the Company will have the
right to redeem all or any part of the Securities at the Redemption Prices
specified in the form of Security attached as Exhibit A set forth therein under
the caption "Redemption," in each case (subject to the right of Holders of
record on a Record Date that is on or prior to such Redemption Date to receive
interest due on the corresponding Interest Payment Date and subject to the
provisions set forth in Section 3.5), including accrued and unpaid interest to
the Redemption Date.
SECTION 3.2. Notices to Trustee and Paying Agent.
-----------------------------------
If the Company elects to redeem Securities pursuant to
Paragraph 5 of the Securities, it shall notify the Trustee and the Paying Agent
in writing of the Redemption Date and the principal amount of Securities to be
redeemed and whether it wants the Paying Agent to give notice of redemption to
the Holders.
If the Company elects to reduce the principal amount of
Securities to be redeemed pursuant to Paragraph 5 of the Securities by crediting
against any such redemption Securities it has not previously delivered to the
Trustee and the Paying Agent for cancellation, it shall so notify the Trustee
and the Paying Agent of the amount of the reduction and deliver such Securities
with such notice.
The Company shall give each notice to the Trustee and the
Paying Agent provided for in this Section 3.2 at least 45 days before the
Redemption Date (unless a shorter notice shall be satisfactory to the Trustee
and the Paying Agent). Any such notice may be cancelled at any time prior to
notice of such redemption being mailed to any Holder and shall thereby be void
and of no effect.
SECTION 3.3. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant
to Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed
on a pro rata basis, by lot or in such other method as the Trustee shall
determine to be fair and appropriate.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company and the Paying Agent in writing of the Securities selected for
redemption and, in the case of any Security selected for partial redemption, the
principal amount thereof to be redeemed. Securities in denominations of $1,000
may be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.4. Notice of Redemption.
--------------------
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, postage
prepaid, to the Trustee, Paying Agent and each Holder whose Securities are to be
redeemed. At the Company's request, the Paying Agent shall give the notice of
redemption in
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the Company's name and at the Company's expense. Each notice for redemption
shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued
and unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent at the address specified in such notice to
collect the Redemption Price;
(5) that, unless the Company defaults in their obligation
to deposit with the Paying Agent Cash, or U.S. Government Obligations which
through the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the due
date of any payment, Cash in an amount to fund the Redemption Price, in
accordance with Section 3.6 hereof or such redemption payment is otherwise
prohibited, interest on Securities called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, including accrued and
unpaid interest to the Redemption Date, upon surrender to the Paying Agent of
the Securities called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion
of the principal amount, equal to $1,000 or any integral multiple thereof, of
such Security to be redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in aggregate principal
amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be redeemed,
as well as the aggregate principal amount of such Securities to be redeemed and
the aggregate principal amount of Securities to be outstanding after such
partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the optional redemption provisions of Paragraph 5 of the
Securities.
SECTION 3.5. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section
3.4, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Paying Agent, such Securities called for
redemption shall be paid at the Redemption Price, including interest, if any,
accrued and unpaid to the Redemption Date; provided that if the Redemption Date
is after a regular Record Date and on or prior to the Interest Payment Date to
which such Record Date relates, the accrued interest shall be payable to the
Holder of the redeemed Securities registered on the relevant Record Date; and
provided, further, that if a Redemption Date is a non-Business Day, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
---------------------------
On or prior to the Redemption Date, the Company shall deposit
with the Paying Agent (other than the Company or an Affiliate of the Company)
Cash or U.S. Government Obligations sufficient to pay the Redemption Price of,
including accrued and unpaid interest on, all Securities to be redeemed on such
Redemption Date (other than Securities or portions thereof called for redemption
on that date that have been delivered by the
29
<PAGE>
Company to the Registrar for cancellation). The Paying Agent shall promptly
return to the Company any Cash or U.S. Government Obligations so deposited which
is not required for that purpose.
If the Company complies with the preceding paragraph and the
other provisions of this Article III and payment of the Securities called for
redemption is not otherwise prohibited, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.1 hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part,
the Company shall issue, the Subsidiary Guarantors shall endorse and the Trustee
shall authenticate and deliver to the Holder, without service charge to the
Holder, a new Security or Securities equal in principal amount to the unredeemed
portion of the Security surrendered.
ARTICLE IV.
COVENANTS
SECTION 4.1. Payment of Securities.
---------------------
The Company shall pay the principal of and interest and
premium, if applicable, on the Securities on the dates and in the manner
provided herein and in the Securities. An installment of principal of or
interest and premium, if applicable, on the Securities shall be considered paid
on the date it is due if the Trustee or Paying Agent (other than the Company, a
Subsidiary of the Company or an Affiliate of the Company) holds for the benefit
of the Holders, on or before 10:00 a.m. New York City time on that date, Cash
deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on
overdue installments of interest at the rate specified in the Securities
compounded semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The
City of New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company and the
Subsidiary Guarantors shall give prompt written notice to the Trustee and the
Paying Agent of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee and the Paying Agent, if
different, with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
14.2.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company shall give prompt written notice to the Trustee and the Paying Agent, if
different, of any such designation or rescission and of any change in the
location of any such other office or agency. The Company hereby initially
designates the corporate trust office of the Trustee as such office.
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<PAGE>
SECTION 4.3. Limitation on Restricted Payments.
---------------------------------
On and after the Amendment Date the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment, if (a) on the date of such Restricted Payment, a Default or
an Event of Default would exist and be continuing or would occur as a
consequence of (after giving effect, on a pro forma basis, to) such Restricted
Payment or (b) immediately prior to such Restricted Payment or after giving
effect thereto, the aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including such proposed Restricted Payment (if not
made in Cash, then the Fair Market Value on the date of such Restricted Payment
of any property used therefor as evidenced by a Board Resolution set forth in an
Officers' Certificate delivered to the Trustee) from and after the Amendment
Date, and on or prior to the date of such Restricted Payment, shall exceed the
sum of (i) the amount determined by subtracting (x) 2.2 times the aggregate
Consolidated Interest Expense of the Company for the period (taken as one
accounting period) from the first day of the fiscal quarter in which the
Amendment Date occurs to the last day of the last full fiscal quarter prior to
the date of the proposed Restricted Payment (the "Computation Period") from (y)
Consolidated EBITDA of the Company for the Computation Period, plus (ii) the
aggregate Net Cash Proceeds received by the Company from the sale (other than to
a Subsidiary of the Company and other than in connection with a Qualified
Exchange) of its Qualified Capital Stock or as a capital contribution from its
Parent, in either case, which Net Cash Proceeds are received by the Company
after the Amendment Date and on or prior to the date of such Restricted Payment.
Notwithstanding the foregoing, the provisions set forth in
clause (b) of the immediately preceding paragraph will not prohibit (i) the
payment of any dividend within 60 days after the date of its declaration if such
dividend could have been made on the date of its declaration in compliance with
the foregoing provisions, (ii) a Qualified Exchange, or (iii) a Permitted
Sharing Arrangements Payment; provided, however, that any amounts expended
pursuant to clause (i) of this paragraph shall be included as Restricted
Payments made for purposes of clause (b) of the immediately preceding paragraph,
whereas amounts received and expended in connection with a Qualified Exchange or
a Permitted Sharing Arrangements Payment shall neither be counted as Restricted
Payments made nor be credited as Net Cash Proceeds received for purposes of
clause (b)(ii) of the immediately preceding paragraph.
SECTION 4.4. Corporate Existence.
-------------------
Subject to Article V, the Company and the Subsidiary
Guarantors shall do or cause to be done all things necessary to preserve and
keep in full force and effect their respective corporate existence in accordance
with the respective organizational documents of each of them (as the same may be
amended from time to time) and the rights (charter and statutory) and corporate
franchises of the Company and the Subsidiary Guarantors; provided, however,
nothing in this Section will prohibit the Company or any Subsidiary Guarantor
from engaging in any transaction permitted under Section 13.4 or Section 13.5
hereof and provided further that neither the Company nor any Subsidiary
Guarantor shall be required to preserve any right or franchise if (a) the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such entity and (b) the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 4.5. Payment of Taxes and Other Claims.
---------------------------------
Except with respect to immaterial items, the Company and the
Subsidiary Guarantors shall, and shall cause each of their Subsidiaries to, pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges (including
withholding taxes and any penalties, interest and additions to taxes) levied or
imposed upon the Company, any Subsidiary Guarantor or any of their Subsidiaries
or any of their respective properties and assets; and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
property and assets of the Company, any Subsidiary Guarantor or any of their
Subsidiaries; provided, however, that neither the Company nor any Subsidiary
Guarantor shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which disputed amounts adequate reserves have been established in accordance
with GAAP.
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SECTION 4.6. Maintenance of Properties and Insurance.
---------------------------------------
The Company and the Subsidiary Guarantors shall cause all
material properties used or useful to the conduct of their business and the
business of each of their Subsidiaries to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
their reasonable judgment may be necessary, so that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
that nothing in this Section 4.6 shall prevent the Company or any Subsidiary
Guarantor from discontinuing any operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
(a) in the judgment of the Board of Directors of the Company, desirable in the
conduct of the business of such entity and (b) not disadvantageous in any
material respect to the Holders.
The Company and the Subsidiary Guarantors shall provide, or
cause to be provided, for themselves and each of their Subsidiaries, insurance
(including appropriate self insurance) against loss or damage of the kinds that,
in the reasonable, good faith opinion of the Company is adequate and appropriate
for the conduct of the business of the Company, the Subsidiary Guarantors and
such Subsidiaries.
SECTION 4.7. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company and each Subsidiary Guarantor shall deliver
to the Trustee within 120 days after the end of its fiscal year an Officers'
Certificate complying with TIA (S) 314(a)(4) stating that a review of its
activities and the activities of 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 or such Subsidiary Guarantor, as the case may
be, has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
Guarantor to comply with any conditions or covenants in this Indenture and, if
such signer does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate shall also
notify the Trustee should the relevant fiscal year end on any date other than
the current fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have knowledge of any
Default or any Event of Default unless one of its Trust Officers receives
written notice thereof from the Company or any of the Holders.
SECTION 4.8. Reports.
-------
Whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
deliver to the Trustee and to each Holder and to prospective purchasers of
Securities identified to the Company by an Initial Purchaser, within 15 days
after it files or would have been required to file such with the Commission,
annual and quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the Commission if
the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the Commission, and, in each case, together with
a management's discussion and analysis of financial condition and results of
operations which would be so required. Whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability and will
make such information available to securities analysts and prospective investors
upon request. The Company shall at all times comply with TIA (S) 314(a). In
addition, for so long as the Transfer Restricted Securities are outstanding, the
Company will continue to provide to Holders of Transfer Restricted Securities
and to prospective purchasers of the Securities the information required by Rule
144A(d)(4) under the Securities Act.
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SECTION 4.9. Limitation on Status as Investment Company.
------------------------------------------
Neither the Company nor any Subsidiary shall become an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
SECTION 4.10. Limitation on Transactions with Affiliates.
------------------------------------------
After the Issue Date, the Company shall not, and shall not
permit any of its Subsidiaries to, enter into any contract, agreement,
arrangement or transaction with any Affiliate (an "Affiliate Transaction") or
any series of related Affiliate Transactions (other than Exempted Affiliate
Transactions), except for such Affiliate Transactions made in good faith, the
terms of which are fair and reasonable to the Company or such Subsidiary, as the
case may be, and are at least as favorable as the terms which could be obtained
by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's-length basis with Persons who are not Affiliates.
Without limiting the foregoing, (a) any Affiliate Transaction
or series of related Affiliate Transactions (other than Exempted Affiliate
Transactions) with an aggregate value in excess of $5.0 million must first be
approved pursuant to a Board Resolution by a majority of the Board of Directors
of the Company who are disinterested in the subject matter of the transaction,
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions (other than Exempted Affiliate Transactions) with an aggregate
value in excess of $20.0 million the Company must first obtain (i) a favorable
written opinion from an independent financial advisor of national reputation as
to the fairness from a financial point of view of such transaction to the
Company or such Subsidiary or (ii) in the case of a real estate transaction or
related real estate transactions with an aggregate value in excess of $20.0
million but not in excess of $50.0 million an opinion from an independent,
qualified appraiser that the consideration received in connection with such
transaction was comparable to the Fair Market Value of the subject assets;
provided, however, in the case of an individual who serves on the Board of
Directors or as an officer of Host Marriott or any of its Subsidiaries on the
one hand, and of the Company or any of its Subsidiaries on the other hand, such
service, in and of itself, shall not affect such Person's status as a
disinterested member of the Board of Directors of the Company for purposes of
clause (a) of this paragraph.
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and
-------------------------------------------------------
Disqualified Capital Stock.
--------------------------
Except as set forth below, neither the Company nor any of the
Company's Subsidiaries shall, directly or indirectly, issue, assume, guaranty,
incur, become directly or indirectly liable with respect to (including as a
result of an Acquisition), or otherwise become responsible for, contingently or
otherwise (individually and collectively, to "incur" or "Incur" or, as
appropriate, an "incurrence" or "Incurrence"), any Indebtedness or any
Disqualified Capital Stock (including Acquired Indebtedness). Notwithstanding
the foregoing:
(a) if on the date of such Incurrence (the "Incurrence
Date"), the Consolidated Coverage Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro forma
basis to such incurrence of such Indebtedness or Disqualified Capital Stock and,
to the extent set forth in the definition of Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least (w) 2.0 to 1 if such incurrence
occurs on or before January 1, 1997, (x) 2.1 to 1 if such incurrence occurs
after January 1, 1997, but before the Amendment Date, (y) 1.8 to 1 if such
incurrence occurs at any time on or after the Amendment Date but on or prior to
the earlier of the New Notes Issuance Date or September 30, 1997, or (z) 2.2 to
1 if such incurrence occurs at any time thereafter (the "Debt Incurrence
Ratio"), then the Company and its Subsidiaries may Incur Indebtedness or
Disqualified Capital Stock; provided, however, any Indebtedness incurred by the
Non-Guarantor Subsidiaries in reliance on this clause (a) shall be limited to an
aggregate amount outstanding at any time of up to $100 million of Indebtedness
which Indebtedness shall be secured by liens permitted under clause (m) of the
definition of "Permitted Liens";
(b) the Company and the Subsidiary Guarantors may Incur
Indebtedness evidenced by the Securities and represented by this Indenture up to
the amounts specified herein as of the date hereof;
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(c) the Company and its Subsidiaries or Subsidiary
Guarantors, as applicable, may Incur Refinancing Indebtedness with respect to
any Indebtedness or Disqualified Capital Stock, as applicable, described in this
clause or clauses (a), (b) or (e) of this Section 4.11 or which was outstanding
at the Company or its Subsidiaries on the Issue Date or that was outstanding at
Properties or its Subsidiaries as of the Properties Issue Date;
(d) the Company and its Subsidiaries or its Subsidiary
Guarantors, as applicable, may Incur Permitted Indebtedness;
(e) the Company and its Subsidiaries may Incur Non-recourse
Purchase Money Indebtedness; and
(f) the Company and its Subsidiary Guarantors may Incur
Indebtedness (in addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate amount outstanding at any time (including any
Indebtedness issued to refinance, replace, or refund such Indebtedness) of up to
$65.0 million.
Notwithstanding the foregoing, no Non-Guarantor Subsidiary may
Incur any Indebtedness or Disqualified Capital Stock unless on the Incurrence
Date the Consolidated Coverage Ratio for all Non-Guarantor Subsidiaries, on a
combined basis, for the Reference Period immediately preceding the Incurrence
Date, after giving effect on a pro-forma basis to such incurrence of such
Indebtedness or Disqualified Capital Stock and, to the extent set forth in the
definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be
at least 2.0 to 1.
Indebtedness of any Person that is not a Subsidiary of the
Company, which Indebtedness is outstanding at the time such Person becomes a
Subsidiary of the Company or is merged with or into or consolidated with the
Company or a Subsidiary of the Company, shall be deemed to have been incurred at
the time such Person becomes a Subsidiary of the Company or is merged with or
into or consolidated with the Company or a Subsidiary of the Company and
Indebtedness which is assumed at the time of the acquisition of any asset shall
be deemed to have been Incurred at the time of such acquisition.
SECTION 4.12. Limitations on Dividends and other Payment Restrictions Affecting
-----------------------------------------------------------------
Subsidiaries.
------------
Neither the Company nor the Subsidiary Guarantors shall,
directly or indirectly, create, assume or suffer to exist any consensual
restriction on the ability of any Subsidiary Guarantors to pay dividends or make
other distributions to or on behalf of, or to pay any obligation to or on behalf
of, or otherwise to transfer assets or property to or on behalf of, or make or
pay loans or advances to or on behalf of, the Company or any other Subsidiary
Guarantor except (a) restrictions imposed by the Securities or this Indenture,
(b) restrictions imposed by applicable law, (c) existing restrictions under
Existing Indebtedness or under any Acquired Indebtedness not incurred in
violation of this Indenture or any agreement relating to any property, asset, or
business acquired by the Company or any of the Subsidiary Guarantors, which
restrictions existed at the time of acquisition, were not put in place in
connection with or in anticipation of such acquisition and are not applicable to
any Person, other than the Person acquired, or to any property, asset or
business, other than the property, assets and business so acquired, (d) any such
restriction or requirement imposed by Indebtedness incurred under paragraph (e)
of Section 4.11, provided such restriction or requirement relates only to the
transfer of the property subject to such Non-recourse Purchase Money
Indebtedness, (e) restrictions with respect to a Subsidiary Guarantor imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary Guarantor, provided such restrictions apply solely to the Capital
Stock or assets of such Subsidiary Guarantor which are being sold, and (f) in
connection with and pursuant to permitted refinancings thereof, replacements of
restrictions imposed pursuant to clause (c) or (d) of this paragraph that are
not more restrictive than those being replaced and do not apply to any other
Person or assets other than those that would have been covered by the
restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing,
customary provisions restricting subletting or assignment of any lease entered
into in the ordinary course of business, consistent with industry practice,
shall not in and of themselves be deemed to be a restriction on the ability of
the Company or any of its Subsidiary Guarantors to transfer such property.
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SECTION 4.13. Limitations on Liens.
--------------------
The Company and the Subsidiary Guarantors shall not, and shall
not permit any of their Subsidiaries to, directly or indirectly, Incur, or
suffer to exist any Lien on any assets or properties of the Company or any of
its Subsidiaries, now owned or hereafter acquired, or any income or profits
therefrom, except Permitted Liens, unless all payments due under this Indenture
and the Securities are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by such Lien.
SECTION 4.14. Limitation on Sale of Assets and Subsidiary Stock.
-------------------------------------------------
The Company shall not, and shall not permit any of its
Subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, business or assets, including by merger or consolidation (in the case
of a Subsidiary Guarantor or a Subsidiary of the Company), and including any
sale or other transfer or issuance of any Capital Stock of any Subsidiary of the
Company, whether by the Company or a Subsidiary of either or through the
issuance, sale or transfer of Capital Stock by a Subsidiary of the Company (an
"Asset Sale"), unless (i) the Board of Directors of the Company determines in
good faith that the Company or such Subsidiary, as applicable, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets or Capital Stock issued or sold or otherwise disposed of,
(ii) no Default or Event of Default would occur as a consequence of (after
giving effect, on a pro forma basis, to) such Asset Sale, and (iii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of Cash or Cash Equivalents; provided that for purposes of this
provision the amount of (A) any Indebtedness (other than Securities) that is
required to be repaid or assumed (and is either repaid or assumed by the
transferee of the related assets) by virtue of such Asset Sale and which is
secured by a Lien on the property or assets sold and (B) any securities or other
obligations received by the Company or any such Subsidiary from such transferee
that are immediately converted by the Company or such Subsidiary into Cash (or
as to which the Company or such Subsidiary has received at or prior to the
consummation of the Asset Sale a commitment (which may be subject to customary
conditions) from a nationally recognized investment, merchant or commercial bank
to convert into Cash within 90 days of the consummation of such Asset Sale and
which are thereafter actually converted into Cash within such 90-day period)
will be deemed to be Cash.
Within 365 days after the receipt of any Net Cash Proceeds
from an Asset Sale, the Company may invest or commit such Net Cash Proceeds,
pursuant to a binding commitment subject only to reasonable, customary closing
conditions, to be invested (and providing such Net Cash Proceeds are, in fact,
so invested, within an additional 180 days) in (x) fixed assets and property
(other than notes, bonds, obligations and securities) which in the good faith
reasonable judgment of the Board of Directors of the Company will immediately
constitute or be part of a Related Business of the Company or such Subsidiary
(if it continues to be a Subsidiary) immediately following such transaction, (y)
Permitted Mortgage Investments or (z) a controlling interest in the Capital
Stock of an entity engaged in a Related Business; provided, that concurrently
with an Investment specified in clause (z), such entity becomes a Subsidiary
Guarantor. Pending the application of any such Net Cash Proceeds as described
above, the Company may invest such Net Cash Proceeds in any manner that is not
prohibited by this Indenture. Any Net Cash Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph
(including any Net Cash Proceeds which were committed to be invested as provided
in such sentence but which are not in fact invested within the time period
provided) will be deemed to constitute "Excess Proceeds."
Notwithstanding the foregoing provisions of the prior
paragraph:
(i) the Company and its Subsidiaries may, in the
ordinary course of business, convey, sell, lease, transfer,
assign or otherwise dispose of inventory acquired and held for
resale in the ordinary course of business;
(ii) the Company and its Subsidiaries may convey,
sell, lease, transfer, assign or otherwise dispose of assets
pursuant to and in accordance with the provisions of Article
V;
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(iii) the Company and its Subsidiaries may sell or
dispose of damaged, worn out or other obsolete property in the
ordinary course of business so long as such property is no
longer necessary for the proper conduct of the business of the
Company or such Subsidiary, as applicable;
(iv) the Company and its Subsidiaries may consummate
any sale or series of related sales (including, without
limitation, sale and leaseback transactions) of assets or
properties of the Company and its Subsidiaries having a Fair
Market Value of less than $2.0 million; and
(v) the Company and its Subsidiaries may exchange
assets held by the Company or a Subsidiary for one or more
hotels and/or one or more Related Businesses of any Person or
entity owning one or more hotels and/or one or more Related
Businesses; provided, that the Board of Directors of the
Company has determined that the terms of any exchange are fair
and reasonable and the Fair Market Value of the assets
received by the Company are approximately equal to the Fair
Market Value of the assets exchanged by the Company.
For purposes of this Section 4.14, "Excess Proceeds Date"
means each date on which the aggregate amount of Excess Proceeds exceeds $15.0
million. Within 30 days after each Excess Proceeds Date, the Company will make a
cash offer (an "Offer to Purchase") to all Holders of Securities and holders of
any other Indebtedness of the Company ranking on a parity with the Securities
from time to time outstanding with similar provisions requiring the Company to
make an offer to purchase or to redeem such Indebtedness with the proceeds from
such Asset Sale, pro rata in proportion to the respective principal amounts
pursuant to an irrevocable, unconditional offer (an "Asset Sale Offer") to
purchase the maximum principal amount of Securities and such other senior
Indebtedness then outstanding that may be purchased out of the Excess Proceeds
(the "Offer Amount"), at an offer price in cash (the "Offer Price") in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon to the date of purchase (the "Purchase Date") in accordance with the
procedures set forth in this Section 4.14.
Notice of an Offer to Purchase will be sent 20 Business Days
prior to the close of business on the earlier of (a) the third Business Day
prior to the Purchase Date and (b) the third Business Day following the
expiration of the Offer to Purchase (such earlier date being the "Final Put
Date"), by first-class mail, by the Company (or by the Registrar at the request
and expense of the Company) to each Holder at its registered address, with a
copy to the Trustee and the Paying Agent. The notice to the Holders will contain
all information, instructions and materials required by applicable law or
otherwise material to such Holders' decision to tender Securities pursuant to
the Offer to Purchase. The notice, which (to the extent consistent with this
Indenture) shall govern the terms of the offer to Purchase, shall state:
(1) that the Offer to Purchase is being made pursuant to such
notice and this Section 4.14;
(2) the Offer Amount, the Offer Price (including the amount
of accrued and unpaid interest), the Final Put Date, and the Purchase Date,
which Purchase Date shall be on or prior to 60 Business Days following the
Excess Proceeds Date;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing Cash with
the Paying Agent in accordance with the penultimate paragraph of this Section
4.14 or such payment is otherwise prevented, any Security, or portion thereof,
accepted for payment pursuant to the Offer to Purchase shall cease to accrue
interest after the Purchase Date;
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(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Offer to Purchase will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent (which
may not for purposes of this Section 4.14, notwithstanding anything in this
Indenture to the contrary, be the Company or any Affiliate of the Company) at
the address specified in the notice prior to the close of business on the Final
Put Date;
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent (which may not for purposes
of this Section 4.14, notwithstanding any other provision of this Indenture, be
the Company or any Affiliate of the Company) receives, up to the close of
business on the Final Put Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder is withdrawing and a statement that such Holder is
withdrawing his election to have such principal amount of Securities purchased;
(7) that if Securities and other senior Indebtedness in a
principal amount in excess of the principal amount of Securities and other
senior Indebtedness to be acquired pursuant to the Offer to Purchase are
tendered and not withdrawn, the Trustee shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) a brief description of the circumstances and relevant
facts regarding such Asset Sales.
Any such Offer to Purchase shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before a Purchase Date, the Company shall, to the extent
lawful, (i) accept for payment Securities or portions thereof properly tendered
pursuant to the Offer to Purchase on or before the Final Put Date (on a pro rata
basis if required pursuant to paragraph (7) hereof), (ii) deposit with the
Paying Agent Cash sufficient to pay the Offer Price for all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Paying Agent
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof being purchased by the Company. The Paying Agent
shall on each Purchase Date mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Offer Price for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered; provided that if the Purchase Date is after a regular Record Date
and on or prior to the Interest Payment Date to which such Record Date relates,
the accrued interest shall be payable to the Holder of the purchased Securities
registered on the relevant Record Date. Any Security not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof.
If the amount required to acquire all Securities and other
senior Indebtedness tendered pursuant to the Offer to Purchase (the "Acceptance
Amount") made pursuant to the third paragraph of this Section 4.14 is less than
the Offer Amount, the excess of the Offer Amount over the Acceptance Amount may
be used by the Company for general corporate purposes without restriction,
unless otherwise restricted by the other provisions of this Indenture. Upon
commencement of any Offer to Purchase made in accordance with the terms of this
Indenture, the amount of Excess Proceeds existing at the time of the
commencement will be reduced to zero irrespective of the amount of Securities
tendered pursuant to the Offer to Purchase.
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and the Subsidiary Guarantors 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 or extension law or any usury law or other law which would prohibit
or forgive the Company
37
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or any Subsidiary Guarantor from paying all or any portion of the principal of,
premium of, or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) each of the Company and the Subsidiary Guarantors hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee or any Paying Agent, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 4.16. Limitation on Investments in Non-Guarantor Subsidiaries.
--------------------------------------------------------
From and after the Amendment Date, the Company shall not, and
shall not permit any Subsidiary Guarantor to, directly or indirectly, make any
Investment in a Non-Guarantor Subsidiary if, after giving effect thereto, the
Net Non-Guarantor Investment would exceed an amount equal to (a) the aggregate
of all capital contributions made to the Company on or after the Amendment Date,
plus (b) the Applicable Percentage of the sum of (i) the combined total assets
of the Company and the Subsidiary Guarantors, excluding the assets of the
Non-Guarantor Subsidiaries (determined by the Company in accordance with GAAP),
plus (ii) the Net Non-Guarantor Investment.
ARTICLE V.
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
--------------------------------------------
(a) The Company shall not, directly or indirectly, consolidate
with or merge with or into another Person or sell, lease, convey or transfer all
or substantially all of its assets (computed on a consolidated basis), whether
in a single transaction or a series of related transactions, to another Person
or group of affiliated Persons, unless (i) either (a) the Company is the
continuing entity or (b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Securities and this
Indenture; (ii) no Default or Event of Default would occur as a consequence of
(after giving effect, on a pro forma basis, to) such transaction; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
Consolidated Net Worth of the consolidated resulting, surviving or transferee
entity is equal to at least 90% of the Consolidated Net Worth of the Company
immediately prior to such transaction; (iv) immediately after giving effect to
such transaction on a pro forma basis, the consolidated resulting, surviving or
transferee entity would immediately thereafter be permitted to Incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in Section 4.11(a) hereof; and (v) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and, if a supplemental indenture is required,
such supplemental indenture complies with this Indenture and that all conditions
precedent herein relating to such transaction have been satisfied.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
SECTION 5.2. Successor Corporation Substituted.
----------------------------------
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1
hereof, the successor corporation formed by such consolidation or into which the
Company is merged or to which such transfer 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 corporation had been
named herein as the Company, and when a successor corporation duly assumes all
of the obligations of the Company pursuant hereto and pursuant to the
Securities, the Company shall be released from such
38
<PAGE>
obligations under the Securities and this Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest upon the
Securities as and when the same becomes due and payable and the continuance of
such default for a period of 30 days;
(2) failure to pay all or any part of the principal of or
premium, if any, on the Securities when and as the same becomes due and payable
at maturity, upon redemption, by acceleration or otherwise, including, without
limitation, default in the payment of the Change of Control Payment in
accordance with Article XI or the Offer Price in accordance with Section 4.14;
(3) failure by the Company or any Subsidiary to observe or
perform any covenant or agreement contained in the Securities or this Indenture
(other than a default in the performance of any covenant or agreement which is
specifically dealt with elsewhere in this Section 6.1), and continuance of such
failure 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 Holders of at least 25% in aggregate principal amount of the outstanding
Securities, a written notice specifying such default or breach, requiring it to
be remedied and stating that such notice is a "Notice of Default" hereunder;
(4) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Company or any of its
Significant Subsidiaries as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization of the Company or any of its Significant
Subsidiaries under any bankruptcy or similar law, and such decree or order shall
have continued undischarged and unstayed for a period of 60 consecutive days; or
a decree, judgment or order of a court of competent jurisdiction appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency for the
Company, any of its Significant Subsidiaries, or any substantial part of the
property of any such Person, or for the winding up or liquidation of the affairs
of any such Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of 60 days;
(5) a default in (i) Non-recourse Purchase Money Indebtedness
of the Company or any of its Subsidiaries with an aggregate principal amount in
excess of 10% of the aggregate assets of the Company and its Subsidiaries, or
(ii) other Indebtedness of the Company or any of its Subsidiaries with an
aggregate principal amount in excess of $20.0 million, in either case (a)
resulting from the failure to pay principal or interest or premium, if any, when
due or (b) as a result of which the maturity of such Indebtedness has been
accelerated prior to its stated maturity;
(6) final unsatisfied judgments not covered by insurance for
the payment of money, or the issuance of any warrant of attachment against any
portion of the property or assets of the Company or any of its Subsidiaries,
aggregating in excess of $10.0 million at any one time shall be rendered against
the Company or any of its Subsidiaries and not be stayed, bonded or discharged
for a period (during which execution shall not be effectively stayed) of 60 days
(or, in the case of any such final judgment which provides for payment over
time, which shall so remain unstayed, unbonded or undischarged beyond any
applicable payment date provided therein).
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Notwithstanding the 30-day period and notice requirement
contained in Section 6.1(3) above, (i) with respect to a default under Article
XI, the 30-day period referred to in Section 6.1(3) shall be deemed to have
begun as of the date notice of a Change of Control Offer is required to be sent
to the Holders in the event that the Company has not complied with the
provisions of Section 11.1, and the Trustee or Holders of at least 25% in
principal amount of the outstanding Securities thereafter give the Notice of
Default referred to in Section 6.1(3) to the Company and, if applicable, the
Trustee; provided, however, that if the breach or default is a result of a
default in the payment when due of the Change of Control Payment on the Change
of Control Payment Date, such default shall be deemed, for purposes of this
Section 6.1, to arise no later than on the Change of Control Payment Date; and
(ii) with respect to a default under Section 4.14 requiring the giving of such
notice, the 30-day period referred to in Section 6.1(3) shall be deemed to have
begun as of the date the notice of an Offer to Purchase is required to be sent
in the event that the Company has not complied with the provisions of Section
4.14, and the Trustee or Holders of at least 25% in principal amount of the
outstanding Securities thereafter give the Notice of Default referred to in
Section 6.1(3) to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Offer Price on the Purchase Date, such default shall be deemed,
for purposes of this Section 6.1, to arise no later than on the Purchase Date.
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.
-------------------------------------------------------
If an Event of Default (other than an Event of Default
specified in Section 6.1(4) relating to the Company or any of its Significant
Subsidiaries) occurs and is continuing, then, in every such case, unless the
principal of all of the Securities shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of then outstanding Securities, by a notice in writing to the Company
(and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare
all of the principal of the Securities (or the Change of Control Payment if the
Event of Default includes failure to pay the Change of Control Payment),
determined as set forth below, including in each case accrued interest thereon,
to be due and payable immediately. If an Event of Default specified in Section
6.1(4) relating to the Company or any Significant Subsidiary occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Securities without any declaration or other act on the part of
the Trustee or the Holders.
At any time after such a declaration of acceleration being
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter provided in this Article VI, the Holders
of not less than a majority in aggregate principal amount of then outstanding
Securities, by written notice to the Company and the Trustee, may rescind, on
behalf of all Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any,
applicable to) any Securities which would become due other
than by reason of such declaration of acceleration, and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the Securities,
(D) all sums paid or advanced by the Trustee
hereunder and the compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 7.7, and
(2) all Events of Default, other than the nonpayment of the
principal of, premium, if any, and interest on Securities which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 6.12, including, if applicable, any Event of Default
relating to the covenants contained in Section 11.1.
40
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Notwithstanding the previous sentence of this Section 6.2, no
waiver shall be effective against any Holder for any Event of Default or event
which with notice or lapse of time or both would be an Event of Default with
respect to (i) any covenant or provision which cannot be modified or amended
without the consent of the Holder of each outstanding Security affected thereby,
unless all such affected Holders agree, in writing, to waive such Event of
Default or other event and (ii) any provision requiring supermajority approval
to amend, unless such default has been waived by such a supermajority. No such
waiver shall cure or waive 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 an Event of Default in payment
of principal, premium, or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, 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, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee and its agents and counsel and all other amounts due the Trustee
under Section 7.7.
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 in favor
of the Holders, 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
the Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effective 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.
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 and premium, if any, or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) 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
and its agent and counsel and all other amounts due the Trustee under Section
7.7) and of the Holders allowed in such judicial proceeding, and
(2) 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
41
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it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and 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 in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel
and all other amounts due the Trustee under Section 7.7, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
SECTION 6.6. Priorities.
----------
Any money collected by the Trustee pursuant to this Article VI
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,
premium (if any) 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 Trustee in payment of all amounts due pursuant
to Section 7.7;
SECOND: To the Holders in payment of the amounts then due and
unpaid for principal of, premium (if any) 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, premium (if any) and
interest, respectively; and
THIRD: To the Company or such other Person as may be lawfully
entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record
date and payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or
direct the Trustee 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;
(B) the Holders of not less than 25% in aggregate
principal amount of then outstanding Securities 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;
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(C) such Holder or Holders have offered to the
Trustee reasonable security or indemnity against the costs,
expenses and liabilities to be incurred or reasonably probable
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 aggregate principal
amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
--------------------
Notwithstanding any other provision of this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
interest on, such Security on the Maturity Dates of such payments as expressed
in such Security (in the case of redemption, the Redemption Price on the
applicable Redemption Date, in the case of the Change of Control Payment , on
the applicable Change of Control Payment Date, and in the case of the Offer
Price, on the Purchase Date) and to institute suit for the enforcement of any
such payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, 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 6.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any
Security to exercise any right or remedy arising upon any Event of Default shall
impair the exercise of any such right or remedy or constitute a waiver of any
such Event of Default. Every right and remedy given by this Article VI 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 6.11. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal
amount of then outstanding Securities 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 upon the Trustee, provided,
that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture or involve the Trustee in personal liability,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not taking part in such
direction, and
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<PAGE>
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12. Waiver of Past Default.
----------------------
Subject to Section 6.8, the Holder or Holders of not less than
a majority in aggregate principal amount of the outstanding Securities may, on
behalf of all Holders, waive any past default hereunder and its consequences,
except a default
(A) in the payment of the principal of, premium, if
any, or interest on, any Security as specified in clauses (1)
and (2) of Section 6.1 and not yet cured, or
(B) in respect of a covenant or provision hereof
which, under Article IX, cannot be modified or amended without
the consent of the Holder of each outstanding Security
affected.
(C) in respect of any provision hereof which, under
Article IX, cannot be modified, amended or waived without the
consent of the Holders of 66-2/3% of the aggregate principal
amount of the Securities at the time outstanding; provided,
that any such waiver may be effected with the consent of the
Holders of 66-2/3% of the aggregate principal amount of the
Securities then outstanding.
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 the exercise of any right arising
therefrom.
SECTION 6.13. 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 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 to be taken
by it as Trustee, any court may in its discretion require 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 6.13 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 aggregate principal amount of the outstanding Securities, or to any
suit instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the respective
Maturity Date expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
SECTION 6.14. 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 case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, 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.
44
<PAGE>
ARTICLE VII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed,
subject to the terms hereof.
SECTION 7.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are adverse to
the Trustee, and
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, in the
case of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall examine
the certificates and opinions 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:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.1,
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts, and
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or at the request, order or direction of the Holders
or in the exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this
Section 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
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SECTION 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1:
(a) The Trustee may rely on 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
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 14.4 and 14.5. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(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 conferred upon it by this Indenture, nor for any action
permitted to be taken or omitted hereunder by any Agent.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(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, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company or any
Subsidiary Guarantor shall be sufficient if signed by an Officer of the Company
or such Subsidiary Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's or any Subsidiary Guarantor's covenants in Article
IV hereof or as to the performance by any Agent of its duties hereunder. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except any Default or Event of Default of which the Trustee
shall have received written notification or with respect to which a Trustee
Officer shall have actual knowledge.
(i) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate.
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, any
Subsidiary Guarantor, any of their Subsidiaries, or their respective Affiliates
with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
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<PAGE>
SECTION 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities and 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 the Trustee's
certificate of authentication (if executed by the Trustee), or the use or
application of any funds received by a Paying Agent other than the Trustee.
SECTION 7.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the uncured Default or Event of Default within 90 days after such
Default or Event of Default occurs. Except in the case of a Default or an Event
of Default in payment of principal (or premium, if any) of, or interest on, any
Security (including the payment of the Change of Control Payment on the Change
of Control Payment Date, the payment of the Redemption Price on the Redemption
Date and the payment of the Offer Price on the Purchase Date), the Trustee may
withhold the notice if and so long as a Trust Officer in good faith determines
that withholding the notice is in the interest of the Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Securityholder a brief report dated as of such May 15 that complies
with TIA (S). 313(a). The Trustee also shall comply with TIA (S). 313(b). The
Trustee also shall transmit by mail all reports as required by TIA (S). 313(c).
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or automated quotation
system.
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Securities are listed in accordance with
TIA (S). 313(d).
SECTION 7.7. Compensation and Indemnity.
--------------------------
The Company and the Subsidiary Guarantors jointly and
severally agree to 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 and the Subsidiary
Guarantors shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it in accordance with
this Indenture. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel.
The Company and the Subsidiary Guarantors jointly and
severally agree to indemnify the Trustee (in its capacity as Trustee) and each
of its officers and each of them, directors, attorneys-in-fact and agents for,
and hold it harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel), loss or liability incurred by it without negligence or bad
faith on the part of the Trustee, arising out of or in connection with the
administration of this trust and its rights or duties hereunder including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company and the
Subsidiary Guarantors shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's and the Subsidiary Guarantors' expense
in the defense. The Trustee may have separate counsel and the Company and the
Subsidiary Guarantors shall pay the reasonable fees and expenses of such
counsel. The Company and the Subsidiary Guarantors need not pay for any
settlement made without their written consent. The Company and the Subsidiary
Guarantors need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
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<PAGE>
To secure the Company's and the Subsidiary Guarantors' payment
obligations in this Section 7.7, the Trustee shall have a Lien prior to the
Securities on all assets held or collected by the Trustee, in its capacity as
Trustee, except assets held in trust to pay principal and premium, if any, of or
interest on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(4) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's and the Subsidiary Guarantors' obligations under
this Section 7.7 and any lien arising hereunder shall survive the resignation or
removal of the Trustee, the discharge of the Company's and the Subsidiary
Guarantors' obligations pursuant to Article VIII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing.
The Holder or Holders of a majority in aggregate principal amount of the
outstanding Securities may remove the Trustee by so notifying the Company and
the Trustee in writing and may appoint a successor trustee with the Company's
consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a receiver, Custodian, or other public officer takes
charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
(e) 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
Holder or Holders of a majority in aggregate principal amount of the outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the Lien provided 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 under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holder or Holders of at least 10% in aggregate principal amount
of the outstanding Securities may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company and the Subsidiary Guarantors' obligations under
Section 7.7 shall continue for the benefit of the retiring Trustee.
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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 resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA
(S)310(a)(1), (2) and (5). The Trustee shall have a combined capital and
surplus of at least $25.0 million 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 shall comply with 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
--------------------------------------------------------
The Company may, at its option at any time within one year of
the Stated Maturity of the Securities, elect to have Section 8.2 or may, at any
time, elect to have Section 8.3 applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
------------------------------
Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.2, the Company and the Subsidiary Guarantors shall
be deemed to have been discharged from their respective obligations with respect
to all outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.5
and the other Sections of this Indenture referred to in (a) and (b) below, and
to have satisfied all its other obligations under such Securities and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Securities to receive solely
from the trust fund described in Section 8.4, and as more fully set forth in
such section, payments in respect of the principal of, premium, if any, and
interest on such Securities when such payments are due, (b) the Company's
obligations with respect to such Securities under Sections 2.4, 2.6, 2.7, 2.10
and 4.2, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's and the Subsidiary Guarantors' obligations in
connection therewith and (d) this Article VIII. Upon Legal Defeasance as
provided herein, the Guaranty of each Subsidiary Guarantor and the pledge of the
Pledged Collateral shall be fully released and discharged and the Trustee shall
promptly execute and deliver to the Company any documents reasonably requested
by the Company to evidence or effect the foregoing. Subject to compliance with
this Article VIII, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 with respect
to the Securities.
SECTION 8.3. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.3, the Company and the Subsidiary Guarantors shall
be released from their respective obligations under the covenants
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contained in Sections 4.3, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14
and 4.16, Article V, Article XI, Article XII and Article XIII with respect to
the outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance") , and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Securities, the Company
need not comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document (and Section 6.1(3) shall not apply to any such covenant),
but, except as specified above, the remainder of this Indenture and such
Securities shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.1 of the option applicable to this Section 8.3, Sections 6.1(3)
through 6.1(6) shall not constitute Events of Default. Upon Covenant Defeasance,
as provided herein, the Guaranty of each Subsidiary Guarantor and the pledge of
the Pledged Collateral shall be fully released and discharged and the Trustee
shall promptly execute and deliver to the Company any documents reasonably
requested by the Company to evidence or effect the foregoing.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of
either Section 8.2 or Section 8.3 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfactory to the Trustee
satisfying the requirements of Section 7.10 who shall agree to comply with the
provisions of this Article VIII applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such Securities, (a)
Cash in an amount, or (b) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, Cash in an amount, or (c) a combination thereof, in such amounts, as in
each case will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be applied by the
Paying Agent (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on the outstanding Securities on the stated
maturity or on the applicable redemption date, as the case may be, of such
principal or installment of principal, premium, if any, or interest; provided
that the Paying Agent shall have been irrevocably instructed to apply such Cash
and the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities. The Paying Agent shall promptly advise the Trustee in
writing of any Cash or Securities deposited pursuant to this Section 8.4.
(b) In the case of an election under Section 8.2, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) In the case of an election under Section 8.3, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
to the effect that the Holders of the outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit or,
in so far as Section 6.1(4) is concerned, at any time in the period ending
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<PAGE>
on the 91st day after the date of such deposit (it being understood that this
condition is a condition subsequent which shall not be deemed satisfied until
the expiration of such period, but in the case of Covenant Defeasance, the
covenants which are defeased under Section 8.3 will cease to be in effect unless
an Event of Default under Section 6.1(4) occurs during such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the Company,
the Subsidiary Guarantors, or any of their Subsidiaries is a party or by which
any of them is bound;
(f) In the case of an election under either Section 8.2 or
8.3, the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election under
Section 8.2 or 8.3 was not made by the Company with the intent of preferring the
Holders over other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(g) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the conditions precedent provided for have
been complied with.
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust;
-------------------------------------------------------------------
Other Miscellaneous Provisions.
------------------------------
Subject to Section 8.6, all Cash and U.S. Government
Obligations (including the proceeds thereof) deposited with the Paying Agent (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Paying Agent") pursuant to Section 8.4 in respect of the outstanding Securities
shall be held in trust and applied by the Paying Agent, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any other Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
------------------------
Anything in this Article VIII to the contrary notwithstanding,
the Trustee or the Paying Agent shall deliver or pay to the Company from time to
time upon the request of the Company any Cash or U.S. Government Obligations
held by it as provided in Section 8.4 hereof which in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof) , are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Any Cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee, or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Security shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any Cash or
U.S. Government obligations in accordance with Section 8.2 or 8.3, as the case
may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's and the
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<PAGE>
Subsidiary Guarantors' obligations under this Indenture and the Securities shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.2 or 8.3 until such time as the Trustee or Paying Agent is permitted to apply
such money in accordance with Section 8.2 and 8.3, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Security following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the Cash and U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company or any
Subsidiary Guarantor, when authorized by Board Resolutions, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided such action pursuant to this clause shall not adversely affect the
interests of any Holder in any respect;
(2) to add to the covenants of the Company or the Subsidiary
Guarantors for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or the Subsidiary Guarantors;
(3) to provide for additional collateral for or additional
guarantors of the Securities;
(4) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the obligations of the
Company, herein and in the Securities in accordance with Article V;
(5) to comply with the TIA;
(6) to provide for the issuance and authorization of the
Exchange Securities;
(7) to evidence the succession of another corporation to any
Subsidiary Guarantor and assumption by any such successor of the Guaranty of
such Subsidiary Guarantor (as set forth in Section 13.4) in accordance with
Article XIII;
(8) to evidence the release of any Pledged Collateral or the
release of any Subsidiary Guarantor in accordance with Article XII or Article
XIII, respectively;
(9) in any other case where a supplemental indenture is
required or permitted to be entered into pursuant to the provisions of Article
XII or Article XIII, respectively, without the consent of any Holder;
(10) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities; or
(11) to enter into any agreements consistent with Article XII
hereof, to further implement the provisions of Article XII in connection with
the incurrence of any Permitted Lien Indebtedness.
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
----------------------------------------------------
Consent of Holders.
------------------
Subject to Section 6.8, with the consent of the Holders of not
less than a majority in aggregate principal amount of then outstanding
Securities, by written act of said Holders delivered to the Company and the
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<PAGE>
Trustee, the Company or any Subsidiary Guarantor, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Securities or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or the Securities or of modifying in any
manner the rights of the Holders under this Indenture or the Securities. Subject
to Section 6.8, the Holder or Holders of not less than a majority in aggregate
principal amount of then outstanding Securities may waive compliance by the
Company or any Subsidiary Guarantor with any provision of this Indenture or the
Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall without the consent of the Holders of not
less than 66-2/3% of the aggregate principal amounts of Securities at the time
outstanding alter the terms or provisions of Article XII or Section 13.3; and no
such amendment, supplemental indenture or waiver shall, without the consent of
the Holder of each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest
on any Security;
(3) reduce the principal or premium amount of any Security, or
reduce the Change of Control Payment, the Offer Price or the Redemption Price;
(4) change the Stated Maturity;
(5) alter the redemption provisions of Article III or the
Offer Price or Change of Control Payment, in any case, in a manner adverse to
any Holder;
(6) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or the rights of
Holders to recover the principal or premium of, interest on, or redemption
payment with respect to, any Security, including without limitation any changes
in Section 6.8, 6.12 or this third sentence of this Section 9.2;
(7) make the principal of, or the interest and premium on, any
Security payable with anything or in any manner other than as provided for in
this Indenture (including changing the place of payment where, or the coin or
currency in which, any Security or any premium or the interest thereon is
payable) and the Securities as in effect on the date hereof; or
(8) make the Securities subordinated in right of payment to
any extent or under any circumstances to any other Indebtedness.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section
9.2 or Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under
this Article IX, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
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<PAGE>
SECTION 9.3. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder 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 his Security by written notice to
the Company or the Person designated by the Company as the Person to whom
consents should be sent if such revocation is received by the Company or such
Person before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be the date so fixed by
the Company notwithstanding the provisions of the TIA. If a record date is
fixed, then notwithstanding the last sentence of the immediately preceding
paragraph, those Persons who were Holders at such record date, and only those
Persons (or their duly designated proxies), shall be entitled to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (9) of Section 9.2, in which case, the amendment, supplement
or waiver shall bind only 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; provided, that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest on a Security, on or after the respective
dates set for such amounts to become due and payable expressed in such Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Registrar or require the Holder to put an appropriate notation on the
Security. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Security
shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
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ARTICLE X.
RESERVED
ARTICLE XI.
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a Change
--------------------------------------------------------------
of Control.
----------
(a) In the event that a Change of Control Triggering Event
occurs, each Holder shall have the right, at such Holder's option, subject to
the terms and conditions of this Indenture, to require the Company to repurchase
all or any part of such Holder's Securities (provided, that the principal amount
of such Securities at maturity must be $1,000 or an integral multiple thereof)
on a date selected by the Company that is no later than 45 Business Days after
the occurrence of such Change of Control Triggering Event (the "Change of
Control Payment Date"), at a cash price (the "Change of Control Payment") equal
to 101% of the aggregate principal amount thereof, plus (subject to the right of
Holders of record on a Record Date that is on or prior to such repurchase date
to receive interest due on the corresponding Interest Payment Date and subject
to clause (b)(4) below) accrued and unpaid interest, if any, to and including
the Change of Control Payment Date.
(b) In the event of a Change of Control Triggering Event, the
Company shall be required to commence an offer to purchase Securities (a "Change
of Control Offer") as follows:
(1) the Change of Control Offer shall commence within 10
Business Days following the occurrence of the Change of Control Triggering
Event;
(2) the Change of Control Offer shall remain open for 20
Business Days, except to the extent that a longer period is required by
applicable law, but in any case not more than 35 Business Days following
commencement (the "Change of Control Offer Period");
(3) upon the expiration of a Change of Control Offer, the
Company shall purchase all of the properly tendered Securities at the Change of
Control Payment , plus accrued interest;
(4) if the Change of Control Payment Date is on or after a
Record Date and on or before the related interest payment date, any accrued
interest will be paid to the Person in whose name a Security is registered at
the close of business on such Record Date, and no additional interest will be
payable to Securityholders who tender Securities pursuant to the Change of
Control Offer;
(5) the Company shall provide the Trustee and the Paying
Agent with notice of the Change of Control Offer at least three Business Days
before the commencement of any Change of Control Offer; and
(6) on or before the commencement of any Change of Control
Offer, the Company or the Registrar (upon the request and at the expense of the
Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture) shall
govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made pursuant
to such notice and this Section 11.1 and that all Securities, or
portions thereof, tendered will be accepted for payment;
(ii) the Change of Control Payment (including the amount of
accrued and unpaid interest, subject to clause (b)(4) above), the
Change of Control Payment Date and the Change of Control Put Date
(as defined below);
55
<PAGE>
(iii) that any Security, or portion thereof, not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of
this Article XI or such payment is prevented, any Security, or
portion thereof, accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent (which may not for purposes of this
Section 11.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the
address specified in the notice prior to the close of business on
the earlier of (a) the third Business Day prior to the Change of
Control Payment Date and (b) the third Business Day following the
expiration of the Change of Control Offer (such earlier date being
the "Change of Control Put Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not
for purposes of this Section 11.1, notwithstanding anything in
this Indenture to the contrary, be the Company or any Affiliate of
the Company) receives, up to the close of business on the Change
of Control Put Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount
of the Securities the Holder is withdrawing and a statement that
such Holder is withdrawing his election to have such principal
amount of Securities purchased; and
(vii) a brief description of the events resulting in such
Change of Control Triggering Event.
Any such Change of Control Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Securities or portions thereof properly tendered pursuant
to the Change of Control Offer on or before the Change of Control Put Date, (ii)
deposit with the Paying Agent Cash sufficient to pay the Change of Control
Payment (including accrued and unpaid interest, subject to clause (b)(4) above)
for all Securities or portions thereof so tendered and (iii) deliver to the
Registrar Securities so accepted together with an Officers' Certificate listing
the aggregate principal amount of the Securities or portions thereof being
purchased by the Company. The Paying Agent shall on the Change of Control
Payment Date or promptly thereafter mail to Holders of Securities so accepted
payment in an amount equal to the Change of Control Payment (together with
accrued and unpaid interest) for such Securities (subject to clause (b)(4)
above), and the Trustee or its authenticating agent shall promptly authenticate
and the Registrar shall mail or deliver (or cause to be transferred by book
entry) to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered; provided, however, that each
such new Security will be in a principal amount of $1,000 or an integral
multiple thereof. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the consummation thereof.
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ARTICLE XII.
SECURITY
SECTION 12.1. Pledge of the Pledged Shares.
----------------------------
(a) In order to secure the prompt and complete payment of the
principal of, premium, if any, and interest (including, without limitation, all
interest, whether or not allowed under Section 502 of the Bankruptcy Law, 11
U.S.C. (S)502, or otherwise, at the applicable rate specified in the
Securities, accrued or accruing after the commencement of any proceeding under
the Bankruptcy Law by or against any of the Pledgors) on the Securities when and
as the same shall be due and payable, whether at the Maturity Date or Interest
Payment Date thereof, by acceleration, call for redemption, upon a Change of
Control Offer, Offer to Purchase or otherwise (including amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Law, 11 U.S.C. (S)362(a)), and the payment and performance of
all other obligations and indemnities of the Company and the Subsidiary
Guarantors to the Holders or the Trustee under this Indenture and the Securities
(the "Obligations"), the Pledgors hereby pledge and grant a security interest in
their respective rights, title and interest in and to the Pledged Collateral to
the Collateral Agent for the benefit of the Holders.
In the event that any Pledgor incurs (x) Indebtedness
contemplated in paragraph (b) or (f) of the definition of Permitted Indebtedness
contained in Section 1.1 or (y) any other Indebtedness ranking pari passu with
the Securities, including, without limitation, the New Notes and the Properties
Notes ("Permitted Lien Indebtedness"), then such Pledgor shall be permitted to
secure the prompt and complete payment of the principal of, premium, if any, and
interest (including, without limitation, all interest, whether or not allowed
under Section 502 of the Bankruptcy Law, 11 U.S.C. (S)502, or otherwise, at the
applicable rates specified, accrued or accruing after the commencement of any
proceeding under the Bankruptcy Law by or against any of the Pledgors) on such
Permitted Lien Indebtedness that may be incurred by the Pledgor, when and as the
same shall be due and payable, whether at the maturity date or interest payment
date thereof, by acceleration, call for redemption, upon a Change of Control
Offer, Offer to Purchase or otherwise (including amounts which would become due
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Law, 11 U.S.C. (S)362(a)), and the payment and performance of all
other obligations and indemnities of such Pledgor with respect to the Permitted
Lien Indebtedness (the "Permitted Lien Indebtedness Obligations") (the
Obligations and any Permitted Lien Indebtedness Obligations, the "Secured
Obligations"), by a pledge and grant of a security interest in its right, title
and interest in and to the Pledged Collateral to the Collateral Agent for the
benefit of the holders of such Permitted Lien Indebtedness, which pledge and
security interest shall be on an equal and ratable basis with the pledge and
security interest granted to secure the Obligations hereunder.
(b) If, subsequent to the date hereof, any Person shall become
a Future Subsidiary Guarantor (as defined in Section 13.3), the applicable
Pledgors will promptly execute and deliver an indenture supplement to the
Trustee and the Collateral Agent (as parties to such indenture supplement, with
a copy to be provided to the appropriate agent or other representative of the
holders of any Permitted Lien Indebtedness) and take such other action
reasonably necessary to evidence the pledge and grant of a security interest in
the Pledgors' respective rights, title and interest in and to the shares of
Capital Stock of such Future Subsidiary Guarantor held by any of the Pledgors,
which shares (the "Future Subsidiary Guarantor Shares") shall constitute
Subsidiary Guarantor Shares, Pledged Shares and Pledged Collateral subject to
the provisions of this Article XII as of the date such Person becomes a Future
Subsidiary Guarantor; provided, however, that the foregoing provisions shall not
apply with respect to (and the term "Future Subsidiary Guarantor Shares" shall
not include) the shares ("Excluded Shares") of any Future Subsidiary Guarantor
(an "Excluded Share Subsidiary") if, at the time such Person becomes a Future
Subsidiary Guarantor pursuant to Section 13.3, the pledge of or grant of a
security interest in the shares of such Future Subsidiary Guarantor is
prohibited by law or the terms of any agreement (other than an agreement entered
into in connection with the transaction resulting in such Person becoming a
Future Subsidiary Guarantor) binding on such Future Subsidiary Guarantor or the
Pledgor(s) owning the shares of such Future Subsidiary Guarantor (provided that
any such Excluded Shares shall cease to be Excluded Shares when all such
prohibitions cease to apply to such Excluded Shares and provided that the assets
of all Excluded Share Subsidiaries (determined by the Company in accordance with
GAAP) shall in no event exceed 15% of the aggregate assets of the Company and
its
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Subsidiaries (other than Leaseback Subsidiaries) on a consolidated basis
(determined by the Company in accordance with GAAP)).
(c) In the event that, subsequent to the date hereof, any
Person previously constituting a Subsidiary Guarantor ceases to be a Subsidiary
Guarantor (pursuant to the provisions of Section 13.4 or Section 13.5, or
otherwise), upon the request of the Company, the Trustee and the Collateral
Agent will promptly execute and deliver an indenture supplement to the Pledgors
(as parties to such indenture supplement, with a copy to be provided to the
appropriate agent or other representative of the holders of any Permitted Lien
Indebtedness), furnish any certificate or opinion required by TIA (S) 314(d), in
connection therewith and take such other action reasonably necessary to evidence
the release of the shares and any other securities of such Person, and of each
Subsidiary of such Person, from the pledge and grant of security interest set
forth in this Section 12.1, and such shares and other securities ("Released
Subsidiary Guarantor Shares") shall cease to constitute Subsidiary Guarantor
Shares, Pledged Shares and Pledged Collateral subject to the provisions of this
Article XII as of the date such Person ceases to be a Subsidiary Guarantor,
provided that, in the event any Subsidiary Guarantor ceases to be a Subsidiary
Guarantor by reason of the sale of less than one hundred percent of the Capital
Stock of such Subsidiary Guarantor, the pledge and grant of the security
interest set forth in this Section 12.1 shall not be released with respect to
(and the Released Subsidiary Guarantor Shares shall not include) the shares of
Capital Stock of such Subsidiary Guarantor that continue to be held by any
Pledgor after such sale and that are not otherwise released in accordance with
the provisions of Article XII or Article XIII.
(d) Notwithstanding anything to the contrary in this Article
XII, unless an Event of Default or an event of default under any Permitted Lien
Indebtedness has occurred and is continuing, the Pledgors shall have the right,
power and authority to sell any of the Subsidiary Guarantor Shares (and
concurrent with such sale, any such Pledged Shares sold shall be released from
the Lien created by this Article), subject to the provisions of Section 4.14.
SECTION 12.2. Delivery of Pledged Shares and Subsequent Changes Affecting the
---------------------------------------------------------------
Pledged Shares.
--------------
(a) All certificates, instruments, documents and writings
representing or evidencing the Pledged Shares (including, without limitation,
Future Subsidiary Guarantor Shares) shall be delivered to and held by or on
behalf of the Collateral Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed stock powers or
other instruments of transfer or assignment in blank (the "Transfer
Instruments"), all in form and substance reasonably satisfactory to the
Collateral Agent. The Collateral Agent shall establish a separate account for
the purpose of holding the Pledged Shares. The Collateral Agent shall have the
right, after the occurrence of an Event of Default or an event of default under
any Permitted Lien Indebtedness and ten Business Days after notice to the
applicable Pledgor(s) in accordance with Section 12.5 hereof, to transfer to or
to register in the name of the Collateral Agent or any of its nominees (which
shall not be the Company or an affiliate of the Company) any or all of the
Pledged Shares. In addition, the Collateral Agent shall have the right at any
time thereafter to exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of smaller or larger
denominations.
(b) All certificates, instruments, documents and writings
representing or evidencing Pledged Shares that have been released from the Lien
created by this Article pursuant to Section 12.1 or Article XIII of this
Indenture, and all Transfer Instruments pertaining thereto, shall be delivered
by the Collateral Agent to the applicable Pledgor entitled thereto promptly upon
written request therefor delivered to the Collateral Agent.
(c) Each of the Pledgors represents and warrants that it has
made its own arrangements for keeping itself informed of changes and potential
changes affecting the Pledged Shares (including, but not limited to, rights to
convert, rights to subscribe, payment of dividends, reorganization and other
exchanges, tender offers and voting rights), and each of the Pledgors agrees
that the Collateral Agent shall not have any obligation to inform any of the
Pledgors of any such changes or potential changes or to take any action or omit
to take any action with respect thereto.
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SECTION 12.3. Supplements, Further Assurances.
-------------------------------
(a) Each of the Pledgors agrees that at any time and from
time to time, at the expense of such Pledgor, such Pledgor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that the Collateral Agent may reasonably request, in
order to create, perfect and protect and maintain the creation, perfection and
priority of any security interest granted or purported to be granted hereby or
to enable the Collateral Agent to exercise and enforce its rights hereunder with
respect to the Pledged Collateral.
(b) Each of the Pledgors further agrees that it will, upon
obtaining any Pledged Shares required to be pledged pursuant to Section 12.1,
promptly deliver the certificates, instruments, documents and writings
representing or evidencing such shares to the Collateral Agent.
SECTION 12.4. Voting Rights; Dividends; Etc.
-----------------------------
(a) As long as no Event of Default or event of default under
any Permitted Lien Indebtedness shall have occurred and be continuing and, in
the case of paragraph (i) below, until ten Business Days after the Collateral
Agent has given written notice to the applicable Pledgor(s) in accordance with
Section 12.4(b):
(i) Each Pledgor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the
Pledged Shares owned by such Pledgor or any part of any of
them for any purpose not inconsistent with the terms this
Indenture or any instrument governing any Permitted Lien
Indebtedness and which would not impair the Pledged Shares.
(ii) Each Pledgor shall be entitled to receive and
retain, and utilize free and clear of the Lien created by this
Indenture, any and all dividends, distributions and other
payments in respect of the Pledged Shares owned by such
Pledgor; provided, however, that any and all dividends and
other distributions received in the form of additional Pledged
Shares shall be forthwith delivered to the Collateral Agent to
hold as Pledged Collateral and shall, if received by such
Pledgor, be received in trust for the benefit of the
Collateral Agent, be segregated from the other property of
such Pledgor and be forthwith delivered to the Collateral
Agent as part of the Pledged Collateral in the same form as so
received (with any necessary endorsement).
(iii) In order to permit the Pledgors to exercise the
voting and other rights which they are entitled to exercise
pursuant to Section 12.4(a)(i) above and to receive the
dividends, distributions, and other payments which each is
authorized to receive and retain pursuant to Section
12.4(a)(ii) above, the Collateral Agent shall, if necessary,
upon written request of a Pledgor, from time to time execute
and deliver (or cause to be executed and delivered) to such
Pledgor, all such proxies, dividend payment orders and other
instruments as such Pledgor may reasonably request.
(b) Upon the occurrence and during the continuance of an
Event of Default or event of default under any Permitted Lien Indebtedness and,
in the case of Section 12.4(b)(i), after the passage of ten Business Days
following the Collateral Agent's written notice to the applicable Pledgor of
cessation of such Pledgor's voting and other consensual rights hereunder:
(i) All rights of any of the Pledgors to exercise the
voting and other consensual rights which each such Pledgor
would otherwise be entitled to exercise pursuant to Section
12.4(a)(i) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which, at the
direction of the Trustee or the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien
Indebtedness as specified in Section 12.8(b), shall thereupon
have the sole right to
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exercise such voting and other consensual rights during the
continuance of such Event of Default or event of default under
any Permitted Lien Indebtedness.
(ii) All rights of the Pledgors to the dividends,
distributions and other payments which such Pledgors would
otherwise be authorized to receive and retain pursuant to
Section 12.4(a)(ii) shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, who shall
thereupon have the sole right to receive and hold as Pledged
Collateral such dividends, distributions, principal, premium
and interest payments during the continuance of such Event of
Default or event of default under any Permitted Lien
Indebtedness.
(c) In order to permit the Collateral Agent to receive
all dividends and other distributions to which it may be entitled under Section
12.4(b)(ii) above, and to exercise the voting and other consensual rights which
it may be entitled to exercise pursuant to Section 12.4(b)(i) above, each of the
Pledgors shall, if necessary, upon written notice from the Collateral Agent,
from time to time execute and deliver to the Collateral Agent all such proxies,
dividend payment orders and other instruments as the Collateral Agent may
reasonably request.
(d) All dividends, distributions and other payments which
are received by a Pledgor contrary to the provisions of Section 12.4(b)(ii)
above shall be received in trust for the benefit of the Collateral Agent, shall
be segregated from other funds of such Pledgor and shall be forthwith paid over
to the Collateral Agent as Pledged Collateral in the same form as so received
(with any necessary endorsement).
SECTION 12.5. Collateral Agent Appointed Attorney-In-Fact.
-------------------------------------------
Each of the Pledgors hereby appoints the Collateral Agent as
such Pledgor's attorney-in-fact, with full authority in the place and stead of
such Pledgor and in the name of such Pledgor or otherwise, from time to time in
the Collateral Agent's discretion, to take any action and to execute any
instrument which the Collateral Agent may reasonably deem necessary or advisable
to accomplish the purposes of this Article XII following the occurrence and
during the continuation of an Event of Default or an event of default under any
Permitted Lien Indebtedness (but not prior thereto, or after the cessation
thereof), including, without limitation, in any respect neither contrary to the
provisions of this Indenture nor any instrument governing any Permitted Lien
Indebtedness, the right to notify and direct the issuer of or any party
obligated with respect to any Pledged Collateral to make payments with respect
to such Pledged Collateral directly to the Collateral Agent or may, in any
respect not contrary to the provisions of this Indenture or any instrument
governing any Permitted Lien Indebtedness, permit such rights to be exercised by
any Pledgor; and, without limiting the generality of the foregoing, in its
discretion following the occurrence and during the continuation of an Event of
Default or an event of default under any Permitted Lien Indebtedness (but not
prior thereto, or after the cessation thereof):
(a) The Collateral Agent may at any time vote or give
consents, or authorize the Pledged Shares to be voted or such consents to be
given in accordance with, and subject to the notice provisions set forth in,
Section 12.4(b) hereof.
(b) The Collateral Agent may join in and become a party
to any plan of reorganization and readjustment, whether voluntary or
involuntary, may deposit any of the Pledged Collateral under such plan or make
any exchange or surrender or permit any substitution for or cancellation of the
Pledged Collateral as required by such plan and may take all such action as may
be required by such plan; provided, however, that all securities issued or
created under such plan and exchanged for the Pledged Collateral and all
securities, moneys or property received pursuant to such plan shall thereafter
be subject to the terms of this Article XII and become part of the Pledged
Collateral.
(c) The Collateral Agent may receive, endorse and collect
all checks, whether or not made payable to the order of the applicable Pledgor,
representing any dividend, distribution or other payments at any time paid or
made on or with respect to the Pledged Collateral all of which shall be applied
to the Secured Obligations as provided herein, and may give full discharge for
the same in accordance with Section 12.4(b) hereof.
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SECTION 12.6. Collateral Agent May Perform.
----------------------------
If any of the Pledgors fails to perform any agreement
contained in this Article XII within a reasonable period of time after receipt
of a written request to do so from the Collateral Agent, the Collateral Agent
may, but shall have no obligation to itself perform, or cause performance of,
such agreement, and the reasonable expenses of the Collateral Agent, including
the reasonable fees and expenses of its counsel, incurred in connection
therewith shall be payable under Section 12.13(h) hereof.
SECTION 12.7. Reasonable Care.
---------------
The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially
equivalent to that which the Collateral Agent, in its individual capacity,
accords its own property consisting of negotiable securities, it being
understood that, in the absence of instructions from the Trustee or the
appropriate agent(s) or other representative(s) of the holders of any Permitted
Lien Indebtedness as specified in Section 12.8(b), except as provided for herein
and in any Agreement With Collateral Agent entered into in connection with the
incurrence of any Permitted Lien Indebtedness pursuant to Section 12.14, the
Collateral Agent shall not have responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, tenders or other matters
relative to any Pledged Collateral, whether or not the Collateral Agent has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Pledged Collateral) to preserve rights against any
Person with respect to any Pledged Collateral.
SECTION 12.8. Remedies Upon Default; Decisions Relating to Exercise of
--------------------------------------------------------
Remedies; Limitations on Exercise of Remedies.
---------------------------------------------
(a) Remedies Upon Default. Subject to Section 12.8(b), if an
Event of Default or an event of default under any Permitted Lien Indebtedness
shall have occurred and be continuing and as a consequence thereof Secured
Obligations equal to at least a majority of the aggregate principal amount of
the Secured Obligations then outstanding shall have become immediately due and
payable:
(i) The Collateral Agent may exercise in respect of
the Pledged Collateral, in addition to other rights provided
for herein or otherwise available to it, all the rights of a
secured party on default under the UCC; and in furtherance
thereof, the Collateral Agent may, at the direction of the
Trustee or the appropriate agent(s) or other representative(s)
of the holders of any Permitted Lien Indebtedness as specified
in Section 12.8(b), without providing notice to the Pledgors
except as specified below, sell the Pledged Collateral or any
part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Collateral
Agent's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may deem commercially
reasonable. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the
part of any of the Pledgors, and each of the Pledgors hereby
waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute
now existing or hereafter enacted. Each of the Pledgors agrees
that to the extent notice of sale shall be required by law, at
least 30 days' notice to such Pledgor of the time and place of
any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each
of the Pledgors hereby waives any claims against the
Collateral Agent arising hereunder by reason of the fact that
the price at which any Pledged Collateral may
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have been sold at such a private sale was less than the price
which might have been obtained at a public sale.
(ii) Each of the Pledgors recognizes that, by reason
of certain prohibitions contained in the Securities Act and
applicable state securities laws, the Collateral Agent may be
compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to
the distribution or resale thereof. Each of the Pledgors
acknowledges that any such private sale may be at prices and
on terms less favorable to the Collateral Agent than those
which may be obtained through a public sale without such
restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities
Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Collateral Agent
shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration
under the Securities Act or under applicable state securities
laws, even if the applicable Pledgor would agree to do so.
(iii) If the Collateral Agent, at the direction of
the Trustee or the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien
Indebtedness as specified in Section 12.8(b), exercises its
right to sell any or all of the Pledged Collateral, upon
written request, the applicable Pledgor(s) shall and shall
cause each issuer of any Pledged Shares to be sold hereunder
from time to time to furnish to the Collateral Agent all such
information as the Collateral Agent may request in order to
determine the number of shares and other instruments included
in the Pledged Collateral which may be sold by the Collateral
Agent as exempt transactions under the Securities Act and the
rules of the SEC thereunder, as the same are from time to time
in effect.
(b) Decisions Relating to Exercise of Remedies.
Notwithstanding anything in this Indenture or any instrument
governing any Permitted Lien Indebtedness to the contrary, the Collateral Agent
shall exercise or shall refrain from exercising any remedy provided for in this
Article XII, or otherwise pertaining to the Pledged Collateral, in accordance
with the instructions of the Trustee or the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien Indebtedness as follows:
the Collateral Agent shall at all times follow the instructions delivered by the
Trustee or the appropriate agent(s) or other representative(s) of the holders of
any Permitted Lien Indebtedness on behalf of the holders of a majority in
aggregate principal amount of the Secured Obligations then outstanding
("Requisite Obligees"). The Collateral Agent may at any time request directions
from the Trustee and the appropriate agent(s) or other representative(s) of the
holders of any Permitted Lien Indebtedness in accordance with the foregoing
(through delivery of such request to the Trustee and such agent(s) or other
representative(s)) with respect to any course of action or other matter relating
to the Pledged Collateral or the provisions of this Article XII. Directions
given by the Trustee and/or such agent(s) or other representative(s) to the
Collateral Agent in accordance with the foregoing shall be in writing and shall
be binding on all Holders of the Securities and holders of any Permitted Lien
Indebtedness for all purposes, and the Collateral Agent shall have no liability
for acting in accordance with such directions; provided, however, that (i) the
Collateral Agent shall not be required to follow any such direction that is in
conflict with any rule of law or with the terms of this Indenture or, except
with respect to determining who may direct the Collateral Agent to act or
refrain from taking action, any instrument governing any Permitted Lien
Indebtedness, and (ii) the Collateral Agent may take any other action it deems
proper which is not inconsistent with such direction.
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SECTION 12.9. Application of Proceeds.
-----------------------
After and during the continuance of an Event of Default or an
event of default under any Permitted Lien Indebtedness, any cash held by the
Collateral Agent as Pledged Collateral and all cash proceeds received by the
Collateral Agent (all such cash being "Proceeds") in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral pursuant to the exercise by the Collateral Agent of its remedies
under this Article XII or otherwise, shall be applied promptly from time to time
by the Collateral Agent:
First, to the payment of the costs and expenses of such sale,
collection or other realization, including reasonable
compensation to the Collateral Agent and its agents and
counsel, and all expenses, liabilities and advances made or
incurred by the Collateral Agent in connection therewith;
Second, to the Trustee for the benefit of the Holders, for
payment until paid in full of the obligations in accordance
with Section 6.6, and to the appropriate agent(s) or other
representative(s) of the holders of all Permitted Lien
Indebtedness for payment until paid in full of the Permitted
Lien Indebtedness Obligations (all such payments to be made
ratably with respect to all outstanding Secured Obligations);
and
Third, after payment in full in cash of all Secured
Obligations, to the applicable Pledgor, or its successors or
assigns, or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct,
of any surplus then remaining from such Proceeds.
At the time of any application of Proceeds by the Collateral
Agent pursuant to this Section 12.9, the Collateral Agent shall provide each of
the Pledgors, the Trustee (if the Collateral Agent is not then the Trustee) and
the appropriate agent(s) or other representative(s) of the holders of any
Permitted Lien Indebtedness with a certificate setting forth the total amount
paid to the Trustee and such agent(s) or other representative(s) and a
calculation of the amounts, if any, deducted from Proceeds otherwise payable to
the Trustee and such agent(s) or other representative(s) or the Pledgors as
contemplated by this Indenture.
For purposes of this Section 12.9, payments shall be deemed to
have been made "ratably" with respect to all outstanding Secured Obligations if
such payments are made to or for the benefit of each holder of outstanding
Secured Obligations in the proportion that the Secured Obligations held by such
holder bears to the total amount of the Secured Obligations, as of such date (it
being understood that all payments by the Collateral Agent to or for the benefit
of the holders of the Outstanding Securities shall be made by the Collateral
Agent to the Trustee and all payments by the Collateral Agent to or for the
benefit of the holders of Permitted Lien Indebtedness shall be made by the
Collateral Agent to the appropriate agent(s) or other representative(s) of the
holders of such Permitted Lien Indebtedness, as applicable).
SECTION 12.10. Recording, Etc.
--------------
The Pledgors will cause, at their own expense, this Indenture
and all amendments or supplements hereto to be registered, recorded and filed or
re-registered, re-recorded, refiled and renewed in such manner and in such place
or places, if any, as may be required by law in order fully to preserve and
protect the security interests created under this Article XII in the Pledged
Collateral and to effectuate and preserve the security therein of the Collateral
Agent for the benefit of the Holders and the holders of any Permitted Lien
Indebtedness and all rights of the Collateral Agent.
The Company shall furnish to the Collateral Agent, the Trustee
(if the Collateral Agent is not then the Trustee) and to the appropriate
agent(s) or other representative(s) of the holders of any Permitted Lien
Indebtedness outstanding as of the applicable date specified below:
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(i) promptly after execution of this Indenture an Opinion
of Counsel either stating that in the opinion of such counsel the
Indenture has been properly recorded and filed so as to make
effective the Liens intended to be created by this Article XII,
and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to make such
Liens effective; and
(ii) within thirty (30) days of July 31 of each year,
commencing July 31, 1996, an Opinion of Counsel either stating
that in the opinion of such counsel such action has been taken
with respect to recording, filing, re-recording and refiling of
this Indenture as is necessary to maintain the Liens intended to
be created by this Article XII, and reciting the details of such
action, or stating that in the opinion of such counsel no such
action is necessary to maintain such Liens.
The release of any Pledged Collateral from the terms hereof will
not be deemed to impair the security under this Indenture or any instrument
governing any Permitted Lien Indebtedness in contravention of the provisions
hereof or thereof if and to the extent the Pledged Collateral is released
pursuant to the provisions of this Article XII or Article XIII of this
Indenture. The Collateral Agent, the Trustee and each of the Holders acknowledge
that a release of Pledged Collateral in accordance with the terms of this
Article XII or Article XIII of this Indenture will not be deemed for any purpose
to be an impairment of the security under this Indenture. To the extent
applicable, the Pledgors shall cause TIA (S) 314(d) relating to the release of
property or securities from the Lien created by this Article XII to be complied
with. Any certificate or opinion required by TIA (S) 314(d) may be made by any
Officer of the applicable Pledgor to the extent permitted by TIA (S) 314(d).
SECTION 12.11. Termination.
-----------
When all Secured Obligations have been paid in full in cash, the
provisions of this Article XII shall terminate, and the Collateral Agent shall,
upon the request and at the expense of the applicable Pledgor(s), forthwith
assign, transfer and deliver, against receipt and without recourse to the
Collateral Agent, such of the Pledged Collateral owned by each of the Pledgors
as shall not have been sold or otherwise applied pursuant to the terms hereof to
or on the order of such Pledgor. Upon the release of any Pledged Collateral
pursuant to Section 12.1 or Article XIII of this Indenture, (i) the provisions
of this Article XII shall terminate with respect to the Pledged Collateral so
released and (ii) the Collateral Agent shall, upon the request and at the
expense of the applicable Pledgor, forthwith assign, transfer and deliver,
against receipt and without recourse to the Collateral Agent, such of the
Pledged Collateral so released as shall have not been sold or otherwise applied
pursuant to the terms hereof to or on the order of such Pledgor.
SECTION 12.12. Continuing Security Interest.
----------------------------
This Article XII shall create a continuing security interest in
the Pledged Collateral and shall (i) remain in full force and effect (a) until
the payment in full in cash of all Secured Obligations or (b) with respect to
any Pledged Collateral released pursuant to Section 12.1 or Article XIII of this
Indenture, until such Pledged Collateral is so released and (ii) be binding upon
each of the Pledgors, its successors and assigns and (iii) inure to the benefit
of the Collateral Agent and each of its successors.
SECTION 12.13. The Collateral Agent.
--------------------
(a) Marine Midland Bank is hereby appointed as the "Collateral
Agent," to serve in such capacity until its successor is duly appointed pursuant
to Section 12.13(e) below. The Collateral Agent hereby accepts such appointment
and acknowledges that it is acting in such capacity for the benefit of the
holders of Secured Obligations. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in this Article XII of this
Indenture or any Agreement With Collateral Agent entered into pursuant to
Section 12.14, and the Collateral Agent, in such capacity, shall not be a
trustee for any Person or have any other fiduciary obligation to any Person
(including, without limitation, any obligation under the Trust Indenture Act of
1939, as amended) by reason of the provisions of this Article XII. The
Collateral Agent may employ agents and attorneys-
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in-fact and shall not be responsible, except as to cash or securities received
by it or its authorized agents, for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. Neither the
Collateral Agent nor any of its directors, officers, employees or agents shall
be liable or responsible for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own negligence
or willful misconduct. For as long as the Trustee acts as the Collateral Agent,
the Collateral Agent shall have the rights and immunities, including
indemnification, of the Trustee as set forth in Article VII.
(b) The Collateral Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by telex,
telecopy, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (including counsel to the Company or
the Pledgors), independent accountants and other experts selected by the
Collateral Agent. As to any matters not expressly provided for in this
Indenture, the Collateral Agent shall in all cases be fully protected in acting,
or in refraining from acting, in accordance with instructions given by the
Trustee and/or the appropriate agent(s) or other representative(s) of the
holders of any Permitted Lien Indebtedness as specified in Section 12.8(b), and
any action taken or failure to act pursuant thereto shall be binding on all
Pledgors and holders of Secured Obligations. Notwithstanding anything to the
contrary herein, the Collateral Agent shall in all cases be permitted to rely on
notice from the Trustee as to whether there has occurred and is continuing an
Event of Default under this Indenture and on notice from the appropriate
agent(s) or other representative(s) of the holders of any Permitted Lien
Indebtedness as to whether there has occurred and is continuing an event of
default under the instruments governing such Permitted Lien Indebtedness.
(c) Except for action expressly required of the Collateral
Agent hereunder, the Collateral Agent shall, notwithstanding anything to the
contrary herein, in all cases be fully justified in failing or refusing to act
hereunder unless and until it shall be further indemnified to its satisfaction
by the holders of the Secured Obligations against any and all loss, cost,
expense or liability which may be incurred by it by reason of taking or refusing
to take any such action. The Collateral Agent shall not be required to take any
action that is in its opinion contrary to law or to the terms of this Indenture
or, except with respect to determining who may direct the Collateral Agent to
act or refrain from taking action, any instrument governing any Permitted Lien
Indebtedness, or which would in its opinion subject it or any of its officers,
employees or directors to liability.
(d) Except as expressly provided herein, the Collateral Agent
shall have no duty to take any affirmative steps with respect to the collection
of amounts payable in respect to the Pledged Collateral.
(e)(i) Until such time as the Secured Obligations shall have
been paid in full, the Collateral Agent may at any time, by
giving written notice to the Company and the Trustee (if the
Collateral Agent is not then the Trustee) and the appropriate
agent(s) or other representative(s) of the holders of any
Permitted Lien Indebtedness resign and be discharged of the
responsibilities hereby created, such resignation to become
effective upon (x) the appointment of a successor Collateral
Agent and (y) the acceptance of such appointment by such
successor Collateral Agent. As promptly as practicable after the
giving of any such notice, the Company shall appoint a successor
Collateral Agent, which successor Collateral Agent shall be
approved by the Trustee and the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien
Indebtedness (which approval shall not be unreasonably withheld).
If no successor Collateral Agent shall be appointed and shall
have accepted such appointment within 90 days after the
Collateral Agent gives the aforesaid notice of resignation, the
Collateral Agent or the Trustee or the appropriate agent(s) or
other representative(s) of the holders of any Permitted Lien
Indebtedness may apply to any court of competent jurisdiction to
appoint a successor Collateral Agent to act until such time, if
any, as a successor shall have been appointed as provided in this
clause (e)(i). Any successor so appointed by such court shall
immediately and without further act be superseded by any
successor Collateral Agent appointed by the Company, with the
approval of the Trustee and the appropriate agent(s) or other
representative(s) of the holders of any Permitted Lien
Indebtedness (which approval shall not be unreasonably withheld),
as provided above in this clause
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(e)(i). The Collateral Agent may be removed at any time at the
written direction of the Requisite Obligees, with notice
delivered to the Trustee, the appropriate agent(s) or other
representative(s) of the holders of Permitted Lien Indebtedness
and the Company.
(ii) If at any time the Collateral Agent shall be removed
or otherwise become incapable of acting, or if at any time a
vacancy shall occur in the office of the Collateral Agent for any
other cause (other than a resignation governed by the preceding
clause (e)(i)), a successor Collateral Agent shall be appointed
by the Company, with the approval of the Trustee and the
appropriate agent(s) or other representative(s) of the holders of
any Permitted Lien Indebtedness (such approval not to be
unreasonably withheld). If no successor Collateral Agent has been
appointed by the Company within 90 days after such vacancy is
created, the Trustee and/or such agent(s) or other
representative(s) may apply to any court of competent
jurisdiction to appoint a successor Collateral Agent to act until
such time, if any, as a successor shall have been appointed as
provided in this clause (e)(ii). The powers, duties, authority
and title of the predecessor Collateral Agent shall be terminated
and cancelled without procuring the resignation of such
predecessor and without any other formality (except as may be
required by applicable law) other than appointment and
designation of a successor by the Company in the manner set forth
above, in writing duly acknowledged and delivered to the
predecessor, the appropriate agent(s) or other representative(s)
of the holders of Permitted Lien Indebtedness and the Trustee.
Such appointment and designation shall be full evidence of the
right and authority to make the same and of all the facts therein
recited, and this Indenture, the instruments governing any
Permitted Lien Indebtedness and any Agreement With Collateral
Agent entered into pursuant to Section 12.14 shall vest in such
successor, without any further act, deed or conveyance, all the
estates, properties, rights, powers, trusts, duties, authority
and title of its predecessor; but such predecessor shall,
nevertheless, on the written request of the Trustee, the
appropriate agent(s) or other representative(s) of the holders of
Permitted Lien Indebtedness, the Company or the successor,
execute and deliver an instrument transferring to such successor
all the estates, properties, rights, powers, trusts, duties,
authority and title of such predecessor hereunder by it or its
agents to such successor.
(iii) The Collateral Agent who has resigned or been removed
shall be entitled to fees, costs and expenses to the extent
incurred or arising, or relating to events occurring, before its
resignation or removal.
(f) Every successor Collateral Agent appointed pursuant to
clause (e), above, shall be a bank or trust company in good standing and having
power to act as Collateral Agent hereunder, incorporated under the laws of the
United States of America or any State thereof or the District of Columbia and
having its principal office within the 48 contiguous States and shall also have
capital, surplus and undivided profits of not less than $50,000,000, if there be
such an institution with such capital, surplus and undivided profits willing,
qualified and able to accept the agency hereunder upon reasonable or customary
terms.
(g) Any corporation into which the Collateral Agent may be
merged, or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Collateral Agent, shall be a party, or
any person succeeding to all or substantially all of the corporate trust
business of the Collateral Agent, shall be Collateral Agent under this Indenture
without the execution or filing of any paper or any further act on the part of
any party hereto.
(h) The Pledgors (jointly and severally) will upon demand pay to
the Collateral Agent the amount of any and all reasonable expenses (including
the reasonable fees and expenses of its counsel) which the Collateral Agent may
incur in connection with (i) the administration of the provisions of this
Article XII, (ii) the custody or preservation of, or the sale of, collection
from or other realization upon, any of the Pledged Collateral or (iii) the
exercise or enforcement of any of the rights of the Collateral Agent hereunder.
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SECTION 12.14. Agreement With Collateral Agent.
-------------------------------
The Collateral Agent, the Trustee, the Pledgors and appropriate
agent(s) or other representative(s) of the holders of any Permitted Lien
Indebtedness shall enter into an Agreement With Collateral Agent in form and
substance reasonably acceptable to them (an "Agreement With Collateral Agent")
to provide for the orderly implementation of their respective rights and
responsibilities pursuant to this Article XII, including provision for the
exchange of such information as may be reasonably required to enable the
Collateral Agent to fulfill its responsibilities pursuant to this Article XII.
SECTION 12.15. Modifications at Such Time as any Permitted Lien Indebtedness
-------------------------------------------------------------
Ceases to be Outstanding.
------------------------
At such time as any Permitted Lien Indebtedness has been fully
satisfied in accordance with the instruments governing such Permitted Lien
Indebtedness, the provisions of this Article XII shall cease to apply with
respect to such Permitted Lien Indebtedness, and from and after such date,
notwithstanding any contrary provisions contained in this Article XII, (i) no
notices, requests or other materials or information will be required to be
provided to the agent(s) or representative(s) of the holders of such Permitted
Lien Indebtedness pursuant to the terms of this Article XII, (ii) any approvals
or directions from such agent(s) or other representative(s) otherwise required
under this Article XII will cease to be so required, (iii) the Collateral Agent
will no longer be entitled or required to take any actions by virtue of an event
of default under such Permitted Lien Indebtedness and all references to such
Permitted Lien Indebtedness (including Permitted Lien Indebtedness Obligations
in respect of such Permitted Lien Indebtedness), the instruments governing such
Permitted Lien Indebtedness, the Agreement With Collateral Agent with respect to
such Permitted Lien Indebtedness and the agent(s) or representative(s) of the
holders thereof shall be deemed to have been deleted.
ARTICLE XIII.
GUARANTY
SECTION 13.1. Guaranty.
--------
(a) In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of the Subsidiary
Guarantors hereby fully and unconditionally guarantees (the "Guaranty"), jointly
and severally, to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability of this Indenture, the Securities or the obligations
of the Company under this Indenture or the Securities, that: (w) the principal
and premium (if any) of and interest on the Securities will be paid in full when
due, whether at the Maturity Date or Interest Payment Date, by acceleration,
call for redemption, upon a Change of Control Offer, Offer to Purchase, or
otherwise; (x) all other obligations of the Company to the Holders or the
Trustee under this Indenture or the Securities will be promptly paid in full or
performed, all in accordance with the terms of this Indenture and the
Securities; and (y) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, they will be paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at maturity, by acceleration, call for redemption, upon a Change of
Control Offer, upon an Offer to Purchase or otherwise. Failing payment when due
of any amount so guaranteed for whatever reason, each Subsidiary Guarantor shall
be jointly and severally obligated to pay the same before failure so to pay
becomes an Event of Default. If the Company or a Subsidiary Guarantor defaults
in the payment of the principal of, premium, if any, or interest on, the
Securities when and as the same shall become due, whether upon maturity,
acceleration, call for redemption, upon a Change of Control Offer, Offer to
Purchase or otherwise, without the necessity of action by the Trustee or any
Holder, each Subsidiary Guarantor shall be required, jointly and severally, to
promptly make such payment in full.
(b) Each Subsidiary Guarantor hereby agrees that its obligations
with regard to this Guaranty shall be full and unconditional, irrespective of
the validity, regularity or enforceability of the Securities or this Indenture,
the absence of any action to enforce the same, any delays in obtaining or
realizing upon or failures to
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obtain or realize upon collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a guarantor
(except as provided in Sections 13.4 and 13.5). Each Subsidiary Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company or right to require the prior disposition
of the assets of the Company to meet its obligations, protest, notice and all
demands whatsoever and covenants that this Guaranty will not be discharged
(except to the extent released pursuant to Section 13.4 or 13.5) except by
complete performance of the obligations contained in the Securities and this
Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Subsidiary Guarantor, or any
Custodian, trustee, or similar official acting in relation to either the Company
or such Subsidiary Guarantor, any amount paid by either the Company or such
Subsidiary Guarantor to the Trustee or such Holder, this Guaranty, to the extent
theretofore discharged, shall be reinstated in full force and effect (except to
the extent released pursuant to Section 13.4 or 13.5). Each Subsidiary Guarantor
agrees that it will not be entitled to any right of subrogation in relation to
the Holders in respect of any obligations guaranteed hereby until payment in
full of all obligations guaranteed hereby. Each Subsidiary Guarantor further
agrees that, as between such Subsidiary Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Section 6.2 for the purposes
of this Guaranty, notwithstanding any stay, injunction or other prohibition
preventing such acceleration as to the Company of the obligations guaranteed
hereby, and (ii) in the event of any declaration of acceleration of those
obligations as provided in Section 6.2, those obligations (whether or not due
and payable) will forthwith become due and payable by each of the Subsidiary
Guarantors for the purpose of this Guaranty.
(d) Each Subsidiary Guarantor and by its acceptance of a
Security issued hereunder each Holder hereby confirms that it is the intention
of all such parties that the guarantee by such Subsidiary Guarantor set forth in
Section 13.1(a) not constitute a fraudulent transfer or conveyance for purpose
of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar Federal or state law. To effectuate the
foregoing intention, the Holders and such Subsidiary Guarantor hereby
irrevocably agree that the obligations of such Subsidiary Guarantor under its
guarantee set forth in Section 13.1(a) shall be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Subsidiary Guarantor in respect of the
obligations of such other Subsidiary Guarantor under its guarantee or pursuant
to the following paragraph of this Section 13.1(d), result in the obligations of
such Subsidiary Guarantor under such guarantee not constituting such a
fraudulent transfer or conveyance.
Each Subsidiary Guarantor that makes any payment or distribution
under Section 13.1(a) shall be entitled to a contribution from each other
Subsidiary Guarantor equal to its Pro Rata Portion of such payment or
distribution. For purposes of the foregoing, the "Pro Rata Portion" of any
Subsidiary Guarantor means the percentage of the net assets of all Subsidiary
Guarantors held by such Subsidiary Guarantor, determined in accordance with
GAAP.
(e) It is the intention of each Subsidiary Guarantor and the
Company that the obligations of each Subsidiary Guarantor hereunder shall be
joint and several and in, but not in excess of, the maximum amount permitted by
applicable law. Accordingly, if the obligations in respect of the Guaranty would
be annulled, avoided or subordinated to the creditors of any Subsidiary
Guarantor by a court of competent jurisdiction in a proceeding actually pending
before such court as a result of a determination both that such Guaranty was
made without fair consideration and, immediately after giving effect thereto,
such Subsidiary Guarantor was insolvent or unable to pay its debts as they
mature or left with an unreasonably small capital, then the obligations of such
Subsidiary Guarantor under such Guaranty shall be reduced by such court if and
to the extent such reduction would result in the avoidance of such annulment,
avoidance or subordination; provided, however, that any reduction pursuant to
this paragraph shall be made in the smallest amount as is strictly necessary to
reach such result. For purposes of this paragraph, "fair consideration",
"insolvency", "unable to pay its debts as they mature", "unreasonably small
capital" and the effective times of reductions, if any, required by this
paragraph shall be determined in accordance with applicable law.
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SECTION 13.2. Execution and Delivery of Guaranty.
----------------------------------
Each Subsidiary Guarantor shall, by virtue of such Subsidiary
Guarantor's execution and delivery of this Indenture or such Subsidiary
Guarantor's execution and delivery of an indenture supplement pursuant to
Section 13.3 hereof, be deemed to have signed on each Security issued hereunder
the notation of guarantee set forth on the form of the Securities attached
hereto as Exhibit A to the same extent as if the signature of such Subsidiary
Guarantor appeared on such Security. The delivery of any Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of the guaranty set forth in Section 13.1 on behalf of each Subsidiary
Guarantor. The notation of a guaranty set forth on any Security shall be null
and void and of no further effect with respect to the guaranty of any Subsidiary
Guarantor which, pursuant to Section 13.4 or Section 13.5, is released from such
guaranty.
SECTION 13.3. Future Subsidiary Guarantors.
----------------------------
Upon (i) the acquisition by the Company or any Subsidiary
Guarantor of the Capital Stock of any Person, if, as a result of such
acquisition, such Person becomes a Subsidiary (other than a Leaseback
Subsidiary) or (ii) the last day of any fiscal quarter during which any
Subsidiary of the Company that is not a Subsidiary Guarantor as of such date and
has not previously been released as a Subsidiary Guarantor pursuant to Section
13.4 or Section 13.5 of this Indenture becomes a Subsidiary (other than a
Leaseback Subsidiary), such Subsidiary (hereinafter any such Subsidiary, except
any Excluded Guaranty Subsidiary or any Special Purpose Subsidiary, being called
a "Future Subsidiary Guarantor") shall fully and unconditionally guarantee the
obligations of the Company with respect to payment and performance of the
Securities and the other obligations of the Company under this Indenture to the
same extent that such obligations are guaranteed by the other Subsidiary
Guarantors pursuant to Section 13.1; and, within 60 days of the date of such
occurrence, such Future Subsidiary Guarantor shall execute and deliver to the
Trustee a supplemental indenture making such Future Subsidiary Guarantor a party
to this Indenture; provided, however, that the foregoing provisions shall not
apply to (A) any Subsidiary referenced in clause (i) or clause (ii) above that
is prohibited by law or by the terms of any agreement from making the guarantee
set forth in Section 13.1 (an "Excluded Guaranty Subsidiary") (provided that
such Subsidiary will become a Future Subsidiary Guarantor as of the date such
prohibition is removed or lapses and provided that the assets of all Excluded
Guaranty Subsidiaries (determined by the Company in accordance with GAAP) shall
in no event exceed 15% of the aggregate assets of the Company and its
Subsidiaries (other than Leaseback Subsidiaries) on a consolidated basis
(determined by the Company in accordance with GAAP)), or (B) a Subsidiary which
would have been released from its guarantee, by virtue of events set forth in
Section 13.5, had such Subsidiary been a Subsidiary Guarantor at the time such
events occurred, or (C) a Subsidiary of any Person which has been released as a
Subsidiary Guarantor pursuant to Section 13.5 or (D) any Subsidiary referenced
in clause (i) or clause (ii) above that is a Special Purpose Subsidiary.
SECTION 13.4. Subsidiary Guarantor May Consolidate, Etc., on Certain Terms.
------------------------------------------------------------
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into the Company or any other Subsidiary Guarantor. Upon any such
consolidation or merger, the guarantees (as set forth in Section 13.1) of the
Subsidiary Guarantor which is not the survivor of the merger or consolidation,
and of any Subsidiary of such Subsidiary Guarantor that is also a Subsidiary
Guarantor, shall be released and shall no longer have any force or effect, and
any and all assets and Capital Stock (and all rights associated with such
Capital Stock) of such Subsidiary Guarantor, and of any Subsidiary of such
Subsidiary Guarantor that is also a Subsidiary Guarantor, that constitute part
of the Pledged Collateral shall be fully and unconditionally released from the
Lien created by Article XII and shall no longer constitute Pledged Collateral.
In the event that a Subsidiary Guarantor is the survivor of a merger or
consolidation with the Company, such Subsidiary Guarantor shall assume the
obligations of the Company pursuant to Section 5.2 and the Guaranty of such
Subsidiary Guarantor shall be released and shall no longer have any force or
effect and all assets and Capital Stock (and all rights associated with such
Capital Stock) of such Subsidiary Guarantor, that constitute part of the Pledged
Collateral shall be unconditionally released from the Lien created by Article
XII and shall no longer constitute Pledged Collateral.
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(b) Nothing contained in this Indenture shall prevent any sale
or conveyance of assets of any Subsidiary Guarantor (whether or not constituting
all or substantially all of the assets of such Subsidiary Guarantor) to any
Person, provided that the Company shall comply with the provisions of Section
4.14, and provided further that, in the event that all or substantially all of
the assets of a Subsidiary Guarantor are sold or conveyed, the guarantees of
such Subsidiary Guarantor (as set forth in Section 13.1) shall be released and
shall no longer have any force or effect, and all assets and Capital Stock (and
all rights associated with such Capital Stock) of such Subsidiary Guarantor, and
of each Subsidiary of such Subsidiary Guarantor that is also a Subsidiary
Guarantor, that constitute part of the Pledged Collateral shall be
unconditionally released from the Lien created by Article XII and shall no
longer constitute Pledged Collateral.
(c) Except as provided in Section 13.4(a) or Section 13.5, each
Subsidiary Guarantor shall not, directly or indirectly, consolidate with or
merge with or into another Person, unless (i) either (a) the Subsidiary
Guarantor is the continuing entity or (b) the resulting or surviving entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Subsidiary Guarantor in connection with the Securities
and this Indenture; (ii) no Default or Event of Default would occur as a
consequence of (after giving effect, on a pro forma basis, to) such transaction;
and (iii) the Subsidiary Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation or
merger and, if a supplemental indenture is required, such supplemental indenture
complies with this Indenture and that all conditions precedent herein relating
to such transaction have been satisfied.
(d) Upon any consolidation or merger of the Subsidiary Guarantor
in accordance with Section 13.4(c) hereof, the successor corporation formed by
such consolidation or into which the Subsidiary Guarantor is merged shall
succeed to, and be substituted for, and may exercise every right and power of,
the Subsidiary Guarantor under this Indenture with the same effect as if such
successor corporation had been named herein as the Subsidiary Guarantor, and
when a successor corporation duly assumes all of the obligations of the
Subsidiary Guarantor pursuant hereto and pursuant to the Securities, the
Subsidiary Guarantor shall be released from such obligations.
SECTION 13.5. Release of Subsidiary Guarantors and Collateral.
-----------------------------------------------
(a) Without any further notice or action being required by any
Person, any Subsidiary Guarantor, and each Subsidiary of such Subsidiary
Guarantor that is also a Subsidiary Guarantor, shall be fully and conditionally
released and discharged from all obligations under its guarantee and this
Indenture, and any and all assets and Capital Stock (and all rights associated
with such Capital Stock) of such Subsidiary Guarantor, and of each Subsidiary of
such Subsidiary Guarantor that is also a Subsidiary Guarantor, constituting
Pledged Collateral shall be fully and unconditionally released, upon (i) the
sale or other disposition of all or substantially all of the assets or
properties of such Subsidiary Guarantor, or 50% or more of the Capital Stock of
any such Subsidiary Guarantor to Persons other than the Company and its
Subsidiaries or (ii) the consolidation or merger of any such Subsidiary
Guarantor with any Person other than the Company or a Subsidiary of the Company,
if, as a result of such consolidation or merger, Persons other than the Company
and its Subsidiaries beneficially own more than 50% of the capital stock of such
Subsidiary Guarantor, provided that, in either such case, the Net Cash Proceeds
of such sale, disposition, merger or consolidation are applied in accordance
with Section 4.14 of this Indenture or (iii) a Legal Defeasance or Covenant
Defeasance, as set forth in Article VIII or (iv) such Subsidiary Guarantor
becoming a Special Purpose Subsidiary. Notwithstanding the foregoing provisions
of this Section 13.5(a), the pledge and grant of a security interest set forth
in Section 12.1 shall not be released pursuant to clause (i) or (ii) above with
respect to any Pledged Shares that continue to be held by any Pledgor after the
consummation of any transaction described in clause (i) or (ii) above, unless
such pledge and security interest are otherwise released in accordance with the
provisions of section 13.5.
(b) The releases and discharges set forth in Section 13.5(a)
shall be effective (i) in the case of releases and discharges effected pursuant
to clause (i) or (ii) of Section 13.5(a) by virtue of a sale, disposition,
consolidation or merger, on the date of consummation thereof, (ii) in the case
of releases and discharges effected pursuant to clause (iii) of Section 13.5(a),
upon the date of Covenant Defeasance or Legal Defeasance, as applicable
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and (iii) in the case of a Subsidiary becoming a Special Purpose Subsidiary, on
the date such Subsidiary becomes a Special Purpose Subsidiary. At the written
request of the Company, the Trustee shall promptly execute and deliver
appropriate instruments in forms reasonably acceptable to the Company evidencing
and further implementing any releases and discharges pursuant to the foregoing
provisions. If the Company desires the instruments evidencing or implementing
any releases or discharges to be executed prior to the effectiveness of such
releases and discharges as set forth above, such instruments may be made
conditional upon the occurrence of the events necessary to cause the
effectiveness of such releases and discharges, as specified in the first
sentence of this Section 13.5.
(c) Notwithstanding the foregoing provisions of this Article
XIII, (i) any Subsidiary Guarantor whose guarantee would otherwise be released
pursuant to the provisions of this Section 13.5 may elect, by written notice to
the Trustee, to maintain such guarantee in effect notwithstanding the event or
events that otherwise would cause the release of such guarantee (which election
to maintain such guarantee in effect may be conditional or for a limited period
of time), and (ii) any Subsidiary of the Company which is not a Subsidiary
Guarantor may elect, by written notice to the Trustee, to become a Subsidiary
Guarantor (which election may be conditional or for a limited period of time).
SECTION 13.6. Certain Bankruptcy Events.
-------------------------
Each Subsidiary Guarantor hereby covenants and agrees, to the
fullest extent that it may do so under applicable law, that in the event of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, such Subsidiary Guarantor shall not file (or join in any filing of), or
otherwise seek to participate in the filing of, any motion or request seeking to
stay or to prohibit (even temporarily) execution on the Guaranty and hereby
waives and agrees not to take the benefit of any such stay of execution, whether
under Section 362 or 105 of the Bankruptcy Law or otherwise.
ARTICLE XIV.
MISCELLANEOUS
SECTION 14.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the imposed duties,
upon qualification of this Indenture under the TIA, shall control.
SECTION 14.2. Notices.
-------
Any notices or other communications to the Company or any
Subsidiary Guarantor, Paying Agent, Registrar, Securities Custodian, transfer
agent or the Trustee required or permitted hereunder shall be in writing, and
shall be sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Subsidiary Guarantor:
HMC Acquisition Properties, Inc.
10400 Fernwood Road
Bethesda, MD 20817
Attention: General Counsel
Telephone: (301) 380-9000
Telecopy: (301) 380-3588
71
<PAGE>
if to the Trustee:
Marine Midland Bank
140 Broadway
New York, New York 10005
Attention: Corporate Trust Division
Telephone: (212)658-6084
Telecopy: (212)658-6425
Any party by notice to each other party may designate additional
or different addresses as shall be furnished in writing by such party. Any
notice or communication to any party shall be deemed to have been given or made
as of the date so delivered, if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and five Business Days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed. Any notice or
communication shall also be mailed to any Person described in TIA (S) 313(c) to
the extent required by the TIA.
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 14.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S) 312(c).
SECTION 14.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, such Person
shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) 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 met; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee), stating that, in the opinion of such counsel, all
such conditions precedent have been met; provided, however, that in the case of
any such request or application as to which the furnishing of particular
documents is specifically required by any provision of this Indenture, no
additional certificate or opinion need be furnished under this Section 14.4.
SECTION 14.5. 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:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
72
<PAGE>
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of 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 met;
and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been met; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 14.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. Any Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 14.7. Non-Business Days.
-----------------
If a payment date is not a Business Day at such place, payment
may be made at such place on the next succeeding day that is a Business Day, and
no interest shall accrue for the intervening period.
SECTION 14.8. Governing Law.
-------------
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. EACH OF
THE COMPANY AND THE SUBSIDIARY GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND THE SUBSIDIARY
GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY AND THE SUBSIDIARY GUARANTORS IN ANY OTHER JURISDICTION.
SECTION 14.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Subsidiary Guarantor or any of
their respective Subsidiaries. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
SECTION 14.10. No Recourse against Others.
--------------------------
No direct or indirect stockholder, partner, employee, officer or
director, past, present or future, of the Company, the Subsidiary Guarantors or
any successor entity, shall have any personal liability in respect of the
obligations of the Company or the Subsidiary Guarantors under the Securities or
this Indenture by reason of his or its status as such stockholder, partner,
employee, officer or director. Each Securityholder by accepting a Security
73
<PAGE>
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 14.11. Successors.
----------
All agreements of the Company and the Subsidiary Guarantors in
this Indenture and the Securities shall bind its successor. All agreements of
the Trustee in this Indenture shall bind its successor.
SECTION 14.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 14.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in
the Securities shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 14.14. Table of Contents, Headings, Etc.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and the 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 14.15. Qualification of Indenture.
--------------------------
The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all costs and expenses (including attorneys, fees for the Company
and the Trustee) incurred in connection therewith, including, but not limited
to, costs and expenses of qualification of the Indenture and the Securities and
printing this Indenture and the Securities. The Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel or
other documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 14.16. Registration Rights.
-------------------
Certain Holders of the Securities are entitled to certain
registration rights with respect to such Securities pursuant to, and subject to
the terms of, the Registration Rights Agreement.
74
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
HMC ACQUISITION PROPERTIES, INC.
By:
-------------------------------
Name:
Title:
HMC SPO, INC.
By:
-------------------------------
Name:
Title:
HMC AP CANADA, INC.
By:
-------------------------------
Name:
Title:
MARINE MIDLAND BANK, as Trustee
By:
-------------------------------
Name:
Title:
75
<PAGE>
Exhibit A
FORM OF SECURITY
HMC ACQUISITION PROPERTIES, INC.
9% SERIES A SENIOR NOTE
DUE 2007
No.
CUSIP 403916 AA 7
$__________________
HMC Acquisition Properties, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to _____________________, or registered assigns, the principal sum of
______________ Dollars, on December 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing
June 15, 1996.
Record Dates: June 1 and December 1.
Reference is made to the further provisions of this Security
on the reverse side, which will, for all purposes, have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to
be duly executed under its corporate seal.
Dated: __________________, 1995
HMC ACQUISITION PROPERTIES, INC.,
a Delaware corporation
[Seal]
By:
---------------------------------
Name:
Title:
Attest:
-----------------------------
Secretary
A-1
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the
within-mentioned Indenture.
MARINE MIDLAND BANK
as Trustee,
By:
------------------------------
Authorized Signatory
A-2
<PAGE>
HMC ACQUISITION PROPERTIES, INC.
9% Series A Senior Note
due 2007
Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein./1/
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $100,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO
OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
- --------------------
/1/ This paragraph should only be added if the Security is issued in global
form.
A-3
<PAGE>
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE
OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE COMPANY AND THE REGISTRAR. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE."/2/
1. Interest.
--------
HMC Acquisition Properties, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Security at the rate of 9% per annum from December 20, 1995 until
maturity. To the extent it is lawful, the Company promises to pay interest on
any interest payment due but unpaid on such principal amount at a rate of 9% per
annum compounded semi-annually.
The Company will pay interest semi-annually on June 15 and
December 15 of each year or, if any such day is not a Business Day, on the next
succeeding Business Day (each, an "Interest Payment Date") , commencing June 15,
1996. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid on the Securities, from
the date of issuance. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the June 1 or December 1 immediately preceding the Interest
Payment Date. Holders must surrender Securities to a Paying Agent to collect
principal payments. Except as provided below, the Company shall pay principal
and interest in such coin or currency of the United States of America as at the
time of payment shall be legal tender for payment of public and private debts
("Cash"). The Securities will be payable as to principal, premium and interest
at the office or agency of the Company maintained for such purpose within or
without the City and State of New York or, at the option of the Company, payment
of principal, premium and interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal of and interest and premium on all Global Securities and all other
Securities the Holders of which shall have provided wire transfer instructions
to the Company or the Paying Agent.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar.
The Company may change any Paying Agent, Registrar or co-Registrar without
notice to the Holders. The Company or any of its Subsidiaries may, subject to
certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as
of December 20, 1995 (the "Indenture"), among the Company, the Subsidiary
Guarantors named therein and Marine Midland Bank (the "Trustee" which term
includes any successor Trustee under the Indenture). Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Securities are
subject
- --------------------
/2/ This paragraph should be included only for the Initial Securities.
A-4
<PAGE>
to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are senior
obligations of the Company limited in aggregate principal amount to
$350,000,000.
5. Redemption.
----------
The Securities may be redeemed, in whole or in part, at any
time on or after December 15, 2000, at the option of the Company, at the
Redemption Price (expressed as a percentage of principal amount) set forth below
with respect to the indicated Redemption Date, in each case (subject to the
right of Holders of record on a Record Date that is on or prior to such
Redemption Date to receive interest due on the Interest Payment Date to which
such Record Date relates), plus any accrued but unpaid interest to the
Redemption Date. The Securities may not be so redeemed prior to December 15,
2000.
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
commencing December 15 Redemption Price
---------------------- ----------------
<S> <C>
2000..................................... 104.500%
2001..................................... 102.250%
2002..................................... 101.125%
2003 and thereafter...................... 100.000%.
</TABLE>
Any such redemption will comply with Article III of the
Indenture.
6. Notice of Redemption.
--------------------
Notice of redemption will be sent by first class mail, at
least 30 days and not more than 60 days prior to the Redemption Date to the
Holder of each Security to be redeemed at such Holder's last address as then
shown upon the registry books of the Registrar. Securities may be redeemed in
part in multiples of $1,000 only.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Securities called for
redemption shall have been deposited with the Paying Agent on such Redemption
Date and payment of the Securities called for redemption is not otherwise
prohibited, the Securities called for redemption will cease to bear interest and
the only right of the Holders of such Securities will be to receive payment of
the Redemption Price.
7. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption.
8. Persons Deemed Owners.
---------------------
The registered Holder of a Security may be treated as the
owner of it for all purposes.
9. Unclaimed Money.
---------------
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agent(s) will pay the money
back to the Company at its written request. After that, all liability of the
Trustee and such Paying Agent(s) with respect to such money shall cease.
A-5
<PAGE>
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
Except as set forth in the Indenture, if the Company
irrevocably deposits with the Trustee, in trust, for the benefit of the Holders,
Cash, U.S. Government Obligations or a combination thereof, in such amounts as
will be sufficient in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Securities to redemption or maturity and comply with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including the restrictive
covenants described in paragraph 12 below, but excluding their obligation to pay
the principal of and interest on the Securities). Upon satisfaction of certain
additional conditions set forth in the Indenture, the Company may, within one
year of the Stated Maturity of the Securities, elect to have its obligations
discharged with respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice to
or consent of any Holder, the parties thereto may under certain circumstances
amend or supplement the Indenture or the Securities to, among other things, cure
any ambiguity, defect or inconsistency, or make any other change that does not
adversely affect the rights of any Holder of a Security.
12. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of
the Company and the Subsidiary Guarantors to, among other things, incur
additional Indebtedness and Disqualified Capital Stock, pay dividends or make
certain other restricted payments, enter into certain transactions with
Affiliates, incur Liens, sell assets, merge or consolidate with any other
Persons or transfer (by lease, assignment or otherwise) substantially all of the
properties and assets of the Company. The limitations are subject to a number of
important qualifications and exceptions. The Company must periodically report to
the Trustee on compliance with such limitations.
13. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control Triggering Event, the
Company shall be required to offer to purchase on the Change of Control Purchase
Date all outstanding Securities at a purchase price equal to 101% of the
principal amount thereof, plus (subject to the right of Holders of Record on a
Record Date that is on or prior to such Purchase Date to receive interest due on
the Interest Payment Date to which such Record Date relates) accrued and unpaid
interest, if any, to the Change of Control Purchase Date. Holders of Securities
will receive a Change of Control Offer from the Company prior to any related
Change of Control Purchase Date and may elect to have such Securities purchased
by completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
(b) The Indenture imposes certain limitations on the ability
of the Company, the Subsidiary Guarantors or any of their respective
Subsidiaries to sell assets. In the event the proceeds from a permitted Asset
Sale exceed certain amounts, as specified in the Indenture, the Company will be
required either to reinvest the proceeds of such Asset Sale in its business or
to make an offer to purchase a certain amount of each Holder's Securities at
100% of the principal amount thereof, plus accrued interest, if any, to the
purchase date.
14. Notation of Guaranty.
--------------------
As set forth more fully in the Indenture, the Persons
constituting Subsidiary Guarantors from time to time, in accordance with the
provisions of the Indenture, fully and unconditionally and jointly and severally
guarantee, in accordance with Section 13.1 of the Indenture, to the Holder and
to the Trustee and its successors and assigns, that (i) the principal of and
interest on the Security will be paid, whether at the Maturity Date or Interest
Payment Dates, by acceleration, call for redemption or otherwise, and all other
obligations of the Company to the
A-6
<PAGE>
Holder or the Trustee under the Indenture or this Security will be promptly paid
in full or performed, all in accordance with the terms of the Indenture and this
Security, and (ii) in the case of any extension of payment or renewal of this
Security or any of such other obligations, they will be paid in full when due or
performed in accordance with the terms of such extension or renewal, whether at
the Maturity Date, as so extended, by acceleration or otherwise. Such guarantees
shall cease to apply, and shall be null and void, with respect to any Subsidiary
Guarantor who, pursuant to Article Thirteen of the Indenture, is released from
its guarantees, or whose guarantees otherwise cease to be applicable pursuant to
the terms of the Indenture.
15. Successors.
----------
When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing (other than an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization relating to the Company or any of its Significant Subsidiaries),
then in every such case, unless the principal of all of the securities shall
have already become due and payable, either the Trustee or the Holders of 25% in
aggregate principal amount of Securities then outstanding may declare all the
Securities to be due and payable immediately in the manner and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Securities then outstanding may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest), if it determines that withholding notice is
in their interest.
17. Trustee or Agent Dealings with Company.
--------------------------------------
The Trustee and each Agent under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates as if it were not the Trustee and such Agent.
18. No Recourse Against Others.
--------------------------
No direct or indirect stockholder (including, without
limitation, Host Marriott and its Subsidiaries other than the Company and the
Subsidiary Guarantors), partner, employee, officer or director, past, present or
future, of the Company, the Subsidiary Guarantors or any successor entity shall
have any personal liability in respect of the obligations of the Company or the
Subsidiary Guarantors under the Securities or the Indenture by reason of his or
its status as such stockholder, partner, employee, officer or director. Each
Holder of a Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Security.
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A ( = Uniform Gifts
to Minors Act).
A-7
<PAGE>
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Additional Rights of Holders of Transfer Restricted Securities.
--------------------------------------------------------------
In addition to the rights provided to Holders of Securities
under the Indenture, Holders of Initial Securities shall have all the rights set
forth in the Registration Rights Agreement.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
HMC Acquisition Properties, Inc.
10400 Fernwood Road
Bethesda, MD 20817
Attn: Corporate Secretary
A-8
<PAGE>
[FORM OF] ASSIGNMENT
I or we assign this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
- --------------------
and irrevocably appoint ___________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
Dated: Signed:
------------------- -------------------------
- --------------------------------------------------------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee*
- --------------------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(I) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP) or (iv) in such other guarantee
program acceptable to be Trustee.
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or Article XI of the Indenture, check the appropriate
box: [__] Section 4.14 Article [__] XI
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.14 or Article XI of the Indenture, as the case may
be, state the amount you want to be purchased: $______
Date: Signature:
---------------------------------
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee**
- --------------------
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(I) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP) or (iv) in such other guarantee
program acceptable to be Trustee.
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES***
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal Amount of Signature of
in Principal Amount in Principal Amount this Global Security authorized officer
Date of Exchange of this Global of this Global following such of Trustee or
Security Security decrease (or increase) Securities Custodian
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
*** This schedule should only be added if the Security is issued in global form.
A-11
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER OF SECURITIES
Re: 9% SERIES A SENIOR NOTES DUE 2007 OF HMC ACQUISITION PROPERTIES, INC.
This Certificate relates to $_____ principal amount of Securities
held in (check applicable box) _____ book-entry or _______ definitive form by
______ (the "Transferor").
The Transferor (check applicable box):
has requested the Registrar by written order to deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
has requested the Registrar by written order to exchange or
register the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Securities and as provided in
Section 2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because (check
applicable box):
Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) in reliance on Rule 144A (in satisfaction of
Section 2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the Indenture) or pursuant to
an effective registration statement under the Securities Act (in satisfaction of
Section 2.6(a)(ii) (C) or Section 2.6(d)(i)(C) of the Indenture.
Such Security is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an exemption from registration in
accordance with Regulation S under the Securities Act or to an "institutional
accredited investor" within the meaning of Rule 501(A)(1), (2), or (3) or (7)
under the Securities Act that is acquiring the Security for its own account, or
for the account of such an institutional accredited investor in each case in a
minimum principal amount of $100,000, not with a view to or for distribution in
violation of the Securities Act, and an Opinion of Counsel to the effect that
such transfer does not require registration under the Securities Act accompanies
this Certificate (in satisfaction of Section 2.6(a)(ii)(C) or Section
2.6(d)(i)(C) of the Indenture).
Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, in accordance with Rule 144 under the
Securities Act, or to an "institutional accredited investor" within the meaning
of Rule 501(A)(1), (2), (3) or (7) under the Securities Act that is acquiring
the Security for its own account, or for the account of such an institutional
accredited investor, in each case in a minimum principal amount of $100,000, not
with a view to or for distribution in violation of the Securities Act, and an
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------
Date:
------------
A-12
<PAGE>
A-13
<PAGE>
Exhibit 5.1
[Host Marriott Corp. Letterhead]
September 10, 1997
HMH Properties, Inc.
10400 Fernwood Road
Bethesda, MD 20817-1109
Re: Offer to Exchange 8 7/8% Senior Notes due
2007, series B for All Outstanding 8 7/8%
Senior Notes due 2007, series A
-----------------------------------------
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Host Marriott
Corporation ("Host Marriott") and have acted as counsel for Host Marriott, HMH
Properties, Inc., a Delaware corporation (the "Company") and their subsidiaries,
in connection with the registration of $600 million aggregate principal amount
of 8 7/8% Senior Notes due 2007, series B (the "Exchange Notes") by the Company,
and the guarantees of the Exchange Notes (the "Guarantees") by such
subsidiaries, on Form S-4 (Registration No. 333-33723) filed with Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), on August 15, 1997 (the "Registration
Statement").
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act. Capitalized terms
used herein but not otherwise defined herein have the meanings ascribed to them
in the Registration Statement.
In my capacity as counsel to the Company in connection with the filing
of the Registration Statement, I am familiar with the proceedings taken by the
Company in connection with the authorization and issuance of the Exchange Notes.
In addition, I have made such legal and factual examinations and inquires,
including an examination of originals or copies, certified or otherwise
identified to my satisfaction of such documents, corporate records and
instruments, as I have deemed necessary or appropriate for purposes of this
opinion.
In my examination, I have assumed the legal capacity of natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to me as originals, the
<PAGE>
conformity to original documents of all documents submitted to me as certified
or photostatic copies and the authenticity of the originals of such copies.
Subject to the foregoing and the other matters set forth herein, it is
my opinion that upon issuance thereof in the manner described in the
Registration Statement, the Exchange Notes will be legally valid and binding
obligations of the Company, except as may be limited by (i) the effect of
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
reorganization, 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 principles of equity, whether enforcement is considered in a
proceeding in equity or law, and the discretion of the court before which any
proceeding therefor may be brought; and (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.
[To the extent that the obligations of the Company under the Indenture
may be dependent upon such matters, I assume for purposes of this opinion that
the Indenture Trustee is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization; that the Indenture Trustee
is duly qualified to engage in the activities contemplated by the Indenture;
that the Indenture has been duly authorized, executed and delivered by the
Indenture Trustee and constitutes the legally valid, binding and enforceable
obligation of the Indenture Trustee enforceable against the Indenture Trustee in
accordance with its terms; that the Indenture Trustee is in compliance,
generally and with respect to acting as a trustee under the Indenture, with all
applicable laws and regulations; and that the Indenture Trustee has the
requisite organizational and legal power and authority to perform its
obligations under the Indenture.]
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and the reference to me under the
heading "Legal Opinions" in the Registration Statement. In giving such consent,
I do not thereby admit that I am in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission promulgated thereunder.
Very truly yours,
/s/ Christopher G. Townsend
Christopher G. Townsend
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF LATHAM & WATKINS APPEARS HERE]
September 10, 1997
HMH Properties, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817-1109
Re: Registration Statement on Form S-4
Dear Sir or Madam:
You have requested our opinion concerning the material federal income
tax consequences of the exchange of 8 7/8% Senior Notes due 2005, series B (the
"Exchange Notes") of HMH Properties, Inc. (the "Company") which have been
registered under the Securities Act of 1933, as amended, for outstanding 8 7/8%
Senior Notes due 2005, series A (the "Original Notes") of the Company, in
connection with the Registration Statement on Form S-4 filed herewith (the
"Registration Statement").
The facts, as we understand them, and upon which with your permission
we rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Material Federal Income Tax Considerations" in the Registration
Statement. No opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters all of which are
subject to change either prospectively or
<PAGE>
HMH Properties, Inc
September 10, 1997
Page 2
retroactively. Also, any variation or difference in the facts from those set
forth in the Registration Statement may affect the conclusions stated herein.
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement, and to the reference to our firm under the headings
"Material Federal Income Tax Considerations" and "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Washington, D.C.
September 15, 1997
