EX-4.1
INDENTURE
EXECUTION COPY
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CHOICE HOTELS INTERNATIONAL, INC.
7.125% Senior Notes Due 2008
QUALITY HOTELS EUROPE, INC.
QH EUROPE PARTNERSHIP
Guarantors
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INDENTURE
Dated as of May 4, 1998
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MARINE MIDLAND BANK
Trustee
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TABLE OF CONTENTS
Page
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ARTICLE 1 Definitions and Incorporation by Reference
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Other Definitions.............................................12
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act .............................................12
SECTION 1.04. Rules of Construction.........................................13
ARTICLE 2 The Securities
SECTION 2.01. Form and Dating...............................................14
SECTION 2.02. Execution and Authentication..................................14
SECTION 2.03. Registrar and Paying Agent....................................15
SECTION 2.04. Paying Agent To Hold Money in Trust...........................16
SECTION 2.05. Securityholder Lists..........................................16
SECTION 2.06. Replacement Securities........................................16
SECTION 2.07. Outstanding Securities........................................17
SECTION 2.08. Temporary Securities..........................................17
SECTION 2.09. Cancelation...................................................17
SECTION 2.10. Defaulted Interest............................................18
SECTION 2.11. CUSIP Numbers.................................................18
ARTICLE 3 Redemption
SECTION 3.01. Notices to Trustee............................................18
SECTION 3.02. Selection of Securities To Be Redeemed........................18
SECTION 3.03. Notice of Redemption..........................................19
SECTION 3.04. Effect of Notice of Redemption................................20
SECTION 3.05. Deposit of Redemption Price...................................20
SECTION 3.06. Securities Redeemed in Part...................................20
ARTICLE 4 Covenants
SECTION 4.01. Payment of Securities.........................................21
SECTION 4.02. Commission Reports............................................21
SECTION 4.03. Compliance Certificate........................................21
SECTION 4.04. Further Instruments and Acts..................................22
SECTION 4.05. Corporate Existence...........................................22
SECTION 4.06. Limitation on Liens...........................................22
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SECTION 4.07. Limitation on Sale and Leaseback
Transactions ..............................................22
SECTION 4.08. Exempted Debt.................................................23
SECTION 4.09. Future Subsidiary Guarantors..................................23
ARTICLE 5 Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets..........................................23
SECTION 5.02. Successor Substituted.........................................24
ARTICLE 6 Defaults and Remedies
SECTION 6.01. Events of Default.............................................25
SECTION 6.02. Acceleration..................................................27
SECTION 6.03. Other Remedies................................................27
SECTION 6.04. Waiver of Past Defaults.......................................28
SECTION 6.05. Control by Majority...........................................28
SECTION 6.06. Limitation on Suits...........................................28
SECTION 6.07. Rights of Holders To Receive Payment..........................29
SECTION 6.08. Collection Suit by Trustee....................................29
SECTION 6.09. Trustee May File Proofs of Claim..............................29
SECTION 6.10. Priorities....................................................30
SECTION 6.11. Undertaking for Costs.........................................30
SECTION 6.12. Waiver of Stay or Extension Laws..............................30
ARTICLE 7 Trustee
SECTION 7.01. Duties of Trustee.............................................31
SECTION 7.02. Rights of Trustee.............................................32
SECTION 7.03. Individual Rights of Trustee..................................33
SECTION 7.04. Trustee's Disclaimer..........................................33
SECTION 7.05. Notice of Defaults............................................34
SECTION 7.06. Reports by Trustee to Holders.................................34
SECTION 7.07. Compensation and Indemnity....................................34
SECTION 7.08. Replacement of Trustee........................................35
SECTION 7.09. Successor Trustee by Merger...................................36
SECTION 7.10. Eligibility; Disqualification.................................36
SECTION 7.11. Preferential Collection of Claims
Against Company ...........................................37
ARTICLE 8 Discharge of Indenture; Defeasance
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SECTION 8.01. Discharge of Liability on Securities;
Defeasance. ...............................................37
SECTION 8.02. Conditions to Defeasance......................................38
SECTION 8.03. Application of Trust Money....................................39
SECTION 8.04. Repayment to Company..........................................39
SECTION 8.05. Indemnity for Government Obligations..........................40
SECTION 8.06. Reinstatement.................................................40
ARTICLE 9 Amendments
SECTION 9.01. Without Consent of Holders....................................40
SECTION 9.02. With Consent of Holders.......................................41
SECTION 9.03. Compliance with Trust Indenture Act...........................42
SECTION 9.04. Revocation and Effect of Consents
and Waivers ...............................................42
SECTION 9.05. Notation on or Exchange of Securities.........................43
SECTION 9.06. Trustee To Sign Amendments....................................43
SECTION 9.07. Payment for Consent...........................................43
ARTICLE 10 Subsidiary Guaranties
SECTION 10.01. Guaranties...................................................44
SECTION 10.02. Contribution.................................................47
SECTION 10.03. Successors and Assigns.......................................47
SECTION 10.04. No Waiver....................................................47
SECTION 10.05. Modification.................................................48
SECTION 10.06. Execution of Supplemental Indenture for
Future Subsidiary Guarantors ............................48
SECTION 10.07. Release of Subsidiary Guaranties.............................48
ARTICLE 11 Miscellaneous
SECTION 11.01. Trust Indenture Act Controls.................................49
SECTION 11.02. Notices......................................................49
SECTION 11.03. Communication by Holders with Other
Holders ..................................................50
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent .....................................50
SECTION 11.05. Statements Required in Certificate
or Opinion ...............................................50
SECTION 11.06. When Securities Disregarded..................................51
SECTION 11.07. Rules by Trustee, Paying Agent and
Registrar ................................................51
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SECTION 11.08. Legal Holidays...............................................51
SECTION 11.09. Governing Law................................................51
SECTION 11.10. No Recourse Against Others...................................51
SECTION 11.11. Successors...................................................52
SECTION 11.12. Multiple Originals...........................................52
SECTION 11.13. Table of Contents; Headings..................................52
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Appendix A Provisions Relating to Initial Securities,
Exchange Securities and Private Exchange
Securities
Exhibit 1 to Form of Initial Security
Appendix A
Exhibit 2 to Form of Representation Letter
Appendix A
Exhibit A Form of Exchange Security or Private Exchange
Security
Exhibit B Form of Supplemental Indenture
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CROSS-REFERENCE TABLE
TIA Indenture
Section Section
------- -------
310(a)(1) ............................................. 7.10
(a)(2) ............................................. 7.10
(a)(3) ............................................. N.A.
(a)(4) ............................................. N.A.
(b) ............................................. 7.08; 7.10
(c) ............................................. N.A.
311(a) ............................................. 7.11
(b) ............................................. 7.11
(c) ............................................. N.A.
312(a) ............................................. 2.05
(b) ............................................. 11.03
(c) ............................................. 11.03
313(a) ............................................. 7.06
(b)(1) ............................................. N.A.
(b)(2) ............................................. 7.06
(c) ............................................. 11.02
(d) ............................................. 7.06
314(a) ............................................. 4.02; 4.03;
11.02
(b) ............................................. N.A.
(c)(1) ............................................. 11.04
(c)(2) ............................................. 11.04
(c)(3) ............................................. N.A.
(d) ............................................. N.A.
(e) ............................................. 11.05
(f) ............................................. 4.03
315(a) ............................................. 7.01
(b) ............................................. 7.05; 10.02
(c) ............................................. 7.01
(d) ............................................. 7.01
(e) ............................................. 6.11
316(a)(last
sentence) ............................................. 11.06
(a)(1)(A) ............................................. 6.05
(a)(1)(B) ............................................. 6.04
(a)(2) ............................................. N.A.
(b) ............................................. 6.07
317(a)(1) ............................................. 6.08
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TIA Indenture
Section Section
------- -------
(a)(2) ............................................. 6.09
(b) ............................................. 2.04
318(a) ............................................. 11.01
N.A. Means Not Applicable.
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Note: This Cross-Reference Table shall not, for any purposes,
be deemed to be part of this Indenture.
INDENTURE dated as of May 4, 1998, among CHOICE HOTELS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), QUALITY
HOTELS EUROPE, INC., a Delaware corporation ("QHE"), QH EUROPE
PARTNERSHIP, a general partnership ("QHE Partnership"), and MARINE
MIDLAND BANK, a New York banking corporation and trust company, as
trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Company's 7.125% Senior Notes
Due 2008 (the "Initial Securities") and, if and when issued pursuant to a
registered exchange for Initial Securities, the Company's 7.125% Senior Notes
Due 2008 (the "Exchange Securities") and, if and when issued pursuant to a
private exchange for Initial Securities, the Company's 7.125% Senior Notes Due
2008 (the "Private Exchange Securities", together with the Exchange Securities
and the Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Affiliate" means, with respect to any Person, a Person (i) which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such Person, (ii) which directly or indirectly
through one or more intermediaries beneficially owns or holds 10% or more of any
class of the Voting Stock of such Person (or a 10% or greater equity interest in
a Person which is not a corporation) or (iii) of which 10% or more of any class
of the Voting Stock (or, in the case of a Person which is not a corporation, 10%
or more of the equity interest) is beneficially owned or held directly or
indirectly through one or more intermediaries by such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
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the ownership of voting securities, by contract or otherwise.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
at any date of determination, (a) if such Sale and Leaseback Transaction is a
Capital Lease Obligation, the amount of Debt represented thereby according to
the definition of "Capital Lease Obligation" and (b) in all other instances, the
present value of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and Leaseback Transaction
(including any period for which such lease has been extended) determined in
accordance with GAAP, discounted at a rate that at the inception of the lease
the lessee would have incurred to borrow over a similar term the funds necessary
to purchase the leased assets.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means any obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP and the amount of Debt represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty. For purposes of Section 4.06, a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible or exchangeable into such
equity interest.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Company" means the party named as such in this Indenture until a successor
replaces it pursuant to the terms hereof and, thereafter, means the successor
and, for purposes of any provision contained herein and required by the TIA,
each other obligor on the indenture securities.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the total amount of assets (less applicable reserves and other properly
deductible items) after deducting (1) all current liabilities (excluding the
amount of those which are by their terms extendable or renewable at the option
of the obligor to a date more than 12 months after the date as of which the
amount is being determined and excluding all intercompany items between the
Company and any Subsidiary or between Subsidiaries) and (2) all goodwill,
tradenames, trademarks, patents, unamortized debt discount and expense and other
like intangible assets, all as determined in accordance with GAAP.
"Consolidated Net Worth" means the excess of assets over liabilities of the
Company and its consolidated Subsidiaries, plus Minority Interests, as
determined from time to time in accordance with GAAP.
"Credit Facility" means the credit facility governed by the Competitive
Advance and Multi-Currency Credit Facilities Agreement, dated as of October 15,
1997, among the Company, The Chase Manhattan Bank, as Agent, and the lenders
named therein or any extension, revision, refinancing or any replacement thereof
by a lender or a group of lenders.
"Currency Agreement" means in respect of any Person, any foreign exchange
contract, currency swap agreement, currency option or other similar agreement or
arrangement designed to protect such Person against fluctuations in currency
exchange rates.
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"Debt" means, with respect to any Person on any date of determination
(without duplication), (a) the principal of and premium (if any) in respect of
(i) debt of such Person for money borrowed and (ii) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable; (b) all Capital Lease Obligations of such
Person and all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person; (c) all obligations of such Person issued or
assumed as the deferred purchase price of Property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (a) through (c)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (e) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (f) all obligations of the type
referred to in clauses (a) through (e) of other Persons and all dividends of
other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; (g) all obligations of the type
referred to in clauses (a) through (f) of other Persons secured by any Lien on
any Property of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
value of such Property or the amount of the obligation so secured; and (h) to
the extent not otherwise included in this definition, Hedging Obligations of
such Person. The amount of Debt of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the
5
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, Redeemable Stock of
such Person as to which (i) the maturity, (ii) mandatory redemption or (iii)
redemption, conversion or exchange at the option of the holder thereof occurs,
or may occur, on or prior to the first anniversary of the Stated Maturity of the
Securities; provided, however, that Redeemable Stock of such Person that would
not otherwise be characterized as Disqualified Stock under this definition shall
not constitute Disqualified Stock if such Redeemable Stock is convertible or
exchangeable into Debt solely at the option of the issuer thereof.
"Exchange Act" means the Securities Exchange Act of 1934.
"Funded Debt" means all Debt of the Company and its Subsidiaries with a
Stated Maturity more than one year after, or which is renewable or extendable at
the option of the Company for a period ending more than one year after, the date
as of which Funded Debt is being determined.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board and (iii) the rules
and regulations of the Commission governing the inclusion of financial
statements (including pro forma financial statements) in periodic reports
required to be filed pursuant to Section 13 of the Exchange Act, including
opinions and pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the Commission.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing
6
any Debt of any other Person and any obligation, direct or indirect, contingent
or otherwise, of such Person (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt of such other Person (whether arising
by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning. The
term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Agreement or any other similar
agreement or arrangement.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by merger, conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
obligation on the balance sheet of such Person (and "Incurrence" and "Incurred"
shall have meanings correlative to the foregoing), provided, however that a
change in GAAP that results in an obligation of such Person that exists at such
time, and is not theretofore classified as Debt, becoming Debt shall not be
deemed an Incurrence of such Debt.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
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"Issue Date" means the date on which the Initial Securities are originally
issued.
"Joint Venture" means (i) with respect to properties located in the United
States, any partnership, corporation or other entity, in which up to and
including 50% of the partnership interests, outstanding voting stock or other
equity interest is owned, directly or indirectly, by the Company and/or one or
more Subsidiaries, and (ii) with respect to properties located outside the
United States, any partnership, corporation or other entity, in which up to and
including 60% of the partnership interests, outstanding voting stock or other
equity interests is owned, directly or indirectly, by the Company and/or one or
more Subsidiaries.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, security interest, encumbrance, hypothecation,
assignment, deposit arrangement, lien, charge or adverse claim affecting title
or resulting in an encumbrance against Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement or lease in the
nature thereof or any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other than to
reflect ownership by another Person of Property leased to such Person under a
lease that is not in the nature of a Capital Lease Obligation, conditional sale
or title retention agreement).
"Minority Interest" means any Capital Stock of a Subsidiary of the Company
that is not owned by the Company or another such Subsidiary.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, any Vice President, the Treasurer or the Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel
8
may be an employee of or counsel to the Company or the Trustee.
"Permitted Liens" means:
(a) Liens for taxes, assessments or governmental charges or levies on
the Property of the Company or any Subsidiary if the same shall not at the
time be delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings, provided that any
reserve or other appropriate provision that shall be required in conformity
with GAAP shall have been made therefor;
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens on the Property of the Company or any Subsidiary arising
in the ordinary course of business and securing payment of obligations
which are not more than 60 days past due or are being contested in good
faith and by appropriate proceedings;
(c) Liens on the Property of the Company or any Subsidiary Incurred in
the ordinary course of business to secure performance of obligations with
respect to statutory or regulatory requirements, performance or
return-of-money bonds, surety bonds or other obligations of a like nature,
in each case which are not incurred in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the deferred
purchase price of Property and which do not in the aggregate impair in any
material respect the use of Property in the operation of the business of
the Company and the Subsidiaries taken as a whole;
(d) Liens on Property at the time the Company or any Subsidiary
acquired such Property, including any acquisition by means of a merger or
consolidation with or into the Company or any Subsidiary; provided,
however, that any such Lien may not extend to any other Property of the
Company or any Subsidiary except as otherwise provided herein;
(e) Liens on the Property or securing the Debt or Capital Stock of a
Person at the time such Person becomes a Subsidiary; provided, however,
that any such
9
Lien may not extend to any other Property of the Company or any other
Subsidiary which is not a direct Subsidiary of such Person except as
otherwise provided herein;
(f) pledges or deposits by the Company or any Subsidiary under
workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Debt) or leases to which the
Company or any Subsidiary is party, or deposits to secure public or
statutory obligations of the Company, or deposits for the payment of rent,
in each case Incurred in the ordinary course of business;
(g) Liens on the stock, partnership or other equity interest of the
Company or any Subsidiary in any Joint Venture or any Subsidiary which owns
an equity interest in such Joint Venture to secure Debt, provided the
amount of such Debt is contributed and or advanced solely to such Joint
Venture;
(h) Liens on Property to secure Debt Incurred for the purpose of
financing all or any part of the cost of acquisition, construction,
improvement, development or expansion of any such Property; provided such
Debt is Incurred and related Liens are created within 24 months of the
completion of acquisition, construction, improvement, development or
expansion and commencement of full operation, whichever is later, and such
Debt does not exceed the aggregate amount of the cost thereof;
(i) utility easements, building restrictions and such other
encumbrances or charges against real Property as are of a nature generally
existing with respect to properties of a similar character;
(j) Liens on franchise agreements of the Company or any Subsidiary
securing Debt in an aggregate principal amount not to exceed the greater of
(i) $25 million or (ii) two percent of Consolidated Net Tangible Assets;
10
(k) Liens existing on the Issue Date not otherwise described in
clauses (a) through (j) above; or
(l) Liens on the Property of the Company or any Subsidiary to secure
any Refinancing, in whole or in part, of any Debt secured by Liens referred
to in clause (b), (d), (e), (g), (h) or (k) above; provided, however, that
any such Lien shall be limited to all or part of the same Property that
secured the original Lien (together with improvements and accessions to
such Property) and the aggregate principal amount of Debt that is secured
by such Lien shall not be increased to an amount greater than the sum of
(i) the outstanding principal amount, or, if greater, the committed amount,
of the Debt secured by Liens described under clause (b), (d), (e), (g), (h)
or (k) above, as the case may be, at the time of such Refinancing and (ii)
an amount necessary to pay any premiums, fees and other expenses incurred
by the Company in connection with such Refinancing.
"Person" means any individual, corporation, partnership, company (including
any limited liability company), joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"Principal" of the Securities means the principal amount of the Securities
plus the premium, if any, on the Securities.
"Principal Property" means any Property owned or leased by the Company or
any Subsidiary of the Company, the net book value of which exceeds the greater
of (i) $5 million or (ii) two percent of Consolidated Net Tangible Assets and
any franchise agreement of the Company or any Subsidiary;
11
"Property" means, with respect to any Person, all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (a) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may
become redeemable or repurchase able at the option of the holder thereof, in
whole or in part, or (c) is convertible or exchangeable for Debt or Disqualified
Stock.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other Debt, in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Sale and Leaseback Transaction" means any arrangement with any Person
(other than the Company or any Subsidiary) providing for the leasing by the
Company or a Subsidiary of any Principal Property owned by the Company or such
Subsidiary (except for leases for a term of not more than three years), which
property has been or is to be sold or transferred by the Company or such
Subsidiary to such Person on the security of such Principal Property more than
365 days after the acquisition thereof or the completion of construction and
commencement of full operation thereof.
"Securities" means the Securities issued under this Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the Commission.
"Stated Maturity" means, with respect to any security or any installment of
interest thereon, the date specified in such security as the fixed date on which
the
12
principal of such security or such installment of interest is due and payable.
"Subsidiary", in respect of any Person, means (i) any Person of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more of the Subsidiaries of that
Person or a combination thereof, and (ii) any partnership, joint venture or
other Person in which such Person or one or more of the Subsidiaries of that
Person or a combination thereof has the power to control by contract or
otherwise the board of directors or equivalent governing body or otherwise
controls such entity.
"Subsidiary Guarantor" means, unless released from their Subsidiary
Guaranties as permitted by this Indenture, QHE, QHE Partnership and any other
Person that becomes a Subsidiary Guarantor pursuant to Section 4.09 hereof.
"Subsidiary Guaranty" means a Guarantee on the terms set forth herein by a
Subsidiary Guarantor of the Company's obligations with respect to the
Securities.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. xx.xx. 77aaa-77bbbb)
as in effect on the date of this Indenture; provided, however, that, in the
event the Trust Indenture Act of 1939 is amended after such date, "TIA" means,
to the extent required by an such amendment, the Trust Indenture Act of 1939 as
so amended.
"Trustee" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer this Indenture.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
13
"U.S. Government Obligations" means direct obliga tions (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Subsidiary all the Voting
Stock of which (other than directors' qualifying shares) is at such time owned
by the Company or one or more other Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Bankruptcy Law" ....................... 6.01
"Claiming Guarantor" ................... 10.02
"Contributing Party" ................. 10.02
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Exchange Securities" .................. Preamble
"Event of Default" ..................... 6.01
"Initial Securities" ................... Preamble
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Obligations" ......................... 10.01
"Paying Agent" ......................... 2.03
"Private Exchange Securities"........... Preamble
"Registrar"............................. 2.03
14
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company, each Subsidiary
Guarantor and any other obligor on the indenture 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 Commission rule have
the meanings assigned to them by such definitions.
SECTION 1.04. 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) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Debt shall not be deemed to be subordinate or junior to
secured Debt merely by virtue of its nature as unsecured Debt;
15
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in Appendix A which is hereby incorporated in and expressly made part of
this Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to Appendix A
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage,
provided that any such notation, legend or endorsement is in a form acceptable
to the Company. Each Security shall be dated the date of its authentication. The
terms of the Securities set forth in Exhibit 1 to Appendix A and Exhibit A are
part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall sign the
Securities 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.
16
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
neverthe less.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and deliver Securities for original issue
upon a written order of the Company signed by two Officers or by an Officer and
either an Assistant Treasurer or an Assistant Secretary of the Company. Such
order shall specify the amount of the Securities to be authenticated and the
date on which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
that amount except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate the Securities. Unless limited by the terms of such
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 any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Secur ities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the
17
terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall notify the Trustee of the
name and address of any such agent. If the Company fails to maintain a Regis
trar or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07. The Company or any
of its domestically incorporated Wholly Owned Subsidiaries may act as Paying
Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying Agent in
connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to 10:00 a.m., New
York City time, on each due date of the principal and interest on any Security,
the Company shall deposit with the Paying Agent a sum sufficient to pay such
principal and interest when so becoming due. The Company shall require each
Paying Agent (other than the Trustee) to agree in writing that the Paying Agent
shall hold in trust for the benefit of Securityholders or the Trustee all money
held by the Paying Agent for the payment of principal of or interest on the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. If the Company or a Wholly Owned Subsidiary acts as Paying
Agent, it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee and to account for any funds disbursed by
the Paying Agent. Upon complying with this Section, the Paying Agent shall have
no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
18
SECTION 2.06. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that such
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.07. Outstanding Securities. Securities outstanding at any time
are all Securities authenticated by the Trustee except for those canceled by it,
those delivered to it for cancelation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.06, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
principal and interest payable on that date with respect to the Securities (or
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.08. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary
19
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.09. Cancelation. The Company at any time may deliver Securities
to the Trustee for cancelation. The Registrar and the Paying Agent shall forward
to the Trustee any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel and destroy
(subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancelation.
SECTION 2.10. Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.11. CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers, if any,
20
printed on the Securities, and any such redemption shall not be affected by any
defect in or omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and that such redemption is being made pursuant to paragraph 5 of
the Securities.
The Company shall give each notice to the Trustee provided for in this
Section at least 30 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the
Securities are to be redeemed at any time, selection of Securities for
redemption may be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Securities are
listed, or, if the Securities are not so listed, on a pro rata basis, by lot or
by such other method that the Trustee shall deem fair and appropriate. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60
days before a date for redemp-
21
tion of Securities, the Company shall mail a notice of redemption by first-class
mail to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or portion
thereof) called for redemption ceases to accrue on and after the redemption
date; and
(7) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense. In such event, the Company
shall provide the Trustee with the information required by this Section at least
five Business Days (unless the Trustee consents to a shorter period) prior to
the date on which such notice is to be mailed. The notice of redemption may omit
the redemption price, provided that the calculation thereof is set forth in such
notice. The redemption price, as so calculated, shall be set forth in an
Officers' Certificate delivered to the Trustee no later than two Business Days
prior to the applicable redemption date.
22
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is
mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest to the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date that is on or prior to the date of
redemption). Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m., New York
City time, on the redemption date, the Company shall deposit with the Paying
Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the redemption price
of and accrued interest (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption) on all Securities to be
redeemed on that date other than Securities or portions of Securities called for
redemption which have been delivered by the Company to the Trustee for
cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
23
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay or
cause to be paid the principal of and interest on the Securities on the dates
and in the manner provided in the Securities and in this Indenture. Principal
and interest shall be considered paid on the date due if on such date the
Trustee or the Paying Agent holds in accordance with this Indenture money
sufficient to pay all principal and interest then due and the Trustee or the
Paying Agent, as the case may be, is not prohibited from paying such money to
the Securityholders on that date pursuant to the terms of this Indenture.
SECTION 4.02. Commission Reports. The Company shall provide the Trustee and
Securityholders, within 15 days after it files them with the Commission, copies
of its annual report on Form 10-K and the other information, documents and other
reports which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may
not be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall continue to file with the
Commission and provide the Trustee and Securityholders with such annual reports
on Form 10-K and such information, documents and other reports as are specified
in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and reports to
be so filed and provided at the times specified for the filing of such
information, documents and reports under such Sections. The Company also shall
comply with the other provisions of TIA ss. 314(a).
SECTION 4.03. Compliance Certificate. The Company and each Subsidiary
Guarantor shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Company an Officers' Certificate stating that in the course
of the performance by the signers of their duties as Officers of the Company
they would normally have knowledge of any Default and whether or not the signers
know of any Default that occurred during such period. If they do, the
certificate shall describe the Default, its status and what
24
action the Company is taking or proposes to take with respect thereto. The
Company and the Subsidiary Guarantors also shall comply with TIA ss. 314(a)(4).
SECTION 4.04. Further Instruments and Acts. Upon request of the Trustee,
the Company shall execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.05. Corporate Existence. Subject to the provisions of Article 5,
the Company will do or cause to be done all things necessary to and will cause
each of its Subsidiaries to preserve and keep in full force and effect its
corporate existence, material rights (charter and statutory) and franchises of
the Company and each of its Subsidiaries; provided, however, that the Company
shall not be required to preserve any such material right or franchise or the
corporate existence of any of its Subsidiaries if (a) the preservation thereof
is no longer desirable in the conduct of the business of the Company or such
Subsidiary and (b) the loss thereof is not disadvantageous in any material
respect to the Holders of the Securities.
SECTION 4.06. Limitation on Liens. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, Incur or
otherwise cause or suffer to exist or become effective any Liens of any kind
upon any Principal Property or any Capital Stock or Debt of any Subsidiary which
owns or leases Principal Property (whether such Principal Property, Capital
Stock or Debt are now owned or hereafter acquired), or any interest therein or
any increase or profits therefrom, unless all payments due under the Indenture
and the Securities are secured on an equal and ratable basis with (or prior to)
the obligations so secured until such time as such obligation is no longer
secured by a Lien, except in the case of Permitted Liens or as provided under
Section 4.08.
SECTION 4.07. Limitation on Sale and Leaseback Transactions. Except as
provided under Section 4.08, the Company shall not, and shall not permit any
Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to
any Principal Property unless either (i) the Company or such Subsidiary would be
entitled, pursuant to the
25
provisions of this Indenture, to Incur Debt secured by a Lien on the Property to
be leased in an amount equal to the Attributable Debt with respect to such
transaction without equally and ratably securing the Securities, or (ii) the
Company, within 180 days after the effective date of such transaction, applies
to the voluntary retirement of its Funded Debt an amount equal to the value of
such transaction, defined as the greater of the net proceeds of the sale of the
Principal Property leased in such transaction or the fair value, in the opinion
of the Board of Directors, of the leased Principal Property at the time such
transaction was entered into.
SECTION 4.08. Exempted Debt. Notwithstanding the provisions contained in
Sections 4.06 and 4.07, the Company and its Subsidiaries may create, Incur or
otherwise cause to suffer to exist or become effective Liens without securing
the Securities, or enter into a Sale and Leaseback Transaction without retiring
Funded Debt, or enter into a combination of such transactions, provided that, at
the time of such event, and after giving effect thereto and to the retirement of
any other such Debt which is concurrently being repaid, the sum of (x) the
principal amount of such Debt secured by such Liens or the Attributable Debt in
respect of such Sale and Leaseback Transaction, as the case may be, and (y) the
principal amount of all other such Debt secured by such Liens (not including
Liens permitted under Section 4.06) and all other Attributable Debt in respect
of Sale and Leaseback Transactions then outstanding (not including Sale and
Leaseback Transactions permitted under Section 4.07), measured, in each case, at
the time any such Lien is Incurred or any such Sale and Leaseback Transaction is
entered into, does not exceed the greater of (i) $25 million or (ii) 15% of the
Consolidated Net Tangible Assets of the Company and its consolidated
Subsidiaries.
SECTION 4.09. Future Subsidiary Guarantors. The Company shall cause each
Person that provides a guarantee under the Credit Facility following the Issue
Date to execute and deliver to the Trustee, at the time such Person executes
such guarantee under the Credit Facility, a supplemental indenture in the form
of Exhibit B pursuant to which such Person shall guarantee payment of the
Securities as provided in Section 10.06.
26
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. The Company shall
not consolidate or amalgamate with or merge into any other Person or convey,
transfer, lease or otherwise dispose of its Property substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease or
amalgamate its Property substantially as an entirety to the Company, unless:
(a) in case the Company shall consolidate or amalgamate with or merge
into another Person or convey, transfer, lease or otherwise dispose of its
Property substantially as an entirety to any Person, the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the Property of the
Company substantially as an entirety shall be a corporation, partnership,
limited liability company or trust, shall be organized and validly existing
under the laws of the United States of America, any State thereof or the
District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal
of and interest on all the Securities and the performance or observance of
every covenant of this Indenture on the part of the Company to be performed
or observed;
(b) immediately before and after giving effect to such transaction on
a pro forma basis, no Default shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation,
amalgamation, merger, conveyance, transfer, lease
27
or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 5.02. Successor Substituted. Upon any consolidation or amalgamation
by the Company with, or merger of the Company into, any other Person or any
conveyance, transfer, lease or other disposition of the Property of the Company
substantially as an entirety in accordance with Section 5.01, the successor
Person formed by such consolidation or amalgamation or into which the Company is
merged or to which such conveyance, transfer, lease or disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a conveyance, transfer, lease or disposition, the predecessor Person shall be
released from its obligations and covenants under this Indenture and the
Securities.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for any such Event of
Default and whether it is voluntary or involuntary or is effected by operation
of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(a) the Company defaults in the payment of any interest upon any
Security when it becomes due and payable, and continuance of such default
for a period of 30 days; or
(b) the Company defaults in the payment of the principal of and
premium, if any, on any Security at its Stated Maturity; or
28
(c) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty
addressed in clauses (a) or (b)), and continuance of such default or breach
for a period of 30 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(d) acceleration of, or failure by the Company or any Subsidiary to
pay when due, the principal of any Debt for money borrowed of the Company
or any Subsidiary having an aggregate principal amount at the time in
excess of the greater of $15,000,000 and 5% of Consolidated Net Worth or
its foreign currency equivalent at such time, if such acceleration is not
annulled, or such Debt is not discharged, by the end of a period of 20 days
after there shall have been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 25% in aggregate principal amount of the outstanding Securities a
written notice specifying such default and requiring the Company to cause
such indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
hereunder; or
(e) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case;
29
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its Property; or
(iv) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws
relating to insolvency; or
(f) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its Property;
(iii) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or
(iv) grants any similar relief under any foreign laws;
and in each such case the order or decree remains
unstayed and in effect for 60 days; or
(g) a Subsidiary Guaranty ceases to be in full force and effect (other
than in accordance with the terms of this Indenture and such Subsidiary
Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations
under its Subsidiary Guaranty.
The term "Bankruptcy Law" means
30
Xxxxx 00, Xxxxxx Xxxxxx Code, or any similar Federal or state law for the relief
of debtors. The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.01(e) or 6.01(f) with respect to the Company)
occurs and is continuing, the Trustee by written notice by registered or
certified mail to the Company, or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities by written notice by registered
or certified mail to the Company and the Trustee, may declare the principal of
the Securities to be due and payable. Upon such a declaration, such principal
shall be due and payable immediately. If an Event of Default specified in
Section 6.01(e) or 6.01(f) occurs with respect to the Company, the principal of
the Securities shall automatically and without any action by the Trustee or any
Holder, become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article 6 provided, the Holders of a majority
in principal amount of the outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
31
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Securities by written notice to the Trustee
and the Company may waive an existing Default and its consequences except (i) a
Default in the payment of the principal of or interest on a Security or (ii) a
Default in respect of a provision that under Section 9.02 cannot be amended
without the consent of each Securityholder affected. When a Default is waived,
it is deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of at least a majority in
aggregate principal amount of the outstanding Securities may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee with
respect to the Securities. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.01,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to reasonable indemnity from the
Holders against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(a) such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding shall have made a written request, and such
Holder of or Holders shall have offered reasonable indemnity, to the
Trustee to pursue such proceeding as trustee; and
32
(c) the Trustee has failed to institute such proceeding and has not
received from the Holders of at least a majority in aggregate principal
amount of the Securities outstanding a direction inconsistent with such
request, within 60 days after such notice, request and offer.
The foregoing limitations on the pursuit of remedies by a Securityholder
shall not apply to a suit instituted by a Holder of Securities for the
enforcement of payment of the principal of or interest on such Security on or
after the applicable due date specified in such Security. A Securityholder may
not use this Indenture to prejudice the rights of another Securityholder or to
obtain a preference or priority over another Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment
of principal of and interest on the Securities held by such Holder, on or after
the respective due dates expressed in this Secu rities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified
in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, its creditors or its property
and, unless prohibited by law or applicable regulations, may vote on behalf of
the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments
33
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
aggregate principal amount of the outstanding Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent
it may lawfully do so) shall not
34
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in their exercise as
a prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; 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 such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
35
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(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 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document
believed by it to be genuine and to have been signed or presented by the proper
36
person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(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; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture 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.
(g) The Trustee shall not be charged with knowledge of any Default or Event
of Default unless either (i) a Trust Officer shall have actual knowledge
thereof, or (ii) the Trustee shall have received written notice thereof from the
Company or any Holder of the Securities.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it
37
would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar
may do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company or any Subsidiary Guarantor in this Indenture or in any document
issued in connection with the sale of the Securities or in the Securities other
than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each May
15 beginning with May 15, 1998, the Trustee shall mail to each Securityholder a
brief report dated as of such May 15 that complies with TIA ss. 313(a), if and
to the extent required by said subsection. The Trustee also shall comply with
TIA ss. 313(b).
A copy of each report at the time of its mailing to Securityholders shall
be filed with the Commission and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall xxxx-
38
xxxxx the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the acceptance and administration of this
trust and the performance of its duties hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall survive
the resignation or removal of the Trustee and the discharge of this Indenture.
When the Trustee incurs expenses after the occurrence of a Default specified in
Section 6.01(e) or (f), the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by
so notifying the Company. The Holders of a majority in aggregate principal
amount of the outstanding Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
39
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the Holders of a
majority in aggregate principal amount of the outstanding Securities and such
Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy
exists in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
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 appoint ment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or
40
transfers all or substantially all its corporate trust busi ness or assets to,
another corporation or banking association, the resulting, surviving or
transferee corporation or banking association without any further act shall be
the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
such successor to the Trustee may authenticate such Securities either in the
name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Securities or in this Indenture provided that the
certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIAss.
310(b), subject to the penultimate paragraph thereof; provided, however, that
there shall be excluded from the operation of TIAss. 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIAss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
41
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When
(i) the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.06) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3, and the
Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.06), and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Sections
8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.06,
4.07, 4.08 and 4.09 and the operation of Sections 6.01(c) (to the extent
relating to such other Sections), 6.01(d), 6.01(e), 6.01(f) and 6.01(g) (but, in
the case of Sections 6.01(e) and (f), with respect only to Significant
Subsidiaries) and its obligations under Sections 5.01(b) and 5.01(c) ("covenant
defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 6.01(c) (with
respect to the provisions of Articles 4 and 5 referred to in the immediately
preceding paragraph) and Sections 6.01(d), 6.01(e), 6.01(f) and 6.01(g) (but, in
the case of
42
Sections 6.01(e) and (f), with respect only to Significant Subsidiaries).
Upon satisfaction of the conditions set forth herein and upon request of
the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding Sections 8.01(a) and (b), the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.05 and 8.06 and Appendix A shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.07 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal
defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of and interest
on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obliga tions plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 6.01(e) or (f) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an
43
Opinion of Counsel stating that (i) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling, or (ii) since
the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Securityholders
will not recognize income, gain or loss for Federal income tax purposes as
a result of such defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(6) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Security-holders 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; and
(7) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to this Article
8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall
promptly turn over to the Company upon request any excess money or securities
held by them at any time.
44
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article 8; provided, however, that, if the Company has made any
payment of interest on or principal of any Securities because of 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 money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company, the Subsidiary
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
45
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add additional guarantees with respect to the Securities or to
release and remove Subsidiary Guarantors when permitted by the terms
hereof, or to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirement of the Commission in connection
with qualifying, or maintaining the qualification of, this Indenture under
the TIA; or
(7) to make any change that does not adversely affect the rights of
any Securityholder.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
46
SECTION 9.02. With Consent of Holders. The Company and the Trustee may
amend this Indenture or the Securities or waive any past default or compliance
with any provision of this Indenture without notice to any Securityholder but
with the written consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Securities. However, without the consent of
each Securityholder affected thereby, an amendment or waiver may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the amount payable upon the redemption of any Security or
change the time at which any Secur ity may be redeemed in accordance with
Article 3;
(5) make any Security payable in a place or in money other than that
stated in the Security;
(6) make any change in any Subsidiary Guaranty that would adversely
affect the Securityholders;
(7) impair the right of any Holder to receive payment of principal of
and interest on such Holder's Securities on or after the due dates therefor
or to institute suit for enforcement of any payment on or with respect to
such Holder's Securities or any Subsidiary Guaranty;
(8) make any change in Section 6.04 or 6.07 or the second sentence of
this Section.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
47
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this
Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to
an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subse xxxxx Xxxxxx of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subse xxxxx Xxxxxx may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Security holder. An amendment or
waiver becomes effective upon the execution of such amendment or waiver by the
Trustee.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securi ties. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and
48
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. Failure to
make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if such amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel complying with Section
11.04 stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of
the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
49
ARTICLE 10
Subsidiary Guaranties
SECTION 10.01. Guaranties. Subject to this Article 10, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Subsidiary Guarantor hereby unconditionally guarantees,
jointly and severally, to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment of principal of and interest on the
Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under this
Indenture and the Securities and (b) the full and punctual performance in
accordance with the terms hereof within applicable grace periods of all other
obligations of the Company under this Indenture and the Securities (all the
foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article 10 notwithstanding any extension or renewal of any Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment from
and protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment. Each Subsidiary Guarantor waives notice of any default
under the Securities or the Obligations. The obligations of each Subsidiary
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any thereof;
(c) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Indenture, the Securities or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Obligations or
any of them; (e) the failure of any Holder or the Trustee to exercise any right
or remedy against any other guarantor of the Obligations; or (f) any change in
the ownership of such Subsidiary Guarantor (other than pursuant to Section
10.07).
50
Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Obligations.
Except as expressly set forth in Section 8.01(b) and in Section 10.07, the
obligations of each Subsidiary Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the obligations, or by any other act or thing or omission or delay to do any
other act or thing which may or might in any manner or to any extent vary the
risk of such Subsidiary Guarantor or would otherwise operate as a discharge of
such Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein shall continue to be effective or be reinstated (except to the extent
released pursuant to Section 10.07), as the case may be, if at any time payment,
or any part thereof, of principal of or interest on any Obligation is rescinded
or must otherwise be restored by any Holder or the Trustee upon the bankruptcy
or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other right
which any Holder or the Trustee has at law or in equity against any Subsidiary
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Obligation when and as the same shall become due, whether
at maturity, by
51
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
amount of such Obligations, (ii) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled to any right
of subrogation in respect of any Obligations guaranteed hereby until payment in
full in cash of all Obligations. Each Subsidiary Guarantor further agrees that,
as between it, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated
as provided in Article 6 for the purposes of such Subsidiary Guarantor's
Subsidiary Guaranty herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6, such Obligations (whether or not due
and payable) shall forthwith become due and payable by such Subsidiary Guarantor
for the purposes of this Section.
Each Subsidiary Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.
SECTION 10.02. Contribution. Each of the Company and any Subsidiary
Guarantor (a "Contributing Party") agrees that, in the event a payment shall be
made by any other Subsidiary Guarantor under any Subsidiary Guaranty (the
"Claiming Guarantor"), the Contributing Party shall indemnify the Claiming
Guarantor in an amount equal to the amount of such payment multiplied by a
fraction, the numerator of which shall be the net worth of the Contributing
Party on the date hereof and the denominator of which shall be the aggregate net
worth of the Company and all the Subsidiary Guarantors on the date hereof (or,
in the case of any Subsidiary Guarantor becoming a party hereto
52
pursuant to Section 9.01, the date of the amendment hereto executed and
delivered by such Subsidiary Guarantor).
SECTION 10.03. Successors and Assigns. This Article 10 shall be binding
upon each Subsidiary Guarantor and its successors and assigns and shall enure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 10.04. No Waiver. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at law,
in equity, by statute or otherwise.
SECTION 10.05. Modification. No modification, amendment or waiver of any
provision of this Article 10, nor the consent to any departure by any Subsidiary
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 10.06. Execution of Supplemental Indenture for Future Subsidiary
Guarantors. Each Subsidiary which is required to become a Subsidiary Guarantor
pursuant to Section 4.09 shall promptly execute and deliver to the Trustee a
supplemental indenture substantially in the form of Exhibit B hereto pursuant to
which such Subsidiary shall become a Subsidiary Guarantor under this Article 10
and
53
shall guarantee the Obligations. Each Subsidiary Guarantor hereby authorizes the
Company to execute such supplemental indenture on its behalf. Concurrently with
the execution and delivery of such supplemental indenture, the Company shall
deliver to the Trustee an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized, executed and delivered by such
Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Subsidiary Guaranty of such Subsidiary
Guarantor is a legal, valid and binding obligation of such Subsidiary Guarantor,
enforceable against such Subsidiary Guarantor in accordance with its terms.
SECTION 10.07. Release of Subsidiary Guaranties. Without any further notice
or action being required by any Person, any Subsidiary Guarantor shall be fully
and unconditionally released and discharged from all its obligations under its
Subsidiary Guarantee and this Indenture upon (i) the sale or other disposition
of such Subsidiary Guarantor, (ii) the sale or disposition of all or
substantially all the assets of such Subsidiary Guarantor (in each case other
than to the Company or an Affiliate of the Company) permitted herein or (iii)
the release or termination of any guarantee provided by such Subsidiary
Guarantor under the Credit Facility.
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
54
SECTION 11.02. Notices. Except as otherwise provided herein, any notice or
communication shall be in writing and delivered in person or mailed by
first-class mail or sent by facsimile (with a hard copy delivered in person or
by mail promptly thereafter) addressed as follows:
if to the Company or any Subsidiary
Guarantor:
Choice Hotels International, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
if to the Trustee:
Marine Midland Bank
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
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 11.03. Communication by Holders with Other Holders. Securityholders
may communicate pursuant to TIA ss. 312(b) with other Securityholders with
respect to
55
their rights under this Indenture or the Securities. The Company, the Trustee,
the Registrar and anyone else shall have the protection of TIA ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(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 complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual 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 individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
56
SECTION 11.06. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Securityholders. The
Registrar, any co-registrar the Paying Agent may make reasonable rules for their
functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or
a day on which banking institutions are not required to be open in the State of
New York. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.
SECTION 11.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.10. No Recourse Against Others. A director, officer, employee,
stockholder, partner or member as such, of the Company or any Subsidiary
Guarantor shall not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability.
57
The waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 11.11. Successors. All agreements of the Company and any Subsidiary
Guarantors in this Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 11.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
58
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
CHOICE HOTELS INTERNATIONAL, INC.,
by
------------------------------
Name:
Title:
QUALITY HOTELS EUROPE, INC.,
by
------------------------------
Name:
Title:
QH EUROPE PARTNERSHIP
by: QUALITY HOTELS EUROPE, INC.,
as partner
by
--------------------------
Name:
Title:
by: CHOICE HOTELS INTERNATIONAL,
INC., as partner
by
---------------------------
Name:
Title:
MARINE MIDLAND BANK, as Trustee,
by
------------------------------
Name:
Title:
APPENDIX A
PROVISIONS RELATING TO INITIAL SECURITIES,
EXCHANGE SECURITIES
AND PRIVATE EXCHANGE SECURITIES
SECTION 1. Definitions
1.01 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security or, to the
extent required by applicable law, a Private Exchange Security, bearing the
restricted securities legend set forth in Section 2.03(d)(i).
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Exchange Securities" means the 7.125% Senior Notes Due 2008 to be issued
pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Agreement.
"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc, Bear, Xxxxxxx & Co. Inc.
and Xxxxxx Brothers.
"Initial Securities" means the 7.125% Senior Notes Due 2008, issued under
this Indenture on or about the date hereof.
"New Securities" shall have the meaning set forth in Section 1 of the
Registration Agreement.
"Private Exchange" means the offer by the Company, pursuant to Section 2(f)
of the Registration Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
2
"Private Exchange Securities" means those New Securities to be issued
pursuant to this Indenture in connection with a Private Exchange pursuant to the
Registration Agreement.
"Purchase Agreement" means the Purchase Agreement dated April 28, 1998,
among the Company, QHE, QHE Partnership and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant to the
Registration Agreement, to certain Holders of Initial Securities, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like
aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means the Registration Agreement dated April 28,
1998, among the Company, QHE, QHE Partnership and the Initial Purchasers.
"Securities" means the Initial Securities, the Exchange Securities and the
Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto, who
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued by
the Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and any other
Securities that bear or are required to bear the legend set forth in Section
2.03(d)(i) hereto.
1.02 Other Definitions
Defined in
Term Section:
---- --------
"Agent Members".................................................2.01(b)
3
"Global Security"...............................................2.01(a)
"Regulation S"..................................................2.01(a)
"Rule 144A".....................................................2.01(a)
SECTION 2. The Securities.
2.01 Form and Dating.
The Initial Securities are being offered and sold by the Company pursuant
to the Purchase Agreement. The Initial Securities will be resold, initially only
to QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A"), and in
reliance on Regulation S under the Securities Act ("Regulation S"). Initial
Securities may thereafter be transferred to, among others, QIBs, purchasers in
reliance on Regulation S and IAIs.
(a) Global Securities. The Initial Securities shall be issued initially in
the form of one or more permanent global Securities in definitive, fully
registered form without interest coupons with the global securities legend and
restricted securities legend set forth in Exhibit 1 hereto (each, a "Global
Security"), which shall be deposited on behalf of the purchasers of the Initial
Securities represented thereby with the Securities Custodian, and registered in
the name of the Depositary or a nominee of the Depositary, duly executed by the
Company and authenticated by the Trustee as provided in this Indenture. The
aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(b) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depositary for such Global Security or Global Securities or the
nominee of such Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as Securities Custodian.
4
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as the Securities Custodian or under
such Global Security, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.03 or 2.04,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.02 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$100,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Agreement, for a like principal amount of Initial
Securities, in each case upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $100,000,000 except
as provided in Section 2.07 of this Indenture.
2.03 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
5
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-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
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.03(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by
the following additional information and documents, as applicable:
(A) if such Definitive 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; or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect; or
(C) if such Definitive Securities are being transferred (x)
pursuant to an exemption from registration in accordance with Rule 144
under the Securities Act; or (y) in reliance on another exemption from
the registration requirements of the Securities Act: (i) a
certification to that effect and (ii) if the Company so requests, an
opinion of counsel or other evidence reasonably satisfactory to it as
to the compliance with the restrictions set forth in the legend set
forth in Section 2.03(d)(i).
6
(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 Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) certification that such Definitive Security is being transferred
(A) to a QIB in accordance with Rule 144A, (B) to an IAI that has furnished
to the Trustee a signed letter containing certain representations and
agreements substantially in the form of Exhibit 2 hereto, or (C) outside
the United States in an offshore transaction within the meaning of
Regulation S and in compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee 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 by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged pursuant to Section 2.04, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Beneficial Interests in Global Securities. (i)
The transfer and exchange of
7
beneficial interests in Global Securities 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. A transferor of a beneficial interest in a Global Security shall
deliver a written order given in accordance with the Depositary's procedures
containing information regarding the participant account of the Depositary to be
credited with a beneficial interest in the Global Security and such account
shall be credited in accordance with such instructions with a beneficial
interest in the Global Security and the account of the Person making the
transfer shall be debited by an amount equal to the beneficial interest in the
Global Security being transferred. In the case of a transfer of a beneficial
interest in a Global Security to an IAI, the transferee must furnish a signed
letter to the Trustee substantially in the form of Exhibit 2 hereto (the form of
which letter can be obtained from the Trustee or the Company).
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global Security,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.04), a Global 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.
(iv) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.04, prior to the
consummation of a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities may
be exchanged only in accordance with such procedures as are substantially
consistent with the
8
provisions of this Section 2.03 (including the certification requirements
set forth on the reverse of the Initial Securities intended to ensure that
such transfers comply with Rule 144A, Regulation S or such other exemption
from registration under the Securities Act, as the case may be) and such
other procedures as may from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following para graphs (ii), (iii),
(iv), (v) and (vi), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or in 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"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A
PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO
AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY
9
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE
COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN
INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL
FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2)
AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION
OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT."
Each Definitive Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(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:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the
10
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Security that does not bear the
legends set forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends set forth above and
rescind any restriction on the transfer of such Transfer Restricted
Security, in either case,
if the Holder certifies in writing to the Registrar that its request
for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities pursuant to a Shelf Registration Statement during the period of
the effectiveness of a Shelf Registration Statement with respect to such
Initial Securities or Private Exchange Securities, as the case may be, all
requirements pertaining to legends on such Initial Security or such Private
Exchange Security will cease to apply, the requirements requiring that any
such Initial Security or such Private Exchange Security issued to certain
Holders be issued in global form will cease to apply, and a certificated or
global Initial Security or Private Exchange Security without legends will
be available to the transferee of the Holder of such Initial Securities or
Private Exchange Securities upon exchange of such transferring Holder's
certificated Initial Security or Private Exchange Security.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Securities pursuant to which certain Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities be issued in global form will cease to apply and
certificated Initial Securities with the restricted securities legend set
forth in Exhibit 1 hereto will be available to Holders of
11
such Initial Securities that do not exchange their Initial Securities, and
Exchange Securities in certificated or global form will be available to
Holders that exchange such Initial Securities in such Registered Exchange
Offer or such other applicable exemption from registration under the
Securities Act.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
continue to apply, and Private Exchange Securities in global form with, to
the extent required by applicable law, the Restricted Securities Legend set
forth in Exhibit 1 hereto will be available to Holders that exchange such
Initial Securities in such Private Exchange.
(vi) Upon a sale or transfer of any Initial Security acquired pursuant
to Regulation S, all requirements pertaining to legends on such Initial
Security will cease to apply, the requirements requiring any such Initial
Security be issued in global form will cease to apply, and an Initial
Security in certificated or global form without the Restricted Security
Legend will be available to the transferee of the Holder of such Initial
Securities.
(e) Cancelation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to such
cancelation, if any beneficial interest in a Global Security is exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, the
principal amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Securities Custodian for such Global Security) with respect
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.
12
(f) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate certificated Securities,
Definitive Securities and Global Securities at the Registrar's or
co-registrar's request.
(ii)No service charge shall be made 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 exchange or transfer pursuant to
Sections 3.06 and 9.05).
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of any Security for a period beginning 15 days
before the mailing of a notice of redemption or 15 days before an interest
payment date.
(iv) Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the con trary.
(v) All Securities issued upon any registration of transfer or
exchange pursuant to the terms of this Indenture shall evidence the same
debt and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such registration of transfer or exchange.
13
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or any other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to the registered Holders (which shall be the Depositary or its
nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants and
any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.04 Certificated Securities.
(a) A Global Security deposited with the Depositary or with the Trustee as
Securities Custodian pursuant to Section 2.01 shall be transferred to the
beneficial owners thereof in the form of certificated Securities in an aggregate
principal amount equal to the principal amount of such Global Security, in
exchange for such Global Security, only if such
14
transfer complies with Section 2.03 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that may be exchanged for certificated Securities
registered in the names of the beneficial owners thereof pursuant to this
Section 2.04 shall be surrendered by the Depositary to the Trustee located in
the Borough of Manhattan, The City of New York, to be so exchanged, in whole or
from time to time in part, without charge, and the Trustee shall authenticate
and deliver, upon such exchange of each portion of such Global Security, an
equal aggregate principal amount of certificated Securities of authorized
denominations. Any portion of a Global Security exchanged pursuant to this
Section shall be executed, authenticated and delivered only in denominations of
$1,000 and any integral multiple thereof and registered in such names as the
Depositary shall direct. Any certificated Initial Security delivered in exchange
for an interest in the Global Security shall, except as otherwise provided by
Section 2.03(d), bear the restricted securities legend set forth in Exhibit 1
hereto.
(c) Subject to the provisions of Section 2.04(b), the registered Holder of
a Global Security may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.04(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
EXHIBIT 1 TO APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS
AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE
DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG
AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH
2
REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE)
UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE
TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.]
3
No.
$___________
CUSIP No.:
7.125% Senior Notes Due 2008
CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation, promises to pay
to _______, or registered assigns, the principal sum set forth in the Schedule
of Increases and Decreases in Global Security on May 1, 2008.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15.
4
Additional provisions of this Security are set forth on the other side of
this Security.
CHOICE HOTELS INTERNATIONAL,
INC.
by
-----------------------
-----------------------
[CORPORATE SEAL]
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
MARINE MIDLAND BANK,
as Trustee, certifies that this
is one of the Securities
referred to in the Indenture.
by
-----------------------------
Authorized Signatory
or
by
-----------------------------
as Authentication Agent
by
-----------------------------
Authorized Signatory
5
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
7.125% Senior Note Due 2008
1. Interest
(a) CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on May 1 and November 1 of each year, commencing
November 1, 1998. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from May
4, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
(b) The Holder of this Security is entitled to the benefits of the
Registration Agreement dated April 28, 1998, among the Company, Quality Hotels
Europe, Inc. ("QHE"), QH Europe Partnership (together with QHE and any other
Subsidiary of the Company that may become a guarantor of the Company's
obligations under the Indenture and the Securities, the "Subsidiary Guarantors")
and the Purchasers named therein (the "Registration Agreement"). Capitalized
terms used in this paragraph (b) but not defined herein have the meanings
assigned to them in the Registration Agreement. In the event that (i) neither
the Exchange Offer Registration Statement nor the Shelf Registration Statement
has been filed with the Commission on or prior to the 150th day following the
date of the original issuance of the Securities, (ii) neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been declared
effective on or prior to the 180th day following the date of the original
issuance of the Securities, (iii) neither the Registered Exchange Offer has been
consummated nor the Shelf Registration Statement has been declared effective on
or prior to the 210th day following the date of the original issuance of the
Securities, or (iv) after either the Exchange Offer Registration Statement or
the Shelf Registration Statement has been declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to certain
exceptions set forth in Section
6
3(b) of the Registration Agreement) in connection with resales of the Securities
at any time that the Company and the Subsidiary Guarantors are obligated to
maintain the effectiveness thereof pursuant to the Registration Agreement (each
such event referred to in clauses (i) through (iv) above being referred to
herein as a "Registration Default"), interest (the "Special Interest") shall
accrue on the principal amount of the Securities affected by such Registration
Default (in addition to stated interest on the Securities) from and including
the date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured. Special Interest shall
accrue at a rate per annum equal to 0.25% of the principal amount of the
Securities for each Registration Default. In no event, however, shall the
aggregate amount of Special Interest payable pursuant to the above provisions
exceed 0.25% per annum of the principal amount of the Securities and the payment
of Special Interest as provided herein shall be the Holders' sole and exclusive
remedy for such Registration Default. The Special Interest will be payable in
cash semiannually in arrears each May 1 and November 1.
7
2. Method of Payment
The Company will pay interest on the Securities (except defaulted interest)
to the Persons who are registered holders of Securities at the close of business
on the April 15 or October 15 next preceding the interest payment date even if
Securities are canceled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Securities represented
by a Global Security (including principal, premium and interest) will be made by
wire transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
3. Paying Agent and Xxxxxxxxx
0
Initially, Marine Midland Bank, a New York banking corporation and trust
company (the "Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar, co-registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of May 4,
1998 (the "Indenture"), among the Company, the Subsidiary Guarantors and the
Trustee. Subject to the terms of the Indenture, 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 of 1939 (15 U.S.C. xx.xx. 77aaa-77bbbb) as
in effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the TIA for a statement of those terms.
The Securities are general unsecured obligations of the Company limited to
$100,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). This Security is one of the Initial Securities referred to in the
Indenture issued in an aggregate principal amount of $100,000,000. The
Securities include the Initial Securities and any Private Exchange Securities or
Exchange Securities issued in exchange for Initial Securities. The Initial
Securities, the Private Exchange Securities and the Exchange Securities are
treated as a single class of securities under the Indenture.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, Incur or otherwise cause or suffer to exist or
become effective any Liens of any kind upon any Principal Property or any
Capital Stock or Debt of any Subsidiary which owns or leases Principal Property
(whether such Principal Property, Capital Stock or Debt are now owned or
hereafter acquired), or any interest therein or any increase or profits
therefrom, unless all payments due under the Indenture and the Securities are
secured on an equal and ratable basis with (or prior to) the obligations so
secured until such time as such obligation is no longer secured by a Lien,
except in the case of Permitted
9
Liens or as provided in the third to the last paragraph of this Section 4.
Except as provided in the third to the last paragraph of this Section 4,
the Company will not, and will not permit any Subsidiaries to, enter into any
Sale and Leaseback Transaction with respect to any Principal Property unless
either (a) the Company or such Subsidiary would be entitled, pursuant to the
provisions of the Indenture, to Incur Debt secured by a Lien on the Property to
be leased in an amount equal to the Attributable Debt with respect to such
transaction without equally and ratably securing the Securities, or (b) the
Company, within 180 days after the effective date of such transaction, applies
to the voluntary retirement of its Funded Debt an amount equal to the value of
such transaction, defined as the greater of the net proceeds of the sale of the
Principal Property leased in such transaction or the fair value, in the opinion
of the Board of Directors, of the leased Principal Property at the time such
transaction was entered into.
Notwithstanding the foregoing limitations on Liens and Sale and Leaseback
Transactions, the Company and its Subsidiaries may create, Incur or otherwise
cause to suffer to exist or become effective Liens without securing the
Securities, or enter into a Sale and Leaseback Transaction without retiring
Funded Debt, or enter into a combination of such transactions, provided that, at
the time of such event, and after giving effect thereto and to the retirement of
any other such Debt which is concurrently being repaid, the sum of (x) the
principal amount of such Debt secured by such Liens or the Attributable Debt in
respect of such Sale and Leaseback Transaction, as the case may be, and (y) the
principal amount of all other such Debt secured by such Liens (not including
Liens permitted by the second preceding paragraph) and all other Attributable
Debt in respect of Sale and Leaseback Transactions then outstanding (not
including Sale and Leaseback Transactions permitted under the preceding
paragraph) measured, in each case, at the time any such Lien is Incurred or any
such Sale and Leaseback Transaction is entered into, does not exceed the greater
of (i) $25 million or (ii) 15% of the Consolidated Net Tangible Assets of the
Company and its consolidated Subsidiaries.
The Company, without the consent of the Holders of any of the outstanding
Securities, may consolidate or amalgamate with or merge into any other Person or
convey,
10
transfer, lease or otherwise dispose of its Property substantially as an
entirety to any Person or may permit any Person to consolidate or amalgamate
with or merge into, or convey, transfer, lease or otherwise dispose of its
Property substantially as an entirety to, the Company; provided, however, that
(a) the successor, transferee or lessee is organized under the laws of any
United States jurisdiction; (b) the successor, transferee or lessee, if other
than the Company, expressly assumes the Company's obligations under the
Indenture and the Securities by means of a supplemental indenture entered into
with the Trustee; (c) immediately before and after giving effect to the
transaction on a pro forma basis, no Default shall have occurred and be
continuing; and (d) certain other conditions set forth in the Indenture are met.
Under any consolidation or amalgamation by the Company with, or merger by the
Company into, any other Person or any conveyance, transfer, lease or other
disposition of the Property of the Company substantially as an entirety as
described in the preceding sentence, the successor resulting from such
consolidation or amalgamation or into which the Company is merged or the
transferee or lessee to which such conveyance, transfer, lease or disposition is
made, will succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture, and thereafter, except in the case of
a conveyance, transfer, lease or disposition, the predecessor (if still in
existence) will be released from its obligations and covenants under the
Indenture and the Securities.
As set forth more fully in the Indenture, to guarantee the due and punctual
payment of the principal and interest on the Securities and all other amounts
payable by the Company under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Subsidiary Guarantors have unconditionally guaranteed the Obligations on a
senior unsecured basis pursuant to the terms of the Indenture. Such guaranties
shall cease to apply, and shall be null and void with respect to any Subsidiary
Guarantor who, pursuant to the Indenture, is released from its guaranty, or
whose guaranty otherwise ceases to be applicable pursuant to the terms of the
Indenture.
5. Optional Redemption
11
The Securities will be redeemable, at the option of the Company, in whole
or in part at any time or from time to time, upon not less than 30 and not more
than 60 days' notice as provided in the Indenture, on any date prior to maturity
(the "Redemption Date") at a redemption price equal to 100% of the principal
amount of the Securities to be redeemed plus accrued interest to the Redemption
Date (subject to the right of Holders of record on the relevant record date to
receive interest due on an interest payment date that is on or prior to the
Redemption Date) plus a Make-Whole Premium, if any (the "Redemption Price"). In
no event will the Redemption Price ever be less than 100% of the principal
amount of the Securities plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(1) the sum of the present values, calculated as of the Redemption
Date, of:
(a) each interest payment that, but for such redemption, would
have been payable on the Security (or portion thereof) being
redeemed on each interest payment date occurring after the
Redemption Date (excluding any accrued interest for the period
prior to the Redemption Date); and
(b) the principal amount that, but for such redemption, would
have been payable at the final maturity of the Security (or
portion thereof) being redeemed;
over
(2) the principal amount of the Security (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in clause
(1) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a
12
discount rate equal to the Treasury Yield (as defined below) plus 25 basis
points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 30 calendar days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation will be made by Xxxxxxx Xxxxx
Xxxxxx Holdings Inc (or an Affiliate thereof or any successor thereto) or, if
such firm is unwilling or unable to make such calculation, by an independent
investment banking institution of national standing appointed by the Trustee (in
any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Securities, calculated to the nearest
1/12th of a year (the "Remaining Term"). The Treasury Yield will be determined
as of the third Business Day immediately preceding the applicable Redemption
Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward. If weekly average yields for United
States Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
13
comparable rates selected by the Independent Investment Banker. Any notice to
the Holders of Securities of such a redemption need not set forth the redemption
price of such Securities but need only set forth the calculation thereof as
described in this paragraph. The redemption price, calculated as aforesaid,
shall be set forth in an Officers' Certificate delivered to the Trustee no later
than two Business Days prior to the Redemption Date.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to register the transfer of or exchange any Securities for a period of 15
days prior to a selection of Securities to be redeemed or 15 days before an
interest payment date.
14
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its request unless an abandoned property law designates another Person. After
any such payment, Holders entitled to the money must look only to the Company
and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some
of or all its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
15
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended without prior notice to any Securityholder but
with the written consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. The Company, the Subsidiary Guarantors and the Trustee may amend the
Indenture or the Securities without the consent of any Securityholder (i) to
cure any ambiguity, omission, defect or inconsistency, (ii) to comply with
Article 5 of the Indenture, (iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of Section
163(f) of the Code or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code, (iv) to add additional guarantees
with respect to the Securities or to release and remove Subsidiary Guarantors
when permitted by the terms of the Indenture or to secure the Securities, (v) to
add to the covenants of the Company for the benefit of the Holders of the
Securities or to surrender any right or power conferred upon the Company, (vi)
to comply with any requirement of the Commission in connection with qualifying,
or maintaining the qualification of, the Indenture under the TIA, or (vii) to
make any change that does not adversely affect the rights of any Securityholder.
13. Defaults and Remedies
If an Event of Default (other than certain events of bankruptcy or
insolvency with respect to the Company) occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the outstanding
Securities, subject to certain limitations, may declare the principal of the
Securities to be immediately due and payable. Such bankruptcy or insolvency
events are Events of Default which shall result in the Securities being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee
16
may refuse to enforce the Indenture or the Securities unless it receives
reasonable indemnity or security. Subject to certain limitations, Holders of at
least a majority in aggregate principal amount of the outstanding Securities may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding
Securities, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee, stockholder, partner or member, as such, of
the Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17
17. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
18. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers, if any, placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security.
18
--------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint as agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
--------------------------------------------------------------------------------
Date: ________________ Your Signature: _______________________
--------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act of 1933 after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement
under the Securities Act of 1933; or
(3) |_| inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933) that
19
purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule
144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(4) |_| inside the United States to an institutional
"accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act of 1933) that has
furnished to the Trustee a signed letter
containing certain representations and
agreements (the form of which letter can be
obtained from the Trustee or the Company); or
(5) |_| outside the United States in an offshore
transaction within the meaning of Regulation S under
the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(6) |_| pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
Person other than the registered holder thereof; provided, however,
that if box (4), (5) or (6) is checked, the Trustee may require, prior
to registering any such transfer of the Securities, such legal
opinions, certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
-----------------------------
Your Signature
Signature Guarantee:
Date:
---------------------------
Signature must be guaranteed by a participant in a recognized
signature guaranty
20
medallion program or other signature guarantor acceptable to the
Trustee
------------------------------
Signature of Signature
Guarantee
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ _________________________________
NOTICE: To be executed by an
executive officer
21
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ]. The
following increases or decreases in this Global Security have been made:
Amount of decrease Amount of increase Principal Amount of Signature of
in Principal Amount in Principal Amount this Global Security authorized officer
Date of of this Global of this Global following such of Trustee or
Exchange Security Security decrease or increase Securities Custodian
--------------- ----------------- ------------------ ------------------ ------------------
EXHIBIT 2 TO APPENDIX A
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Choice Hotels International, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attention: General Counsel
Marine Midland Bank
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: 7.125% Senior Notes Due 2008 of Choice Hotels International, Inc.
Reference is hereby made to the Indenture, dated as of May 4, 1998 (the
"Indenture"), among Choice Hotels International, Inc. (the "Company"), Quality
Hotels Europe, Inc., QH Europe Partnership and Marine Midland Bank, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $ aggregate principal amount
of:
(a) |_| Beneficial interests in Global Securities
("Book-Entry Interests"), or
(b) |_| Definitive Securities,
we confirm that:
1. We understand that any subsequent transfer of the Securities or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Securities or any interest therein except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities and any interest
therein may not be offered
2
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell the Securities or any interest therein, we will
do so only (A) to the Company or any subsidiary thereof, (B) in accordance with
Rule 144A under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to you and to the Company a signed letter substantially
in the form of this letter and, if such transfer is in respect of a principal
amount of Securities, at the time of transfer of less than $250,000 an Opinion
of Counsel in form reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act, (D) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (E)
pursuant to the provisions of Rule 144 under the Securities Act or (F) pursuant
to an effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing the Definitive Securities or
Book-Entry Interests from us a notice advising such purchaser that resales
thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Definitive Securities
or Book-Entry Interests, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as you and the Company
may reasonably require to confirm that the proposed sale complies with the
foregoing restrictions.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or its investment.
5. We are acquiring the Definitive Securities or Book-Entry Interests
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
3
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
___________________________________
[Insert Name of Accredited
Investor]
by: _______________________________
Name:
Title:
Dated: ______________, __
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE
SECURITY]
*/
**/
No.: _____________
CUSIP No.:
7.125% Senior Notes Due 2008
CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation, promises to pay
to , or registered assigns, the principal sum [of _________ Dollars] on May 1,
2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
*/ [If the Security is to be issued in global form add the Global
Securities Legend from Exhibit 1 to Appendix A and the attachment from such
Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY" and add "set forth in the
Schedule of Increases and Decreases in Global Security" in place of the
bracketed language in the first paragraph above.]
**/ [If the Security is a Private Exchange Security issued in a Private
Exchange to an Initial Purchaser holding an unsold portion of its initial
allotment, add, to the extent required by applicable law, the Restricted
Securities Legend from Exhibit 1 to Appendix A and replace the Assignment
Form included in this Exhibit A with the Assignment Form included in such
Exhibit 1.]
2
Additional provisions of this Security are set forth on the other side of
this Security.
CHOICE HOTELS INTERNATIONAL,
INC.,
by
____________________________
____________________________
[CORPORATE SEAL]
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
MARINE MIDLAND BANK,
as Trustee, certifies that
this is one of the Securities
referred to in the Indenture.
by
_____________________________
Authorized Signatory
or
by
_____________________________
as Authentication Agent
by
_____________________________
Authorized Signatory
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY
OR PRIVATE EXCHANGE SECURITY]
7.125% Senior Note Due 2008
1. Interest
CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above[; provided
however, that if a Registration Default (as defined in the Registration
Agreement) occurs, interest will accrue on this Security at a rate of 0.25% per
annum from and including the date on which any such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured] ***/. The Company will pay interest semiannually on May 1 and November 1
of each year, commencing on November 1, 1998. Interest on the Securities will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from May 4, 1998. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
---------------
***/ Insert if at the time of issuance of the Exchange Security or Private
Exchange Security (as the case may be) neither the Registered Exchange Offer has
been consummated nor a Shelf Registration Statement has been declared effective
in accordance with the Registration Agreement.
4
2. Method of Payment
The Company will pay interest on the Securities (except defaulted interest)
to the Persons who are registered holders of Securities at the close of business
on the April 15 or October 15 next preceding the interest payment date even if
Securities are canceled after the record date and on or before the interest
payment date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer giving written notice to the Trustee or
the Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Marine Midland Bank, a New York banking corporation and trust
company, (the "Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
4. Indenture
5
The Company issued the Securities under an Indenture dated as of May 4,
1998 ("Indenture"), among the Company, Quality Hotels Europe, Inc. QH Europe
Partnership and the Trustee. Subject to the terms of the Indenture, 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 of 1939 (15 U.S.C. xx.xx.
77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are general unsecured obligations of the Company limited to
$100,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). This Security is one of the Exchange Securities or Private Exchange
Securities referred to in the Indenture issued in exchange for Initial
Securities. The Initial Securities were issued in an aggregate principal amount
of $100,000,000. The Initial Securities, the Exchange Securities and the Private
Exchange Securities are treated as a single class of securities under the
Indenture.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, Incur or otherwise cause or suffer to exist or
become effective any Liens of any kind upon any Principal Property or any
Capital Stock or Debt of any Subsidiary which owns or leases Principal Property
(whether such Principal Property, Capital Stock or Debt are now owned or
hereafter acquired), or any interest therein or any increase or profits
therefrom, unless all payments due under the Indenture and the Securities are
secured on an equal and ratable basis with (or prior to) the obligations so
secured until such time as such obligation is no longer secured by a Lien,
except in the case of Permitted Liens or as provided in the third to the last
paragraph of this Section 4.
Except as provided in the third to the last paragraph of this Section 4,
the Company will not, and will not permit any Subsidiaries to, enter into any
Sale and Leaseback Transaction with respect to any Principal Property unless
either (a) the Company or such Subsidiary would be entitled, pursuant to the
provisions of the Indenture, to
6
Incur Debt secured by a Lien on the Property to be leased in an amount equal to
the Attributable Debt with respect to such transaction without equally and
ratably securing the Securities, or (b) the Company, within 180 days after the
effective date of such transaction, applies to the voluntary retirement of its
Funded Debt an amount equal to the value of such transaction, defined as the
greater of the net proceeds of the sale of the Principal Property leased in such
transaction or the fair value, in the opinion of the Board of Directors, of the
leased Principal Property at the time such transaction was entered into.
Notwithstanding the foregoing limitations on Liens and Sale and Leaseback
Transactions, the Company and its Subsidiaries may create, Incur or otherwise
cause to suffer to exist or become effective Liens without securing the
Securities, or enter into a Sale and Leaseback Transaction without retiring
Funded Debt, or enter into a combination of such transactions, provided that, at
the time of such event, and after giving effect thereto and to the retirement of
any other such Debt which is concurrently being repaid, the sum of (x) the
principal amount of such Debt secured by such Liens or the Attributable Debt in
respect of such Sale and Leaseback Transaction, as the case may be, and (y) the
principal amount of all other such Debt secured by such Liens (not including
Liens permitted by the second preceding paragraph) and all other Attributable
Debt in respect of Sale and Leaseback Transactions then outstanding (not
including Sale and Leaseback Transactions permitted under the preceding
paragraph) measured, in each case, at the time any such Lien is Incurred or any
such Sale and Leaseback Transaction is entered into, does not exceed the greater
of (i) $25 million or (ii) 15% of the Consolidated Net Tangible Assets of the
Company and its Consolidated Subsidiaries.
The Company, without the consent of the Holders of any of the outstanding
Securities, may consolidate or amalgamate with or merge into any other Person or
convey, transfer, lease or otherwise dispose of its Property substantially as an
entirety to any Person or may permit any Person to consolidate or amalgamate
with or merge into, or convey, transfer, lease or otherwise dispose of its
Property substantially as an entirety to, the Company; provided, however, that
(a) the successor, transferee or lessee is organized under the laws of any
United States jurisdiction; (b) the successor, transferee or lessee, if other
than the
7
Company, expressly assumes the Company's obligations under the Indenture and the
Securities by means of a supplemental indenture entered into with the Trustee;
(c) immediately before and after giving effect to the transaction on a pro forma
basis, no Default shall have occurred and be continuing; and (d) certain other
conditions set forth in the Indenture are met. Under any consolidation or
amalgamation by the Company with, or merger by the Company into, any other
Person or any conveyance, transfer, lease or other disposition of the Property
of the Company substantially as an entirety as described in the preceding
sentence, the successor resulting from such consolidation or amalgamation or
into which the Company is merged or the transferee or lessee to which such
conveyance, transfer, lease or disposition is made, will succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture, and thereafter, except in the case of a conveyance, transfer,
lease or disposition, the predecessor (if still in existence) will be released
from its obligations and covenants under the Indenture and the Securities.
As set forth more fully in the Indenture, to guarantee the due and punctual
payment of the principal and interest on the Securities and all other amounts
payable by the Company under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Subsidiary Guarantors have unconditionally guaranteed the Obligations on a
senior unsecured basis pursuant to the terms of the Indenture. Such guaranties
shall cease to apply, and shall be null and void with respect to any Subsidiary
Guarantor who, pursuant to the Indenture, is released from its guaranty, or
whose guaranty otherwise ceases to be applicable pursuant to the terms of the
Indenture.
8
5. Optional Redemption
The Securities will be redeemable, at the option of the Company, in whole
or in part at any time or from time to time, upon not less than 30 and not more
than 60 days' notice as provided in the Indenture, on any date prior to maturity
(the "Redemption Date") at a redemption price equal to 100% of the principal
amount of the Securities to be redeemed plus accrued interest to the Redemption
Date (subject to the right of Holders of record on the relevant record date to
receive interest due on an interest payment date that is on or prior to the
Redemption Date) plus a Make-Whole Premium, if any (the "Redemption Price"). In
no event will the Redemption Price ever be less than 100% of the principal
amount of the Securities plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(1) the sum of the present values, calculated as of
the Redemption Date, of:
(a) each interest payment that, but for such
redemption, would have been payable on the
Security (or portion thereof) being redeemed on each
interest payment date occurring after the Redemption
Date (excluding any accrued interest for the period
prior to the Redemption Date); and
(b) the principal amount that, but for such
redemption, would have been payable at the final
maturity of the Security (or portion thereof) being
redeemed;
over
(2) the principal amount of the Security (or
portion thereof) being redeemed.
The present values of interest and principal payments referred to in clause
(1) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or
9
principal from the date that each such payment would have been payable, but for
the redemption, to the Redemption Date at a discount rate equal to the Treasury
Yield (as defined below) plus 25 basis points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 30 calendar days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation will be made by Xxxxxxx Xxxxx
Xxxxxx Holdings Inc (or an Affiliate thereof or any successor thereto) or, if
such firm is unwilling or unable to make such calculation, by an independent
investment banking institution of national standing appointed by the Trustee (in
any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Securities, calculated to the nearest
1/12th of a year (the "Remaining Term"). The Treasury Yield will be determined
as of the third Business Day immediately preceding the applicable Redemption
Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure
10
of 1/200th of 1% or above being rounded upward. If weekly average yields for
United States Treasury Notes are not available in the H.15 Statistical Release
or otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker. Any notice to
the Holders of Securities of such a redemption need not set forth the redemption
price of such Securities but need only set forth the calculation thereof as
described in this paragraph. The redemption price, calculated as aforesaid,
shall be set forth in an Officers' Certificate delivered to the Trustee no later
than two Business Days prior to the Redemption Date.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register
11
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or to register the transfer of or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its request unless an abandoned property law designates another Person. After
any such payment, Holders entitled to the money must look only to the Company
and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some
of or all its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
12
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended without prior notice to any Securityholder but
with the written consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. The Company, the Subsidiary Guarantors and the Trustee may amend the
Indenture or the Securities without the consent of any Securityholder (i) to
cure any ambiguity, omission, defect or inconsistency, (ii) to comply with
Article 5 of the Indenture, (iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of Section
163(f) of the Code or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code, (iv) to add additional guarantees
with respect to the Securities or to release and remove Subsidiary Guarantors
when permitted by the terms of the Indenture or to secure the Securities, (v) to
add to the covenants of the Company for the benefit of the Holders of the
Securities or to surrender any right or power conferred upon the Company, (vi)
to comply with any requirement of the Commission in connection with qualifying,
or maintaining the qualification of, the Indenture under the TIA, or (vii) to
make any change that does not adversely affect the rights of any Securityholder.
13. Defaults and Remedies
If an Event of Default (other than certain events of bankruptcy or
insolvency with respect to the Company) occurs and is continuing, the Trustee or
the Holders of at least 25% in aggregate principal amount of the outstanding
Securities, subject to certain limitations, may declare the principal of the
Securities to be immediately due and payable. Such events of bankruptcy or
insolvency are Events of Default which shall result in the Securities being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
13
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of at least a majority in aggregate principal
amount of the outstanding Securities may direct the Trustee in its exercise of
any trust or power under the Indenture. The Holders of a majority in aggregate
principal amount of the outstanding Securities, by written notice to the Trustee
and the Company, may rescind any declaration of acceleration and its
consequences if the rescission would not conflict with any judgment or decree,
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee, stockholder, partner or member, as such, of
the Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
14
16. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
18. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers, if any, placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security.
15
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ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint as agent to
transfer this Security on the books of the Company. The
agent may substitute another to act for him.
--------------------------------------------------------------------------------
Date: ______________ Your Signature: _______________________
--------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of
______________, among [SUBSIDIARY GUARANTOR] (the "New Subsidiary
Guarantor"), CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation (the
"Company") on behalf of itself and the Subsidiary Guarantors (the "Existing
Subsidiary Guarantors") under the Indenture referred to below, and MARINE
MIDLAND BANK, a New York banking corporation and trust company, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the Trustee an
Indenture (the "Indenture") dated as of May 4, 1998, providing for the issuance
of an aggregate principal amount of up to $100,000,000 of 7.125% Senior Notes
Due 2008 (the "Securities");
WHEREAS Section 4.09 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantor shall unconditionally guarantee all the Company's
obligations under the Securities pursuant to a Subsidiary Guaranty substantially
on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company
and the Existing Subsidiary Guarantors are authorized to execute and deliver
this Supplemental Indenture;
2
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
1. Agreement to Guarantee. The New Subsidiary Guarantor hereby agrees,
jointly and severally with all other Subsidiary Guarantors, to unconditionally
guarantee the Company's obligations under the Indenture and the Securities on
the terms and subject to the conditions set forth in Article 10 of the Indenture
and to be bound by all other applicable provisions of the Indenture.
2. Ratification of Indenture; Supplemental Indentures Part of Indenture.
Except as expressly amended hereby, the Indenture is in all respects ratified
and confirmed and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. Trustee Makes No Representation. The Trustee makes no representation as
to and shall not be responsible for the validity or sufficiency of this
Supplemental Indenture or for the recitals contained herein, all of which
recitals are made solely by the Company, the Existing Subsidiary Guarantors and
the New Subsidiary Guarantor.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
3
6. Effect of Headings. The Section headings herein are for convenience only
and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW SUBSIDIARY GUARANTOR],
by ______________________________
Name:
Title:
CHOICE HOTELS INTERNATIONAL, INC.,
on behalf of itself and the
Existing Subsidiary Guarantors,
by ______________________________
Name:
Title:
MARINE MIDLAND BANK, as Trustee,
by ______________________________
Name:
Title:
