Exhibit 99.01
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
IT MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.
SUNBURST HOSPITALITY CORPORATION
SUBORDINATED NOTE
DUE OCTOBER 15, 2002
$115,000,000 October 15, 1997
SUNBURST HOSPITALITY CORPORATION, a Delaware corporation
("Payor"), for value received, promises to pay to the order of Choice Hotels
International, Inc. ("Payee") the principal amount of ONE HUNDRED AND FIFTEEN
MILLION DOLLARS ($115,000,000), together with accrued interest thereon, each
calculated and payable only as and to the extent set forth below in this Note.
The principal and interest on this Note is payable in lawful money of the United
States of America in immediately available funds at such place in the United
States as Payee may from time to time designate in writing to Payor.
All capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
1. Payment of Principal and Interest
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1.1. Calculation and Payment of Interest.
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Interest on the principal balance of this Note outstanding
from time to time until paid in full shall accrue at the rate per annum of the
sum of five percent (5.0%) per annum plus the five year U.S. Treasury Note yield
to be fixed on the Distribution Date, computed on the
basis of a 365 or 366-day year, as appropriate, for the actual number of days
elapsed, commencing on the date hereof. Such interest shall be payable upon
maturity.
1.2. Payment on Maturity Date. The principal balance of, and any
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accrued and unpaid interest on, this Note shall be payable on October 15, 2002
(the "Maturity Date").
1.3. Prepayment.
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(a) Payor may, at its option at any time, without premium or
penalty, prepay all or any portion of this Note.
(b) Any prepayment of this Note shall be applied first, to
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payment of accrued interest, and second, to payment of principal. Upon any
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partial prepayment, at the request either of Payee or Payor, this Note shall be
surrendered to Payor in exchange for a substitute note, which shall set forth
the revised principal amount. In the event that this Note is prepaid in its
entirety, this Note shall be surrendered to Payor for cancellation as a
condition to any such prepayment.
1.4. Payment Only on Business Days. Any payment hereunder which
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would be payable on a day which is not a Business Day, shall instead be due and
payable on the Business Day next following such date for payment.
2. Events of Default
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The following shall constitute "Events of Default" under this
Note:
(a) Subject to Section 4, failure by Payor to make any payment
or prepayment required under this Note when the same shall become due and
payable (whether at maturity, by acceleration or otherwise) and the continuation
of such failure for a period of thirty (30) days; or
(b) Payor breaches any covenant under Section 3.1 or Section
3.2 of this Note, which breach or failure, if curable, shall continue uncured
for a period of thirty (30) days after
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the date on which written notice specifying such breach, and stating that such
notice is a "Notice of Default" hereunder, shall have been given by Xxxxx to
Payor; or
(c) The commencement of an involuntary proceeding or the
filing of an involuntary petition in a court of competent jurisdiction seeking
(i) relief in respect of Payor, or of any Subsidiary, or of a substantial part
of the property or assets of Payor or a Subsidiary, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for Payor or any Subsidiary or (iii) the winding-up or
liquidation of Payor or any Subsidiary; and the continuation of such proceeding
or petition undismissed for 60 days or the entrance of an order or decree
approving or ordering any of the foregoing; or
(d) The (i) voluntarily commencement of any proceeding or
filing of any petition seeking relief under Title 11 of the United States Code,
as now constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) granting of consent to
the institution of, or failure to contest in a timely and appropriate manner,
any proceeding or the filing of any petition described in clause (c) above,
(iii) application for or granting of consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for Payor or
any Subsidiary or for a substantial part of the property or assets of Payor or
any Subsidiary, (iv) filing of an answer admitting the material allegations of a
petition field against it in any such proceeding, (v) making of a general
assignment for the benefit of creditors, (vi) becoming unable, admitting in
writing such inability or failing generally to pay its debts as they become due
or (vii) taking of any action for the purpose of effecting any of the foregoing,
in each case, by Payor or any Subsidiary; or
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(e) The rendering of one or more judgments for the payment of
money in the aggregate amount in excess of $5,000,000 against Payor, any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 60 consecutive days during which execution shall not be effectively
stayed, or the legal taking of any action by a judgment creditor to levy upon
assets or properties of Payor or any Subsidiary to enforce any such judgment.
If an Event of Default specified in Section 2(a) or 2(b) shall
have occurred and be continuing and any Senior Debt shall then be outstanding,
subject to the provisions of Section 4 hereof, Payee may, at its option, by
notice in writing to Payor and to Chase (the "Acceleration Notice"), declare the
entire principal amount of this Note and the interest accrued thereon to be due
and payable upon the earlier of (i) one hundred fifty (150) days after the
receipt of the Acceleration Notice by Xxxxx and Chase or (ii) an acceleration
under the Senior Debt Documents, and upon any such declaration the same shall
become due and payable at such time. If an Event of Default specified in Section
2(a) or 2(b) shall have occurred and be continuing and no Senior Debt shall then
be outstanding, Payee may, at its option, declare the entire principal amount of
this Note and the interest accrued thereon to be due and payable upon the date
which is five Business Days after the date of delivery by Payee to Payor of a
written notice of acceleration, and upon any such declaration the same shall
become due and payable at such time. If an Event of Default specified in Section
2(c) or 2(d) hereof occurs, the principal balance of and accrued interest on
this Note shall become due and payable immediately without any declaration or
other act on the part of Payee.
If any Event of Default shall have occurred and be continuing,
subject to the provisions of Sections 2 and 4 hereof, Payee may proceed to
protect and enforce its rights either
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by suit in equity or by action at law, or both, whether for specific performance
of any provision of this Note or in aid of the exercise of any power granted to
Payee under this Note.
3. Covenants.
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3.1. Affirmative Covenants. Payor covenants and agrees that for so long
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as any indebtedness evidenced by this Note shall remain outstanding, unless
waived by Payee, Payor shall promptly give notice to Payee of (i) any default or
Event of Default hereunder or in connection with any Indebtedness having an
aggregate principal amount in excess of $25,000,000, other than the Senior Debt,
(ii) any notice of an "Event of Default" (as defined in the Senior Debt
Documents) permitting the holder or holders of the Senior Debt to accelerate
such Senior Debt given to Payor by any holder of Senior Debt or its agent or
(iii) any acceleration of the Senior Debt or any other Indebtedness of Payor
having an aggregate principal amount in excess of $25,000,000.
3.2. Negative Covenants. Payor covenants and agrees that for so long as
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any indebtedness evidenced by this Note remains outstanding, Payor will not,
without the written consent of Xxxxx:
(a) liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of related transactions, all or
substantially all of its assets; provided, however, that the foregoing shall not
apply in any way to the foreclosure, sale or other disposition of collateral
pledged to secure Senior Debt pursuant to any judicial proceeding or by or at
the direction of the holders of any Senior Debt or any agent or other
representative acting on their behalf; or
(b) merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, except that:
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(i) (A) Payor may merge or consolidate with a Subsidiary or (B)
a Subsidiary may merge or consolidate with Payor, in each case so long as Payor
is the surviving entity;
(ii) any Subsidiary may merge or consolidate with any
Subsidiary; and
(iii) Payor or any Subsidiary may merge or consolidate with any
other Person; provided, however, that (A) Payor or such Subsidiary is the
surviving entity; (B) no Event of Default or event which, with notice or the
passage of time or both, would constitute an Event of Default exists after
giving effect to such merger or consolidation; and (C) Payee shall receive a
certificate signed by a Financial Officer of Payor confirming compliance with
clause (B) above.
4. Subordination
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4.1. Note Subordinated to Senior Debt. To the extent and in the manner
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hereinafter set forth in this Section 4, the indebtedness represented by this
Note and the payment of the principal of and the interest on this Note and any
claim for rescission of the purchase of this Note, and any claim which is the
equivalent of or substitute for principal of or interest on this Note, for
damages arising from the purchase of this Note or for reimbursement or
contribution on account of such a claim, and all other payments with respect to
or on account of this Note (collectively, the "Subordinated Debt") are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full in cash of all Senior Debt. This Section 4 constitutes a continuing
offer to all Persons who become holders of, or continue to hold, Senior Debt,
each of whom is an obligee hereunder and is entitled to enforce such holder's
rights hereunder, subject to the provisions hereof, without any act or notice of
acceptance hereof or reliance hereon. For purposes of this Section 4, Senior
Debt shall not be deemed to have been paid in full until the
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termination of all commitments or other obligations by any holder thereof and
unless all such holders shall have received indefeasible payment in full in cash
of all obligations under or in respect of Senior Debt (including, without
limitation, Post-Petition Interest).
4.2. No Payment on Note in Certain Circumstances.
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(a) During the continuance of any default in the payment of
any Senior Debt, whether at maturity, upon redemption or pursuant to
acceleration or otherwise (each, a "Payment Default"), no direct or indirect
payment of any kind shall be made, asked for, demanded, accepted, received or
retained with respect to principal, interest or other amounts due under the Note
nor shall any holder thereof exercise any remedies with respect thereto.
(b) Upon the occurrence of any default (other than a Payment
Default) under the Credit Agreement or any other Senior Debt Document which
would permit the Lenders (or any other holder of Senior Debt) to accelerate the
maturity of the Senior Debt outstanding thereunder (whether after the giving of
notice, the lapse of time, or both or otherwise) (each, a "Non-Payment
Default"), no payment or distribution (including any payment or distribution
that may be payable by reason of any other indebtedness of Payor being
subordinated to payment of the Subordinated Debt) shall be made by or on behalf
of Payor for or on account of or in respect of the Subordinated Debt until such
Non-Payment Default shall have been cured or waived or otherwise ceases to exist
pursuant to the terms of such Senior Debt, or the benefits of this sentence
shall have been waived by or on behalf of, and at the sole option of, the
holders of a majority of the principal amount of such Senior Debt.
Notwithstanding the foregoing, the suspension of payments described in the
preceding sentence shall terminate, and the Payor shall be obligated to make all
payments of principal and interest on this Note, including any payments not made
by virtue of such suspension, if any holder or holders of the relevant Senior
Debt has
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not, on or prior to the 180th day after the occurrence of the Non-Payment
Default under the Senior Debt, declared all unpaid principal and interest on
such Senior Debt to be immediately due and payable, unless such Non-Payment
Default shall have been cured or waived or otherwise ceases to exist pursuant to
the terms of such Senior Debt, or the benefits of the previous sentence shall
have been waived by or on behalf of, and at the sole option of, the holders of a
majority of the principal amount of such Senior Debt.
(c) Payee agrees that, so long as payments or distributions
for or on account of the Subordinated Debt are not permitted pursuant to this
Section 4, Payee will not take, sue for, ask or demand from Payor payment of all
or any amounts under or in respect of this Note, or commence, or join with any
creditor other than the holders of Senior Debt and their agents in commencing,
directly or indirectly cause Payor to commence, or assist Payor in commencing,
any proceeding referred to in Section 4.3, and Payee shall not take or receive
from Payor, directly or indirectly or on its behalf, in cash or other property
or by set-off or in any other manner, including, without limitation, from or by
way of collateral, payment of all or any amounts under or in respect of the
Subordinated Debt. In the event that notwithstanding the foregoing provisions of
this Section 4.2, any payment or distribution of any kind or character, whether
in cash, property or securities (including any payment or distribution that may
be payable by reason of any other indebtedness of Payor being subordinated to
payment of the Subordinated Debt), shall be received by Payee for or on account
of or in respect of the Subordinated Debt before all Senior Debt is indefeasibly
paid in full, such payment or distribution shall be received and held in trust
for, and shall be paid over (in the same form as so received, to the extent
practicable, and with any necessary endorsement) to the holders of the Senior
Debt remaining unpaid or their representative or representatives, or to the
trustee or trustees under any such indenture or
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agreement under which any Senior Debt may have been issued, for application (in
the case of cash) to, or as collateral (in the case of non-cash property or
securities) for the payment or prepayment of Senior Debt, until all Senior Debt
shall have been paid in full in cash, after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.
4.3. Dissolution; Liquidation; Bankruptcy; Acceleration. In the event
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of (i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar proceeding in connection therewith,
relative to the Payor or any of its assets, or (ii) any liquidation, dissolution
or other winding up of the Payor, whether voluntary or involuntary or whether or
not involving insolvency or bankruptcy, or (iii) any assignment for the benefit
of creditors or any other marshalling of assets or liabilities of the Payor, or
(iv) the acceleration of the Senior Debt by reason of the occurrence of a
default or an event of default thereunder (each such event, if any, herein
sometimes referred to as a "Proceeding"):
(a) The holders of all Senior Debt shall first be entitled to
receive payment in full in cash of all Senior Debt before any direct or indirect
payment may be made for or on account of payments under or in respect of the
Subordinated Debt, whether in cash, property or securities of any kind;
(b) Any payment or distribution of any kind or character,
whether in cash, property or securities (including any payment or distribution
that may be payable by reason of any other indebtedness of Payor being
subordinated to payment of the Subordinated Debt), to which Xxxxx would be
entitled except for the provisions of this Section 4, shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other trustee or agent, directly to the holders of Senior Debt or their
representative or representatives, or to the trustee or trustees
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under any indenture under which any instrument evidencing any of such Senior
Debt may have been issued for application (in the case of cash) to, or as
collateral (in the case of non-cash property or securities) for the payment or
prepayment of Senior Debt, to the extent necessary to make payment in full of
all Senior Debt remaining unpaid, after giving effect to any concurrent payment
or distribution to the holders of such Senior Debt.
(c) The holders of Senior Debt are hereby irrevocably authorized
and empowered (in their own names or in the name of Payee or otherwise), but
shall have no obligation, to demand, sue for, collect and receive every payment
or distribution referred to in paragraph (b) above and give acquittance therefor
and to file claims and proofs of claim and take such other action (including,
without limitation, voting the amounts owing under the Subordinated Debt or
enforcing any security interest or other lien securing payment of the amounts
owing under the Subordinated Debt) as they may deem necessary or advisable for
the exercise or enforcement of any of the rights or interests of the holders of
Senior Debt hereunder.
(d) Xxxxx shall duly and promptly take such action as the
holders of Senior Debt may reasonably request to execute and deliver to the
holders of Senior Debt such powers of attorney, assignments, or other
instruments as the holders of Senior Debt may request in order to enable the
holders of Senior Debt to enforce any and all claims with respect to, and any
security interests and other liens securing payment of, the amounts owing under
the Subordinated Debt.
(e) In the event that notwithstanding the foregoing provisions
of this Section 4.3, any payment or distribution of any kind or character,
whether in cash, property or securities (including any payment or distribution
that may be payable by reason of any other indebtedness of Payor being
subordinated to payment of the Subordinated Debt), shall be received by Payee
for or on account of or in respect of the Subordinated Debt before all Senior
Debt is indefeasibly
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paid in full, such payment or distribution shall be received and held in trust
for, and shall be paid over (in the same form as so received, to the extent
practicable, and with any necessary endorsement) to the holders of the Senior
Debt remaining unpaid or their representative or representatives, or to the
trustee or trustees under any such indenture or agreement under which any Senior
Debt may have been issued, for application (in the case of cash) to, or as
collateral (in the case of non-cash property or securities) for the payment or
prepayment of Senior Debt, until all Senior Debt shall have been paid in full in
cash, after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
4.4. Subrogation. Upon the final payment in full in cash of all Senior
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Debt, Payee shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of Payor
applicable to the Senior Debt until the principal of and interest on and all
other amounts payable under the Subordinated Debt shall be paid in full, and for
the purposes of such subrogation, no payments or distributions to the holders of
the Senior Debt of any cash, property or securities to which Xxxxx would be
entitled except for the provisions of this Section 4 and no payment pursuant to
the provisions of this Section 4 to the holders of Senior Debt by Payee shall,
as between Payor, its creditors other than holders of Senior Debt, and Payee, be
deemed to be a payment by Payor to or on account of the Senior Debt. It is
understood that the provisions of this Section 4 are and are intended solely for
the purpose of defining the relative rights of Xxxxx, on the one hand, and the
holders of the Senior Debt, on the other hand.
4.5. Obligations of Payor Unconditional. Nothing contained in this
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Section 4 or elsewhere in this Note is intended to or shall impair, as among
Payor, its creditors other than the holders of Senior Debt, and Payee, the
obligation of Payor, which is absolute and unconditional,
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to pay to Payee the principal of and interest on and all other amounts due under
this Note in accordance with its terms, or is intended to or shall affect the
relative rights of Payee and creditors of Payor other than the holders of the
Senior Debt, nor shall anything herein prevent Payee from exercising all
remedies otherwise permitted by applicable law upon default under this Note,
subject to the provisions of this Section 4 and to the rights of holders of
Senior Debt to receive distributions and payments otherwise payable to Payee.
4.6. Reliance on Judicial Order or Certificate of Liquidating Agent.
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Upon any payment or distribution of assets of Payor referred to in this Section
4, Payee shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation
or reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, delivered to Payee, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Debt and other indebtedness of Payor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to Section 4 of this Note.
4.7. Subordination Rights Not Impaired by Amendment or Waiver. No
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amendment, waiver or other modification of this Note shall in any way adversely
affect the rights of the holders of any Senior Debt under this Section 4 unless
such holders of Senior Debt consent in writing to such amendment, waiver or
modification. The provisions of this Section 4 are intended for the benefit of
and shall be enforceable directly by the holders of the Senior Debt.
4.8. Further Assurances. Payee and Payor each will, at Payor's expense
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and at any time and from time to time, promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the holders of Senior Debt
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may request, in order to protect any right or interest granted or purported to
be granted hereby or to enable the holders of Senior Debt to exercise and
enforce their rights and remedies hereunder.
4.9. Agreements in Respect of Subordinated Debt.
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(a) Xxxxx agrees that it will not make any payment for or on
account of or in respect of this Note, or take any other action, in
contravention of the provisions of this Section 4.
(b) Payee shall promptly notify the holders of Senior Debt, at
The Chase Manhattan Bank, Agent Bank Services Group, One Chase Manhattan Plaza,
8th Floor, New York, New York, 10081, Attention of Xxxxxxxxx Xxxxx, or such
other address of which Xxxxx has been notified in writing, of the occurrence of
any default under this Note of which Payee shall obtain knowledge.
4.10. Obligations Hereunder Not Affected. All rights and interests of
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the holders of Senior Debt hereunder, and all agreements and obligations of
Payee and Payor under this Section 4, shall remain in full force and effect
irrespective of:
(i) any lack of validity or enforceability of any of
the Guarantee Agreements or any successor guaranty of the Credit
Agreement or any other Senior Debt Document;
(ii) any change in the time, manner or place of
payment of, all or any of the Senior Debt, or any other amendment or
waiver of or any consent to any departure from the Credit Agreement or
any of the Guarantee Agreements or any successor guaranty or any other
Senior Debt Document, including, without limitation, any increase in
the Senior Debt resulting from the extension of additional credit to
Payor or any of its Subsidiaries or otherwise;
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(iii) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release, amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Debt;
(iv) any manner of application of collateral, or proceeds thereof,
to all or any of the Senior Debt, or any manner of sale or other
disposition of any collateral for all or any of the Senior Debt or any
other assets of Payor or any of its Subsidiaries; or
(v) any change, restructuring or termination of the corporate
structure or existence of Payor or any of its Subsidiaries.
The provisions of this Section 4 shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by the holders of Senior Debt
upon the insolvency, bankruptcy or reorganization of Payor or otherwise, all as
though such payment had not been made.
4.11. Waiver. Payee and Payor each hereby waives promptness, diligence,
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notice of acceptance and any other notice with respect to any of the Senior
Debt, the Note and this Section 4 and any requirement that the holders of Senior
Debt protect, secure, perfect or insure any security interest or lien on any
property subject thereto or exhaust any right or take any action against Payor
or any other person or entity or any collateral.
4.12. No Waiver; Remedies. No failure on the part of the holders of
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Senior Debt to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
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4.13. Continuing Agreement; Assignments Under Senior Debt Agreements.
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The provisions of this Section 4 constitute a continuing agreement and shall (i)
remain in full force and effect until the indefeasible payment in full in cash
of the Senior Debt, (ii) be binding upon Payee, Payor and their respective
successors and assigns, and (iii) inure to the benefit of, and be enforceable
by, the holders of Senior Debt and their successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), the holders of
Senior Debt may assign or otherwise transfer all or any portion of their rights
and obligations under the Credit Agreement or any other Senior Debt Document, as
applicable, to any other person or entity to the extent provided in the Credit
Agreement, and such other person or entity shall thereupon become vested with
all the rights in respect thereof granted to the holders of Senior Debt herein
or otherwise.
5. Certain Definitions
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"Bankruptcy Law" means Title 11, United States Code, or any
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similar federal, state or foreign law for the relief of debtors or any
arrangement, reorganization, assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of Payor.
"Business Day" means any day (other than a day which is a Saturday,
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Sunday or legal holiday in the State of New York) on which banks are open for
business in New York City.
"Capital Stock" means, with respect to any Person, any and all
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shares, interests, participations, warrants, options or other equivalents
(however designated) of capital stock of such Person (if a corporation) and any
and all equivalent ownership interests in such Person (if other than a
corporation), in each case whether now outstanding or hereafter issued.
"Chase" means The Chase Manhattan Bank, as agent for the lenders
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under the Credit Agreement, and its successors and assigns.
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"Credit Agreement" means the Credit Agreement dated as of October 15,
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1997 by and among Payor, the lenders named therein (the "Lenders") and The Chase
Manhattan Bank, as agent for the Lenders, together with the related documents
thereto (including without limitation any guarantee agreements and security
documents), in each case as such agreement or document may be amended, modified
or supplemented from time to time, including without limitation any agreement or
document extending the maturity of, refinancing, replacing or otherwise
restructuring all or any part of the Indebtedness under such agreement or
document or any replacement or successor agreement or document and whether by
the same or any other agent, lender or group of lenders.
"Event of Default" means any of the occurrences specified under
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Sections 2(a) through 2(d) of this Note.
"Indebtedness" of any Person means, without duplication, (a)
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all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services, (f)
all Indebtedness of others secured by (or for which the holders of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange
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agreements or other interest or exchange rate hedging arrangement and (j) all
obligations of such Person as an account party in respect of letters of credit
(other than (x) documentary letters of credit (including commercial and trade
letters of credit) issued to secure payment obligations in respect of goods and
services in the ordinary course of business and (y) letters of credit and fully
accounted for a liabilities in the financial records of such Person) and
bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any partnership in which such Person is a general partner.
"Person" means any natural person, corporation, business trust, joint
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venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.
"Refinancing Debt" means any indebtedness incurred to repay,
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refinance or otherwise replace indebtedness or obligations (including, without
limitation, commitments) under the Credit Agreement.
"Senior Debt" means all obligations of Payor (including without
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limitation contingent obligations with respect to undrawn letters of credit
issued under the Credit Agreement, any obligations owed with respect to
indemnification obligations, interest rate protection classified as Obligations
under the Credit Agreement and commitment fees and agency fees payable
thereunder or pursuant thereto) (i) under the Credit Agreement and the other
Senior Debt Documents and (ii) with respect to Refinancing Debt (including in
each such case fees, expenses, claims, charges, indemnity obligations and
interest at the contract rate (including any rate applicable upon default)
accrued or accruing after the commencement of a Proceeding whether or not such
interest is an allowed claim enforceable against the debtor in a bankruptcy case
under Title 11 of the United States Code or whether or not such interest accrues
after the
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filing of such petition for purposes of such Title ("Post-Petition Interest")).
Senior Debt outstanding under or in respect of Senior Debt Documents shall
continue to constitute Senior Debt notwithstanding that such Senior Debt may be
disallowed, avoided or subordinated pursuant to any Bankruptcy Law or other
applicable insolvency law or equitable principles.
"Senior Debt Documents" means the Credit Agreement and any other
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agreement, indenture, mortgage, guaranty, pledge, security agreement or
instrument evidencing or securing Senior Debt or pursuant to which Senior Debt
is incurred.
"subsidiary", with respect to any Person, any corporation or
----------
other entity, whether such corporation or entity now exists or shall hereafter
be created, of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Subsidiary" means any subsidiary of Payor.
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6. Miscellaneous
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6.1. Section Headings. The section headings contained in this Note are
-----------------
for reference purposes only and shall not affect the meaning or interpretation
of this Note.
6.2. Amendment and Waiver. Subject to Section 6.9, no provision of this
--------------------
Note may be amended or waived unless Payor shall have obtained the written
agreement of Payee and (unless there are no Obligations outstanding under the
Credit Agreement) Chase. No failure or delay in exercising any right, power or
privilege hereunder shall imply or otherwise operate as a waiver of any rights
of Payee, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege.
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6.3. Successors, Assigns and Transferors. This Note may not be assigned
------------------------------------
or transferred by Payee to (x) any competitor, customer or supplier of Payor or
any of its Subsidiaries or (y) to any other Person if such assignment or
transfer would cause any interest payments due under this Note to become
non-deductible as an expense for any tax purposes. Payor may not assign its
obligations under this Note without the prior written consent of Payee except in
connection with a transaction permitted under Section 3.2(b) hereof. Subject to
the foregoing, the obligations of Payor and Payee under this Note shall be
binding upon, and inure to the benefit of, and be enforceable by, Payor and
Payee, and their respective successors and permitted assigns, whether or not so
expressed.
6.4. Governing Law. This Note shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York without giving effect to any
conflicts of laws principles thereof that would otherwise require the
application of the law of any other jurisdiction.
6.5. Lost, Stolen, Destroyed or Mutilated Note. Upon receipt of evidence
-----------------------------------------
reasonably satisfactory to Payor of the loss, theft, destruction or mutilation
of this Note and of indemnity arrangements reasonably satisfactory to Payor from
or on behalf of the holder of this Note, and upon surrender or cancellation of
this Note if mutilated, Payor shall make and deliver a new note of like tenor in
lieu of such lost, stolen, destroyed or mutilated Note, at Xxxxx's expense.
6.6. Waiver of Presentment, Etc. Except as otherwise provided herein,
--------------------------
presentment, demand, protest, notice of dishonor and all other notices are
hereby expressly waived by Payor.
6.7. Notices. Any notice, request, instruction or other document to be
-------
given hereunder by either party to the other shall be in writing and shall be
deemed given when received and shall be (i) delivered personally or (ii) mailed
by certified mail, postage prepaid, return receipt requested or (iii) delivered
by Federal Express or a similar overnight courier, as follows:
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If to Payor, addressed to:
-------------------------
Sunburst Hospitality Corporation
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
If to Payee, addressed to:
-------------------------
Choice Hotels International, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other party.
In the event that any notice under this Note is required to be made
on or as of a day which is not a Business Day, then such notice shall not be
required to be made until the first day thereafter which is a Business Day.
6.8. Representations and Warranties of Payor. Payor hereby represents
---------------------------------------
and warrants to Payee that: (a) Payor is duly incorporated, validly existing and
in good standing under the laws of the State of Delaware; (b) Payor has duly
authorized, executed and delivered this Note; and (c) this Note constitutes a
legally valid and binding obligation of Payor, enforceable against Payor in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors and the effect of
general principles of equity, whether enforcement is considered in a proceeding
in equity or at law, and the discretion of the court before which any proceeding
therefor may be brought.
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6.9. Action by Payee. Subject to the provisions of this Section 6.9,
----------------
Payee and Payor may enter into agreements for the purpose of adding or modifying
provisions of this Note or changing in any manner the rights of the Payee or
Payor hereunder or waiving any covenant, default or Event of Default hereunder;
provided, however, that no supplemental agreement shall, without the consent of
the Payee: (a) extend the stated maturity of this Note or reduce the principal
amount hereof, or reduce the rate or change the time of payment of interest due
on this Note; or (b) amend this Section 6.9; and provided, further, that no
change may be made to this Note which would either modify the subordination
provisions hereof or would otherwise adversely affect the rights of the holders
of Senior Debt without the written consent, prior to the indefeasible repayment
thereof in cash, of the Required Lenders (as defined in the Credit Agreement)
and thereafter the holders of a majority in principal amount of Senior Debt.
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IN WITNESS WHEREOF, Xxxxx has executed and delivered this Note as of
the date hereinabove first written.
SUNBURST HOSPITALITY CORPORATION
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
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Acknowledgment
--------------
Choice Hotels International, Inc., Payee under the attached
Subordinated Promissory Note, dated as of October 15, 1997 (the "Note") hereby
acknowledges the provisions of Section 4 and Section 6.9 of the Note and agrees
to be bound by the provisions thereof.
/s/ Xxxxxxx X. XxXxxxxx
By: Xxxxxxx X. XxXxxxxx
Title: Senior Vice President
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