Exhibit 99.2
FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $847,10,
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $152.90, THE ISSUE DATE IS
JANUARY 4, 2001 AND THE YIELD TO MATURITY IS 11.375% PER ANNUM.
- --------------------------------------------------------------------------------
11.375% Series A Senior Subordinated Discount Notes due 2008
No. 1 $41,318,000
SUNBURST HOSPITALITY CORPORATION
promises to pay to Choice Hotels International, Inc.
or registered assigns, the principal sum of Forty One Million Three Hundred
Eighteen Thousand Dollars on January 4, 2008.
Interest Payment Dates: January 4 and July 4.
Record Dates: December 15 and June 15.
Dated: January 4, 2001.
SUNBURST HOSPITALITY CORPORATION
By: /s/ James MacCutcheon
----------------------------
Name:
Title:
By: /s/ Kevin Hanley
----------------------------
Name:
Title:
This is one of the Notes referred to in (SEAL)
the within-mentioned Indenture:
Wilmington Trust Company,
as Trustee
By: /s/ Illegible
----------------------------
Authorized Signatory
11.375% Series A Senior Subordinated Discount Notes due 2008
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON
WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION
OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN ACCRETED VALUE/AGGREGATE
PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN $______, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST
HEREIN WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U-S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cash interest will not accrue on the Notes prior to July 4,
2002. Prior to July 4, 2002, original issue discount on the Notes will accrete
at a rate of 11.375%, compounded semi-annually to an aggregate principal amount
of $41,318,000 on July 4, 2002. Sunburst Hospitality Corporation, a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 11.375% per annum from July 4, 2002 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement. The Company will pay interest and Liquidated Damages semi-annually in
arrears on January 4 and July 4 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 4, 2002;
provided that if there is no existing Default in the payment of interest, and if
this Note is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be January 4, 2003. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes as set
forth above (except defaulted interest) and Liquidated Damages to the Persons
who are registered Holders of Notes at the close of business on the December 15
or June 15 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Wilmington Trust Company, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
January 4, 2001 ("Indenture") between the Company, the Guarantors named therein
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to
$41,318,000 in aggregate principal amount, plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in subparagraph (a) and (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option.
(b) At any time prior to January 4, 2005, the Company may redeem all, but
not less than all, of the Notes upon not less than 30 nor more than 60 days
prior notice mailed by first-class mail to each Holder's registered address, at
a redemption price equal to 100% of the Accreted Value of Notes redeemed plus
the Applicable Premium as of, and Liquidated Damages, if any, to the date of
redemption (if prior to July 4, 2002) or 100% of the principal amount of Notes
redeemed plus the Applicable Premium as of, and accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption (if on or after July 4,
2002). The date of redemption for the purposes of this paragraph (a) shall be
referred to in the Indenture as the "Redemption Date."
(c) On or after January 4, 2005, the Company may redeem all or a part of
the Notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, on the Notes
redeemed, to the applicable redemption date, if redeemed during the twelve-month
period beginning on January 4 of the years indicated below:
Year Percentage
---- ----------
2005 .............................. 105.6875%
2006 .............................. 102.84375%
2007 and thereafter ............... 100.000%
6. MANDATORY REDEMPTION.
Except as set forth in Paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDERS
(a) Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require the Company to make an offer (a "Change of Control
Offer") to repurchase all or any part (equal to $1,000 principal amount at
maturity or an integral multiple of $1,000 principal amount at maturity) of that
Holder's Notes at an offer price in cash equal to 101% of the Accreted Value of
Notes repurchased plus Liquidated Damages, if any, on the Notes repurchased, to
the date of repurchase (if prior to July 4, 2002) or 101% of the aggregate
principal amount of Notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, on the Notes repurchased, to the date of repurchase
(if on or after July 4, 2002) (the "Change of Control Payment"). Within ten days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, when the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall make
an Asset Sale Offer to all Holders of Notes and offers to purchase or redeem to
all holders of other Indebtedness that is pari passu with the Notes or a
Guarantor's Subsidiary Guarantee containing provisions similar to those set
forth in the
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum amount of Accreted Value of Notes (if
prior to July 4, 2002) or the maximum principal amount of Notes (if on or after
July 4, 2002) and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds, pursuant to Section 3.09 of the Indenture. The offer
price in any Asset Sale Offer shall be equal to 100% of Accreted Value plus
Liquidated Damages, if any, to the date of purchase (if prior to July 4, 2002)
or 100% of principal amount plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase (if on or after July 4, 2002), and
shall be payable in cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. Upon completion of each Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are
the subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount at
maturity of the then outstanding Notes voting as a single class, and any
existing default or compliance with any provision of the Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount at maturity of the then outstanding Notes
voting as a single class. Without the consent of any Holder of a Note, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Subsidiary Guarantee with respect to the
Notes.
12. DEFAULTS AND REMEDIES.
(a) Events of Default include: (i) default for 30 days in the payment when
due of interest on, or Liquidated Damages with respect to, the Notes whether or
not prohibited by the subordination provisions of the Indenture; (ii) default in
payment when due of the principal of, or premium, if any, on the Notes, whether
or not prohibited by the subordination provisions of the Indenture; (iii)
failure by the Company or any of its Subsidiaries to comply with the provisions
of Sections 4.07, 4.09, 4.10, 4.15 or 5.01 of the Indenture; (iv) failure by the
Company or any of its Subsidiaries for 60 days after notice to comply with any
of the other agreements in the Indenture; (v) default under certain other
agreements relating to Indebtedness of the Company which default (a) is caused
by a Payment Default or (b) results in the acceleration of such Indebtedness
prior to its express maturity, and the aggregate principal amount of such
Indebtedness so accelerated is $10 million or more; (vi) certain final judgments
for the payment of money aggregating in excess of $10 million that remain
undischarged for a period of 60 days; (vii) except as permitted by the
Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee; (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Restricted Subsidiaries that are Significant Subsidiaries; and (viii)
certain events of bankruptcy or insolvency described in the Indenture with
respect to the Company or any of its Restricted Subsidiaries that are
Significant Subsidiaries.
(b) If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of the then outstanding
Notes may declare all the Notes to be due and payable. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes will become due and payable
immediately without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount at maturity of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest or Liquidated Damages) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount at maturity of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes or Liquidated Damages. The Company is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator
or stockholder, of the Company or any Guarantor, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of January 4, 2001, between the Company and the parties named on the
signature pages thereof (the "Registration Rights Agreement").
18. 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 Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Sunburst Hospitality Corporation
10770 Columbia Pike
Silver Spring, Maryland 20901
Telecopier No.: (301) 592-3935
Attention: General Counsel
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
----------------------------------
(Insert assignee's legal name)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
---------------
Your Signature:
----------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:
--------------
* Participant in a recognized Signature Guarantee Mcdallion Program (or other
signature guarantor acceptable to the Trustee).
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
--------------
Date:
--------------
Your Signature:
----------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
--------------------------------------------
Signature Guarantee*:
--------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).