EXHIBIT 1.2
$100,000,000
SIGNATURE RESORTS, INC.
____ CONVERTIBLE SUBORDINATED NOTES DUE 2007
UNDERWRITING AGREEMENT
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January __, 1997
▇▇▇▇▇▇▇▇▇▇ SECURITIES
▇▇▇▇▇▇▇, SACHS & CO.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
As Representatives of the several Underwriters
c/▇ ▇▇▇▇▇▇▇▇▇▇ SECURITIES
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
SECTION 1. Introductory. Signature Resorts, Inc., a Maryland
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corporation (the "Company"), proposes to issue and sell an aggregate of
$100,000,000 principal amount of its ____% Convertible Subordinated Notes Due
2007 (the "Firm Notes") to be issued under an indenture, to be dated as of
__________, 1997 (the "Indenture"), between the Company and Norwest Bank
Minnesota, National Association as Trustee (the "Trustee"), to the several
underwriters named in Schedule A annexed hereto (the "Underwriters") for whom
you are acting as representatives (the "Representatives"). In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
aggregate of $15,000,000 principal amount of the Securities (the "Option Notes")
as provided in Section 5 hereof. The Firm Notes and, to the extent such option
is exercised, the Option Notes are hereinafter collectively referred to as the
"Notes."
Concurrently with the offering of the Notes, the Company proposes to
issue and sell 1,600,000 shares of its authorized but unissued common stock,
$.01 par value (the "Common
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Stock"), and several stockholders of the Company propose to sell 1,400,000
shares of the Company's issued and outstanding Common Stock (the "Common
Shares").
You have advised the Company that the Underwriters propose to make a
public offering of their respective portions of the Notes on the effective date
of the Registration Statement hereinafter referred to, or as soon thereafter as
in your judgment is advisable.
The Company hereby confirms its respective agreements with respect to
the purchase of the Notes by the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The
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Company hereby represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-18447) with
respect to the Notes has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") thereunder and has been filed
with the Commission. The Company has also taken such actions as are
necessary to qualify the Indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"). There have been delivered to you
two signed copies of such registration statement and any amendments
thereto, together with two copies of each exhibit filed therewith.
Conformed copies of such registration statement and amendments (but without
exhibits) and of the related preliminary prospectus have been delivered to
you in such reasonable quantities as you have requested for each of the
Underwriters. The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, or (ii)
a final prospectus in accordance with Rules 430A and 424(b) of the Rules
and Regulations. As filed, such amendment and form of final prospectus, or
such final prospectus, shall include all Rule 430A Information (as
hereinafter defined) and, except to the extent that you shall agree in
writing to a modification, shall be in all
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substantive respects in the form furnished to you prior to the date and
time that this Agreement was executed and delivered by the parties hereto,
or, to the extent not completed at such date and time, shall contain only
such specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Representatives
shall have approved.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the First Closing Date, shall also mean such
registration statement as so amended; provided, however, that such term
shall also include all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes
effective as provided by Rule 430A of the Rules and Regulations. The term
"Preliminary Prospectus" shall mean any preliminary prospectus referred to
in the preceding paragraph and any preliminary prospectus included in the
Registration Statement at the time it becomes effective that omits Rule
430A Information. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Notes in the form in which it is first
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or, if no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, shall mean the form of final prospectus included
in the Registration Statement at the time such registration statement
becomes effective. The term "Rule 430A Information" means information with
respect to the Notes and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule 430A
of the Rules and Regulations.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the applicable requirements of the
Act, the Rules and Regulations and the Trust Indenture Act and, as of its
date, has not included any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in the
light of the
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circumstances under which they were made, not misleading; and at the time
the Registration Statement becomes effective, and at all times subsequent
thereto up to and including each Closing Date (as hereinafter defined), the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, will contain all material statements and information
required to be included therein by the Act, the Rules and Regulations and
the Trust Indenture Act and will in all material respects conform to the
requirements of the Act, the Rules and Regulations and the Trust Indenture
Act, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty contained in this Section
2(b) shall be applicable to information contained in or omitted from any
Preliminary Prospectus, the Registration Statement, the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished pursuant to Section 3 of this Agreement to
the Company by or on behalf of any Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof.
(c) The Company has been duly formed and is validly existing as a
corporation, is in good standing under the laws of the State of Maryland,
with full power and authority (corporate and other) to conduct its business
as currently conducted or as described in the Prospectus.
(d) Each of the Company's affiliates (as defined in Rule 144(a) under
the Act) and subsidiaries which is material to the operation of the
Company, considered as whole (the "Company Affiliates and Subsidiaries")
has been duly formed and is validly existing as a partnership, limited
liability company or corporation, as applicable, in good standing under the
laws of its jurisdiction of formation, with full power and authority
(partnership and other) to own and lease its properties and conduct its
respective businesses as currently conducted or described in the
prospectus, except where the failure to be in good standing would not have
a material adverse effect on the condition (financial or otherwise),
business,
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properties, results of operations or prospects of the Company and the
Company Affiliates and Subsidiaries, considered as one entity (a "Material
Adverse Effect").
(e) The Company and each of the Company Affiliates and Subsidiaries
are in possession of and operating in compliance with all authorizations,
licenses, permits, consents, certificates and orders material to the
conduct of their respective businesses, all of which are valid and in full
force and effect; the Company and each of the Company Affiliates and
Subsidiaries are duly qualified to do business and in good standing as a
foreign corporation, partnership or limited liability company, as
applicable, in each jurisdiction in which the conduct of their respective
businesses requires such qualification, except where the failure to be so
qualified and in good standing would not have a Material Adverse Effect;
and to the Company's knowledge no proceeding has been instituted or
threatened in any such jurisdiction revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification.
(f) As of September 30, 1996, the Company has an authorized and
outstanding capital stock as set forth under the column captioned "Actual"
under the heading "Consolidated Capitalization" in the Prospectus; the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities and will conform to the description
thereof contained in the Registration Statement and the Prospectus. The
form of the certificate, if any, evidencing the Common Stock complies with
all applicable requirements of Maryland law. All of the shares of Common
Stock issuable upon conversion of the Notes have been duly authorized and
duly reserved for issuance upon such conversion and, when issued upon
conversion of the Notes pursuant to the terms of the Indenture, will be
validly issued, fully paid and the Notes nonassessable. No preemptive
rights or other rights to subscribe for or purchase Common Stock will exist
with respect to the issuance and sale of the Common Shares upon
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conversion of the Notes. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company and the related
notes thereto, as of the First Closing Date the Company does not have
outstanding any options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase such securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares
of its capital stock, partnership interests or limited liability company
interests, as the case may be, or any such options, rights, convertible
securities or obligations. The description of the Company's share option,
share bonus and other share plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
(g) The Notes have been duly authorized and, when issued, delivered
and paid for in the manner set forth in this Agreement and the Indenture,
will be duly executed, authenticated and delivered and will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture under which they are to be issued, which
will be in substantially the form filed as an exhibit to the Registration
Statement subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Indenture has been duly authorized and duly
qualified under the Trust Indenture Act and, when executed and delivered by
the Company and the Trustee, the Indenture will constitute a valid and
legally binding instrument enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles, and the Notes and the Indenture will conform to the
descriptions thereof in the Prospectus.
(h) The Company has full legal right, power and authority to enter
into this Agreement, the Notes and the Indenture and perform the
transactions contemplated hereby
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and thereby. The Company has all necessary corporate power and authority to
issue the Common Stock issuable upon conversion of the Notes. This
Agreement, the Notes and the Indenture have been duly authorized, executed
and delivered by the Company and constitutes a valid and binding obligation
of the Company in accordance with its terms. The making and performance of
this Agreement, the Notes and the Indenture by the Company and the
consummation of the transactions herein and therein contemplated (including
the issuance of Common Stock upon the conversion of the Notes), will not
violate any provisions of any partnership agreement, certificate of
partnership, charter, bylaws or other organizational documents, as
applicable, of the Company or any of the Company Affiliates and
Subsidiaries and will not conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time
or both, a default under (i) any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the
Company or any of the Company Affiliates and Subsidiaries is a party or by
which the Company, any of the Company Affiliates and Subsidiaries or any of
the Existing Resorts (as defined in the Prospectus) may be bound or
affected or (ii) any statute or any authorization, judgment, decree, order,
rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Company, any of the
Company Affiliates and Subsidiaries or any of the Existing Resorts, in each
case except as would not have a Material Adverse Effect. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required, including the
satisfaction of any requirements pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, for the execution and
delivery of this Agreement, the Notes and the Indenture or the consummation
of the transactions contemplated by this Agreement and the Indenture,
except for compliance with the Act, the Exchange Act, the Trust Indenture
Act, the Blue Sky and Canadian securities laws applicable to the public
offering of the Notes by the several Underwriters, the clearance of such
offering with the National Association of Securities Dealers, Inc. (the
"NASD") and except for any such consent, approval, authorization or other
order as has been or will be obtained prior to the First Closing Date.
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(i) Ernst and Young LLP ("E & Y") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇
▇▇▇▇▇▇▇▇") who have expressed their opinion with respect to the financial
statements and schedules filed with the Commission as a part of the
Registration Statement and included in the Prospectus and in the
Registration Statement, are independent accountants as required by the Act
and the Rules and Regulations.
(j) The consolidated financial statements of the Company, together
with the related notes thereto, set forth in the Registration Statement and
the Prospectus fairly present the financial condition of such entities as
of the dates indicated and the results of operations and changes in
financial position for the periods presented. The pro forma financial
statements, included in the Registration Statement and the Prospectus
comply in all material respects with the applicable requirements of Rule
11-02 of Regulation S-X of the Commission and the pro forma adjustments
have been properly applied to the historical amounts in the compilation of
such statements. Such statements, schedules and related notes have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis as certified by the independent accountants
named in Section 2(i). No other financial statements or schedules are
required to be included in the Registration Statement. The selected
financial data set forth in the Prospectus under the captions "Consolidated
Capitalization", "Selected Combined Historical Financial Information of the
Company" and "Summary Consolidated Historical and Pro Forma Financial
Information" fairly present the information set forth therein on the basis
stated in the Registration Statement.
(k) Except as disclosed in the Prospectus, the Company is not in
violation of any of its articles of organization or by-laws, and is not in
breach or default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which it is a party or by which it
or any of its properties are bound, or to which any of the property or
assets of the Company is subject except for any such violation, breach or
default that could not have a Material Adverse Effect.
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(l) There are no material contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which
have not been described or filed as required. The material contracts so
described in the Prospectus are in full force and effect on the date
hereof; and neither the Company or any of the Company Affiliates and
Subsidiaries, nor to the best of the Company's knowledge, any other party
is in breach of or default under any such material contracts.
(m) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or threatened to which
the Company or any of the Company Affiliates and Subsidiaries are a party
or of which any resort owned or leased by the Company Affiliates and
Subsidiaries is the subject, or related to environmental or discrimination
matters, which actions, suits or proceedings could reasonably be
anticipated to individually or in the aggregate, prevent or adversely
affect the transactions contemplated by this Agreement or have a Material
Adverse Effect. Neither the Company nor any of the Company Affiliates and
Subsidiaries is a party or subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
(n) Except as set forth in the Prospectus, the Company or the Company
Affiliates and Subsidiaries have good and marketable title to all of the
Existing Resorts, and, to the Company's knowledge and except as set forth
in the Prospectus, the Registration Statement on S-4 (Registration No. 333-
16339) filed by the Company with the Commission on November 19, 1996 as
amended by Amendment No. 1 filed by the Company with the Commission on
December 20, 1996 (the "S-4") or the schedules to the Merger Agreement (the
"Schedules"), upon consummation of the Agreement and Plan of Merger, dated
as of September 22, 1996, by and between the Company and AVCOM
International, Inc. ("AVCOM"), as amended (the "Merger Agreement"), the
Company or the Company Affiliates and Subsidiaries will have good and
marketable title to Scottsdale Villa Mirage Resort, Sedona Summit Resort,
Tahoe Beach & Ski Club, Villas on the Lake and The Ridge on Sedona Golf
Resort (collectively, the "Merger Properties"), subject
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to no lien, mortgage, pledge, charge or encumbrance of any kind except
those reflected in the financial statements or elsewhere in the Prospectus.
Except as disclosed in the Prospectus, the Company and each of the Company
Affiliates and Subsidiaries owns or leases all such properties as are
necessary to operate the Existing Resorts as now conducted or as proposed
to be conducted, except with respect to the Poipu Resort and the San ▇▇▇▇
Bay intervals.
(o) From September 30, 1996 through the date hereof, and except as
described in or specifically contemplated by the Registration Statement and
Prospectus: (i) the Company has not incurred any material liabilities or
obligations, indirect, direct or contingent, or entered into any material
verbal or written agreement or other transaction which is not in the
ordinary course of business or which could result in a material reduction
in the future earnings of the Company; (ii) the Company has not sustained
any loss or interference with its respective businesses or properties from
fire, flood, windstorm, accident or other calamity, whether or not covered
by insurance, that would have a Material Adverse Effect; (iii) the Company
has not paid or declared any dividends or other distributions with respect
to its capital stock, shares or interests, as applicable (other than such
dividends or distributions paid to shareholders to satisfy tax liabilities)
and the Company is not in arrears or default in the payment of principal or
interest on any outstanding material debt obligations; (iv) there has not
been any change (excluding transfers) in the capital stock (other than the
sale of the Common Shares under this Agreement) of the Company, or
indebtedness material to the Company (other than in the ordinary course of
business); and (v) there has not been any material adverse change in the
condition (financial or otherwise), business, properties, or results of
operations of the Company and its Subsidiaries, considered as one entity (a
"Material Adverse Change").
(p) Except as specifically disclosed in or specifically contemplated
by the Prospectus, the Company will have sufficient trademarks, trade
names, patent rights, copyrights, licenses or other similar rights and
proprietary knowledge (collectively, "Intangibles"), approvals and
governmental authorizations to conduct its businesses; the
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expiration of any Intangibles, approvals or governmental authorizations
will not have a Material Adverse Effect; and the Company has no knowledge
of any material infringement by it or any of the Company Affiliates and
Subsidiaries of any Intangibles, and there is no claim being made against
the Company or any of the Company Affiliates and Subsidiaries regarding any
Intangible or other infringement which could have a Material Adverse
Effect.
(q) Neither the Company nor any of the Company Affiliates and
Subsidiaries has been advised, or has reason to believe, that the Company
or any of the Company Affiliates and Subsidiaries is not conducting its
businesses in compliance with all applicable laws, rules and regulations of
the jurisdictions in which any of them is, including, without limitation,
all applicable local, state and federal environmental laws and regulations,
in each case except as would not have a Material Adverse Effect.
(r) The Company and each of the Company Affiliates and Subsidiaries
has filed all necessary federal, state and foreign income and franchise tax
returns and have paid all taxes shown as due thereon; and the Company has
no knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company in each case except as would not have a
Material Adverse Effect.
(s) Neither the Company nor any of the Company Affiliates and
Subsidiaries has distributed or will distribute prior to the First Closing
Date any offering material in connection with the offering and sale of the
Common Shares other than the Prospectus, the Registration Statement,
materials distributed in connection with the offering and sale of the
Common Stock and Notes and other materials permitted or not prohibited by
the Act and the Rules and Regulations.
(t) Neither the Company nor any of the Company Affiliates and
Subsidiaries has at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law or (ii) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public
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duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(u) Neither the Company nor any of the Company Affiliates and
Subsidiaries has taken or will take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Notes.
(v) The Company and the Company Affiliates and Subsidiaries have and
will maintain liability, property and casualty insurance (insured by
insurers of recognized financial responsibility) in favor of the Company,
or the Company Affiliates and Subsidiaries, with respect to each of the
Existing Resorts and, upon consummation of the Merger Agreement, and except
as set forth in the Prospectus, the S-4 or the Schedules, the Merger
Properties (except with respect to the Poipu Resort, such insurance
therefor being obtained and/or maintained by the Poipu Partnership), in an
amount and on such terms as is reasonable and customary for businesses of
the type proposed to be conducted by the Company, including, among other
things, insurance against theft, damage, destruction and acts of vandalism.
The Company has not received from any insurance company notice of any
material defects or deficiencies affecting the insurability of any such
resort.
(w) Title insurance in favor of the Company or the Company Affiliates
and Subsidiaries, is in force with respect to each of the Existing Resorts
in an amount reasonably acceptable to a reasonably prudent company in a
similar line of business (except with respect to the St. Maarten Resorts),
and upon consummation of the Merger Agreement, and except as set forth in
the Prospectus, the S-4 or the Schedules, title insurance in favor of the
Company or the Company Affiliates and Subsidiaries will be in force with
respect to the Merger Properties in an amount reasonably acceptable to a
reasonably prudent company in a similar line of business.
(x) The mortgages and deeds of trust encumbering the Existing Resorts
and, to the best knowledge of the Company, and except as set forth in the
Prospectus, the S-4 or the
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Schedules, the Merger Properties, are not convertible into equity
securities of the Company nor does the Company hold a participating
interest therein and such mortgages and deeds of trust are not cross-
defaulted or cross-collateralized to any property not to be owned, upon
consummation of the Merger Agreement, directly or indirectly by the
Company, and since the Initial Public Offering (as defined in the
Prospectus) and as of the date hereof, the Company has not acquired any
property subject to such mortgage.
(y) The Company and each of the Company Affiliates and Subsidiaries
(i) are in compliance with any and all applicable foreign, federal, state
and local rules, laws and regulations relating to the protection of human
health and safety, the environment or any Hazardous Material (as
hereinafter defined) ("Environmental Laws"), (ii) has received, or will
have received, as of the Closing Date, as the case may be, all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) is or will be, as of
the Closing Date, as the case may be, in compliance with all terms and
conditions of any such permit, license or approval, in each case except as
would not have a Material Adverse Effect. As used herein, "Hazardous
Material" shall mean (a) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA"), (b) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act, as amended, (c) any petroleum or
petroleum product, (d) any polychlorinated biphenyl and (e) any pollutant
or contaminant or hazardous, dangerous, or toxic chemical, material, waste
or substance regulated under or within the meaning of any other
Environmental Law.
(z) To the Company's knowledge, there is no liability, alleged
liability or potential liability (including, without limitation, liability,
alleged liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries or penalties), of the Company arising out of,
based on or resulting from (a) the presence or release into the environment
of any Hazardous Material at any location, whether or not owned by the
Company, or (b) any violation or alleged violation of any
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Environmental Law, which liability, alleged liability or potential
liability is required to be disclosed in the Registration Statement, other
than as disclosed therein.
(aa) The Company is not, nor will it conduct its business in a manner
in which it would become an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(bb) The assets of neither the Company nor any of the Company
Affiliates and Subsidiaries constitute, nor will such assets, as of the
Closing Date, constitute "plan assets" under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(cc) The Company and each of the Company Affiliates and Subsidiaries
maintain and will maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
financial and corporate books and records is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(dd) Neither the Company nor any of the Company Affiliates and
Subsidiaries has incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than
as disclosed in the Registration Statement.
(ee) No environmental engineering firm which prepared Phase I
environmental assessment reports (or other similar reports with respect to
the Existing Resorts as set forth in the Registration Statement) was, at
the time such reports were delivered, employed for such purpose on a
contingent
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basis or had any substantial interest in the Company or any of the Company
Affiliates and Subsidiaries.
(ff) To the Company's knowledge, no labor problem exists or is
imminent with respect to the employees of any of the Existing Resorts, the
Company, any of the Company Affiliates and Subsidiaries, or, except as set
forth in the Prospectus, the S-4 or the Schedules, the Merger Properties
which could have a Material Adverse Effect.
(gg) Each certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company as to the matters
covered thereby.
(hh) The Company, and to the Company's knowledge and except as set
forth in the Prospectus, the S-4 or the Schedules, AVCOM are in compliance
with all federal, state, local and foreign laws and regulations regarding
the marketing, offers to sell and sales of vacation intervals in each state
in which the Company is doing business, including but not limited to the
Federal Trade Commission Act, Regulation Z (the truth-in-lending act),
Equity Opportunity Credit Act and Regulation B, Interstate Land Sales Full
Disclosure Act, Telephone Consumer Protection Act, Telemarketing and
Consumer Fraud and Abuse Prevention Act, Fair Housing Act and Civil Rights
Acts of 1964 and 1968, in each case except as would not have a Material
Adverse Effect. The Company and to the Company's knowledge and except as
set forth in the Prospectus, the S-4 or the Schedules, AVCOM have filed all
required documents and supporting information in compliance with federal,
state, local and foreign laws and regulations, and the Company and to the
Company's knowledge and except as set forth in the Prospectus, the S-4 or
the Schedules, AVCOM are in compliance with all licensure, anti-fraud,
telemarketing, price, gift and sweepstakes and labor laws to which it is or
may become subject, in each case except as would not have a Material
Adverse Effect. The Company and each of the Company Affiliates and
Subsidiaries have, or upon the First Closing Date will have, all permits
and licenses which are required to sell vacation intervals in each state
and foreign jurisdiction where it conducts business, in each case except as
would not have a Material Adverse Effect. To
15
the Company's knowledge, and except as set forth in the Prospectus, the S-4
or the Schedules, the Company will have, upon consummation of the Merger
Agreement, all permits and licenses which are required to sell vacation
intervals at the Merger Properties in each state and foreign jurisdiction
where it conducts business, in each case except as would not have a
Material Adverse Effect.
(ii) Except as set forth in the Prospectus, no person has an option
or right of first refusal to purchase all or part of any of the Existing
Resorts (other than the Poipu Resort), and to the Company's knowledge, and
except as set forth in the Prospectus, the S-4 or the Schedules, the Merger
Properties, or any interest therein. Each of the Existing Resorts and, to
the Company's knowledge, and except as set forth in the Prospectus, the S-4
or the Schedules, the Merger Properties complies with all applicable codes,
laws and regulations (including, without limitation, building and zoning
codes and laws relating to handicapped access), except as would not have a
Material Adverse Effect. The Company has no knowledge of any pending or
threatened condemnation proceedings, zoning changes, or other proceedings
or actions that will in any manner affect the size of, number of vacation
intervals planned for, the use of any improvements on, or access to, the
Existing Resorts or, except as set forth in the Prospectus, the S-4 or the
Schedules, the Merger Properties.
(jj) To the Company's knowledge, no dispute exists or is imminent
between the Company and Promus Hotels, Inc. or between the Company and
Westin Hotels & Resorts and no officer or director of the Company has any
agreement or understanding (verbally or in writing) with Westin Hotels &
Resorts except as set forth in the Prospectus.
(kk) The Common Stock into which the Notes are convertible will be
approved for listing on the Nasdaq National Market, subject to official
notice of issuance.
(ll) The Company has full legal right, power and authority to enter
into the Merger Agreement and perform the transactions contemplated
thereby. The Merger Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation of
the
16
Company in accordance with its terms. Assuming the consents and approvals
set forth in the Prospectus have been obtained, the making and performance
of the Merger Agreement by the Company and the consummation of the
transactions therein contemplated, will not violate any provisions of any
partnership agreement, certificate of partnership, charter, bylaws or other
organizational documents, as applicable, of the Company or any of the
Company Affiliates and Subsidiaries and will not conflict with, result in
the breach or violation of, or constitute, either by itself or upon notice
or the passage of time or both, a default under (i) any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or
other instrument to which the Company or any of the Company Affiliates and
Subsidiaries is a party or by which the Company, any of the Company
Affiliates and Subsidiaries and, to the Company's knowledge, and except as
set forth in the Prospectus, the S-4 or the Schedules, AVCOM, or any of the
Existing Resorts, or, to the Company's knowledge, and except as set forth
in the Prospectus, the S-4 or the Schedules, the Merger Properties may be
bound or affected or (ii) any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company,
any of the Company Affiliates and Subsidiaries or any of the Existing
Resorts or, to the Company's knowledge, and except as set forth in the
Prospectus, the S-4 or the Schedules, the Merger Properties, in each case
except as would not have a Material Adverse Effect. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required, including the satisfaction
of any requirements pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, for the execution and delivery of the
Merger Agreement or the consummation of the transactions contemplated by
the Merger Agreement, except for compliance with the Act, the Exchange Act,
the Blue Sky and Canadian securities laws applicable to the transactions
contemplated by the Merger Agreement, and except for any such consent,
approval, authorization or other order as has been or will be obtained
prior to the First Closing Date.
(mm) The Company has received from its independent certified public
accountants the letter attached hereto respecting pooling of interest
treatment relating to the
17
consummation of the transactions contemplated by the Merger Agreement.
SECTION 3. [Intentionally omitted]
-----------------------
SECTION 4. Representations and Warranties of the Underwriters. The
--------------------------------------------------
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company that the information set forth (i) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of offering and (ii) under "Underwriting" in the Prospectus was furnished
to the Company by and on behalf of the Underwriters for use in connection with
the preparation of the Registration Statement and the Prospectus and is correct
in all material respects. The Representatives represent and warrant that they
have been authorized by each of the other Underwriters as the Representatives to
enter into this Agreement on their behalf and to act for each Underwriter in the
manner herein provided.
SECTION 5. Purchase, Sale and Delivery of Notes. On the basis of the
------------------------------------
representations, warranties and agreements set forth herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
the Underwriters an aggregate of $100,000,000 principal amount of the Firm
Notes; each Underwriter agrees, severally and not jointly, to purchase from the
Company the respective principal amount of Firm Notes set forth opposite the
name of such Underwriter in Schedule A annexed hereto. The purchase price for
the Firm Notes to be paid by the several Underwriters to the Company shall be
__% of the principal amount thereof.
Delivery of certificates for the Firm Notes to be purchased by the
Underwriters and payment therefor shall be made at such place as set forth below
at such time and date, not later than the third full business day following the
first date that any of the Notes are released by you for sale to the public, as
you shall designate by at least 48 hours prior notice to the Company (or at such
other time and date, not later than one week after such third full business day
as may be agreed upon by the
18
Company and the Representatives) (the "First Closing Date"); provided, however,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later of
the third full business day following the later of the first date that any of
the Notes are released by you for sale to the public and the date that is 48
hours after the date that the Prospectus has been so recirculated.
Delivery of certificates for the Firm Notes shall be made by or on
behalf of the Company to you, for the respective accounts of the Underwriters
against payment by you, for the accounts of the several Underwriters, by wire
transfer of immediately available funds to the order of the Company or other
agent designated by the Company. The Notes shall be registered in such names
and denominations as you shall have requested at least two full business days
prior to the First Closing Date, and shall be made available for checking and
packaging on the business day preceding the First Closing Date at a location in
New York, New York or such other location, as may be designated by you. Time
shall be of the essence, and delivery at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and
agreements set forth herein, and subject to the terms and conditions set forth
herein, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of $15,000,000 principal
amount of the Option Notes at the same percentage purchase prices to be paid for
the Firm Notes, for use solely in covering any over-allotments made by you for
the account of the Underwriters in the sale and distribution of the Firm Notes.
The option granted hereunder may be exercised at any time (but not more than
once) within 30 days after the first date that any of the Notes are released by
you for sale to the public, upon written notice by you to the Company setting
forth the aggregate number of Option Notes as to which the Underwriters are
exercising the option, the names and denominations in which the certificates for
such shares are to be registered and the time and place at which such
certificates will be delivered. Such time of delivery (which may not be earlier
than the First Closing Date), being herein referred to as the "Second Closing
Date," shall be determined by you, but if at any time other than the First
19
Closing Date shall not be earlier than three nor later than five full business
days after delivery of such notice of exercise. References herein to "Closing
Date" shall mean the First Closing Date and/or the Second Closing Date, as the
context requires. The Option Notes shall be purchased for the account of each
Underwriter in the same proportion as the principal amount of Firm Notes set
forth opposite such Underwriter's name on Schedule A hereto bears to the total
amount of Firm Notes (subject to adjustment by the Underwriters to round
purchases to the nearest $1,000 principal amount). Such Option Notes will be
made available for checking and packaging on the business day preceding the
Second Closing Date at a location in New York, New York or such other location,
as may be designated by you. Payment for the Option Notes shall be the same as
for the Firm Notes purchased from the Company as specified in the two preceding
paragraphs. At any time before lapse of the option, you may cancel such option
by giving written notice of such cancellation to the Company. If the option is
cancelled or expires unexercised in whole or in part, the Company will
deregister under the Act the number of Option Notes as to which the option has
not been exercised.
You have advised the Company that each Underwriter has authorized you
to accept delivery of its Notes, to make payment and to issue a receipt
therefor. You, individually and not as the Representatives of the Underwriters,
may (but shall not be obligated to) make payment for any Notes to be purchased
by any Underwriter whose funds shall not have been received by you by the First
Closing Date or the Second Closing Date, as the case may be, for the account of
such Underwriter, but any such payment shall not relieve such Underwriter from
any of its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose
to make a public offering of their respective portions of the Notes as soon
after the effective date of the Registration Statement as in the judgment of the
Representatives is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the Prospectus.
SECTION 6. Covenants of the Company. The Company covenants and
------------------------
agrees that:
20
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective. If the Registration Statement has become or becomes
effective pursuant to Rule 430A of the Rules and Regulations, or the filing
of the Prospectus is otherwise required under Rule 424(b) of the Rules and
Regulations, the Company will file the Prospectus, properly completed,
pursuant to the applicable paragraph of Rule 424(b) of the Rules and
Regulations within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. The Company will promptly
advise you in writing (i) of the receipt of any comments of the Commission,
(ii) of any request of the Commission for amendment of or supplement to the
Registration Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus or for additional information,
(iii) when the Registration Statement shall have become effective and (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will not
file any amendment or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been furnished with a copy a reasonable
time prior to such filing or to which you reasonably object or which is not
in compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration
Statement or the Prospectus which in your judgment may be necessary or
advisable to enable the several Underwriters to continue the distribution
of the Notes and will use its best efforts to cause the same to become
effective as promptly as possible. The Company will fully and completely
comply with the provisions of Rule 430A of the Rules and Regulations with
respect to information omitted from the Registration Statement in reliance
upon such Rule.
21
(c) If at any time within the applicable period referred to in Section
10(a)(3) of the Act or Rule 174 of the Rules and Regulations during which a
prospectus relating to the Notes is required to be delivered under the Act
any event occurs, as a result of which the Prospectus, including any
amendments or supplements, would include an untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or if it is
necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the
Company will promptly advise you thereof and will promptly prepare and file
with the Commission, at its own expense, an amendment or supplement which
will correct such statement or omission or an amendment or supplement which
will effect such compliance and will use its best efforts to cause the same
to become effective as soon as possible; and, in case any Underwriter is
required to deliver a prospectus after the applicable time period, the
Company upon request, but at the expense of such Underwriter, will promptly
prepare such amendment or amendments to the Registration Statement and such
Prospectus or Prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act and Rule 174 of the Rules
and Regulations, as applicable.
(d) As soon as practicable, but not later than 45 days (or 90 days if
such quarter is the fiscal year end) after the end of the first quarter
ending after one year following the effective date of the Registration
Statement (as defined in Rule 158(c) of the Rules and Regulations), the
Company will make generally available to its security holders an earnings
statement (which need not be audited) covering a period of 12 consecutive
months beginning after the effective date of the Registration Statement
which will satisfy the provisions of the last paragraph of Section 11(a) of
the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the applicable period referred to in
Section 10(a)(3) of the Act or Rule 174 of the Rules and Regulations, will
furnish to you or mail to your order copies of the
22
Registration Statement, the Prospectus, the Preliminary Prospectus and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as you may reasonably request, for the
purposes contemplated by the Act and the Rules and Regulations.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Notes for sale under (or obtain exemptions from the
application of) the Blue Sky and Canadian securities laws of such
jurisdictions as you designate, will comply with such laws and will
continue such qualifications, registrations and exemptions in effect so
long as reasonably required for the distribution of the Notes, except that
the Company will not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such jurisdiction where
it is not presently qualified or where it would be subject to taxation as a
corporation. The Company will advise you promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the
Notes for offering; sale or trading in any jurisdiction or any initiation
or threat of any proceeding for any such purpose, and in the event of the
issuance of any order suspending such qualification, registration or
exemption, the Company, with your cooperation, will use its best efforts to
obtain the withdrawal thereof.
(g) During the period of five years after the date of this Agreement,
the Company will furnish to the Representatives and their counsel and, upon
request of the Representatives, to each of the other Underwriters: (i) as
soon as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, shareholders' equity
and cash flows for the year then ended and the opinion thereon of the
Company's independent public accountants; (ii) as soon as practicable after
the filing thereof, copies of each proxy statement, Annual Report on Form
10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other report
filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its Common
Stock.
23
(h) During the period of 90 days after the first date that any of the
Notes are released by you for sale to the public, without your prior
written consent (which consent may be withheld at your sole discretion),
the Company will not, other than as disclosed in the Prospectus, issue,
offer, sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into or
exchangeable with its Common Stock or other equity security of the Company,
except, in each case, to grant options or to sell shares of Common Stock
pursuant to the Company's 1996 Equity Participation Plan or the Company's
Employee Stock Option Plan, each as described in the Prospectus, to grant
options or to sell shares of Common Stock in connection with the offering
and sale of the Common Shares or to grant options or to sell or issue
shares of Common Stock in connection with the Merger Agreement.
(i) The Company will apply the net proceeds of the sale of the Notes
sold by it in accordance with the statements under the caption "Use of
Proceeds" in the Prospectus.
(j) As necessary, the Company will use its best efforts to qualify or
register its Notes for sale in non-issuer transactions under (or obtain
exemptions from the application of) the Blue Sky laws of the State of
California and the provincial laws of Canada as specified by the
Representatives (and thereby permit market making transactions and
secondary trading in the Company's Notes in California and such Canadian
provinces as specified by the Representatives), will comply with such Blue
Sky or Canadian provincial laws and continue such qualifications,
registrations and exemptions in effect for a period of five years after the
date hereof.
(k) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of formation of the Company, a registrar (which may be the
same entity as the transfer agent).
You, on behalf of the Underwriters, may, in your sole discretion,
waive in writing the performance by the Company of
24
any one or more of the foregoing covenants or extend the time for their
performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limiting the
generality of the foregoing, (i) all expenses incident to the issuance and
delivery of the Notes (including all printing and engraving costs), (ii) all
fees and expenses of the Trustee and any agent of the Trustee, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Notes to the Underwriters, (iv) all fees and expenses of the
Company's counsel and the Company's independent accountants, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement, each Preliminary Prospectus and
the Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, this Agreement, the Agreement
Among Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney and the preliminary and final
Blue Sky memoranda, (vi) all filing fees, attorneys' fees and expenses incurred
by the Company or the Underwriters in connection with qualifying or registering
(or obtaining exemptions from the qualification or registration of) all or any
part of the Notes for offer and sale under the Blue Sky laws or the provincial
securities laws of Canada, (vii) the filing fee of the NASD and the fees and
expenses related to the inclusion of the Notes on the Nasdaq National Market,
and (viii) all other fees, costs and expenses referred to in Item 13 of Part II
of the Registration Statement. Except as provided in this Section 7, Section 9
and Section 11 hereof, the Underwriters shall pay all of their own expenses,
including the fees and disbursements of their counsel (excluding those relating
to qualification, registration or exemption under the Blue Sky and Canadian
provincial securities laws and the preliminary and final Blue Sky memoranda,
which fees shall be paid on the First Closing Date or the Second Closing Date,
as applicable).
This Section 7 shall not affect any agreement to which the Company is
a party relating to the payment of expenses
25
incurred in connection with the separate issuance and sale of the Common Shares.
SECTION 8. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Firm Notes
on the First Closing Date and the Option Notes on the Second Closing Date shall
be subject to the accuracy of the representations and warranties on the part of
the Company set forth herein as of the date hereof and as of the First Closing
Date or the Second Closing Date, as the case may be, to the accuracy of the
statements of the Company's officers made pursuant to the provisions hereof, to
the performance of the Company of its obligations hereunder, and to the
following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M. (or, in the case of a registration statement filed pursuant
to Rule 462(b) of the Rules and Regulations relating to the Common Shares,
not later than 10:00 P.M.), Washington, D.C. Time, on the date of this
Agreement, or at such later time as shall have been consented to by you; if
the filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b) of the Rules and Regulations, the Prospectus shall
have been filed in the manner and within the time period required by Rule
424(b) of the Rules and Regulations; and prior to such Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company or you,
shall be contemplated by the Commission; and any request of the Commission
for inclusion of additional information in the Registration Statement, or
otherwise, shall have been complied with to your satisfaction.
(b) There shall have been furnished to you, as Representatives of the
Underwriters, on each Closing Date, in form and substance satisfactory to
you, except as otherwise expressly provided below:
(i) An opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company
(exclusive of environmental matters, matters relating to real property
ownership and condition, indebtedness of the Company or its affiliates
or subsidiaries, regulation of the Company's business and property or
that of its affiliates or subsidiaries, the Company's or its
26
affiliates' or subsidiaries' relationship with Promus Hotels
Corporation and Westin Hotels & Resorts and any matters relating to
AVCOM and its subsidiaries and affiliates) addressed to the
Underwriters and dated the First Closing Date, or the Second Closing
Date, as the case may be, to the effect that:
(1) The Indenture and the Notes have been duly authorized by
the Company, the Indenture has been duly qualified under the
Trust Indenture Act and when duly executed and delivered will
constitute, and the Notes, when duly executed, authenticated,
issued and delivered as contemplated hereby and by the Indenture,
will constitute, valid and legally binding obligations of the
Company, enforceable in accordance with their terms and, in the
case of the Notes, entitled to the benefits of the Indenture,
subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(2) Except as disclosed in or specifically contemplated by
the Prospectus and except for the Common Shares, to such
counsel's knowledge, there are no outstanding options, warrants
or other rights calling for the issuance of any shares of capital
stock of the Company or any security convertible into or
exchangeable for capital stock of the Company;
(3)(a)(i) The Registration Statement has become effective
under the Act; (ii) to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued; (iii) to
such counsel's knowledge, no proceedings for that purpose have
been instituted by the Commission;
27
and (iv) any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) of the Rules and Regulations has
been made in the manner and within the time period required by
such Rule 424(b);
(b) The Registration Statement and the Prospectus comply as
to form in all material respects with the applicable requirements
for registration statements on Form S-1 under the Act, the Trust
Indenture Act and the Rules and Regulations, it being understood
that such counsel need not express any opinion with respect to
the financial statements, schedules and other financial and
statistical data included in the Registration Statement or the
Exhibits thereto;
(c) To such counsel's knowledge, there are no contracts,
agreements, documents, franchises, leases or licenses of a
character required to be disclosed in the Registration Statement
or Prospectus which are not disclosed or filed, as required
(which opinion may be rendered by the Company's general counsel);
and
(d) To such counsel's knowledge, there are no legal or
governmental actions, suits or proceedings pending or threatened
against the Company which are required to be described in the
Prospectus which are not described as required (which opinion may
be rendered by the Company's general counsel);
(4) This Agreement is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except as to those
28
provisions relating to indemnity or contribution for liabilities
arising under the Act as to which no opinion need be expressed;
(5) No approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with
any court, regulatory, administrative or other governmental body
is required for the execution and delivery of this Agreement by
the Company or the consummation of the transactions contemplated
by this Agreement, except (i) such as have been obtained and are
in full force and effect under the Act and the Trust Indenture
Act, (ii) such as may be required under applicable Blue Sky or
Canadian securities laws in connection with the purchase and
distribution of the Notes by the Underwriters; (iii) clearing of
such offering with the NASD; and (iv) such as to which the
failure to so obtain would not have a Material Adverse Effect;
(6) The execution and performance of this Agreement, the
Notes and the Indenture and the consummation of the transactions
herein and therein contemplated will not conflict with, result in
the breach of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any of the material
agreements filed under Rule 601(b)(10) of Regulation S-K under
the Act as exhibits to the Registration Statement except as would
not have a Material Adverse Effect;
(7) Except for the holders of the Company's Common Stock
who are parties to the Company's Registration Rights Agreement
dated August 19, 1996 and except as otherwise set forth in the
Prospectus, no holders of securities of the Company have rights
to register shares of Common Stock or other securities because of
the filing of the Registration Statement by the Company or the
29
offering or other transactions contemplated hereby; and
(8) The Company is not an "investment company" within the
meaning of the 1940 Act.
Such counsel shall also include a statement to the effect that
nothing has come to such counsel's attention that would lead such
counsel to believe that either at the effective date of the
Registration Statement or at the applicable Closing Date the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, it being
understood that in addition to the matters excluded in paragraph
(b)(i) above, such counsel express no belief as to the financial
statements, schedules and other financial, statistical, numerical and
accounting data included in the Registration Statement or Prospectus
or in the exhibits to the Registration Statement.
In rendering such opinion, such counsel may rely as to matters
of fact, on certificates of the Company and the Company Affiliates and
Subsidiaries, officers of the Company and the Company Affiliates and
Subsidiaries, and governmental officials, in which case their opinion
is to state that they are so doing and that the Underwriters are
justified in relying on such opinions or certificates and copies of
each of said opinions or certificates are to be attached to the
opinion.
(ii) An opinion of Ballard, Spahr, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, local
counsel for the Company, on matters of Maryland law, addressed to the
Underwriters and dated the First Closing Date, or the Second Closing
Date, as the case may be, to the effect that:
(1) The Company has been duly formed and is validly
existing as a corporation, is in good standing under the laws of
the State of Maryland,
30
and is duly qualified to do business as a foreign corporation and
is in good standing in those jurisdictions where the conduct of
the Company's business requires it to be qualified, and has the
requisite corporate power and authority to own its Existing
Resorts and conduct its business as described in the Registration
Statement;
(2) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus; all outstanding
shares of Common Stock of the Company (including the Common
Shares), have been duly and validly issued, are fully paid and
nonassessable, have been issued in compliance with federal and
state securities laws, were not issued in violation of or subject
to any preemptive rights or other rights to subscribe for or to
purchase any securities; the Notes are convertible into Common
Stock of the Company in accordance with the terms of the
Indenture; the shares of such Common Stock initially issuable
upon conversion of the Notes have been duly authorized and
reserved for issuance upon such conversion and, when issued upon
such conversion in accordance with the terms of the Indenture,
will be validly issued and outstanding, fully paid and
nonassessable and will conform in all material respects to the
description thereof contained in the Registration Statement;
other than as described in the prospectus, the stockholders of
the Company have no preemptive or other rights to subscribe for
or to purchase, and no restrictions exist upon the voting or
transfer of, any shares of the Common Stock issuable upon
conversion of the Notes, pursuant to the laws of the State of
Maryland, the Articles of Incorporation or Bylaws of the Company
or any agreement or instrument filed with the Commission as an
exhibit to the Registration Statement or any document
incorporated therein; and neither the filing of the Registration
Statement, the offering or sale of the Notes nor the conversion
of the Notes as contemplated by this Agreement gives rise under
any agreement or instrument filed with the
31
Commission as an exhibit to the Registration Statement or any
document incorporated therein to any rights, other than those
which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock;
(4) This Agreement has been duly and validly authorized by
all necessary action by the Company, has been duly and validly
executed and delivered by and on behalf of the Company; and
(4) The information set forth in the Prospectus under the
headings "Description of Capital Stock", "Certain Provisions of
Maryland Law and of the Company's Charter and Bylaws" and "Shares
Eligible for Future Sale" to the extent that such information
constitutes matters of Maryland law or legal conclusions
involving Maryland law, has been reviewed by such counsel and is
correct in all material respects.
(iii) Opinions of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ and/or
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ (or other counsel acceptable to you), each
a special real estate and timeshare counsel for the Company, addressed
to the Underwriters and dated as of the First Closing Date, or the
Second Closing Date, which opinions shall state to the effect that (it
being understood that such counsel shall only have to opine as to the
laws of the jurisdictions in which it is duly licensed to practice law
in):
(1) The Company has obtained the material approvals and
permits from the timeshare authority of the state in which the
subject Existing Resort is located ("Home State") necessary to
offer for sale and sell timeshare interests and offer purchase
money financing in connection with such sales ("Home State
Approvals") in accordance with the applicable laws and
regulations of the state in which the resort is located
specifically governing the marketing and sale of timeshare
interests in real property ("Home State Timeshare Laws");
32
(2) All of the permits and/or approvals issued by timeshare
authorities of states other than the state where each applicable
resort is located ("Foreign State") for the offering for sale and
sale of timeshare interests in such resort (collectively, the
"Foreign State Approvals"), constitute the material approvals and
permits necessary to be issued by such Foreign State to permit
the offering for sale and sale of timeshare interests in such
resort in accordance with the laws and regulations of the Foreign
State specifically governing the offering for sale and sale of
timeshare interests in real property located outside of the
Foreign State ("Foreign State Timeshare Laws");
(3) To such counsel's knowledge and based upon its review of
certificates and letters from state timeshare authorities, the
Company and other pertinent parties (collectively, "Reliance
Certificates and Letters"), the Company has not received any
written notice from any regulatory authority that it is in
violation of any applicable federal or state law or regulation
regarding the offering for sale and sale of timeshare interests
in the resorts, the violation of which would have a Material
Adverse Effect on the ownership or operation of the Existing
Resorts;
(4) To such counsel's knowledge, there are no material
franchises, licenses, leases, contracts, agreements or other
documents (collectively, the "Material Agreements") entered into
by the Company outside the ordinary course of business, which
involve matters relating to the ownership, purchase money
financing and/or use of real property and/or the offering for
sale or sale of timeshare interests in the Existing Resorts,
which are of a character required to be disclosed in the
Registration Statement or to be filed as exhibits to the
Registration Statement which are not disclosed or filed;
33
(5) To such counsel's knowledge and based upon such
counsel's review of Reliance Certificates and Letters, there are
no real estate or timeshare related governmental actions,
governmental suits or governmental proceedings pending or
threatened against the Company with respect to the business and
property relating to the Existing Resorts except (a) those which
have been disclosed in the Registration Statement, and (b) those
which would not have a Material Adverse Effect;
(6) The consummation by the Company of the transactions
contemplated by the Underwriting Agreement do not require the
consent, approval, authorization, registration or qualification
of (i) any governmental agency or authority of the timeshare
authority of the states where each of the Existing Resorts are
located, (ii) any lender which has a recorded security interest
in the Existing Resorts, (iii) Westin Hotels & Resorts or any
related entities under that certain agreement by and between W &
S Hotel L.L.C. and Argosy/Koar Group, Inc., dated May 3, 1996
("Westin Agreement"), (iv) Promus Hotels, Inc. (or any subsidiary
or affiliate of Promus Hotels, Inc.) under any Licensee
Agreements and Management Agreements with Promus Hotels, Inc. (or
any of its subsidiaries or affiliates) (collectively, the
"Embassy License Agreements and Management Agreements"), except
those which have been obtained and are in full force and effect
and those as to which the failure to so obtain would not have a
Material Adverse Effect;
(7) The consummation by the Company of the transactions
contemplated by the Underwriting Agreement as they relate to the
Existing Resorts do not conflict with or result in a material
breach or violation by the Company of: (i) any of the terms and
provisions of any loans which encumber the Existing Resorts, (ii)
any terms or provisions of the Home State Approvals where each of
the Existing Resorts are located; (iii) any
34
terms or provisions of the Foreign State Approvals; (iv) the
Westin Agreement; (v) the Embassy License Agreements and
Management Agreements, or if such transactions would have
constituted such a breach, violation or default had the necessary
consents or approvals not been obtained, consents or approvals
have been obtained and are in full force and effect;
(8) The owner of each of the Existing Resorts, if required
by law, has obtained a brokerage or sales license from the state
timeshare authority in order to offer purchase money financing in
connection with the sale of timeshare interests in the applicable
resorts. The owner of each of the Existing Resorts, if required
by law, has obtained a brokerage or sales license from the state
timeshare authority in order to offer for sale and sell timeshare
interests in the State of California or has contracted with a
licensed broker to provide any of the aforementioned services;
and
(9) A statement to the effect that although such counsel is
not passing upon, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in
the Registration Statement or the Prospectus and has not made any
independent check or verification thereof, during the course of
such participation (relying as to the factual matters upon the
Reliance Certificates and Letters), no facts came to the
counsel's attention that have caused it to believe that the
Registration Statement at the time it became effective and as of
the date hereof or the Prospectus contained an untrue statement
of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made,
not misleading; provided, however, that this statement is limited
solely to the statements or omissions relating to (i)
indebtedness secured by the Existing Resorts (it
35
being understood that the counsel's review of the Registration
Statement has been limited to legal and other non-financial
matters with respect thereto), (ii) environmental matters with
respect to the Existing Resorts (it being understood that our
involvement with respect thereto has been limited to
environmental matters that have come to the counsel's attention
since the acquisition of such Existing Resorts by the Company),
(iii) ownership of the Existing Resorts (it being understood that
our review thereof has been limited to the review of certain
title reports), (iv) regulation by each Home State and each
Foreign State with respect to the issuance of the Home State
Approvals and the Foreign State Approvals, (v) the Property
Partnerships' and the Company's contractual relationships with
Promus or Westin, and (vi) the statements in the Prospectus under
the caption "Business - Governmental Regulation," to the extent
that such information constitutes matters of law or legal
conclusions as it pertains to the ownership, operation, sale and
offering of sale of timeshare interests in the Existing Resorts.
In rendering such opinions, each such counsel may rely as to
matters of local law, on opinions of local counsel, and as to
matters of fact, on certificates of officers of the Company as
applicable, and of governmental officials, in which case their
opinion is to state that they are doing so and certificates and
copies of each of said opinions or certificates are attached to
the opinion.
(iv) An opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, in addition to
the opinion set forth above in section 8(c)(iii), as counsel for the
Company in connection with the Merger Agreement, addressed to the
Underwriters and dated as of the First Closing Date, or the Second
Closing Date, which opinions shall state to the effect that:
36
(1) The Company had the corporate power and authority to
enter into the Merger Agreement and to consummate the
transactions contemplated therein; the Merger Agreement has been
duly and validly authorized by all necessary action by the
Company, has been duly and validly executed and delivered by and
on behalf of the Company, and is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except as to those
provisions relating to indemnity or contribution for liabilities
arising under the Act as to which no opinion need be expressed;
(2) The registration statement and the prospectus filed with
the Commission on November 20, 1996, and the Merger Agreement
were duly and validly authorized by all necessary action by the
Company and conformed in all material respects with the
applicable requirements for registration statements on Form S-4
under the Act and the Rules and Regulations; and
(3) The Merger has been duly and validly approved by the
shareholders of AVCOM.
(v) An opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to AVCOM,
substantially in the form required by Section 6.1(c) of the Merger
Agreement.
(v) Such opinion or opinions of O'Melveny & ▇▇▇▇▇ LLP, counsel
for the Underwriters, dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to the formation of the
Company and other legal matters relating to this Agreement, the
validity of the Notes, the Registration Statement and the Prospectus
and other related matters as you may reasonably require, and the
Company shall have furnished to such counsel such documents and shall
have exhibited to them such papers and records as they may reasonably
request for the purpose of enabling them to
37
pass upon such matters. In connection with such opinions, such counsel
may rely on representations or certificates of officers of the Company
and governmental officials, as applicable.
(vi) A certificate of the Company, executed by the Chairman of
the Board or President and the chief financial or accounting officer
of the Company, dated the First Closing Date or the Second Closing
Date, as the case may be, to the effect that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with each of the agreements and satisfied all of the
conditions on its part to be performed or satisfied on or prior
to such Closing Date;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the knowledge
of the Company no proceedings for that purpose have been
instituted or are pending or contemplated under the Act;
(3) Each of the respective signers of each certificate has
carefully examined the Registration Statement and the Prospectus;
in his opinion and to the knowledge of the Company, the
Registration Statement and the Prospectus and any amendments or
supplements thereto contain all statements required to be stated
therein; and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements
38
therein not misleading, provided, however, that such certificate
does not require any representation concerning statements in, or
omissions from, the Registration Statement or Prospectus, which
are based upon and conform to information furnished by the
Underwriters pursuant to Section 3 hereof;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to or
amendment of any prospectus which has not been disclosed in such
a supplement or amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and
except as specifically disclosed in or contemplated by the
Prospectus and except for the Stock Offering, there has not been
any Material Adverse Change or a development involving a Material
Adverse Change; and no legal or governmental action, suit or
proceeding is pending or threatened against the Company, or, to
the knowledge of the Company, any of the Existing Resorts which
would have a Material Adverse Effect; since such dates and except
as so disclosed, the Company has not entered into any verbal or
written agreement or other transaction which is not in the
ordinary course of business, incurred any liability or
obligation, direct, contingent or indirect, made any change in
its capital stock, made any change in its short-term debt or
funded debt or repurchased or otherwise acquired any of the
Company's capital stock which could be reasonably expected to
have a Material Adverse Effect; and the Company has not declared
or paid any dividend, or made any other distribution (other than
dividends or distributions paid to shareholders to satisfy tax
liabilities), upon its capital stock payable to shareholders of
record on a date prior to the
39
First Closing Date or the Second Closing Date, as the case may
be; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except
as disclosed in or contemplated by the Prospectus, none of the
Existing Resorts has sustained a material loss or damage by
strike, fire, flood, windstorm, hurricane, typhoon, accident or
other calamity (whether or not insured).
(vii) On the date that this Agreement is executed and also on
the First Closing Date and the Second Closing Date a letter addressed
to you, as Representatives of the Underwriters, from E & Y and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, as applicable, independent accountants, the first one to be
dated the day of this Agreement, the second one to be dated the First
Closing Date and the third one (in the event of a Second Closing) to
be dated the Second Closing Date, in form and substance satisfactory
to the Representatives, to the effect that:
(1) E & Y and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ are independent certified
public accountants with respect to the Company within the meaning
of the Act and the Rules and Regulations;
(2) It is their opinion that the financial statements
included in the Registration Statement audited by them comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations;
(3) The financial statements for the nine months ended
September 30, 1996 and the nine months ended September 30, 1995,
to the extent applicable, were reviewed by them in accordance
with the standards established by the American Institute of
Certified Public Accountants and based upon their review they are
not aware of any material modifications that should be made to
such
40
financial statements for them to be in conformity with generally
accepted accounting principles currently in effect in the United
States to comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations;
(4) Based upon procedures set forth in detail in such
letter with respect to the period from October 1, 1996 to
December 31, 1996, including a reading of the latest available
interim financial statements of the Company and inquiries of
officials of the Company responsible for financial and accounting
matters, nothing has come to their attention which causes them to
believe that:
(a) at December 31, 1996, there was any change in the
capital stock, increase in long-term debt, or decrease in
consolidated net current assets or stockholders' equity of the
consolidated companies as compared with amounts shown in the
September 30, 1996, unaudited condensed consolidated balance
sheet included in the Registration Statement;
(b) for the period from October 1, 1996, to December 31,
1996, there were any decreases, as compared to the corresponding
period in the preceding year, in consolidated net sales or in the
total or per-share amounts of income before extraordinary items
or of net income, except in all instances for changes, increases,
or decreases that the Registration Statement discloses have
occurred or may occur;
(c) at a specified date not more than five days prior to
the date of this Agreement, other than changes resulting from the
offering and sale of the Common Shares or the Merger Agreement,
(i) there has been any change in the capital stock, increase in
long-term debt or any decreases in consolidated net current
assets or stockholders' equity of the Company as compared
41
with the amounts shown in the September 30, 1996 balance sheet of
the Company included in the Registration Statement, (ii) or for
the period from October 1, 1996 to a date not to exceed five days
prior to the date of this Agreement, there were any decreases, as
compared with the corresponding period in the preceding year, in
consolidated net revenues or in the total per share amounts of
income before extraordinary items or of net income of the
Existing Resorts, except in all instances for changes, increases
or decreases which the Registration Statement discloses have
occurred or may occur; and
(5) In addition to the examination referred to in their
opinions and the procedures referred to above, they have carried
out certain specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial information
which are included in the Registration Statement and Prospectus
and which were specified by you, and have found such amounts,
percentages and financial information to be in agreement with, or
derived from, the relevant accounting, financial and other
records of the Company and each of the Property Partnerships.
(c) The NASD, upon review of the terms of the public offering, shall
not have objected to such offering, such terms or the Underwriters'
participation in the same.
(d) The Company shall have furnished to you such further certificates
and documents as you shall have reasonably requested.
(e) There shall have been delivered to you the Firm Notes, and if any
Option Notes are purchased, the Option Notes in the manner required
pursuant to Section 5, hereof.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to O'Melveny & ▇▇▇▇▇ LLP, counsel for the Underwriters. The Company shall
furnish you with such
42
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request. Any certificate signed by any officer of the Company
and delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to each of the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company without liability on the part of any Underwriter
or the Company, except for the expenses to be paid or reimbursed by the Company
pursuant to Sections 7 and 9 hereof and except to the extent provided in Section
10 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding
---------------------------------------
any other provisions hereof, if this Agreement shall be terminated by you
pursuant to Section 14, or if the sale to the Underwriters of the Notes at the
First Closing is not consummated because of any willful refusal, inability or
failure on the part of the Company to perform any agreement herein or to comply
with any provision hereof without reasonable justification therefor, the Company
agrees to reimburse you and the other Underwriters upon demand for all out-of-
pocket expenses that shall have been reasonably incurred by you and them in
connection with the proposed purchase and the sale of the Notes, including but
not limited to fees and disbursements of counsel relating directly to the
offering contemplated by the Prospectus. Any such termination shall be without
liability of any party to any other party except that the provisions of this
Section 9, Section 7 and Section 11 shall at all times be effective and shall
apply.
SECTION 10. Effectiveness of Registration Statement. You and the
---------------------------------------
Company will use your and its best efforts to cause the Registration Statement
to become effective, to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.
SECTION 11. Indemnification. (a) The Company agrees to indemnify
---------------
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of the
43
Act against any losses, claims, damages, liabilities or expenses, joint or
several, to which such Underwriter or such controlling person may become
subject, under the Act, the Exchange Act, the Trust Indenture Act, or other
federal, state or Canadian statutory laws or regulations, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations and
warranties of the Company contained herein or any failure of the Company to
perform its obligations hereunder or under law, and will reimburse each
Underwriter and each such controlling person for any legal and other expenses as
such expenses are reasonably incurred by such Underwriter or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability, expense or action arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or as a result of or any amendment or supplement thereto in
reliance upon and in conformity with the information furnished to the Company
pursuant to Section 4 hereof; and provided the indemnity agreement contained in
this Section 11(a) shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages, liabilities or expenses
purchased the Notes concerned to the extent that any such loss, claim, damage
liability or expense of such Underwriter results from the fact that a copy of
the Prospectus was not sent or given to such person at or prior to the written
confirmation of sale of such Notes to such person as required by the Act. In
addition to its other obligations under this Section 11(a) the Company agrees
that it will reimburse expenses as provided in this Section 11(a) as incurred,
but no less frequently than quarterly,
44
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligations to reimburse each Underwriter for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company, together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter within 30
days of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages, liabilities or expenses to
which the Company, any such director, officer or controlling person may become
subject under the Act, the Exchange Act, the Trust Indenture Act, or other
federal or state statutory laws or regulations, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Underwriter), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue or alleged untrue statement of
any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with the information furnished to the Company pursuant to Section 4
hereof; and will reimburse the Company, or any such director, officer or any
controlling person of the Company for any legal and other expense
45
reasonably incurred by the Company, or any such director, officer or controlling
person of the Company in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. In addition to its other obligations under this Section 11(b), each
Underwriter severally agrees that it will reimburse expenses as provided in this
Section 11(b) as incurred, but no less frequently than quarterly,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters, obligation to reimburse the Company (and, to
the extent applicable, each officer, director or controlling person of the
Company) for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the extent
that any such interim reimbursement payment is so held to have been improper,
the Company (and, to the extent applicable, each officer, director or
controlling person of the Company) shall promptly return it to the Underwriters
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made within 30 days
of a request for reimbursement, shall bear interest at the Prime Rate from the
date of such request. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have
46
reasonably concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel representing all indemnified parties who are parties to such
action or set of related actions) or (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel shall be at
the expense of the indemnifying party.
(d) If the indemnification provided for in this Section is required by
its terms, but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under Sections 11(a), 11(b)
or 11(c) hereof in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Underwriters from the offering of the Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions
47
or inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received by
the Company and the Underwriters shall be deemed to be in the same proportion,
in the case of the Company as the total price paid to the Company for the Notes
sold by it to the Underwriters (net of underwriting commissions, but before
deducting expenses), and in the case of the Underwriters as the underwriting
commissions received by them bears to the total of such amounts paid to the
Company and received by the Underwriters as underwriting commissions. The
relative fault of the Company and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
or the inaccurate or the alleged inaccurate representation and/or warranty
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section (c) of this Section, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in Section (c) of this Section
with respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section (d); provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section (c) of this Section for purposes of
indemnification. The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section were determined
solely by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section, no Underwriter shall be required
to contribute any amount in excess of the amount of the total underwriting
commissions received by such Underwriter in connection with the Notes
underwritten by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was
48
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section are several in proportion to their
respective underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 11(a) or 11(b)
hereof, including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 11(a) and 11(b)
hereof and would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of such
Sections 11(a) or 11(b) hereof.
SECTION 12. Default of Underwriters. It shall be a condition to this
-----------------------
Agreement and the obligation of the Company to sell and deliver the Notes
hereunder, and of each Underwriter to purchase the Notes in the manner as
described herein, that, except as hereinafter in this Section provided, each of
the Underwriters shall purchase and pay for all the Notes agreed to be purchased
by such Underwriter hereunder upon tender to the Representatives of all such
shares in accordance with the terms hereof. If any Underwriter or Underwriters
so default in their obligation to purchase Notes hereunder on either the First
or Second Closing Date, and the aggregate number of Notes which such defaulting
Underwriter or Underwriters agreed but failed to purchase on such Closing Date
does not exceed 10% of the total number of Notes which the Underwriters are
obligated to purchase on such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Notes which such defaulting Underwriters agreed but
failed to purchase on such Closing Date. If any Underwriter or Underwriters so
default and
49
the aggregate number of Notes with respect to which such default occurs is more
than 10% of the total number of Notes which the Underwriters are obligated to
purchase on such Closing Date, and arrangements satisfactory to the
Representatives and the Company for the purchase of such Notes by other persons
are not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter or the Company
except for the expenses to be paid by the Company pursuant to Section 7 hereof
and except to the extent provided in Section 11 hereof.
In the event that the Notes to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, for not more than
five business days in order that the necessary changes in the Registration
Statement, Prospectus and any other documents, as well as any other
arrangements, may be effected. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section. Nothing
herein will relieve a defaulting Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 7, 9, 11, 14 and 15 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the Company
or by release of any of the Notes for sale to the public. For the purposes of
this Section 13, the Notes shall be deemed to have been so released upon the
release for publication of any newspaper advertisement relating to the Notes or
upon the release by you of telegrams (i) advising Underwriters that the Notes
are released for public offering or (ii) offering the Notes for sale to
securities dealers, whichever may occur first.
50
SECTION 14. Termination. Without limiting the right to terminate
-----------
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
or by you by notice to the Company at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company to any
Underwriter (except for the expenses to be paid or reimbursed by the
Company pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof) or of any Underwriter to the Company (except
to the extent provided in Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been
suspended on either such Exchange or in the over the counter market by the
NASD, or a general banking moratorium shall have been established by
federal, New York or California authorities; (ii) if an outbreak of major
hostilities or other national or international calamity or any substantial
change in political, financial or economic conditions shall have occurred
or shall have accelerated or escalated to such an extent, as, in the
judgment of the Representatives, to affect adversely the marketability of
the Notes; (iii) if any adverse event shall have occurred or shall exist
which makes untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or Prospectus or which
is not reflected in the Registration Statement or Prospectus but should be
reflected therein in order to make the statements or information contained
therein not misleading in any material respect; or (iv) if there shall be
any action, suit or proceeding pending or threatened, or there shall have
been any development involving particularly the business or properties or
securities of the Company or the transactions contemplated by this
Agreement, which, in
51
the reasonable judgment of the Representatives, may materially and
adversely affect the Company's business or earnings and makes it
impracticable or inadvisable to offer or sell the Notes. Any termination
pursuant to this Section 14(b) shall be without liability on the part of
any Underwriter to the Company or on the part of the Company to any
Underwriter (except for expenses to be paid or reimbursed by the Company
pursuant to Sections 7 and 9 hereof and except to the extent provided in
Section 11 hereof).
SECTION 15. [Intentionally omitted]
-----------------------
SECTION 16. Representations and Indemnities to Survive Delivery. The
---------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company, the Company's officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of its or their partners, officers or
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Notes sold hereunder and any termination of this
Agreement.
SECTION 17. Notices. All communications hereunder shall be in
-------
writing and, if sent to the Representatives shall be mailed, delivered,
telecopied or telegraphed and confirmed to ▇▇▇▇▇▇▇▇▇▇ Securities at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier: (415) 249-
5513, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ with a copy to O'Melveny & ▇▇▇▇▇ LLP, Embarcadero Center West ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.; and if sent to the Company shall be mailed,
delivered or telegraphed and confirmed to the Company, as applicable at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ with a copy to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇
▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Telecopier: (213)
891-8763, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇., Esq. The Company or you may
change the address for receipt of communications hereunder by giving notice to
the other.
52
SECTION 18. Successors. This Agreement will inure to the benefit of
----------
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Notes as such from any of the Underwriters merely by reason
of such purchase.
SECTION 19. Underwriters' Representatives. You will act as
-----------------------------
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you, as
Representatives, will be binding upon all of the Underwriters.
SECTION 20. Partial Unenforceability. The invalidity or
------------------------
unenforceability of any section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other section, paragraph or
provision hereof. If any section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 21. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 22. Knowledge. As used in this Agreement, the term knowledge
---------
or best knowledge on the part of an entity shall include the knowledge of such
entity's officers and any other employees with managerial responsibilities and
such entity shall only make such statement after conducting a diligent
investigation on the subject matter thereof.
SECTION 23. General. This Agreement constitutes the entire agreement
-------
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in several
53
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company and the several Underwriters,
including you, all in accordance with its terms.
[Signature Page to Follow]
54
Very truly yours,
SIGNATURE RESORTS, INC.
By:_________________________
Its______________________
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us in
San Francisco, California as of the date
first above written.
▇▇▇▇▇▇▇▇▇▇ SECURITIES
▇▇▇▇▇▇▇, SACHS & CO.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
Acting as Representatives of the several
Underwriters named in the attached
Schedule A.
By: ▇▇▇▇▇▇▇▇▇▇ SECURITIES
By:___________________________
Managing Director
55
SCHEDULE A
Underwriter Principal
----------- Amount of
Notes to be
Purchased
---------
▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
56
