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EXHIBIT 1.3
4,000,000 Shares
SUNSTONE HOTEL INVESTORS, INC.
COMMON SHARES
UNDERWRITING AGREEMENT
April 30, 1997
▇▇▇▇▇▇▇▇▇▇ SECURITIES
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
EVEREN SECURITIES, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
c/▇ ▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
As Representatives of the several Underwriters
Ladies and Gentlemen:
SECTION 1. Introductory. Sunstone Hotel Investors, Inc., a Maryland
corporation (the "Company"), proposes to issue and sell 4,000,000 shares (the
"Firm Common Shares") of its authorized but unissued common stock at $.01 par
value (the "Shares"), to the several underwriters named in Schedule A annexed
hereto (the "Underwriters"), for whom you are acting as Representatives. In
addition, the Company proposes to grant to the Underwriters an option to
purchase up to 600,000 additional Shares (the "Optional Common Shares") as
provided in Section 4 hereof. The Firm Common Shares and, to the extent such
option is exercised, the Optional Common Shares are hereinafter collectively
referred to as the "Common Shares."
You have advised the Company that the Underwriters propose to make a public
offering of their respective portions of the Common Shares on the effective date
of the registration statement hereinafter referred to, or as soon thereafter as
in your judgment is advisable.
The Company and Sunstone Hotel Investors, L.P., a Delaware limited
partnership (the "Partnership") hereby confirm their respective agreements with
respect to the purchase of the Common Shares by the Underwriters as follows:
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SECTION 2. Representations and Warranties of the Company and the
Partnership. The Company and the Partnership hereby jointly and severally
represent and warrant to the several Underwriters that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement on Form S-3 (File No. 333-16887) with respect to the
Common Shares, including a prospectus (the "Base Prospectus"), 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 filed with the Commission and
has become effective. Such registration statement may have been amended
prior to the date of this Agreement; any such amendment was so prepared and
filed, and any such amendment filed after the effective date of such
registration statement has become effective. There have been delivered to
you two signed copies of such registration statement and amendments,
together with two copies of each exhibit filed therewith. Conformed copies
of such Registration Statement and amendments (but without exhibits) and of
any related preliminary prospectus (the "Preliminary Prospectus") have been
delivered to you in such reasonable quantities as you have requested for
each of the Underwriters. No stop order suspending the effectiveness of
the registration statement has been issued, and no proceeding for that
purpose has been instituted or, to the Company's knowledge, threatened by
the Commission. A final prospectus containing information permitted to be
omitted at the time of effectiveness by Rule 430A of the Rules and
Regulations ("Rule 430A Information") has been or will be so prepared and
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations on or before the second business day after the date hereof (or
such earlier time as may be required by the Rules and Regulations); and the
Rules and Regulations do not require the Company to, and, without your
consent, the Company will not, file a post- effective amendment after the
time of execution of this Agreement and prior to the filing of such final
form of prospectus. As filed, such final prospectus, shall include all
Rule 430A Information and, except to the extent that you shall agree in
writing to a modification, shall be in all 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 as the Company shall have
previously advised you in writing would be included or made therein.
The term "Registration Statement" means such registration statement as
amended at the time it becomes or
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became effective (the "Effective Date"), including financial statements and
all exhibits and any information deemed by virtue of Rule 430A of the Rules
and Regulations to be included in such Registration Statement at the
Effective Date and any prospectus supplement filed thereafter with the
Commission and shall include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The term
"Prospectus" means, collectively, the Base Prospectus together with any
prospectus supplement, in the respective forms they are filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations. Any
reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Registration Statement or the Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act
after the Effective Date, or the date of the Prospectus, as the case may
be, that is incorporated therein by reference.
(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 requirements of the Act and the
Rules and Regulations 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 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 and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, 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 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
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laws of the State of Maryland, with full power and authority (corporate and
other) to own and lease its properties and conduct its business as
currently conducted or as described in the Prospectus. Except as disclosed
in the Registration Statement neither the Company nor the Partnership owns
or controls, directly or indirectly, any corporation, partnership,
association or other entity.
(d) Sunstone Hotel Properties, Inc. (the "Lessee") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Colorado with full power and authority
(corporate and other) to own and lease its properties and conduct its
business as described in the Prospectus. Sunstone Hotel Management, Inc.,
a Colorado corporation (the "Manager"), has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full power and authority (corporate and
other) to own and lease its properties and conduct its respective business
as described in the Prospectus.
(e) The Partnership has been duly formed and is validly existing as a
limited partnership under the laws of the State of Delaware with full power
and authority (partnership and other) to own and lease its properties and
conduct its business as currently conducted or as described in the
Prospectus. The Company is and will on each Closing Date be the sole
general partner of the Partnership. Upon the consummation of the Offering,
the Company will own the Units it holds free and clear of all liens,
encumbrances, equities, claims, security interests, voting trusts or
charges. Except as set forth in the Prospectus, each of the Company, the
Partnership, the Lessee and each property to be owned by the Partnership as
of the First Closing Date is, and after the consummation of the Offering
will be, in possession of and operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders
material to the conduct of its business, all of which are valid and in full
force and effect. Each of the Company, the Partnership, the Manager and
the Lessee is, and after the consummation of the Offering will be, duly
qualified to do business and in good standing as a foreign corporation,
real estate investment trust or partnership, as applicable, in each
jurisdiction in which the ownership or leasing of properties or the conduct
of its respective business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company, the Partnership, the Manager or the
Lessee, as the case may be, and no proceeding has been instituted in any
such jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
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(f) All of the issued and outstanding Shares of the Company (the
"Current Shares") 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 conform in all material respects to the description thereof contained
in the Prospectus. All of the issued and outstanding Units of the
Partnership have been validly issued and are fully paid and nonassessable
and have been issued in compliance with all federal and state securities
laws. Except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company, and the related notes thereto and
except for warrants to acquire 67,892 Units (the "Warrants"), neither the
Company nor the Partnership has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock or partnership interests, as
the case may be, or any such options, rights, convertible securities or
obligations.
(g) The Common Shares to be sold by the Company in the public
offering contemplated by this Agreement, when issued, delivered and paid
for in the manner set forth in this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable, have been duly authorized for
listing on the New York Stock Exchange upon official notice of issuance and
will conform in all material respects to the description thereof contained
in the Prospectus. No shareholder of the Company has any right which has
not been waived to require the Company to register the sale of any shares
owned by such shareholder under the Act in the public offering contemplated
by this Agreement. No further approval or authority of the shareholders or
the Board of Directors of the Company will be required for the issuance and
sale of the Common Shares to be sold by the Company as contemplated herein.
The descriptions 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 are accurate in all
material respects and present all information required to be disclosed with
respect to such plans, arrangements, options and rights. The Company is,
and following the issuance and sale of the Common Shares will be, in
compliance in all material respects with all of the rules and regulations
of the New York Stock Exchange applicable to the Company.
(h) Each of the Company and the Partnership has full legal right,
power and authority to enter into this Agreement and perform the
transactions contemplated hereby.
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This Agreement has been duly authorized by the Company and the Partnership,
has been duly executed and delivered by the Company and the Partnership and
constitutes a valid and binding obligation of each of the Company and the
Partnership in accordance with its terms. The making and performance of
this Agreement by each of the Company and the Partnership and the
consummation of the transactions herein contemplated will not violate any
provisions of the partnership agreement, certificate of partnership,
charter, by-laws or other organizational documents, as applicable, of the
Company or the Partnership 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 material default under (i) any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or
other instrument to which the Company or the Partnership is a party or by
which the Company or the Partnership or any of their respective 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 or the Partnership or any of their respective properties. 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 or the consummation of the
transactions contemplated by this Agreement, except for compliance with the
Act, the Blue Sky and Canadian securities laws applicable to the public
offering of the Common Shares by the several Underwriters and the clearance
of such offering with the National Association of Securities Dealers, Inc.
(the "NASD") and the listing of additional shares with the New York Stock
Exchange.
(i) Coopers & ▇▇▇▇▇▇▇ L.L.P. ("Coopers & ▇▇▇▇▇▇▇"), who has expressed
its opinion with respect to the financial statements and schedules filed
with the Commission or incorporated by reference as a part of the
Registration Statement and included in the Prospectus and in the
Registration Statement, is an independent accountant as required by the Act
and the Rules and Regulations.
(j) The financial statements, together with the related notes
thereto, of the Company and the Lessee set forth or incorporated by
reference in the Registration Statement and 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
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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 caption "Selected
Financial Information" fairly presents the information set forth therein on
the basis stated in the Registration Statement.
(k) There are no 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 other than a copy of this
Agreement and the tax opinion to be rendered in connection with this
Offering which will be filed on Form 8-K on or before May 2, 1997.
(l) There are no legal or governmental actions, suits or proceedings
pending in which service of process has been received by an employee of the
Company or, to the best of the Company's knowledge, threatened to which the
Company, the Partnership, the Manager or the Lessee is or may be, a party
or of which property owned or leased by the Company, the Partnership, or
the Lessee is or may be, the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings might,
individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result in a material adverse
change in the condition (financial or otherwise), properties, business,
results of operations or prospects of the Company, the Partnership, the
Manager or the Lessee, taken as a whole; and no labor disturbance by the
employees of the Company, the Partnership, the Manager or the Lessee exists
or to the Company's knowledge is imminent which might be expected to affect
adversely such condition (financial or otherwise), properties, business,
results of operations or prospects. None of the Company, the Partnership,
the Manager nor the Lessee 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.
(m) The Partnership has good and marketable title to the Hotels (as
defined in the Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those reflected in the financial
statements (or
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described elsewhere in the Prospectus) or (ii) those which are not material
in amount and do not adversely affect the use made and proposed to be made
of such property by the Company and the Partnership. The Partnership holds
its leased properties under valid and binding leases, with such exceptions
as are not or will not be materially significant in relation to the
business of any of the Partnership. The Company does not own or lease any
real property. The Partnership owns or leases all such real and personal
properties (except for items of inventory, vehicles, liquor licenses and
Franchise Agreements to be held by the Lessee) as are necessary to operate
the Properties as now operated or as proposed to be operated.
(n) To the knowledge of the Company (i) no lessee, licensee,
concessionaire or vendor of any portion of any of the Hotels is in default
under any of the leases or licenses governing such properties and there is
no event which, but for the passage of time or the giving of notice, or
both, would constitute a default under any of such leases or licenses,
except such defaults that would not have a material adverse effect on the
condition (financial or otherwise) or on the earnings, business affairs or
business prospects of the Company, the Partnership or the Lessee; (ii) all
such material leases or licenses are assignable without consent or approval
or if such consent or approval is required the applicable consent or
approval has been obtained to assign any such lease or license, to the
Partnership or the Lessee, as applicable; (iii) the current and intended
use and occupancy of each of the Hotels complies with all applicable codes
and zoning laws and regulations, if any, except for such failures to comply
which would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise) or on the earnings,
business affairs or business prospects of the Company, the Partnership or
the Lessee; and (iv) there is no pending or to the Company's knowledge
threatened condemnation, zoning change, environmental or other proceeding
or action that will in any material respect affect the size of, use of,
improvements on, construction on, or access to any of the Hotels or actions
that would reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) or on the earnings, business affairs or
business prospects of the Company, the Partnership or the Lessee.
(o) Since December 31, 1996, and except as described in or
specifically contemplated by the Prospectus: (i) none of the Company, the
Partnership, the Manager nor the Lessee has 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
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in a material reduction in the future earnings of the Company, the
Partnership, the Manager or the Lessee; (ii) none of the Company, the
Partnership, the Manager nor the Lessee has sustained any material loss or
interference with its respective businesses or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by insurance;
(iii) none of the Company, the Partnership nor the Lessee has paid or
declared any dividends or other distributions with respect to its capital
stock other than (x) a dividend of $0.25 per share paid by the Company and
a distribution of $0.25 per Unit paid by the Partnership in February 1997,
and (y) a dividend of $0.25 per share declared by the Company in April 1997
and a distribution of $0.25 per Unit to be paid by the Partnership in May,
1997, and none of the Company, the Partnership, the Manager nor the Lessee
is in default in the payment of principal or interest on any outstanding
material debt obligations; (iv) there has not been any change in the number
of outstanding Shares (other than upon the sale of the Common Shares or
purchase of shares pursuant to the Company's dividend reinvestment program)
of the Company, the ownership interests in any of the Partnership or the
common stock of the Lessee or indebtedness material to the Company, the
Partnership, the Manager or the Lessee (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, results of
operations or prospects of the Company, the Partnership, the Manager or the
Lessee.
(p) Except as disclosed in or specifically contemplated by the
Prospectus, the Company, the Partnership, the Manager and the Lessee have
sufficient trademarks, trade names, patent rights, copyrights, licenses or
other similar rights and proprietary knowledge (collectively,
"Intangibles"), approvals and governmental authorizations to conduct their
businesses as now conducted; the expiration of any Intangibles, approvals
or governmental authorizations would not have a material adverse effect on
the condition (financial or otherwise), business, results of operations or
prospects of the Partnership or the Company or the Lessee; and the Company
has no knowledge of any material infringement by the Partnership of any
Intangibles, and there is no claim being made against the Company, the
Partnership, the Manager or the Lessee regarding any Intangible or other
infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of
the Company, the Partnership, the Manager or the Lessee.
(q) Neither the Company nor the Partnership has been advised, or has
reason to believe, that the Company, the Partnership, the Manager and the
Lessee are not conducting
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business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which any of them is conducting business, including,
without limitation, all applicable local, state and federal environmental
laws and regulations; except where failure to be in compliance would not
materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of any such entity.
(r) The Company, the Partnership, the Manager and the Lessee each has
filed all necessary federal, state and foreign income and franchise tax
returns and has paid all taxes shown as due thereon; and to the Company's
knowledge, there is no tax deficiency which has been or might be asserted
or threatened against which could materially and adversely affect the
business, operations or properties of, the Company, the Partnership, the
Manager or the Lessee, as the case may be.
(s) Neither the Company nor the Partnership 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 and the other materials permitted by
the Act.
(t) None of the Company, the Partnership, the Manager nor the Lessee
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 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 its affiliates 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 Shares to facilitate the sale or resale of the
Common Shares.
(v) The Company, the Partnership, the Manager or the Lessee, as
applicable, have and maintains liability, property and casualty insurance
(insured by insurers of recognized financial responsibility) in favor of
the Partnership, and in the case of liability insurance, the Lessee and the
Partnership and the Manager, with respect to each of the Hotels, in an
amount and on such terms as is reasonable and customary for businesses of
the type proposed to be conducted by the Partnership, the Manager and the
Lessee, including, among other things, insurance against
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theft, damage, destruction and acts of vandalism. Neither the Company nor
the Partnership has received from any insurance company written notice of
any material defects or deficiencies affecting the insurability of any such
Hotels.
(w) Title insurance in favor of the Partnership is in force with
respect to each of the Hotels.
(x) The mortgages and deeds of trust encumbering the Hotels are not
convertible nor does the Company or the Partnership 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
directly or indirectly by the Company or the Partnership.
(y) Each of the Company, the Partnership, the Manager and the Lessee
(i) is in compliance with any and all applicable foreign, federal, state
and local 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 all permits, licenses or
other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) is in compliance with all
terms and conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals are otherwise
disclosed in the Prospectus or would not, singly or in the aggregate, have
a material adverse effect on the Company, the Partnership or the Lessee.
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 knowledge of the Company, 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, the Partnership,
the Manager or the Lessee 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 the
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Lessee or (b) any violation or alleged violation of any Environmental Law,
which liability, alleged liability or potential liability is required to be
disclosed in the Registration Statement, other than as disclosed therein,
or which liability, alleged liability or potential liability, singly or in
the aggregate, would have a material and adverse effect on the respective
business, prospects, properties, condition (financial or otherwise) or
results of operations of any of the Hotels or the Company, the Partnership,
the Manager or the Lessee.
(aa) None of the Company, the Partnership, the Manager nor the Lessee
is or will conduct their respective businesses in a manner in which any
such entity 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) Neither the assets of the Company nor the Partnership
constitutes, 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) As of the Closing Date, the Company will be organized and will
operate in a manner so as to qualify as a "real estate investment trust"
("REIT") under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), and has elected to, is qualified to and
intends to remain qualified to, be taxed as a REIT under the Code and
pursuant to any applicable state tax laws. As of the Closing Date, less
than 15 percent of the aggregate adjusted tax bases of both the personal
property and the real property (the "Total Bases") to be leased pursuant to
any Percentage Lease shall consist of the adjusted tax bases of the
personal property (the "Personal Property Bases"), except in each instance
where the failure to maintain such ratios will not disqualify the Company's
election as a REIT or otherwise have a material adverse effect on the
business and operations of the Company; in each succeeding year the
Personal Property Bases in connection with each Percentage Lease will not
exceed 15 percent of the Total Bases for such lease, except in each
instance where the failure to maintain such ratios will not cause the
Company to fail to qualify as a REIT or otherwise have a material adverse
effect on the business and operations of the Company; and the Company has
received a segmentation study from Coopers & ▇▇▇▇▇▇▇ stating that based on
its projections, during the first five years of the term of each Percentage
Lease less than 15 percent of the Total Bases of each such Percentage Lease
is expected to consist of Personal Property Bases, except in each instance
where the failure to maintain such ratios will not cause the Company to
fail to qualify as a REIT or otherwise have a
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material adverse effect on the business and operations of the Company. The
Company does not know of any event which would cause or is likely to cause
the Company to fail to qualify as a REIT at any time. All of the assets,
liabilities and items of income, deduction and credit of the Partnership
are treated as assets, liabilities and items of income, deduction and
credit of the Company under the provisions of the Code and the Partnership
is not, nor will it be, treated as a separate corporation under the
provisions of the Code. The Partnership is treated for federal income tax
purposes as a partnership and not as an association taxable as a
corporation.
(dd) The Company, the Partnership and the Lessee each 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.
(ee) Neither the Company, the Partnership nor any other affiliate of
the Company 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.
(ff) No environmental engineering firm which prepared Phase I
environmental assessment reports of the Properties with respect to the
Hotels as set forth in the Registration Statement was employed for such
purpose on a contingent basis or has any substantial interest in the
Company, the Partnership or the Lessee.
(gg) To the best knowledge of the Company, no general labor problem
exists or is imminent with the employees of any of the Hotels, the Company,
the Manager, the Partnership or the Lessee.
(hh) Each certificate signed by any officer of the Company, the
Partnership or the Lessee or any of their affiliates and delivered to the
Representatives or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company, the Partnership or the Lessee,
as the case may be, as to the matters covered thereby.
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SECTION 3. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company and the Partnership 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 complete and 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
its behalf and to act for it in the manner herein provided.
SECTION 4. Purchase, Sale and Delivery of Common Shares. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
to the Underwriters the Firm Common Shares. The Underwriters agree, severally
and not jointly, to purchase from the Company the number of Firm Common Shares
described below. The purchase price per share to be paid by the several
Underwriters to the Company shall be $12.84 per share.
Transfer of the Firm Common Shares 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 (or, if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) of the Securities Exchange Act of 1934, after
4:30 P.M. Washington, D.C. Time, the fourth) full business day following the
first date that any of the Common Shares 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 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 or fourth, as the case may be, full
business day following the first date that any of the Common Shares are released
by you for sale to the public or the date that is 48 hours after the date that
the Prospectus has been so recirculated.
Transfer of the Firm Common Shares shall be made by or on behalf of the
Company to you, through the FAST system of The Depository Trust Company, for the
respective accounts of the
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Underwriters, in New York, New York, against payment by you, for the accounts
of the several Underwriters, of the purchase price therefor by wire transfer of
same day funds to the order of the Company for the purposes set forth in the
Prospectus. At your option, the Firm Common Shares shall be registered in such
names and denominations as you shall have requested in writing to the Company
or the Company's transfer agent at least two full business days prior to the
First Closing Date. Time shall be of the essence, and delivery in the manner
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
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, the Optional Common Shares at the purchase price per
share to be paid for the Firm Common Shares, 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 Common Shares. 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 Common Shares are released by you for sale to the public,
upon notice by you to the Company setting forth the aggregate number of Optional
Common Shares 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 Closing Date shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
The number of Optional Common Shares to be purchased by each Underwriter shall
be determined by multiplying the number of Optional Common Shares to be sold by
the Company pursuant to such notice of exercise by a fraction, the numerator of
which is the number of Firm Common Shares to be purchased by such Underwriter as
set forth opposite its name in Schedule A and the denominator of which is
4,000,000 (subject to such adjustments to eliminate any fractional share
purchases as you in your discretion may make). Transfer of the Optional Common
Shares shall be made by or on behalf of the Company to you, through the FAST
system of The Depository Trust Company, for the respective accounts of the
Underwriters, in New York, New York. Payment for the Optional Common Shares
shall be made directly to the Company, or such other party as designated by the
Company, by wire transfer of same-day funds, and transfer of the Optional Common
Shares shall be the same as for the Firm Common Shares 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.
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You have advised the Company that each Underwriter has authorized you to
accept delivery of its Common Shares, 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 Common Shares 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 Common Shares 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 5. Covenants of the Company and the Partnership. The Company and
the Partnership covenant and agree that:
(a) 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. Notwithstanding the foregoing,
the Company may file any filing required under the Exchange Act which will
be incorporated by reference into the Registration Statement, any
Preliminary Prospectus or the Prospectus without the need to furnish a copy
to the Underwriters prior to such 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.
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(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 Common Shares 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.
(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 Common Shares is required to be
delivered 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
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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 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 Common Shares 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 Common Shares;
provided, however, that neither the Company nor the Partnership shall be
required to qualify as a foreign real estate investment trust, corporation
or partnership, as applicable, 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 foreign real estate investment
trust, corporation or partnership. The Company will advise you promptly of
the suspension of the qualification or registration of (or any such
exemption relating to) the Common Shares 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 hereafter, the Company will
furnish to the Representatives and, upon request of the Representatives, to
each of the other Underwriters: (i) as soon as available after the end of
each fiscal year and mailing to the shareholders, 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 Shares.
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(h) During the period of 90 days after the first date that any of the
Common Shares are released by you for sale to the public, without the prior
written consent of ▇▇▇▇▇▇▇▇▇▇ Securities (which consent may be withheld at
the sole discretion of ▇▇▇▇▇▇▇▇▇▇ Securities), the Company will not, other
than pursuant to the Company's share incentive plans and dividend
reinvestment plan, pursuant to redemptions in accordance with the
Partnership Agreement or in connection with the acquisition of real estate
or hotel properties, or in response to the exercise of any outstanding
options or warrants or in connection with a merger, consolidation or
similar transaction 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 Shares or other equity
security.
(i) The Company and the Partnership will apply the net proceeds of
the sale of the Common Shares sold by the Company substantially in
accordance with the statements under the caption "Use of Proceeds" in the
Prospectus.
(j) As necessary, the Company will use its reasonable best efforts to
qualify or register its Common Shares 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 Common Shares in California and such
Canadian provinces as specified by the Representatives), will comply with
such Blue Sky or Canadian provincial laws and will use its reasonable best
efforts to continue such qualifications, registrations and exemptions in
effect for a period of five years after the date hereof; provided, however,
that neither the Company nor the Partnership shall be required to qualify
as a foreign real estate investment trust, corporation or partnership, as
applicable, 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 foreign real estate investment trust, corporation
or partnership.
(k) The Company will use its reasonable best efforts to continue the
listing of the Common Shares on the New York Stock Exchange and will
continue to comply in all material respects with all of the rules and
regulations of the New York Stock Exchange applicable to the Company and
the trading of the Common Shares.
(l) The Company will continue to meet the requirements to qualify as
a REIT, effective for the year ending December 31, 1995 and thereafter.
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(m) The Company will maintain a transfer agent for the Common Shares
and, if necessary under the jurisdiction of formation of the Company, a
registrar (which may be the same entity as the transfer agent).
(n) The Company and the Partnership will not permit the conversion of
any of the Units into Shares in any manner which would or might affect the
Company's qualification as a REIT.
(o) The Company and the Partnership in good faith will expend
reasonable efforts to enforce the terms of any agreements with the Lessee,
the Manager, Messrs. Alter, ▇▇▇▇▇▇▇▇▇ and Enever, or any parties affiliated
with the Lessee or Messrs. Alter, ▇▇▇▇▇▇▇▇▇ or Enever.
(p) The Partnership will, per quarter on a cumulative basis, make
available for periodic replacement and refurbishment of furniture, fixtures
and equipment at each of the Hotels an amount equal to 4% of room revenues
(as defined in the Percentage Leases).
You, on behalf of the Underwriters, may, in your sole discretion, waive in
writing the performance by the Company or the Partnership, as applicable, of
any one or more of the foregoing covenants or extend the time for their
performance.
SECTION 6. 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 Common Shares (including all printing and engraving costs), (ii)
all fees and expenses of the registrar and transfer agent of the Common Shares,
(iii) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Common Shares 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 and the Blue
Sky memorandum, (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 Common Shares 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
related legal fees in connection with such filing
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(other than counsel fees incurred relating to compensation issues) and (viii)
all other fees, costs and expenses referred to in Item 14 of the Registration
Statement. Except as provided in this Section 6, Section 8 and Section 10
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 Blue Sky memorandum which fees shall be
paid on the First Closing Date or the Second Closing Date, as applicable).
SECTION 7. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Partnership herein set forth 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 and
the Partnership's officers made pursuant to the provisions hereof, to the
performance by each of the Company and the Partnership 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.) New York 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 ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for
the Company, the Partnership, the Manager and the Lessee, or ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ &
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Ingersoll, special Maryland counsel to the Company, 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, and is duly qualified to do business as a
foreign corporation and is in good standing in all other
jurisdictions where the ownership or leasing of properties or the
conduct of its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not
reasonably be expected to have a material adverse effect on the
Company, the Partnership or any Property, and has the requisite
power to own its properties and conduct its business
substantially as described in the Registration Statement; and, to
such counsel's knowledge, other than the Partnership, the Company
does not own or control, directly or indirectly, any corporation,
association, partnership or other entity;
(2) Each of the Lessee and Manager has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Colorado, and is duly
qualified to do business as a foreign corporation and is in good
standing in each of the states in which it leases real property
from the Partnership and has the requisite corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement;
(3) The Partnership has been duly formed and is validly
existing as a limited partnership under the laws of the State of
Delaware, is duly qualified to do business as a foreign limited
partnership and is in good standing in each of the states in
which it owns real property, has the requisite partnership power
and authority to own and lease its properties and conduct its
business as currently conducted as described in the Prospectus.
The Company is the sole general partner of the Partnership, which
Units, to such counsel's knowledge shall be held free and clear
of all liens, encumbrances, equities, claims, security interests,
voting trusts or charges;
(4) All of the issued and outstanding Shares have been duly
authorized and validly issued; all outstanding Shares were duly
registered under the
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Act or were issued in transactions exempt from the registration
requirements of the Act and were duly registered or subject to an
available exemption from the registration requirements of the
applicable state securities or blue sky laws, are fully paid and
nonassessable, were not issued in violation of or subject to any
statutory, or to such counsel's knowledge, other preemptive
rights or other rights to subscribe for or purchase any
securities and conformed in all material respects to the
description thereof incorporated by reference in the Registration
Statement; provided however that such counsel need not express
any opinion with respect to the registration or availability of
an exemption under applicable state securities or blue sky laws
for Common Shares issued pursuant to an underwritten public
offering;
(5) The Company has given proper authorization to
ChaseMellon Shareholder Service, L.L.C. (the "Transfer Agent") to
issue the Firm Common Shares to you at the First Closing by
electronic transfer through the FAST system of The Depository
Trust Company, upon receipt of telephonic notification from you
and the Company to issue such shares. Upon your payment of the
agreed consideration for the Firm Common Shares in accordance
with the provisions of the Underwriting Agreement, and the
electronic transfer to you of the Firm Common Shares by the
Transfer Agent, the Firm Common Shares will be duly authorized
and validly issued, fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive
rights or (to our knowledge) other rights to subscribe for or
purchase securities from the Company;
(6) Except as disclosed in or specifically contemplated by
the Prospectus, the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 or the Company's Proxy Statement
prepared in connection with its 1997 annual shareholders'
meeting, to such counsel's knowledge, there are no outstanding
options, warrants or other rights calling for the issuance of,
and no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company;
(7)(a) 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 and no
proceedings for that purpose have been instituted or are
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pending or contemplated by the Commission and 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, the Prospectus and any amendment
or supplement thereto (except for the financial statements and
schedules and other financial and statistical information included
therein as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
Rules and Regulations; and
(c) To such counsel's knowledge, there are no legal or
governmental actions, suits or proceedings pending (in which service
or notice of process has been received by the Company) or threatened
against the Company which are required to be described in the
Prospectus which are not described as required;
(8) The Company has the corporate power and authority to
enter into this Agreement, to sell and deliver the Common Shares
to be sold by it to the several Underwriters and to consummate
the other transactions contemplated herein; the Partnership has
the partnership power and authority to enter into this Agreement
and to consummate the transactions contemplated herein; this
Agreement has been duly and validly authorized by all necessary
partnership action by each of the Company and the Partnership,
respectively, has been duly and validly executed and delivered by
and on behalf of each of the Company and the Partnership; and 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 each of the
Company and the Partnership or the consummation of the
transactions contemplated by this Agreement, except such as have
been obtained and are in full force and effect under the Act and
such as may be required under applicable Blue Sky or Canadian
securities laws in connection with the purchase and distribution
of the Common Shares by the Underwriters and the clearance of
such offering with the NASD;
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(9) The execution and delivery of the Underwriting
Agreement and the issuance of the Common Shares contemplated
therein will not conflict with, result in the material breach of,
or constitute, either by itself or upon notice or the passage of
time or both, a material default under, any agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or
other instrument listed on Schedule 1 to any of the Backup
Officers' Certificates; or violate any of the provisions of the
partnership certificate, partnership agreement, articles of
incorporation or bylaws, or other organizational documents, as
applicable, of the Company, the Partnership, or the Lessee; or to
our knowledge, violate any California statute, judgment, decree,
order, rule or regulation of any court or California governmental
body having jurisdiction over the Company, the Partnership, the
Lessee, or any of their property;
(10) Such counsel has not received written notice that the
Company, the Partnership or the Lessee is in violation of its
respective declaration of trust, partnership certificate,
partnership agreement, certificate of incorporation or bylaws, or
other organizational documents, as applicable, or is in breach of
or default with respect to any provision of any agreements,
mortgages, deeds of trust, leases, franchises, licenses,
indentures, permits or other instruments listed in Schedule 1 to
any of the Officers' Certificates delivered pursuant to Section
7(b)(iii) of this Agreement, known to such counsel and which is
required to be filed as an item 10 exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996,
to which the Company, the Partnership or the Lessee is a party or
by which they or any of their properties may be bound or
affected, except where such default would not materially
adversely affect the Company, the Partnership or the Lessee, as
the case may be;
(11) To such counsel's knowledge, no holders of securities
of the Company or the Partnership have rights to register Shares,
Units or other securities because of the filing of the
Registration Statement by the Company or the offering;
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(12) No transfer taxes are required to be paid to the
states of Maryland and New York in connection with the sale and
delivery of the Common Shares to the Underwriters hereunder;
(13) Neither the Company nor the Partnership is or will be
an "investment company" within the meaning of the 1940 Act;
(14) Each of the Closing Agreements has been duly
authorized, executed and delivered by the Company, the
Partnership or the Lessee, as applicable, and constitutes a valid
and binding agreement on such parties, enforceable in accordance
with its terms, except as may be limited or otherwise affected by
general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of
creditors generally and by principles of equity, whether
considered at law or in equity, and except with respect to those
provisions relating to indemnities or contributions for
liabilities under the Act, as to which no opinion need be
expressed;
(15) The Common Shares have been duly authorized for
listing by the New York Stock Exchange upon official notice of
issuance; and
(16) An opinion on the REIT status of the Company and the
treatment of the Partnership as a partnership for federal income
tax purposes in form and substance satisfactory to Underwriter's
counsel.
In rendering such opinion, 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, the Partnership or the Lessee, as applicable, and
certificates and verbal advice of 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 said
opinions or certificates are to be attached to the opinion. Such counsel shall
also include a statement to the effect that although such counsel is not passing
upon and does not assume responsibility for the accuracy, completeness or
fairness of the statements contained therein, 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
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fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading (other than
with respect to the financial statements, the notes thereto and the
related financial schedules and other financial or statistical data as
to which such counsel need express no opinion).
(ii) 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, the execution and delivery of the Agreement, the validity of
the Common Shares, certain legal matters related to 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 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.
(iii) A certificate of each of the Company, executed by the
Chairman of the Board and President of the Company solely in their
capacity as such, and the Partnership executed by an authorized
officer of its general partner solely in his capacity as such, 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 and
the Partnership 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 and the Partnership each has complied with all 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 best of
the knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under
the Act;
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(3) Each of the respective signers of each certificate has
carefully examined the Registration Statement and the Prospectus;
in his opinion and to the best of his knowledge, 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, in light of the circumstances under which they
were made, or necessary to make the statements therein not
misleading;
(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 incorporated by
reference into the Prospectus or Registration Statement or
disclosed in such a supplement or amendment;
(5) As to the Company's certificate only, 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, there has not
been any material adverse change or a development involving a
material adverse change in the condition (financial or
otherwise), business, properties, results of operations,
management or prospects of the Company or, to the best of such
officer's knowledge, any of the Hotels; and no legal or
governmental action, suit or proceeding is pending or, to the
best knowledge of such officer, threatened against the Company,
or, to the best of such officer's knowledge, any of the Hotels
which is material to the Company or any of the Hotels, as
applicable, whether or not arising from transactions in the
ordinary course of business, or which may adversely affect the
transactions contemplated by this Agreement; 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 or which could reasonably be
expected to result in a material reduction in the future earnings
of the Company or the Partnership or incurred any material
liability or obligation, direct, contingent or indirect,
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made any material adverse change in its short-term debt or funded
debt or repurchased or otherwise acquired any of the Company's
Shares or the Partnership's interests; and the Company, has not
declared or paid any dividend, or made any other distribution,
upon its outstanding Shares payable to shareholders of record on
a date prior to the First Closing Date or Second Closing Date
except as set forth in the Prospectus and except for the dividend
of $0.25 per share paid by the Company in February, 1997 and the
dividend of $0.25 per share declared by the Company on April 17,
1997;
(6) As to the Partnership's certificate only, 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, there has not
been any material adverse change or a development involving a
material adverse change in the condition (financial or
otherwise), business, properties, results of operations,
management or prospects of the Partnership, or to the best of
such officer's knowledge, any of the Hotels; and no legal or
governmental action, suit or proceeding is pending or, to the
best knowledge of such officer, threatened against the
Partnership or, to the best of such officer's knowledge, any of
the Hotels, which is material to the Partnership or any of the
Hotels, as applicable, whether or not arising from transactions
in the ordinary course of business, or which may adversely affect
the transactions contemplated by this Agreement; since such dates
and except as so disclosed, the Partnership has not entered into
any verbal or written agreement or other transaction which is not
in the ordinary course of business or which could reasonably be
expected to result in a material reduction in the future earnings
of the Company or the Partnership or incurred any material
liability or obligation, direct, contingent or indirect, made any
change in its partnership interests, made any material adverse
change in its short-term debt or funded debt or repurchased or
otherwise acquired any of the Partnership's interests other than
as set forth on Schedule B; and the Partnership has not declared
or paid any dividend, or made any other distribution, upon its
outstanding partnership interests payable to partners of record
on a date prior to the First Closing Date or Second Closing Date,
except as set forth in the Prospectus and except for the
distribution of $0.25 per Unit paid by the Partnership in
February 1997 and $0.25 per Unit to be paid in May 1997;
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(7) 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
Hotels (or any other hotel property owned by the Partnership) has
sustained a material loss or damage by strike, fire, flood,
windstorm, accident or other calamity (whether or not insured);
and
(8) To the best knowledge of such officer, each of the
Company, the Partnership and each of the Hotels owned by the
Partnership (i) will be in compliance with any and all applicable
Environmental Laws, (ii) will have received all permits, licenses
or other approvals required under applicable Environmental Laws
to conduct its operations and (iii) will be in compliance with
all terms and conditions of any such permit, license or approval
except where such noncompliance with Environmental Laws, failure
to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals are otherwise disclosed in the Prospectus
or would not, singly or in the aggregate, have a material adverse
effect on the Company, the Partnership or any Hotel.
(iv) 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 Coopers & ▇▇▇▇▇▇▇,
as 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) Coopers & ▇▇▇▇▇▇▇ is an independent certified public
accountants with respect to the Company and the Partnership
within the meaning of the Act and the Rules and Regulations;
(2) It is its opinion that the financial statements,
historical summaries and any supplementary financial information
and supporting schedule included or incorporated by reference in
the Registration Statement and the Prospectus examined by them
comply as to form in all material
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respects with the applicable accounting requirements of the Act
and the Rules and Regulations;
(3) The financial statements of each of the entities and
properties included in the Prospectus for the periods referenced
therein 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 financial statements or historical
summaries for them to be in conformity with generally accepted
accounting principles and such financial statements 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, 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) the unaudited financial information with respect
to the results of operations for and at the end of each of
the five years (or such lesser period, if applicable) in the
period ended December 31, 1996 and any subsequent quarters
included or incorporated by reference in the Registration
Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and
the Rules and Regulations or are not presented in conformity
with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited
financial statements included in the Registration Statement,
or do not agree with the corresponding amounts in the
audited financial statements for each of the years then
ended, or that with respect to the unaudited pro forma
financial statements, such financial statements do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules
and Regulations and the pro forma adjustments have not been
properly applied to the historical amounts in the
compilation of such statements, or
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(B) at a specified date not more than five days prior
to the date of this Agreement, (i) there has been any change
in the assets or shareholders' equity, as compared with the
amounts shown in the December 31, 1996 balance sheet of the
Company included in the Registration Statement, (ii) there
has been any increase in indebtedness or other liabilities
as compared with the amounts shown in the December 31, 1996
historical or pro forma balance sheets related to the Hotels
(other than accrued interest) or during the period December
31, 1996 to a specified date not more than five days prior
to the date of this Agreement, there were any decreases, as
compared with the corresponding period in the preceding
year, in combined revenues or net income of the Hotels,
except in all instances for changes, increases or decreases
which the Registration Statement and the Prospectus disclose
have occurred or may occur or (iii) there has been any
decrease since December 31, 1996 in room revenues or total
revenues from the Hotels which would adversely affect the
Percentage Lease revenue of the Company or the Partnership,
in each case as compared with the corresponding period of
the preceding year, except in each case for decreases which
the Prospectus discloses have occurred or may occur or which
are described in such letter; 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, in
accordance with generally accepted auditing standards, 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, the Partnership and the Present Owners.
(v) On or before the First Closing Date, a copy of the
segmentation study of Coopers & ▇▇▇▇▇▇▇ referred to in Section 2(cc).
(c) The Firm Common Shares and the Optional Common Shares shall have
been approved for listing on the New York Stock Exchange, subject to
official notice of issuance, and the NASD, upon review of the terms of the
public offering,
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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 Common Shares
and, if any Optional Common Shares are purchased, the Optional Common
Shares in the manner required pursuant to Section 4 hereof.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to O'Melveny & ▇▇▇▇▇ LLP, counsel for the Underwriters. The Company
shall furnish you with such 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 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 written 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 6 and 8 hereof and except to the extent provided in Section 10 hereof.
SECTION 8. Reimbursement of Underwriters' Expenses. Notwithstanding any
other provisions hereof, if this Agreement shall be terminated by you pursuant
to the last paragraph of Section 7, or if the sale to the Underwriters of the
Common Shares at the First Closing is not consummated because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or to comply with any provision hereof, 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 Common Shares, 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 8, Section 6 and
Section 10 shall at all times be effective and shall apply.
SECTION 9. Effectiveness of Registration Statement. You and the Company
will use your and its best efforts to prevent the issuance of any stop order
suspending the effectiveness of
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the Registration Statement and, if such stop order be issued, to obtain as soon
as possible the lifting thereof.
SECTION 10. Indemnification. (a) The Company and the Partnership,
jointly and severally, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the 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, or other federal, state or Canadian statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company or the Partnership, as applicable), 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 or the Partnership contained herein or any failure of the Company or the
Partnership 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 neither the Company nor the Partnership will be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense 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 any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company and the Partnership pursuant to Section 3
hereof; and provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any Preliminary
Prospectus, the indemnity agreement contained in this Section 10(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 Common Shares
concerned (or to the benefit of any person controlling such Underwriter) to the
extent that any such loss, claim, damage, liability or expense of such
Underwriter or controlling person 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 Common Shares to such person as required by the
Act. In addition to its other obligations under this Section 10(a), the Company
and the
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Partnership agree that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, or any
inaccuracy in the representations and warranties of the Company or the
Partnership herein or failure to perform its obligations hereunder, all as
described in this Section 10(a), they will reimburse each Underwriter not less
than on a quarterly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
or the Partnership's obligation 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 or the Partnership, as
applicable, 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 or the Partnership 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, the Partnership and each person, if any, who controls the Company or
the Partnership within the meaning of the Act, against any losses, claims,
damages, liabilities or expenses to which the Company, or any such director,
officer, the Partnership, or controlling person may become subject, under the
Act, the Exchange Act, or other federal or state statutory law or regulation, 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
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thereto, in reliance upon and in conformity with the information furnished to
the Company and the Partnership pursuant to Section 3 hereof; and will
reimburse the Company, or any such director, officer, the Partnership or any
controlling person of the Company or the Partnership for any legal and other
expense reasonably incurred by the Company, or any such director, officer, the
Partnership, any controlling person of the Company or the Partnership 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 10(b), each Underwriter severally agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, or any inaccuracy
in the representations and warranties of the Underwriters herein or the failure
to perform its obligations hereunder, all as described in this Section 10(b),
that it will reimburse expenses as provided in this Section 10(b) as incurred,
but no less frequently than quarterly, notwithstanding the absence of a
judicial determination at to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company, the Partnership (and, to the
extent applicable, each officer, trustee or controlling person of the Company
or the Partnership) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, 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 or the Partnership (and, to the extent
applicable, each officer, director or controlling person of the Company or the
Partnership) 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 than 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
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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 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;
provided, however, that the indemnifying party shall only be obligated to pay
the reasonable fees and expenses of a single law firm employed by all of the
indemnified 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 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 10 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 (a), (b) or
(c) of this Section 10 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 Partnership and the Underwriters from the offering of the
Common Shares 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, the Partnership and the Underwriters in connection with
the statements or omissions or inaccuracies in the representations and
warranties herein which resulted in such
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losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company, the Partnership and the Underwriters shall be deemed to be in the same
proportion, in the case of the Company and the Partnership as the total price
paid to the Company, for the Common Shares sold by the Company 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,
the Partnership 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, the Partnership 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 10, 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 10 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 10 for purposes of
indemnification. The Company, the Partnership and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 10
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 the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 10, 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 Common Shares 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 not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 10 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 10(a) or 10(b) hereof,
including the amounts of any
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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 Section 10(a) 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 10(a) and 10(b) hereof.
SECTION 11. Default of Underwriters. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares 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 Common
Shares 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 default in its or their obligations to purchase
Common Shares hereunder on either the First or Second Closing Date and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase on such Closing Date does not exceed
10% of the total number of Common Shares 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 Common Shares which such defaulting Underwriters agreed but failed
to purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than 10% of the total number of Common Shares 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
Common Shares 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 or the Partnership except for the
expenses to be paid by the Company pursuant to Section 6 hereof and except to
the extent provided in Section 10 hereof.
In the event that Common Shares 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 or
Second Closing
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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 12. Effective Date. This Agreement shall become effective
immediately as to Sections 6, 8, 10, 13 and 14 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 8:00 A.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 Common Shares for sale to the public. For the
purposes of this Section 12, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public offering or
(ii) offering the Common Shares for sale to securities dealers, whichever may
occur first.
SECTION 13. 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 6 and 8 (if applicable) hereof and except to
the extent provided in Section 10 hereof) or of any Underwriter to the
Company (except to the extent provided in Section 10 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
40
41
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 Common Shares; (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, the
Partnership or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and
adversely affect the Company's or the Partnership's business or earnings
and makes it impracticable or inadvisable to offer or sell the Common
Shares. Any termination pursuant to this Section (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 6 and 8 hereof and except to
the extent provided in Section 10 hereof).
SECTION 14. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, the Partnership, the Company's and the Partnership'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 the Partnership or any
of its or their partners, officers or trustees or any controlling person, as the
case may be, and will survive delivery of and payment for the Common Shares sold
hereunder and any termination of this Agreement.
SECTION 15. Notices. All communications hereunder shall be in writing
and, if sent to the Representatives shall be mailed, delivered, telecopied or
telegraphed and confirmed to you at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇ ▇▇▇▇▇▇▇ III with a
copy to O'Melveny & ▇▇▇▇▇ LLP, Embarcadero Center West ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇; and if sent to the
41
42
Company or the Partnership shall be mailed, delivered or telegraphed and
confirmed to the Company at ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. Alter with a
copy to ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇. The Company, the Partnership or you may change the address for
receipt of communications hereunder by giving notice to the others.
SECTION 16. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 11 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 10, 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 Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 17. 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 18. 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 19. 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 20. 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
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, the Partnership and you.
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43
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, the Partnership and the several
Underwriters, including you, all in accordance with its terms.
Very truly yours,
SUNSTONE HOTEL INVESTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ALTER
--------------------------------
▇▇▇▇▇▇ ▇. Alter, President
SUNSTONE HOTEL INVESTORS, L.P.
By: SUNSTONE HOTEL INVESTORS, INC.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ALTER
----------------------------------
▇▇▇▇▇▇ ▇. Alter, President
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us in
San Francisco, California as of the date
first above written.
▇▇▇▇▇▇▇▇▇▇ SECURITIES
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
EVEREN SECURITIES, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By: ▇▇▇▇▇▇▇▇▇▇ SECURITIES
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Managing Director
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SCHEDULE A
Amount of
Securities
to be
Underwriter Purchased
----------- ---------
▇▇▇▇▇▇▇▇▇▇ Securities 1,000,000
Bear, ▇▇▇▇▇▇▇ & Co. Inc. 1,000,000
Everen Securities, Inc. 1,000,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. 1,000,000
---------
Total 4,000,000
=========
45
SCHEDULE B
CUMULATIVE UNIT ISSUANCE CHART
FOR SUNSTONE HOTEL INVESTORS, INC.
SSI REIT UNITS
1. 2. 3. 4. 5. 6. 7. 8. 9.
COMMON OTHER LPS TOTAL
TRANSACTION DATE NEW UNITS NEW SHARES STOCK(1) GP(2) LP UNITS UNITS(3)
----------- -------- --------- ---------- ---------- ------- ---------- --------- ----------
Opening Balance 08/23/96 N/A N/A 10,323,500 117,823 10,205,677 1,458,800 11,792,300
Over-Allotment 09/10/96 600,000 600,000 10,923,500 123,823 10,799,677 1,458,800 12,382,300
for Secondary
Public Offering
Redemption of 10/04/96 (3,000) N/A 10,923,500 123,793 10,799,707 1,455,800 12,379,300
Units by
Steamboat Hotel
Partners, Ltd.
Issuance of Shares 10/10/96 7,500 7,500 10,931,000 123,868 10,807,132 1,455,800 12,386,800
to Directors
Issuance of Shares 10/16/96 1,250 1,250 10,932,250 123,881 10,808,369 1,455,800 12,388,050
to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Acquisition of 10/29/96 706,347 N/A 10,932,250 130,944 10,801,306 2,162,147 13,094,397
Summit Hotels
Issuance of Shares 11/10/96 1,500 1,500 10,933,750 130,959 10,802,791 2,162,147 13,095,897
to ▇▇▇▇▇▇▇ ▇▇▇▇▇
DRIP Issuance 11/15/96 1,182 1,182 10,934,932 130,971 10,803,961 2,162,147 13,070,079
DRIP Issuance 12/15/96 1,525 1,525 10,936,457 130,986 10,805,471 2,162,147 13,098,604
Public Offering 1/15/97 4,000,000 4,000,000 14,936,457 170,986 14,765,741 2,162,147 17,098,604
Over-Allotment 1/15/97 600,000 600,000 15,536,457 176,986 15,359,471 2,162,147 17,698,604
for Public
Offering
DRIP Issuance 1/15/97 1,448 1,448 15,537,905 177,000 15,360,905 2,162,147 17,700,052
46
1. 2. 3. 4. 5. 6. 7. 8. 9.
COMMON OTHER LPS TOTAL
TRANSACTION DATE NEW UNITS NEW SHARES STOCK(1) GP(2) LP UNITS UNITS(3)
----------- ------- --------- ---------- ---------- ------- ---------- --------- ----------
Acquisition of 1/17/97 68,936 N/A 15,537,905 177,000 15,360,905 2,231,083 17,768,988
Holiday Inn - San
Diego
Adjustment to 1/17/97 N/A N/A 15,537,905 177,690 15,360,215 2,231,083 17,768,988
Sunstone GP
Account
Issuance of Shares 1/17/97 1,250 1,250 15,539,155 177,702 15,361,453 2,231,083 17,770,238
to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
DRIP Issuance 2/14/97 4,564 4,564 15,543,719 177,748 15,365,971 2,231,083 17,774,802
▇▇▇▇▇▇▇ Unit 2/19/97 (1,170) N/A 15,543,719 177,737 15,365,982 2,229,913 17,773,632
Redemption
Issuance of 3/21/97 190 190 15,543,909 17,773,822
Director's Shares
Adjustment of N/A N/A 15,543,909 177,740 15,366,169 2,230,103 17,774,012
Sunstone GP Account
▇▇▇▇▇▇ Unit 3/10/97 (5,170) N/A 15,543,909 177,688 15,366,221 2,224,933 17,768,842
Redemption
Issuance of Shares 3/12/97 3,000 3,000 15,546,909 177,718 15,369,191 2,224,933 17,771,842
to ▇▇▇▇▇▇ ▇▇▇▇▇▇
Issuance of Shares to 3/12/97 1,076 1,076 15,547,985 177,729 15,370,256 2,224,933 17,772,918
▇▇▇▇▇ ▇▇▇▇▇
DRIP Issuance 3/17/97 3,335 3,335 15,551,340 177,763 15,373,577 2,224,933 17,776,273
Equity Offering 3/24/97 700,000 700,000 16,251,340 184,763 16,066,577 2,224,933 18,476,273
DRIP Issuance 4/15/97 2,431 2,431 16,253,771 184,787 16,068,984 2,224,933 18,478,704
Issuance of Shares to 4/18/97 1,250 1,250 16,255,021 184,800 16,070,221 2,224,933 18,479,954
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Over-Allotment for 4/28/97 105,000 105,000 16,360,021 185,850 16,174,171 2,224,933 18,584,954
Offering
-----------------
1. Common Stock (column 5) should always equal SSI REIT Units outstanding
(column 6 + column 7).
2. Units held by Sunstone Hotel Investors, Inc. as G.P. (column 6) must always
equal 1% of the total outstanding limited partnership units (column 9).
3. Total Units (column 9) should always equal REIT Units (columns 6 + 7) plus
Other LP Units (column 8).
